Navigating biotech's "haves" and "have-nots"

08 Dec 2023

Navigating biotech's "haves" and "have-nots"

A widening gap in performance between firms with positive clinical data and those without is creating opportunities for stock picking, say Portfolio Managers Andy Acker and Dan Lyons.

Andy Acker, CFA, Portfolio Manager | Daniel Lyons, PhD, CFA, Portfolio Manager | Research Analyst

Key takeaways:
  • While the disparity between biotech’s winning and losing stocks is often among the widest of any industry, rising interest rates and tight capital markets have enlarged the gap.
  • Many “have-nots” are either going out of business or having their public listing taken over by a private company in a transaction known as a reverse merger.
  • In our view, this process of industry rationalization creates a stock picker’s environment.

Andy Acker: Biotech, it’s always looked at as a monolith. But we talk about healthcare having the biggest disparity between winners and losers. In biotech, it’s even more extreme. In any given year over the last decade, the difference between the winners and losers is seventeen-fold. So, the top five biotech stocks will nearly quadruple every given year, while the bottom five lose almost 80% of their value.

It’s really critical to identify exciting innovation in the sector. Those stocks can potentially do well, even if the overall biotech market is not going up.

Dan Lyons: What we’ve seen in the sector is really a divergence between the haves and have-nots. But among the companies that have come out with truly innovative data, they’re able to control their own destiny. Even in a rising rate environment, they’ve been able to raise substantial amounts of capital and go forward with their programs alone, which also sets them up to negotiate well if there is potential M&A [mergers and acquisitions] down the road.

On the flipside, we’ve seen the have-nots with either disappointing data, or poor balance sheets, or too much opex [operating expenses] really struggling in this environment. And there are a lot of companies in the index that need to be cleaned up. We call them zombie companies that maybe they have some cash left, but not much else. And we’re seeing a lot of reverse mergers among promising private companies coming to market through that channel.



Health care industries are subject to government regulation and reimbursement rates, as well as government approval of products and services, which could have a significant effect on price and availability, and can be significantly affected by rapid obsolescence and patent expirations.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.

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Please read the following important information regarding funds related to this article.

Global Life Sciences Equity Fund

Horizon Biotechnology Fund

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