THE STOCKPICKERS: John Hanock's Junkin Taps Bayer, Thoratec, Spectrum Pharma
By Kristen Gerencher 01/15/07
SAN FRANCISCO (Dow Jones) -- Health care and pharmaceutical stocks can be tough investments to measure.
But Rob Junkin, manager of the John Hanock Health Sciences Fund (JHGRX) , hunkers down with research and writes a prescription.
"I try to find valuation opportunities in difficult-to-value sectors," he said. "In biotech, you can't put a value on a stock that's in clinical trials. You're making assumptions about the ability of a drug to get approved. But there are opportunities even in those situations.
"I look for [stocks] that will be driven by new products, new services, obviously positive clinical data," he added. "That's a function of spending a lot of time with management and doing research on which products have the best chance for approval and translating that into the portfolio."
Junkin likes to keep between 55 and 75 stocks in the fund, and it's in the upper end of that range now. Drugmakers comprise the bulk of the portfolio, with biotechnology companies accounting for 15% to 20% of assets, about the same proportion as health-care services, he said.
Junkin also is partial to Thoratec Corp. (THOR) , of Pleasanton, Calif., which makes artificial heart devices for heart-failure patients and those awaiting heart transplants.
The company is now working on the second-generation of its HeartMate left ventricular assist system, which is now in late-stage clinical trials. The HeartMate 2 is expected to receive FDA approval as a bridge-to-transplant device and be on the market in the second half of 2007, Junkin said.
"They'll generate revenues off that indication, which will prove that the product works," he said. At that point the company likely will try to get FDA approval for what's called destination therapy, which would allow doctors to use it the device patients who aren't good candidates for transplant.
The second-generation device will last longer than the first, making it more attractive, Junkin said. "As they move toward destination-therapy approval, it's a much bigger market. Suddenly the market goes from a 10,000-to-25,000 person market to north of 100,000."
Shares of Thoratec closed Thursday at $18.05, up 21 cents
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