BB Biotech: Stabilization of biotech sector in the second quarter of 2016
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BB BIOTECH AG /
BB Biotech: Stabilization of biotech sector in the second quarter of 2016
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Interim Report of BB Biotech AG as of June 30, 2016
BB Biotech returned to profit in Q2 2016
The biotech sector stabilized during the second quarter. BB Biotech's Net Asset
Value (NAV) increased by +1.4% in CHF and +2.3% in EUR, resulting in a net
profit of CHF 36 mn. Despite the positive trend witnessed during the past few
months, BB Biotech's net result for the first half was a negative CHF 1170 mn
due to the loss reported for the first quarter. BB Biotech shares closed the
second quarter slightly lower, down -2.7% in CHF and -1.2% in EUR. An increasing
disconnect has been observed between the share prices of companies in BB
Biotech's portfolio and their positive operational performance. Valuations of
biotech blue chips have dropped to levels last seen in 2010/11. Meanwhile
company fundamentals remain positive, notwithstanding the increasing attention
that drug-pricing practices have received. From an operating standpoint, the
companies are performing well and setting new milestones.
The global equity markets showed continued volatility in Q2 2016. The US Federal
Reserve Bank's decision to defer again interest rate increases and the UK
referendum to leave the European Union were notable. Overall market performance
for Q2 2016 was mixed. Positive total returns were recorded for the S&P 500 of
2.5% in USD, European indices such as the DAX showed negative 2.9% performance
in EUR, the SMI was positive 4.7% in CHF, and the Nasdaq Biotechnology Index
(NBI) more or less stable with negative 1.1% in USD.
The disconnect in value between strong progress reported in biotechnology
relative to the equity market valuation continued to widen. Biotechnology stocks
have underperformed general equity markets by around 20% since January 2016. The
following can be summarized for the biotech sector in 2016:
* Valuations for biotech blue chip companies have fallen to previous lows of
2010/11, trading significantly below large pharmaceutical company multiples
and below the average S&P multiple. Many small and midsized market cap
biotech firms continue to trade at record low pipeline valuations.
* Healthcare reform discussions continue, and the drug industry has become
more assertive about new product value propositions. The US presidential
election process will highlight payer complexities of the US healthcare
system and continue to rattle investors.
* Payer recalcitrance continues to impair the pace of new product launches
such as the PCSK9 antibodies Praluent and Repatha for hypercholesterolemia.
Future launches will face similar pushback on price and volume.
* Investor's fund flows were negative in January and February 2016 but have
begun to stabilize in recent months. Large asset managers reduced
biotechnology holdings in the second half of 2015 and in 2016, but overall
pressure diminished in the second, compared to the arduous first quarter
2016.
* Positive biotech pipeline news was only recently reflected in equity gains.
This is encouraging compared to the first quarter 2016, when good news
hardly moved the needle.
It was therefore appropriate that BB Biotech's strategy meeting in June included
an expert panel on global drug pricing and reimbursement trends. Encouragingly,
genuine innovation is anticipated to command premium pricing as long as
innovators address market price realities. Experts believe that innovation
continues as the strongest foundation for attractive prices. Health economic
arguments are also gaining in importance and can help solve the equation of
payer profitability - which remains their first priority. BB Biotech continues
to monitor the political and legal landscape for healthcare reforms and changes
but expects incremental rather than dramatic change particularly in the US.
Strong progress by many of the portfolio holdings was evident once more. At
several companies this progress was not adequately reflected in equity
valuations. Conversely, two negative news events were associated with sharp
share price reactions. However, BB Biotech believes the share price corrections
of Ionis and Agios in connection with clinical news were overreactions.
Furthermore, new investment candidates were identified in the small- and mid-cap
category with attractive investment cases and which have the potential to
develop into highly valued biotech companies in the future.
BB Biotech Q2 2016 and H1 2016 performance
For the second quarter 2016, BB Biotech's share return was -2.7% in CHF and
-1.2% in EUR while the NAV gained +1.4% in CHF and +2.3% in EUR. The resulting
gain for Q2 2016 was to CHF 36 mn.
For the first six months of 2016, BB Biotech's total share return was -18.8% in
CHF and -18.4% in EUR. The total return for the NAV for the same period was
-29.1% in CHF and -28.9% in EUR, corresponding to a net loss of
CHF 1,170 mn.
BB Biotech investment leverage remained in double digits with an investment
grade of 112.3% by end of June 2016. The year 2016 began with the fund 103.5%
invested, by March 31 it was 112.8%.
BB Biotech's portfolio continued to deliver milestones
Net asset value began to stabilize - outperforming the biotech industry
benchmark in the second quarter - while still slightly behind that benchmark
year-to-date. Clinical trial results, product approvals, launches and one M&A
announcement contributed to positive results in the second quarter. The NAV was
pushed back by news of unexpected adverse events reported for two of Ionis'
late-stage pipeline assets and also by Infinity's Pi3k inhibitor Duvelisib data
which investors rated as underwhelming.
Other company news items were reported. Gilead received multiple product
approvals for products in its leading HIV and HCV franchises. Both the US FDA
and the European Agency EMEA approved the fixed-dose combination product Descvoy
(Emtricitabine, TAF) for treating HIV patients in April 2016. Gilead's HIV
franchise was further strengthened with the positive CHMP opinion for Odefsey
(Emtricitabine, Rilpivirine, TAF). Gilead also received US approval for Epclusa
(Sofosbuvir, Velpatasvir) and a positive CHMP opinion for Epclusa. Despite these
significant successes, Gilead's share price declined further in the second
quarter as Q1 2016 financial results were below market expectations and
investors continued to fret about the trajectory and longevity of the company's
HCV business.
Actelion was granted European marketing authorization for Uptravi to treat PAH
patients in the second quarter. We believe this further strengthens the company.
Intercept was granted accelerated approval for Ocaliva (obeticholic acid) for
the treatment of patients with PBC (primary biliary cirrhosis) by the FDA.
Swedish Orphan Biovitrum was granted EU approval for Alprolix, a recombinant
Factor IX-Fc for the treatment of hemophilia B. In contrast to these positive
regulatory events, Clovis terminated development of Rociletinib in lung cancer
after receiving a complete response letter from the FDA.
Both Radius and Cempra made progress with lead assets. Radius submitted a new
drug application (NDA) for Abaloparatide-SC for the treatment of postmenopausal
women with osteoporosis. The submission was accepted for filing by the FDA and
an approval decision is expected in early 2017. Also during the second quarter,
Cempra submitted its NDA for Solithromycin for the treatment of community-
acquired bacterial pneumonia in the US and Europe.
Late-stage clinical trial results lifted market sentiment during the second
quarter. Tesaro doubled in market valuation after announcing strong Phase III
data for Niraparib - a new class of anticancer drugs called PARP inhibitors in
specific types of ovarian cancer. The trial met its primary endpoint of improved
progression-free survival in the germline BRCA mutant cohort and in the non-
germline BRCA mutant cohort, including both the HRD-positive and overall
analysis populations. Tesaro plans to submit regulatory applications in the US
and Europe later in 2016.
Regeneron and its partner Sanofi announced positive Dupilumab data in patients
with inadequately controlled moderate-to-severe atopic dermatitis.
Alexion did not reach statistical significance for the primary efficacy endpoint
with Soliris in patients with refractory generalized myasthenia gravis (gMG).
Alexion's share price fell as investors registered concerns over long-term
growth of Soliris.
Infinity announced results for its Pi3K inhibitor Duvelisib in patients with
refractory indolent non-Hodgkin lymphoma. An overall response rate of 46%, all
partial responders, is not considered competitive compared to other treatment
options. Abbvie consequently returned worldwide marketing rights for Duvelisib.
Unexpected safety findings for Ionis' two late-stage pipeline candidates IONIS-
TTRrx and Volanesorsen resulted in a sharp decline in the company's valuation.
While time will tell, BB Biotech regarded this as an overreaction by a sensitive
biotech market.
Agios presented promising early-stage data for AG-348 in PK deficient patients.
Acquisition news played a minor role for BB Biotech's portfolio. Although large
pharma and biotechnology companies emphasized their appetite for acquisitions at
current low prices, none has yet landed a transaction. Sanofi offered USD 52 per
share for Medivation in late April 2016. The company and the market was not
impressed, but this story is anticipated to play out - Medivation has traded
around USD 60 per share since the hostile take-over offer - and recently another
buyer made a potentially better offer. BB Biotech will follow the situation
closely.
Portfolio changes
Careful adjustments were made to the portfolio during the second quarter of
2016. Infinity and Clovis were sold off. Three new small and midsized companies
were added to the portfolio:
* Intra-Cellular Therapies is developing the lead molecule ITI-007 for the
treatment of schizophrenia, bipolar disorder and behavioral disturbances in
dementia. ITI-007 is an improved 5-HT2A serotonin receptor antagonist,
designed to offer similar efficacy but improved tolerability profile
compared to established drugs of the same class. The company has announced
one positive Phase 3 study for schizophrenia, and a second Phase III trial
is expected to readout in the third quarter of 2016.
* Macrogenics is an antibody technology company developing effector function
improved antibodies and a novel platform called DART (Dual-Affinity-Re-
Targeting) which offers potential for the efficient development of
bispecific antibodies. This platform has been partially validated through
multiple partnerships with major pharma companies.
* Tobira Therapeutics is developing Cenicriviroc, a dual CCR2 and CCR5
antagonist for treating patients with nonalcoholic steatohepatitis or NASH -
a common, often "silent" liver disease. The company has a large Phase II
study ongoing with data readout expected later in 2016.
Outlook for the sector and the portfolio
BB Biotech anticipates further volatility of biotechnology equities in 2016.
Nevertheless, product approvals and readouts from key clinical trials offer the
potential for significant growth in valuations for the rest of 2016 and into
2017. Important regulatory and clinical trial milestones anticipated for
companies in BB Biotech's portfolio include:
* Neurocrine - Valbenazine for patients with tardive dyskinesia
* Radius - Abaloparatide-SC for postmenopausal women with osteoporosis
* Medivation - label expansion for Xtandi for treating pre-chemo prostate
cancer-patients
In addition, important clinical trial results are expected, including:
* Vertex - VX/661/Ivacaftor combination for treating cystic fibrosis patients
that are heterozygous for the F508 deletion
* Incyte - Epocadostat in multiple Phase II studies in combination with
various PD1 and PDL1 antibodies
* Celgene - Revlimid tested in the REMARC study for patients with diffuse
large B-cell lymphoma
* Novavax - RSV vaccine Phase III study for the elderly
* Intra-Cellular - ITI-007 Phase III study for schizophrenia patients
* Tobira - Cenicriviroc Phase II for NASH patients
* Sage - SAGE-547 with a Phase III study for superrefractory status
epilepticus in Q4 2016 and a Phase II study for postpartum depression in Q3
2016
These and other milestones are anticipated to support the strong fundamentals of
BB Biotech's portfolio specifically and the biotechnology sector in general.
With one of the weakest half year results now behind it,
BB Biotech expects a return to growth from its portfolio holdings in the coming
quarters and for FY 2016 as a whole. With many large pharmaceutical and
biotechnology companies declaring interest in M&A, industry consolidation and
opportunities for attractive exit prices could increase. However, BB Biotech's
strategy remains focused on biotech companies offering innovation which promises
to expand treatment options for important human diseases and to improve health
outcomes significantly.
The complete interim report as of June 30, 2016 is available on
www.bbbiotech.com
For further information:
Investor Relations
Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland, tel.
+41 44 267 67 00
Dr. Silvia Schanz, ssc(at)bellevue.ch
Maria-Grazia Iten-Alderuccio, mga(at)bellevue.ch
Claude Mikkelsen, cmi(at)bellevue.ch
Media Relations
Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland, tel.
+41 44 267 67 00
Tanja Chicherio, tch(at)bellevue.ch
b-public AG, Pfingstweidstrasse 6, 8005 Zürich, Switzerland, tel.
+41 79 423 22 28
Thomas Egger, teg(at)b-public.ch
www.bbbiotech.com
Company profile
BB Biotech invests in companies in the fast growing market of biotechnology and
is one of the world's largest investors in this sector. BB Biotech is listed in
Switzerland, Germany and Italy. Its investments are focused on listed companies
that are developing and commercializing novel medical treatments and cures. BB
Biotech's investment selection process is guided by the fundamental research and
analysis of physicians and molecular biologists. Its Board of Directors has many
years of experience in industry and science.
Disclaimer
This release contains forward-looking statements and expectations as well as
assessments, beliefs and assumptions. Such statements are based on the current
expectations of BB Biotech, its directors and officers, and are, therefore,
subject to risks and uncertainties that may change over time. As actual
developments may significantly differ, BB Biotech and its directors and officers
accept no responsibility in that regard. All forward-looking statements included
in this release are made only as of the date of this release and BB Biotech and
its directors and officers assume no obligation to update any forward-looking
statements as a result of new information, future events or other factors.
Composition of BB Biotech's portfolio as of June 30, 2016
(in % of securities, rounded values)
Celgene 11.8%
Incyte 10.2%
Actelion 9.3%
Gilead 7.7%
Ionis Pharmaceuticals 5.5%
Radius Health 5.3%
Neurocrine Biosciences 4.7%
Alexion Pharmaceuticals 4.6%
Vertex Pharmaceuticals 4.0%
Novo Nordisk 4.0%
Medivation 4.0%
Agios Pharmaceuticals 3.3%
Tesaro 3.2%
Regeneron Pharmaceuticals 2.4%
Alnylam Pharmaceuticals 2.2%
Halozyme Therapeutics 2.1%
Novavax 2.0%
Swedish Orphan Biovitrum 1.8%
Juno Therapeutics 1.7%
Alder Biopharmaceuticals 1.4%
Kite Pharma 1.2%
Intercept Pharmaceuticals 1.2%
Cempra 1.1%
Intra-Cellular Therapies 0.9%
Sage Therapeutics 0.8%
Probiodrug 0.7%
Macrogenics 0.5%
Puma Biotechnology 0.4%
Prothena Corp. 0.4%
Achillion Pharmaceuticals 0.3%
Esperion Therapeutics 0.3%
PTC Therapeutics 0.3%
Cidara Therapeutics 0.3%
Tobira Therapeutics 0.2%
Radius Health warrants 04/23/2018 0.1%
Radius Health warrants 02/19/2019 0.1%
Merck & Co Inc Contingent Value Rights - ex Trius/Cubist 0.0%
Total securities CHF 2 945.0 mn
Other assets CHF 32.8 mn
Other payables CHF (356.5) mn
Total shareholders' equity CHF 2 621.3 mn
Treasury shares (in % of company) (1)) 7.0%
1) Corresponds to the total of all own shares held including the second trading
line
Press Release (PDF):
http://hugin.info/130285/R/2029988/754966.pdf
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Source: BB BIOTECH AG via GlobeNewswire
[HUG#2029988]
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Datum: 22.07.2016 - 07:01 Uhr
Sprache: Deutsch
News-ID 484791
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