Biotech stocks continue to advance
(Thomson Reuters ONE) -
BB BIOTECH AG /
Biotech stocks continue to advance
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The issuer is solely responsible for the content of this announcement.
Interim Report of BB Biotech AG as of September 30, 2016
Good operational progress and renewed M&A activity lead to a positive third
quarter for biotech stocks
BB Biotech shares continued to recover lost ground, gaining +11.9% in CHF and
+11.7% in EUR during the past quarter. Net Asset Value (NAV) also rose and
resulted in a quarterly profit of CHF 392.1 mn. A pickup in M&A activity
contributed to the positive sector performance. Investor interest centered on
Pfizer's acquisition of Medivation and Allergan's bid for Tobira. Many biotech
firms also reported good progress in their clinical trials. Highlights here
included Ionis, Agios, Kite, Sage, Radius and Alder. Meanwhile the US elections
on November 8, 2016 are looming large and the possibility of more government
price controls is commanding the attention of investors. That said, BB Biotech
believes that any changes enacted by the next administration and Congress will
be incremental rather than dramatic. BB Biotech AG made careful adjustments to
its portfolio during the third quarter to capture opportunities presented by the
ongoing market volatility and possible overreactions to news flow. Positions in
Novo Nordisk and Regeneron were increased, for example, and profits were taken
in Celgene, Actelion, Tesaro, Swedish Orphan Biovitrum and Puma Biotechnology.
Global equity markets generally traded higher in Q3 2016, as the US Federal
Reserve Bank once more deferred raising interest rates and other reserve banks
continued expansive policies. The third quarter of 2016 saw positive USD returns
of 3.9% for the S&P Index, 2.8% for the Dow Jones Index, 10.7% for the Nasdaq
100 and 12.5% for the Nasdaq Biotech Index. In Europe, a recovery of sorts
continued after the Brexit vote with the DAX gaining 8.6% in EUR but the SMI
gaining a mere 1.7% in CHF. In the same time period, BB Biotech reported a gain
of 11.9% in CHF, and 11.7% in EUR.
Biotech valuations saw modest upward progress despite improving fundamentals and
this disconnect reinvigorated the M&A market in the third quarter. Large
pharmaceutical companies took advantage of the disconnect to acquire small and
midcap companies - eschewing mega-mergers and generating cash from their own
restructuring-related divestment activity - which included the sale by entire
pharmaceutical divisions in some cases. Pharma's entry into M&A once more led
the recovery of BB Biotech's Net Asset Value (NAV), which increased 15.5% in
USD, 14.9% in CHF and 14.3% in EUR.
Key events and readouts which impacted BB Biotech's portfolio holdings in the
third quarter of 2016 included M&A transactions:
* Medivation - acquired by Pfizer for USD 81.50 per share, valuing the company
at USD 14.5 bn.
* Tobira - received a takeover offer from Allergan for USD 28.35 per share in
cash and up to USD 49.84 per share in contingency value rights, representing
USD 600 mn in upfront cash payment and an additional USD 1.1 bn in milestone
payments.
In addition, valuable progress with drug development programs was announced:
* Ionis, with its development partner Biogen, announced that the nusinersen
Phase III ENDEAR study treating spinal muscular atrophy (SMA 1) patients was
stopped early due to a positive interim data for motor milestone
achievements.
* Agios announced, with its development partner Celgene, it would accelerate
the filing of AG-221 for treating AML patients with IDH mutations.
* Kite reported positive initial results for KTE-019 for treating DLBCL
patients.
* Sage announced positive Phase II data for severe post-partum depression for
SAGE-547. The FDA granted SAGE-547 breakthrough designation status.
* Radius' abaloparatide patch demonstrated positive PK/PD data for the
treatment of osteoporosis.
* Alder reported positive Phase II data for ALD403 for the treatment of
chronic migraine.
Some news events were negative or mixed, including:
* Novavax announced that the Phase III RSV vaccine trial for elderly patients
did not meet the primary endpoint of prevention of moderate to severe RSV-
associated lower respiratory tract disease.
* Intra-Cellular reported that the second Phase III trial for ITI-007 did not
reach the primary endpoint in schizophrenia patients.
* Celgene's Phase III trial for Revlimid to treat diffuse large B cell
lymphoma reported a positive progression-free survival effect but failed to
show an overall survival benefit.
Life-science investors also remained focused on the US presidential election
(November 8) - looking for signals of policy change from either candidate. The
debate was fueled as a consequence of inquiries into aggressive price increases
for Mylan's EpiPen - a long-established product. EpiPen is not a product of
modern biotechnology. Nevertheless these controversies fuel investor concerns
about future price control mechanisms in the US - which BB Biotech believes will
be modest and will not impede investment and value in innovative medicines.
Innovation continues to be recognized as the strongest foundation for attractive
pricing - and firms that deliver biotech progress and smart health economics
will continue to win. In the meantime, pharmacy benefit managers (PBMs) in the
US continue to come under scrutiny. PBMs act as middle-market negotiators
between payers, pharmacies, providers and biopharmaceutical companies. They have
been widely criticized for taking too big a slice of the cost of medicines in
the US - but continue to exert influence on drug adoption, prices and payment
terms. Recently, Novo Nordisk reduced its revenue growth outlook for 2017
consequent to PBM pressure, leading to a sharp correction in its share price
over the last few weeks.
BB Biotech will continue to monitor the US political, pricing and reimbursement
landscape for healthcare reforms, and believes that any modifications introduced
by the next president and Congress will be incremental rather than dramatic.
Third quarter 2016 and year to date 2016 performance
For the third quarter 2016, BB Biotech's positive share return was 11.9% in CHF
and 11.7% in EUR. For the same period the NAV gained 14.9% in CHF and 14.3% in
EUR. The resulting profit for Q3 2016 is CHF 392.1 mn.
For the first nine months of 2016, BB Biotech's share price return was -9.1% in
CHF and -9.6%% in EUR. The total return for the NAV for the same period was
-18.5% in CHF and -18.7% in EUR, corresponding to a net loss of CHF 777.8 mn.
BB Biotech reduced its investment leverage most significantly by selling its
Medivation position into the Pfizer offer and by selling its Tobira position in
the takeover offer by Allergan. The fund's investment grade of 112.3% at the end
of June 2016 was reduced to 107.6% by the end of the third quarter 2016.
Throughout the third quarter, BB Biotech increased the number of its own shares
through the first trading line by 11 000, representing a total of around 0.5% of
the 55.4 mn outstanding shares of BB Biotech.
BB Biotech's portfolio news in the third quarter
The NAV performance moved up in the third quarter - outperforming the benchmark
by 3% in USD, and moving closer to the benchmark on a year-to-date basis. Most
of the clinical trial results reported by portfolio companies were positive, but
the (few) negative outcomes limited growth reported for the quarter. As
described earlier, M&A activity contributed positively to overall performance.
During the quarter BB Biotech portfolio companies reported several important
clinical milestones. Ionis, and its partner Biogen, surprisingly announced the
early stopping of the ENDEAR Phase III study (SMA 1 patients), which met one of
the co-primary endpoints in an interim analysis - showing impressive
improvements in motor milestone achievements compared to untreated babies.
Biogen has already completed the filing process and the product is expected to
be launched in 2017 in the US and Europe.
Capitalizing further on BB Biotech's experience in SMA, Avexis was added to the
portfolio based on early, but highly promising improvements seen in SMA type 1
babies after a single administration of Avexis' gene therapy product AVXS-101.
Early results indicate strong improvements in motor milestones, in contrast to
the devastating deterioration seen in untreated SMA 1 babies.
Radius Health announced further progress on the abaloparatide program. The
subcutaneous injection formulation - abaloparatide SC - is expected to receive
the CHMP opinion by the end of 2016 and has been accepted for filing in the US.
The FDA decision on approvability is expected in 2017. Improvements in the
transdermal patch have significantly enhanced the delivery profile, making it
closer in release performance than the subcutaneous formulation, potentially
allowing for approval based on bioequivalence and without running another long
term fracture study. The abaloparatide patch has the potential to address a
significant group of patients who do not want to receive regular injections.
Sage continued to make progress with its neurology pipeline. Although its Phase
III seizure study data read-out was delayed to 2017, the company reported
positive Phase II results for SAGE-547, which is being tested in severe
postpartum depression (PPD). Remission from depression was seen in 7 of 10
patients treated with SAGE-547 compared with 1 of 11 patients given placebo
(p = 0.008). The FDA breakthrough designation, which offers the potential for
expedited development and review, underscores the significant unmet medical need
in women with severe PPD.
Agios, and partner Celgene, disclosed that Celgene has filed AG-221, a first in
class, oral inhibitor of mutant isocitrate dehydrogenase-2 (IDH2) in relapsed
and/or refractory acute myeloid leukemia (AML). The NDA is based on the broad
Phase II/III study, with a Phase III program expected to generate data in 2018.
Agios' fully owned AG-120 molecule to treat mutant IDH1 patients with AML is
also being developed with a similar clinical trial strategy, potentially leading
to an NDA filing as early as 2017.
The quarter saw a handful of unexpected setbacks in the portfolio as well.
Celgene provided an update on the Phase III REMARC study of Revlimid maintenance
treatment in patients with diffuse large b-cell lymphoma (DLBCL) responding to
the current standard or care (R-CHOP therapy). The primary endpoint of
progression free survival was statistically significant but the overall survival
at the interim analysis showed no benefit. Celgene will not seek approval for
the DLBCL indication but has further trials treating lymphoma patients that are
expected to report data in the coming year or so. The disappointment modestly
impacts the growth trajectory for Revlimid, and therefore the effect on
Celgene's share price was limited.
Two smaller companies in the portfolio experienced share price declines
following negative outcomes for Phase III trials. Novavax unexpectedly announced
negative topline RSV F vaccine data from its Phase III RESOLVE in older adults.
As a consequence Novavax lost 80% of its value and announced restructuring plans
to conserve cash for ongoing RSV programs.
Intra-Cellular, a new portfolio investment company, also unexpectedly reported
negative top line results from its second Phase III trial of ITI-007 in patients
with schizophrenia. This means Intra-Cellular now has positive Phase II data,
one positive Phase III trial, one negative Phase III trial and a superior safety
profile versus the standard of care. The company is evaluating next steps with
the FDA regarding the schizophrenia indication and continues to test ITI-007 in
other indications such as bipolar disorder, depression and other psychiatry
indications.
As summarized earlier, M&A transactions played a substantial role in BB
Biotech's performance in the third quarter. Although many large pharmaceutical
and biotechnology companies expressed an appetite for acquisitions, few have yet
consummated a transaction. Pfizer's contested takeover offer for Medivation in
August at USD 81.50 per share beat the USD 52 offer made by Sanofi in late April
2016. Tobira - themselves under pressure due to Phase II study failures -
accepted a strong takeover offer from Allergan of USD 28.50 per share in cash,
and a CVR of up to USD 49 per share. After the offer, Tobira's share price rose
to around USD 39 per share, substantially higher than the last share price pre-
offer of USD 4.70 per share, and reflecting confidence in the terms, which are
attractive for shareholders.
Portfolio changes
With an eye to opportunities presented by volatile markets and potential over-
reaction to news flow, careful adjustments were made to the portfolio during the
third quarter of 2016. Two existing larger cap positions in Novo Nordisk and
Regeneron were increased, which reflects BB Biotech's confidence in the growth
potential these two well-established firms offer. The position in Sage was also
increased on the strength of the Phase II data for severe PPD. Shareholdings of
Macrogenics and in Intra-Cellular Therapeutics were likewise increased.
Positions in Celgene, Actelion, Tesaro, Swedish Orphan Biovitrum and Puma
Biotechnology were trimmed to take profits. As stated earlier, the positions in
Medivation and Tobira were closed, generating both significant profits and cash
inflows.
Avexis was added to the portfolio. Avexis is developing AVXS-101, a recombinant
adeno-associated virus 9 (AAV9) therapy that delivers a fully functional human
'survival of motor neuron 1' (SMN 1) gene into target motor neurons. The
compound is being tested in an ongoing Phase I study in SMA type 1 patients with
initial promising data showing improved motor functions. The product has been
granted orphan drug status and breakthrough designation by the FDA.
Outlook for the sector and the portfolio
BB Biotech anticipates continued volatility for the remainder of 2016. The US
election and a large range of company milestones will play out. Potential
product approvals and a high rate of data read-outs from clinical trials are
expected to bring the curtain down on a very active 2016. The news flow offers
the potential for significant appreciation in firm valuations.
Regulatory milestones to watch out for in the BB Biotech portfolio include:
* Regeneron - Sarilumab for rheumatoid arthritis
* Radius Health - Abaloparatide sc with a CHMP opinion for osteoporosis
* Cempra - Solithromycin for community acquired bacterial pneumonia
Clinical trial results of potential importance include:
* Celgene - detailed GED301 endoscopy data in Crohn's disease
* Gilead - triple combination data in HCV to test an 8 week regimen
* Halozyme - Phase II data in pancreatic cancer for pegPH20
* Actelion - third generation ERA with hemodynamic data and safety data
These events are expected to draw attention to the fundamental strength of BB
Biotech's portfolio in particular and the biotechnology sector in general.
Results for the third and fourth quarter should also be strong and confirm the
solid operating performance. And in view of the obvious M&A opportunities that
pharmaceutical companies can take advantage of, there may be increased
consolidation following several quarters of significantly reduced takeover
activity in the sector.
Above all, BB Biotech will continue to focus on investing in biotechnology
innovation that can deliver effective treatment options, and potentially create
enormous value for patients, healthcare systems and shareholders alike.
The complete interim report as of September 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 September 30, 2016
(in % of securities, rounded values)
Incyte 11.0%
Celgene 10.8%
Actelion 8.3%
Ionis Pharmaceuticals 7.9%
Radius Health 7.1%
Gilead 6.6%
Neurocrine Biosciences 4.7%
Alexion Pharmaceuticals 4.3%
Agios Pharmaceuticals 4.2%
Novo Nordisk 3.7%
Vertex Pharmaceuticals 3.7%
Regeneron Pharmaceuticals 3.0%
Tesaro 2.9%
Halozyme Therapeutics 2.7%
Alnylam Pharmaceuticals 2.4%
Swedish Orphan Biovitrum 1.7%
Alder Biopharmaceuticals 1.7%
Cempra 1.5%
Sage Therapeutics 1.4%
Kite Pharma 1.3%
Macrogenics 1.3%
Juno Therapeutics 1.3%
Intercept Pharmaceuticals 1.3%
Probiodrug 0.8%
Prothena 0.6%
Intra-Cellular Therapies 0.6%
Esperion Therapeutics 0.5%
Novavax 0.5%
PTC Therapeutics 0.5%
Puma Biotechnology 0.5%
Avexis Inc. 0.4%
Achillion Pharmaceuticals 0.3%
Cidara Therapeutics 0.3%
Radius Health Warrants 23.04.2018 0.1%
Radius Health Warrants 19.02.2019 0.1%
Merck & Co Inc Contingent Value Rights - ex Trius/Cubist 0.0%
Total securities CHF 3 241.8 mn
Other assets CHF 14.6 mn
Other payables CHF (243.2) mn
Total shareholders' equity CHF 3 027.3 mn
Treasury shares (in % of company) (1)) 0.5%
1) Corresponds to the total of all own shares held including the second trading
line
Press Release (PDF):
http://hugin.info/130285/R/2050286/766879.pdf
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The issuer of this announcement warrants that they are solely responsible for the content, accuracy and originality of the information contained therein.
Source: BB BIOTECH AG via GlobeNewswire
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