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Hilary Kramer describes some small biotech companies you should look at, as well as a few large drug companies with nice yields.
Hilary, you have got an impressive background in your record on biotech. Where are you looking right now?
There are biotechs that are just growing companies that are still small. One is MEI Pharmaceuticals (MEIP). You want to own this company in the $9 area. It is an oncology company; it has breakthrough technologies in pinpointing the cancerous cells but keeping the ones that are healthy around it staying healthy and being targeted in their therapeutics.
Now, of course, any biotech is risky, so you want to buy more as a diverse basket.
Another company I love is Intercept Pharmaceuticals (ICPT). Many people haven’t heard of ICPT because it only went public in October. Now MEIP is such a small company that it is under the radar, but Intercept is a larger company that has an orphan drug up for approval in 2014 with the FDA for bile duct disease—liver disease.
Now here is the catch: orphan diseases receive special consideration, subsidies, tax breaks, so there is all sorts of incentive for pharmaceutical companies to do R&D for orphan drugs. But the beauty of Intercept is that their drug, which is very effective for these liver bile diseases, also has applications to the liver in general. Cirrhosis of the liver should obviously be a deadly disease, as well as other areas of the body where there might be disease.
But you are looking at a company, Intercept, that today no one knows. It doubled, pulled back to the low $30s from a high of $42, so this is the right time to go into Intercept. Someone is going to snatch up that company, because this is an area—just like there is so much research needed in the area of diabetes, heart disease, oncology—you want to be in a drug company that specializes in liver diseases.
As we go from biotech, a perhaps different subject: big pharmaceuticals. Any thoughts about those?
Yes, for anyone who wants income, you want to own some of the largest pharma companies. You can really make money, especially with big names like Bristol-Myers (BMY), even companies like Eli Lilly (LLY) that have lost so many of patents on their big blockbuster drugs.
But my favorite area, where sometimes you can have a little more yield and a little bit more diverse global exposure—and again, I am a real believer in being globally invested—is with companies like Sanofi (SNY), which trades with an ADR here in the US. That is a French company.
They make a lot of vaccines—vaccines for animals, vaccines for human beings—and have an incredible distribution network around the world. Vaccines will become more and more important as the emerging markets become more developed, have more income, and pass laws and rules requiring vaccinations of herds and of those of us that are human.
I also of course love Glaxo (GSK). I think Glaxo is a wonderful company that has therapeutic spanning oncology all the way to HIV and many chronic illnesses. So that is another one, Glaxo, which will be a great one to buy. I am a strong recommender of those that want income—not just to be in utilities and diversified industrials. Go for big pharma.