For many investors in the biopharmaceutical sector today, the focus is on companies that are developing vaccines or treatments for infectious diseases. For our portfolio, however, we look at longer-term themes that could drive sustained growth for businesses over a multi-year time horizon. One example is personalized medicine.
This refers to the customization of medical treatments and approaches based on an individual patient’s specific needs. We are in the very early innings of a broad shift toward personalized medicine, where therapies will be targeted to a person’s DNA, RNA, and genetic composition.
A complex industry with many uncertainties
Many companies are making great strides in cell and gene therapy to help in the diagnosis and treatment of cancers and genetic diseases. There are currently thousands of treatments and programs in various phases of development. When it comes to biopharmaceuticals, however, there are many complexities, uncertainties, and possible outcomes. Drug development and new product launches include multiple phases of testing and trials, FDA approvals, reimbursement challenges, regulation issues, market access barriers, and supply chain challenges.
Investment opportunities emerge from a wide array of themes
Putnam Growth Opportunities Fund’s managers, along with a team of analysts, develop investment themes then narrow their focus to look for large-cap companies that offer durable long-term growth prospects.
In our portfolio: Lonza (LONN SW)
Rather than trying to forecast which individual drugs and treatments will be successful, we are invested in Lonza, a company that provides a manufacturing facility for businesses that are developing drugs. Lonza is a leading CDMO — a contract development manufacturing organization. Biopharmaceutical companies rely on CDMOs to ramp up production and ultimately commercialize their therapies.
In early 2018, Lonza opened the world’s largest dedicated cell-and-gene-therapy facility, and today it is outsourcing the manufacturing for over 1,000 different therapies. We believe Lonza has the potential to benefit when any of these treatments successfully come to market.
Our theme-based approach to investment decisions
Investment themes are a distinctive feature of our fund. Together with a team of analysts, we analyze global trends, as well as problems and potential solutions, to find long-term growth opportunities.
Once we identify a promising growth theme, we seek companies that we believe can benefit from it. We look for businesses with durable long-term growth prospects, high and/or improving capital returns, and a strong ownership culture. We look for companies with the ability to grow at above-market rates and to sustain that growth in most macroeconomic environments.
Active management: A benefit in times of changing markets
As active managers, we are able to take advantage of shifting market and economic conditions. Our intense focus on portfolio positioning and downside risk may be especially beneficial with swift and unexpected events such as the COVID-19 pandemic. As always, we are taking a patient and methodical approach while using market weakness and dislocations to add to existing holdings or to initiate new positions.
As of 9/30/20, Lonza comprised 1.25% of the fund’s holdings. For complete holdings and fund details, visit putnam.com.
Under portfolio managers Richard E. Bodzy and Gregory D. McCullough, CFA, Putnam Growth Opportunities Fund received a 5-star Overall Morningstar Rating out of 1,229 funds in the Large Growth category based on total return as of 9/30/20.
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