Biotech stocks outperformed the general markets
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BB BIOTECH AG /
Biotech stocks outperformed the general markets
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Interim Report of BB Biotech AG as of June 30, 2011
BB Biotech reported a positive performance during the first half of 2011. While
government debt problems in Europe and in the US proved to be key factors for
financial markets, BB Biotech shares advanced 9.1% in CHF and 11.5% in EUR
during the period (adjusted for dividends). Six small and mid-cap companies were
added to the portfolio in the first half and the investment scope was broadened
to include emerging markets, India in particular. BB Biotech remains confident
that the non-cyclical healthcare industry will continue to perform well during
the second half of the year and looks forward to positive newsflow and good
operational execution from the companies in its portfolio.
Financial markets have been pressured by international events on the political
and policy fronts and the second quarter was no exception in this regard. The
debt crisis in the peripheral euro zone countries remained the dominant theme
for the global marketplace. The surge in the value of the Swiss franc versus the
US dollar and the euro was a direct consequence of widespread uncertainty and it
also had an impact on BB Biotech AG's investment portfolio.
Despite these factors, the biotechnology sector showed a positive out-
performance versus the general market in the second quarter. The Nasdaq
Biotechnology Index (NBI) advanced 14.2% (in USD) during the first half of the
year and by 6.5% during the second quarter. During the first half of 2011, the
Net Asset Value (NAV) of BB Biotech increased by 8.2% (in USD) while the share
price rose by 9.1% in CHF and 11.5% in EUR (adjusted for dividends). However, BB
Biotech's performance in the second quarter did not meet our expectations,
mainly because the core investments were unable to match the general sector
performance. Specifically, Actelion experienced a particularly strong under-
performance for the second quarter. The NAV advanced by 1.6% in USD but, due to
the sharp appreciation in the value of the CHF versus the USD, the NAV declined
by 6.8% (in CHF). BB Biotech's share price declined by 2.7% in CHF and gained
2.9% in EUR during the quarter.
Progress was made in reducing the discount during the first half. Greater
interest from institutional investors in biotechnology and the implementation of
our previously communicated profit-enhancing strategy brought the discount down
to 15.3% at the end of June 2011. This compares to a discount of 23.8% at the
end of 2010. BB Biotech actively pursued its share buyback program in the second
quarter and repurchased a total of 472 890 shares through a second line of
trading. These shares will be cancelled subject to shareholder approval at the
next general meeting. We will continue our efforts to achieve a lasting
reduction in the discount and to confine future fluctuations in the discount to
a range of 10 to 15%. During the standard blackout periods prior to the release
of company results the company is not allowed to repurchase any shares. This can
lead to a temporary increase in the discount depending on general market
conditions, particularly when volatility is high, as is the case today. We are
committed to finding an appropriate solution for such situations that is in
accord with the accretive strategy as well as regulatory requirements.
The main adjustments to the portfolio in the second quarter concerned the core
investments in Gilead, Celgene, and Vertex. Among the smaller participations,
the position in Affymetrix was reduced and the position in Basilea Pharmaceutica
was closed. Six new positions were opened. BB Biotech participated in the rights
issues announced by Bavarian Nordic and Swedish Orphan Biovitrum, and in the
capital increases carried out by Radius Health, Idenix, and Achillion
Pharmaceuticals. Additional shares of Isis Pharmaceuticals and Human Genome
Sciences were bought in the open market.
Initial positions in emerging markets were taken after a thorough due diligence
process. India has acquired a special status among newly industrialized
countries as a producer of pharmaceutical drugs. Drawing on its deep pool of
talented professionals, the country has developed an internationally competitive
drug industry over the past few years and now ranks as the fourth largest
producer of drugs in the world (by volume). Our first investments in emerging
markets, which are described in more detail below, were made in Glenmark
Pharmaceuticals, Lupin and Strides Arcolab. We plan to further expand our
exposure to emerging markets as the year progresses.
Portfolio development and valuation in the second quarter
Celgene (+4.8%, in USD) was able to strengthen Revlimid's clinical profile with
the presentation of further data at major conferences. Better outcomes were
achieved with Revlimid maintenance in newly diagnosed multiple myeloma patients.
This news marks another success in the company's efforts to grow the sales
potential of its lead drug. Investors will be following Revlimid's sales numbers
in the coming quarters very closely.
Actelion shares (-21.6%, in CHF) pulled back sharply in the second quarter. The
uncertainty stemming from a jury verdict, ordering the company to pay Asahi
Kasei USD 557 million in damages, as well as the ongoing legal battle between
the companies, put Actelion shares under heavy pressure. Furthermore, the
outcome of the Annual General Meeting dampened expectations that the company
might be taken over. The coming months will be decisive, both for the company
and for shareholders. Positive data from the long-term Phase III trial with
Macitentan in the treatment of pulmonary arterial hypertension would allow the
company to cement its dominant position in the PAH market for the foreseeable
future.
Vertex (+8.5%, in USD) achieved an important milestone in May when it received
FDA approval for Incivek for the treatment of hepatitis C patients. The product
profile and product label should enable a clear differentiation relative to
Victrelis (Merck) and allow Vertex to price Incivek at a significant premium.
The stock market will be following the market uptake of Incivek very closely, in
addition to the future progress of the company's pipeline candidates for the
treatment of cystic fibrosis.
Shares of Gilead (-2.5%, in USD) were weak on news that it had received a
subpoena from US authorities requesting information about the company's
distribution practices. The headline event for the second half of the year will
be the outcome of the Phase III study with its single-tablet Quad regimen, a new
co-formulated medicine containing four Gilead compounds for HIV. Quad is a
crucial part of Gilead's strategy for defending its leading position in HIV drug
therapies.
Novo Nordisk's stock consolidated (-2.3%, in DKK) in the second quarter, after
gaining 94.4% over the past 18 months. Clinical data on Degludec, a new long-
acting insulin analog, were presented at a diabetes conference. Degludec is
expected to be launched in 2012.
Among BB Biotech's smaller participations, the following news deserves special
mention:
* Immunogen (+34.4%, in USD) soared after the release of positive data from
breast cancer trial with
T-DM1. T-DMI showed superiority to Herceptin and chemotherapy in a Phase II
study.
* Incyte (+19.5%, in USD) announced that it is seeking US marketing approval
of Ruxolitinib for the treatment of myelofibrosis (a bone marrow disorder).
Fears that Ruxolitinib would face competition from new products subsided
during the quarter and investors are more optimistic that Incyte's product
will be launched towards the end of the year.
We opened six new portfolio positions during the course of the second quarter:
* Achillion Pharmaceuticals, a company with an attractive pipeline of
candidates for treating the hepatitis C virus. These product candidates have
the potential to redefine the search for a all-oral HCV therapy. The long-
standing goal of developing an Interferon-free HCV therapy regimen has moved
closer to becoming reality.
* Radius Health, an unlisted company that is developing a promising patch for
osteoporosis with good potential. The patch, a joint project with 3M, will
serve as a transdermal delivery system for a parathyroid hormone-related
protein analog.
* Theravance is developing Relovair, a once daily inhaled medication for
asthma and chronic obstructive pulmonary disease in partnership with
GlaxoSmithKline. Results from a number of clinical trials for both
indications will be presented in the coming months.
* Glenmark Pharmaceuticals is a company headquartered in Mumbai that generates
approximately CHF 600 million in sales, which are fairly evenly divided
between India, the USA and the rest of the world. Glenmark is using its
income as a generic drug producer to finance two research facilities, one in
India for chemical substances and the other in Switzerland for biologic
molecules. It recently licensed a molecule to Sanofi Aventis for an upfront
payment of USD 50 million and potential milestone payments of up to USD 550
million.
* Lupin is one of the market leaders in India and is growing by more than 20%
p.a. in the local market. It has a subsidiary in the USA that sells branded
generics. The company is also investing in proprietary biosimilars that
should be ready for market launch in newly industrialized countries within
one to two years.
* Strides Arcolab, a company based in Bangalore, is specialized in producing
sterile injectables (intravenously administered drugs). Strides has
established a competitive advantage for itself in this technically
challenging niche and has set up extensive partnerships with Pfizer and
GlaxoSmithKline (GSK) for the production of sterile injectables and other
products.
Outlook and positioning
The reallocation of assets from large-cap companies to small and mid-cap
companies will continue. BB Biotech is strengthening its position for the mid to
long-term future as the latter companies are expected to deliver above-average
sales growth. Investments will be focused on innovative drugs as before.
The noncyclical healthcare industry remains a very attractive investment
proposition. BB Biotech has a positive view on the biotechnology sector due to
its proven innovation credentials and successful record of bringing products to
market, which, in turn, will help to fuel high sales growth and earnings
potential going forward. This positive stance is reflected in BB Biotech's
current investment strategy and its more than 100% level of investment.
The complete Interim Report as of June 30, 2011 and a webcast with Dr Daniel
Koller, Head Management Team BB Biotech, can be viewed at www.bbbiotech.com.
For further information:
Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland
Thomas Egger, telephone +41 44 267 67 09,teg(at)bellevue.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 with CHF 1.2 billion in
assets under management. 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.
Composition of BB Biotech's portfolio as of June 30, 2011
(in % of securities, rounded values)
CORE HOLDINGS
Celgene 16.5%
Actelion 15.6%
Vertex Pharmaceuticals 11.5%
Gilead 9.6%
SMALL HOLDINGS
Novo Nordisk 6.4%
Incyte 5.8%
Immunogen 3.2%
Dendreon 3.1%
Isis Pharmaceuticals 3.1%
Micromet 2.6%
Amylin Pharmaceuticals 2.4%
Halozyme Therapeutics 2.3%
Amgen 2.0%
Biomarin Pharmaceutical 1.8%
Swedish Orphan Biovitrum 1.8%
Optimer Pharmaceuticals 1.6%
Alexion Pharmaceuticals 1.6%
Bavarian Nordic 1.5%
Human Genome Sciences 1.4%
Idenix Pharmaceuticals 1.0%
Theravance 1.0%
Lupin 0.7%
Achillion Pharmaceuticals 0.7%
Affymetrix 0.5%
Glenmark Pharmaceuticals 0.5%
Strides Arcolab 0.3%
Cosmo Pharmaceuticals 0.2%
Probiodrug (1)) 1.0%
Radius Health (1)) 0.2%
Cosmo Pharmaceuticals put option (long) <0.1%
SWAP agreement on treasury shares <0.1%
Novo Nordisk call option (short) <(0.1)%
Novo Nordisk put option (short) <(0.1)%
Total securities CHF 1 245.0 mn
Liquid funds (net) CHF (157.6) mn
Other assets CHF 10.9 mn
Other payables CHF (9.6) mn
Total shareholder's equity CHF 1 088.7 mn
Treasury shares (in % of company)(2)) 21.0%
1) Unlisted company
2) Correspond to the total of all own shares held in Switzerland, Germany and
Italy including the second trading line
--- End of Message ---
BB BIOTECH AG
Vordergasse 3 Schaffhausen Switzerland
WKN: AONFN3;ISIN: CH0038389992;
Media Release_BB Biotech Q2 2011_21.07.2011 (PDF):
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Source: BB BIOTECH AG via Thomson Reuters ONE
[HUG#1532299]
Datum: 21.07.2011 - 07:31 Uhr
Sprache: Deutsch
News-ID 56589
Anzahl Zeichen: 17343
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Town:
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Kategorie:
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