US biotechnology is a hot pick for Goldman Sachs, which said the sector offers investors some “very attractive” entry points. Luke Barrs, head of fundamental equity, EMEA at Goldman Sachs Asset Management, told CNBC that “transformational change” is happening in healthcare, particularly in genomic technology, an emerging area of medicine that can personalize treatments for patients. Barrs noted that the SPDR S&P Biotech ETF (XBI) “underperformed the broader market very significantly.” XBI is down over 40% this year and down about 53% over the past 12 months. The S&P 500, by comparison, is down 21% year-to-date and 11.7% over the 12-month period. Some companies in the industry face “immediate challenges,” according to Barrs. E.g. the development of drugs that have to be approved by the regulatory authorities, which is expensive. However, he added: “A third of this universe is trading below cash on the balance sheet, so look for companies with negative enterprise value positions. That seems like a very attractive entry point if you’re investing in the long-term growth story.” Such companies are ripe for acquisition, Barrs said. “If you think about the exit strategy for some of these companies, the M&A opportunity is in This space — where big pharma could step in and acquire some of these unique and emerging technologies — is clearly very attractive.” The 12 largest pharma companies currently have around $600 billion in cash on their balance sheets, Barrs added. “The big pharma could easily get in and take out a lot of these new unique technologies, which gives you a very interesting exit point upside if you’re committed to some of these new and unique technologies.” Other banks noted opportunities in biotech companies earlier this month. The analyst at Piper Sandler, Christopher Raymond, designated Cogent Biosc iences as his preferred under-the-radar small-cap pick with an overweight rating, while Morgan Stanley’s Matthew Harrison prefers BioMarin Pharmaceutical. – CNBC’s Christina Cheddar Berk contributed to this report.
