The investment trust, which is run by Phoenix Asset Management, upped its existing allocation to the FTSE 100 pharma giant from 5.8% to 8.3% at the end of last year, making it the fifth largest holding in the portfolio.
Tristan Chapple (pictured), a director and research analyst at Phoenix AM, said the firm’s faith in GSK, and in the pharma sector more widely, stemmed from research it conducted a few years ago looking at the acquisitions over the years by the largest pharma players, and their unfaltering dominance throughout the 20th century.
He explained: “Although the companies have changed substantially because of M&A in the sector, the market shares are very stable over time – decades and generations. In other words, big pharma companies today were the same big pharma companies 20, 40, 60 and 80 years ago.”
In July last year, fellow FTSE 100 listed pharma company AstraZeneca’s share price plummeted 16% and it lost more than £10bn off its market value after revealing a lung cancer drug trial had failed.
Chapple acknowledged people tend to be concerned about things like patent cliffs, discovering blockbuster products and individual drug exposures, but said they should not worry because the pharma industry operates on an “ongoing cycle of creative destruction”.
“They will have a product that does not exist in 15 years’ time, but they will have new ones then and history bears that out,” he said. “The reason they are able to regenerate themselves is they are vast industrial complexes with tremendous research and distribution capabilities.
“These businesses have a lot of their strength in getting products into the market and I think people sometimes overlook that in the pharmaceutical market.”
The Aurora Investment Trust is slow to transact and rarely adds new names to the portfolio, having made just 109 investments in 20 years.
In recent weeks, it has added FTSE 250 funeral business Dignity and prior to that it invested in Easyjet in October 2016. The airline now represents 3.7% of the portfolio, its 12th largest holding.
