On the Total Number of Mutual Funds in the US Market

Posted by on

The number of publicly-listed US companies continues to decline each year. From a peak of over 7,600 in 1997 the number has shrunk to about 3,600 at the end of 2017. That is a reduction of over 50%.

Click to enlarge

Source: Where Have All the Public Companies Gone?, April 8, 2018, Bloomberg

Despite the fall of public companies, the number of mutual funds available in the market has exploded in the past few decades and remains high. At the end of 2017, nearly 8,000 mutual funds existed in the US market as shown in the chart below. To put this number in perspective, there were only 361 funds in 1970. Then the number jumped to 564 in 1980. Since then the number of funds have steadily increased year over year until the dot-com crash of early 2000 and the global financial crisis of 2008-09.

 

Click to enlarge

Data Source: 2018 Investment Company Institute Fact Book

Note: The above figure includes equity, debt and money market funds.

There were a total of 4,706 pure equity funds at the end of last year.

Mutual funds typically have high expense ratios in the range of 1.20% to 1.50% on an average. Many funds have much higher fees than these ratios. Investors looking to avoid these high fees can consider index funds or ETFs.

Biotech Stocks Are Not For The Faint-Hearted

Posted by on

The biotech sector is soaring this year with the benchmark NYSE Arca Biotechnology Index up by over 27% YTD as of the end of September. Investors’ attraction towards biotech stocks shows no signs of showing as evidenced by many successful IPOs being launched on a weekly basis and also trading volumes. In addition, one of the top viewed pages on this site is the complete list of biotech stocks page.

In general biotech stocks are not suitable for all investors especially retail investors that are risk averse. This is because these equities are highly speculative and most of the companies cannot be analyzed using fundamental factors such as P/E ratio, assets, revenues, etc. The majority of the companies do not have any earnings yet as they are still in the discovery process to create some drug for cancer or other diseases. As such, a company that is successful in the discovery and winning of FDA-approval will be a winner while the unsuccessful ones will be spectacular losers. In addition, equity prices of losers can lose 50% or more almost overnight providing no warning and time to escape the carnage. So investors in biotech need to be aware of these risks and prepare their portfolios accordingly.

The case of two companies that had wild moves recently vividly describes the above scenarios.

On the winning side of the equation, Amarin Corporation plc(AMRN) is based in Dublin, Ireland. Below is short profile from Yahoo Finance:

Amarin Corporation plc, a biopharmaceutical company, focuses on the development and commercialization of therapeutics for the treatment of cardiovascular diseases in the United States. The company’s lead product is Vascepa, a prescription-only omega-3 fatty acid capsule, used as an adjunct to diet for reducing triglyceride levels in adult patients with severe hypertriglyceridemia. It is also involved in developing Vascepa for the treatment of patients with high triglyceride levels who are also on statin therapy for elevated low-density lipoprotein cholesterol levels. Amarin Corporation plc sells its products principally to wholesalers and specialty pharmacy providers through direct sales force. It has collaboration with Mochida Pharmaceutical Co., Ltd. for the development of EPA-Based drug products and indications. The company was formerly known as Ethical Holdings plc and changed its name to Amarin Corporation plc in 1999. Amarin Corporation plc was founded in 1989 and is based in Dublin, Ireland.

AMRN was trading at under $5 per share for over a year. On Sept 21st, the stock was trading at $2.99. On Monday Sept 24th, the company announced that its fish oil drug reduced the risk of heart diseases. The stock more shot up 315% on this announcement. From a journal article that day:

Amarin Corp. more than tripled in value Monday, after the company said its drug derived from fish oil reduced the risk of heart attacks, strokes and deaths in certain high-risk patients.

The results could open the door for a new line of attack against heart disease, and turn Amarin’s drug Vascepa into a blockbuster, if the data is borne out under closer scrutiny.

“This is indeed huge,” Amarin CEO John Thero said during a conference call with analysts. The result “positions Vascepa to be first to market in addressing a large unmet medical need.”

ADR shares of Dublin-based Amarin jumped 315% on the news, raising the company’s market cap by $2.8 billion, to $3.6 billion.

Source: Amarin Surges on Fish-Oil Drug Data, WSJ, Sept 24, 2018

After ending Sept 24 a $12.4 the stock further rose in the following days. On Friday it shot up another 17% and ended the week at $16.27.

AMRN Year-to-date return chart:

Click to enlarge

Source: Yahoo Finance

This example shows how a biotech stock can soar to the moon on a single day and then some based on a single news announcement.

The below case of Geron Corporation (GERN) shows the scary situations that biotech investors face.  On September 26, Geron announced that Johnson & Johnson (JNJ) had terminated a partnership venture with it. The exit of a deep-pocketed partner and future uncertainty caused the  stock by plunge by 68% on a single day. Earlier in the day the stock was down by 76%.

GERN Year-to-date return chart:

Source: Yahoo Finance

On Friday the stock further plunged another 22% in morning trading. The above YTD chart shows the dramatic selloff in Geron’s shares.

The above two sample cases show that biotech stocks are not for the faint-hearted. Investors can earn wonderful returns or lose huge investments within a short period.

The key takeaway is investors in individual biotech stocks have to know the huge risks involved and diversify accordingly. A better option would be to avoid individual firms and simply buy an index fund.

Disclosure: No Positions

The 10 Best Global Contract Research Organizations (CROs) in 2018

Posted by on

Contract Research Organizations (CROs) play an important role in medical innovation as more pharmaceutical, biopharmaceutical and medical device companies outsource many of their R&D activities. The top 10 global CROs are listed in the chart below.

Here is a brief overview of the CRO industry:

In 2017, the global CRO services market is estimated to be valued at USD 36.27 Billion and projected to grow at a CAGR of 7.6% from USD 39.13 Billion in 2018 to reach USD 56.34 Billion by 2023.  Globally more than 1,100 CRO companies are active in 2017. The global CRO market is centralized with the top 10 companies that generated collective total revenue of USD 34.514 billion in 2017 (including reimbursed out-of-pocket revenue). The global contract research market is growing at a strong rate as increased dependence of pharmaceutical, biopharmaceutical and medical device companies seen due to increased outsourcing of R&D activities, increased R&D expenditures and, increasing number of clinical trials.

The leaders in this market include a mix of public-listed and privately held organizations. Recent collaborations by CRO companies with government agencies and non-profit health organizations has proved that CROs are not just clinical service providers but actively involved in the new drug development process, and immensely contributing to the development of new products and helping advancement in healthcare outcomes.

Click to enlarge

Source: IGEA Hub

Some of the publicly-listed companies from the above rankings are Laboratory Corp. of America Holdings(LH), Charles River Laboratories Intl. Inc (CRL) and Iqvia Holdings Inc(IQV).

From an investment perspective, the CROs are a better bet than drug and biotech firms since they provide a service and are not dependent hugely on the discovery or success of a drug for example.

Earlier:

Disclosure: No Positions

The Top 20 Best Selling Drugs in 2018: Chart

Posted by on

The Top 20 Best Selling Drugs in 2018 are shown in the chart below with their sales figures in 2017:

Click to enlarge

Source: IGEA Hub via microbeminded

All of the top selling drugs above are owned by major pharmaceutical firms. For example, the popular brand drug Humira is used to treat rheumatoid arthritis and other related diseases is made by Abbott Laboratories (ABT). Similar GlaxoSmithKline (GSK) is the maker of Advair.

Disclosure: No Positions

Also checkout: