Joining the biotech revolution: biotechnology and health sciences offer exponential growth in the coming years

Money Digest, March, 2000

The biotech boom

Biotechnology is one of the fastest growing sectors of the stock market. Advances in mapping human genetic codes have led to unprecedented developments in the field of medicine. Such developments will have tremendous implications for our health and well-being -- such as a cure for cancer, which may be just five years away. Biotech companies stand to profit immensely from such developments.

Investing opportunities

We are still in the early stages of the biotechnology revolution. In the years to come, we will see cures for many ailments directly as a result of advances in biotechnology.

Investors can can take advantage of the exponential growth in these sectors by investing in two areas: Biotechnology and health sciences. However, to participate in the growth in these sectors, one needs specialized knowledge. Not all companies involved in the biotech sector -- as is true of any sector -- will prosper. For this reason, it is best to invest in funds that specialize in biotechnology and health sciences. In fact, even funds that specialize in the biotechnology sector tend to invest in related fields such as health sciences. In fact, except for C.I. Global Biotechnology Sector Fund, none of the Canadian biotech funds can be considered a pure play in this sector.

Biotech and health sciences mutual funds

Here are some funds that you might want to consider if you are interested in biotechnology and health sciences.

C.I. Global Biotechnology Sector Fund covers two aspects. The first is gernomics with applications covering cures for diseases such cardiovascular disease, psoriasis and cancer. The second is gene therapy, which specializes in reversing genetic conditions. As we mentioned, this fund is exclusively focused on the biotechnology sector.

Trimark Discovery Fund invests in biotechnology and small cap technology stocks. About one-fifth of this fund is invested in biotechnology (mostly gernomics) while the rest is invested mostly in small cap technology and other stocks.

AIM Global Health Sciences Fund invests in many large cap pharmaceutical companies as well as the the biotech sector. It invests about a third of its capital in the biotech sector.

Sentry Select Biotechnology and Health Sciences Fund, 1999, is a new entrant to the field. It was launched in November, 1999, and will be available to new investors until May 31 of this year. It invests in 25 companies, about half of which are biotech companies. It is designed to wind up by October 31, 2004, although investors will be allowed to redeem at any time.

Labour-sponsored venture capital fund

If you are more adventurous and not risk-averse, you may want to consider Canadian Medical Discoveries Fund, a labour-sponsored venture capital fund. This fund invests in Canadian companies in their early developmental stage.

The future

The biotechnology and the pharmaceutical sectors have already registered impressive gains. However, major breakthroughs such as cancer cures and life-enhancement technologies are still ahead of us. In the next few years, we can expect ever more impressive gains. This is not a risk-free sector even though a diversified and prudent investor has a much better chance of making rather losing money.

So, future-oriented investors may want to allocate part of their investment capital -- perhaps 10% to 15% -- in this promising sector.

Biotech mutual funds

                                                        Returns (%)

Fund name                           RRSP   Commission   1 mth   3 mth

AIM Global Health Sciences Fund        F           B      6.1     837
C.I. Global Biotechnology Sector       F           B     16.1    60.1
Canadian Medical Discoveries Fund      Y           B     12.0    22.8
Sentry Select Biotechnology &
Health Sciences Fund                   F           F      5.3       -
Trimark Discovery Fund                 F         F/B      7.9    48.0

                                         Returns (%)

Fund name                           6 mth   1 yr.   3 yr.

AIM Global Health Sciences Fund       835    -1.1   17.6
C.I. Global Biotechnology Sector        -       -      -
Canadian Medical Discoveries Fund    15.7    8.60   -0.3
Sentry Select Biotechnology &
  Health Sciences Fund                  -       -      -

Trimark Discovery Fund 71.8 84.2 42.1

Sources: Southam's FundProfiler and The Globe and Mail Report on Mutual Funds period ending January 31, 2000