Investing in biotech outside of weight-loss drugs

GLP-1 weight-loss drugs have pushed the biotech sector to new heights as demand steadily increases. But despite the drugs' popularity, there are other investment opportunities within the biotech sector. Goldman Sachs lead analyst for the US biotechnology sector Salveen Richter joins Market Domination to discuss some of the most overlooked biotech plays.

"When you look at healthcare, you tend to want to gravitate towards the more defensive sectors in a period like this. Within biotech, there are defensive aspects, but there are non-defensive aspects. So with regard to rates, obviously a positive for the sector if we start to see a rate cut. But if you're in a recessionary environment, then you can kind of pass through that situation and people will determine where they're going to allocate for growth and more of a defensive play, which will probably be these larger-cap, more quality-oriented names," Richter explains. She points to Amgen (AMGN) as an investment opportunity, as alongside its GLP-1 offerings, it's working on products to treat cancer and autoimmune diseases and is leveraging AI in its genetic medicine efforts.

She also points to Vertex (VRTX) as an opportunity, as it is "not only furthering their cystic fibrosis monopoly essentially, but also bringing in a non-opioid pain version." She notes that Vertex is also looking to build a cancer vertical as well as innovate in the autoimmune space. Richter explains that when choosing a name like Vertex, "it's much more about where do you see innovation and sustainable growth and a kind of first-in-class outlook?" She adds that diversification is key, and both Amgen and Vertex are ahead of their competitors on that front.

For more expert insight and the latest market action, click here to watch this full episode of Market Domination.

This post was written by Melanie Riehl

Video transcript

In today's Yahoo finance playbook, we're taking a close look at the biotech sector and opportunities outside of G LP ones joining us now.

Salve Richter, lead analyst for the US biotechnology sector at Goldman Sachs within global investment research Salvin thanks for being here.

Thanks for coming in.

So I wanna start a sort of big picture because we are on a day here where we're seeing this very dramatic sell off across assets.

And I just wonder kind of how you think about biotech as strategically as part of a portfolio at a time like this.

Well, I think when you look at health care, you tend to want to gravitate towards the more defensive sectors in a period like this.

Within biotech, there are defensive aspects, but they're non defensive aspects.

So with regard to rates, you know, obviously a positive for the sector we start to see a rate cut.

But if you're in a recessionary environment and then you know you can kind of pass through that situation and people will determine where they're going to allocate for for growth and and more of a defensive play which will probably be these larger cap more quality oriented names and which among those names sin in your coverage of this right now, where do you see the opportunity?

So Amgen's won their reporting earnings this week, Um, that we're focused on and and they, um they do have a next generation glip angle.

Um, but they are for obesity, but they also have a slew of pipeline products of that have come out via internal R and D and, um, and then M and a.

And so we're looking at them from an earnings execution standpoint and then the ability to kind of own in different verticals within cancer within autoimmune disease.

Um, and they also are, um, basically leveraging the A I side of of the world with regard to kind of bringing it in house and mixing it with genetic medicine.

Um, and then we, Vertex and Regeneron are two others.

We should highlight really strong R and D first execution stories.

And with Vertex, they're looking at, um, not only furthering their cystic fibrosis monopoly essentially, but also bringing in a non opioid pain version and then going further into rare diseases.

Vertex, um, is looking to build a cancer vertical and also looking to go into kind of innovative spaces in autoimmune disorders and others.

So I I think it's much more about where do you see innovation and sustainable growth and a kind of a first in class outlook First in class, best in class outlook.

And it, it sounds like, Are you also looking at the biotechs that are not sort of I mean, even though Vertex has that dominant product in cystic fibrosis, they have some other others in the pipeline you just mentioned.

Are you sort of focusing also on some diversified plays, right that aren't just sort of betting the farm on one particular, um, treatment area?

Exactly.

I mean, I think Vertex has done extremely well being a focused player.

But the idea of diversification is is key, right?

As you think about growth levers as you've penetrated a market, so they do have they've been acquiring and innovating to kind of create that diversification diversification.

So has Amgen to that point.

And, um and now we're seeing regen run have to do it.

So we've seen this with the large BioPharma or even just large farmers when they get to a point where they're too concentrated.

They do have to work on diversification here.

So I'm curious.

You know, one kind of mega trend.

No surprise.

We talk a lot about on the show is a I How are the companies in your coverage universe leveraging that technology?

And how do you see it?

Sort of just reshaping the biotech sector.

I think it's gonna reshape the biotech sector.

Um, in terms of being a tool that that everyone brings in and now it's already it already exists as computational biology.

So as we think of it's it's more of a, um, I would say a gradual, um, you know, uh, step wise function towards can Maybe greater integration here.

And so some companies, some large companies like Amgen, have gone out and been acquiring tools that they're bringing in house to, you know, Quicken development.

Lower time to, um, market, therefore lower costs, but also go after drug targets.

Right?

And so there's work on that front that's being done.

Um, and so you've seen several large pharma come in that way and and then you're seeing this emergence of a group that are calling themselves Tech vio, and they really are tech companies and drug companies that have kind of merged.

And culturally, they are interesting because they're different from models we've seen and working to create kind of next generation drugs here and And we'll see.

I think some will succeed.

Some won't.

But we're in early innings here.

Great salve.

Thank you so much for joining the show today.

Appreciate it.

Thank you.