This fund shows that industry expertise can help you make a lot of money in the stock market

The Janus Henderson Global Life Sciences Fund is about one-third invested in the biotechnology industry, which had an especially rough 2022. The fund’s benchmark is the MSCI World Health Care Index. Here’s a chart showing how the fund’s Class T shares have performed against its benchmark index (in U.S. dollars) and the SPDR S&P 500 ETF
SPY
trust over the past 15 years through September, adding the SPDR S&P Biotech ETF
XBI
to show that industry group’s volatility:

All investment returns in this article are net of expenses and assume the reinvestment of dividends and capital-gain distributions. Annual expenses for the Janus Henderson Global Life Sciences Fund total 0.98% of assets under management. The expense ratio for SPY is 0.095%; it is 0.35% for XBI.

Here are two more performance snapshots. First, total returns for various periods, as calculated by FactSet through September:

And here are the average annual returns:

Lyons has a Ph.D in immunology from Stanford University and is also a chartered financial analyst (CFA). He has been a health industry research analyst at Janus since 2000 and joined Acker to co-manage the Janus Henderson Global Life Sciences Fund earlier this year.

Speaking to MarketWatch, Lyons emphasized the importance of being selective within biotech, because “many companies are losing money and do not have good prospects.” If we look at the 147 biotech companies held by the Vanguard Russell 3000 ETF
VTHR
(essentially the largest 3,000 publicly traded companies listed on U.S. exchanges) and sum up their past four quarters’ earnings per share, the results are negative for 136 companies, according to data provided by FactSet.

The rest of the fund is roughly split between pharmaceutical companies and providers of healthcare devices and services.

Lyons said he and colleagues focus on identifying companies developing innovative medications and therapies “that result in significant cash flows because they change how healthcare is given.”

For industry efficiency improvement, he pointed to United Health Health Group Inc.
UNH,
+0.99%,
the fund’s largest holding as of Aug. 31. The company’s Optum Health unit mines medical records data. “A focus for that is improving healthcare and learning from outcomes,” Lyons said. “This can help doctors to put together care pathways for certain conditions.”

He also pointed to Intuitive Surgical Inc.
ISRG,
+0.08%,
which is employing AI and algorithms to help doctors predict the outcomes of surgeries. “They can make a good surgeon even better, by tailoring the approach to the best outcomes, whether it be prostate removal or orthopedic procedures, Lyons said.

Lyons named three companies working on new therapies for Nonalcoholic Steatohepatitis (NASH), which can spring from nonalcoholic fatty liver disease, which itself affects about 25% of people in the U.S., according to the American Liver Foundation.

“To set the stage, with a million patients in the clinics today, it is believed that by 2030, there could be 30 million people in the U.S. with NASH at some level,” he said, adding, “It is a disease for which no good therapies exist today.”

There are three companies whose stocks are held by the fund that Lyons believes “can really help with this condition over time.”

Madrigal Pharmaceuticals Inc.
MDGL,
-3.51%
has completed trials of a drug to treat “the mid-stage of the disease” Lyons said. “In the clinical trials they were able to show it would remove fat from the liver and remove fibrosis or scarring,” which could help “more people to avoid needing a liver transplant,” he said.

He said the trials the company is “in the lead” for developing NASH treatments and that he expects the medication to be approved by the Food and Drug Administration in 2024, under the regulator’s priority review.

He also named Akero Therapeutics Inc.
AKRO,
-7.20%
and 89bio Inc.
ETNB,
-5.51%,
which are both developing injectable therapies to remove liver scarring, which “will be important therapies to add on to the Madrigal therapy, to help patients avoid losing their livers over time.”

He also pointed to the excitement in the healthcare industry over new obesity treatments, including those developed by Elli Lilly & Co.
LLY,
-1.52%
and Novo Nordisk
NOVO.B,
-1.10%.
One promising development, he said, was that insurers were becoming more likely to cover the obesity treatments, because of reduced risk from heart attacks.

Finally, Lyons said that investors are now looking at an attractive setup for health care, in light of the sector’s slow recent performance relative to the broad stock market and its defensive nature, especially if the economy is headed into a recession.

Here are the top 10 holdings (out of122) of the Janus Henderson Global Life Sciences Fund as of Aug. 31:

Click on the tickers for more about each company, ETF or index.

Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.

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