Biotech Small Caps: Fund Managers Have Lost Interest

Well the markets have certainly been somewhat turbulent of late – to say the very least!  I am definitely of the mindset that when the market tumbles, jump in and scoop up some bargains – that way when it does turn around – and it will – you will be sitting on some healthy fat profits.

The most important thing to remember is that the companies you are backing haven’t changed in any way; they are still the same good businesses – regardless of what the market is doing. The rules are don’t panic and don’t rush into anything – as the market could have further to fall, and it would be nice to pick up some even cheaper bargains.

As Warren Buffett says, “Be greedy when others are fearful”.

A small company caught my eye this week called Neuropharm, it’s a UK based biotech company that has managed to raise £20m and is looking to list on Aim this month.

Have you noticed that there is a huge void on Aim concerning IPO activity in the life sciences sector?  In fact Neuropharm which develops treatments for the central nervous system may be only one of a handful that seek a listing this year – so could be a unique opportunity, but I need to do some more digging first!

A lack of interest from investor’s seems to have been the main reason why a couple of biotechs have shelved their IPO’s this year – the story was quite different last year – because by March five life science companies had already listed on Aim.

Comments on the grapevine have been that fund managers have lost interest in biotech small caps, the reason being the mass of under-performing ones that are congregated on Aim – sound familiar?  The mining sector appears to be suffering from the same problem (see penny sleuth last week) – so could we see further consolidation in the biotech sector too? I think we will.

This could create a fantastic investment opportunity. Top performers have been Renovo whose shares doubled and AGI Therapeutics, the gastrointestinal specialist which has risen 30%.

There has also been a great deal of activity M&A-wise, as big pharmas continue to snap up smaller ones – like Pfizer, the world’s largest pharma group who paid up to £214m for PowerMed last year.

Until tomorrow,

Melissa Carroll
for The Penny Sleuth