Citing the opioid addiction epidemic in the United States as a driving force, investment officers at Highland Capital Management of Dallas, Texas are finding growth opportunities in non-opioid pain reliever production. The company’s small-cap fund allocates a sector of approximately 25% for health care industry investments, close only to the 16% for energy concern investments as of December 2016.
In the February 2, 2017 Market Watch article, “Fund that almost tripled the S&P 500’s gain last year is now big on health-care stocks,” Michael Gregory details why his Highland Small Cap Equity Fund is investing in pharmaceutical companies developing non-opioid pain relievers. Gregory is the chief investment officer of Highland Alternative Investors, a division of Highland Capital Management, which runs the small-cap stock fund. Gregory noted that insurance providers are starting to “fast-track” pain relievers designed to be less addictive. One such company, Collegium Pharmaceutical Inc., is combining oxycodone with fatty acids and waxes to make it difficult to concentrate, therefore harder to abuse. Another company Gregory cited, Pacira Pharmaceuticals Inc., produces a non-opioid pain reliever specifically for use after soft-tissue surgeries. Gregory expects to see tremendous growth in these stocks as this safer generation of pain medication gains market share and approvals. The Market Watch article stated that it was Gregory’s and his co-manager, James Dondero’s, tactics that lead to the 31.6% returns in 2016, mostly through energy stock picks.
According to Nasdaq, not only does Highland Small Cap Equity hold stocks in Collegium and Pacira pharmaceutical companies, but also in businesses such as Minerva Neurosciences Inc. and Coherus BioSciences, Inc. Gregory is confident that allocating a large sector of investments in the health care industry will pay off as he expects the industry to rebound significantly in 2017.