A contagious opportunity in biotech stocks

Genetics companies could be the future of fighting diseases.

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In the last year, we have witnessed firsthand biotechnology's power to come up with solutions against diseases and infections. Although the response to COVID-19 has been in the spotlight, biotechnology companies continue to find solutions and discover therapies for other important diseases. It has been 18 years since scientists first mapped the human genome—the genetic blueprint for building a human being. There is a continual push to better understand the human genome, as well as to create and leverage new technology to better understand and treat human health problems.

Advances in biology and medicine usually are preceded by important breakthroughs in measurement, concludes Fidelity’s Christopher Lin and Ryota Ishizuka, who believe a handful of companies are taking human genome sequencing to new heights. Lin, who manages Fidelity® OTC Portfolio (FOCPX), and Ishizuka, an analyst who works with him closely, note what has changed recently is the technology’s scale, resolution, and analytical capability to better understand the human genome.

“This deeper understanding will enable us to treat disease more effectively, and we have identified companies that are leading the way from a measurement perspective and could help bring about game-changing treatments,” Lin says.

In managing the tech-heavy fund, Lin seeks companies with competitive advantages he thinks will enable them to deliver durable growth and above-average revenue and earnings growth. He seeks to acquire stocks of these companies at reasonable prices.

As of April 30, the fund held several genomics plays that met his criteria, including 10x Genomics (TXG). The company’s products combine hardware, chemistry, and software to provide single-cell and spatial views (where different nucleic acids and proteins are located and in specific amounts) of biological samples. Lin says 10x is using its tools to understand infectious diseases by gaining a holistic understanding of their pathophysiological signature and the body’s cell-mediated immune response.

Lin adds that, in oncology, 10x is using its single-cell and spatial insight to investigate the complex biology underlying tumor heterogeneity, the immune microenvironment, and other medical phenomena.

Also illustrative is NanoString Technologies (NSTG), a specialist in technology that enables basic research, translational medicine, and in-vitro diagnostics applications. Through its GeoMx® Digitalspatial profiler, the company can combine spatial analysis of RNA and protein expression data.

“I’m excited about what the future could hold as we consider contributions from these and other innovative companies,” Lin says.

Fidelity® OTC Portfolio held securities mentioned in this article as of its most recent holdings disclosure. For specific fund information, including holdings, please click on the fund trading symbol above.

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