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A man stands outside an entrance to a Moderna, Inc., building, Monday, May 18, 2020, in Cambridge, Mass.

Bill Sikes/The Associated Press

Investors are diversifying bets in the healthcare sector, as the rush to develop treatments for COVID-19 has driven up prices for some pharmaceutical stocks.

A record 48% of fund managers are overweight healthcare stocks, a BofA survey showed, and the S&P 500 healthcare sector is up nearly 34% since its March low. Hopes for a treatment have also sparked outsize rallies in the shares of companies such as Moderna and Inovio Pharmaceutcials, up 242% and 3331% since the start of the year, respectively, as of Thursday’s close.

In recent weeks, news of potential treatments or vaccines to fight the pandemic have occasionally fueled swings in broader markets.

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Yet some fund managers believe lasting profits may be elusive for vaccine-makers, leading them to seek corners of the healthcare sector that could see longer-term benefits from the fight against coronavirus.

Large pharmaceutical companies such as Johnson & Johnson and GlaxoSmithKline Plc have said they plan to make any successful vaccine available at cost, though they could reap profits later if a seasonal shot is needed . Multiple treatments could also divide the market between many players, investors said.

“There’s the question of ‘Does anyone really make a lot of money on this?,” said Larry Cordisco, co-portfolio manager of the Osterweis Fund.

Signs of progress on potential treatments could bolster the case for a quicker economic recovery and further fuel the rally that has boosted the S&P 500 around 30% from its late March lows. In the next two weeks, Gilead Sciences is expected to announce results of clinical studies of its potential coronavirus treatment remdesivir for patients with moderate symptoms of COVID-19. Pfizer has said it expects to release safety data for initial human testing of experimental vaccine by the end of May.

Cordisco is looking further afield. One of the companies he owns is medical device maker Danaher Corp, which manufactures a rapid COVID-19 test the FDA approved in March. Its shares are up 3.6% since the start of the year.

“If you’re looking for where the profits might be in the chain, it’s somebody like that who is going to benefit. They can cash in the whole way,” Cordisco said.

Alessandro Valentino, portfolio manager at Causeway Capital Management, said his firm is looking for value opportunities as the healthcare sector becomes more expensive, trading now at 22.9 times trailing earnings, slightly more than the 21.9 multiple of the S&P 500 index as a whole.

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He is staying away from potential vaccine producers in favor of companies such as Takeda Pharmaceutical Co Ltd. Japan’s largest pharmaceutical company said this month it could start clinical trials as early as July for a COVID-19 treatment based on antibodies from blood of recovered patients.

“This is a company that will be part of the solution and can buy a world class business for a significant discount to what we think the fair value is,” Valentino said. Its shares are down nearly 5% for the year to date.

Mike Caldwell, a portfolio manager of the Driehaus Event Driven Fund, said his fund is focusing on supply chains of vaccine production rather than the drug companies themselves.

He is betting on companies such as Roche Holding and Abbott Laboratories, which have large diagnostics businesses that will likely be a part of any future COVID-19 treatment.

He is also bullish on smaller companies such as Luminex Corp , which received an FDA emergency use authorization for its COVID-19 diagnostic test. Shares are up 36% year to date.

“With so many players who have meaningful resources, it’s hard to predict what the ultimate market share of any one approach will be,” he said.

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