EQS-News: BB BIOTECH AG: Lackluster first quarter for biotech stocks
EQS-News: BB Biotech AG
/ Key word(s): Interim Report
Media release as at April 21, 2023
Lackluster first quarter for biotech stocks
Concerns about capital market resilience clearly had an impact on investor preferences during the first quarter. After a strong start to the year, market sentiment switched to risk-off and this triggered heavy selling in the small- and mid-cap segments. Portfolio investment flows in the biotech sector an important indicator remained negative. Smaller biotech companies underperformed relative to their larger peers. In contrast to the sector performance, many biotech companies reported positive R&D and regulatory news. Despite the difficult start to the year, BB Biotech looks to the future with confidence in view of the fundamental progress that innovative large, mid- and small-cap biotech firms are making.
Smaller biotechnology companies underperformed relative to others. The S&P Biotech Select Industry Index's (SPSIBI Index) total return of -8.7% in USD was worse than the -1.9% return in USD for the NBI Index, which mainly tracks larger biotechnology and pharmaceutical firms. While M&A activity picked, there was little impact on the biotechnology sector. For BB Biotech shares, this meant a total return for the first quarter 2023 of -4.4% in CHF and -6.8% in EUR (including the dividend payment of CHF 2.85 per share). Total return for the portfolio was -9.2% in CHF, -9.4% in EUR and -8.3% in USD, behind the NBI Index but in line with the S&P Biotech Select Industry Index. Consequently, the net loss for the first quarter of 2023 was CHF 254 mn compared to a net loss of CHF 300 mn for the same period in 2022.
AGM approves all proposals
All of the proposals of BB Biotechs board of directors were approved by shareholders at the annual general meeting on March 23, 2023. These included the proposal to pay a dividend of CHF 2.85 gross per share, resulting in a total of CHF 156 mn paid to shareholders of BB Biotech on March 29, 2023. Shareholders re-elected board members Dr. Erich Hunziker (Chairman), Dr. Clive Meanwell, Laura Hamill, Dr. Pearl Huang, Prof. Dr. Mads Krogsgaard Thomsen and Dr. Thomas von Planta for another one-year term of office.
Continued high investment level
At the end of the first quarter, our investment level was close to our upper boundary at 114.0%. The continued high investment level reflects the management teams positive stance that many companies are attractively valued after the correction of the last two years in the biotech sector. The team will continue to work within the established and successful investment guidelines, such as investment levels of 95% to 115%. The dividend payment of CHF 156 mn used mostly cash from the Myovant takeover by Sumitomo Dainippon Pharma.
A small number of portfolio adjustments were made during the first quarter. The Myovant Sumitomo Dainippon Pharma transaction was completed for USD 27 per share in cash. In addition, Kezar Life Sciences and Homology Medicines positions were closed. At the end of the quarter, BB Biotechs portfolio comprised 28 positions concentrated further on profitable companies which now represent more than one third of BB Biotechs equity. Well capitalized companies expected to reach sustainable profitability with their current balance sheet constitute more than 40% whereas smaller companies still needing capital constitute less than 20% of the portfolio.
Moderna's RSV vaccine showed promising results in a Phase III trial of older adults. This vaccine is emerging as a potential best-in-class product among the current 3-horse race. Moderna earned two Breakthrough Therapy Designations: One for their investigational RSV vaccine candidate, and a second for their personalized mRNA cancer vaccine in combination with Keytruda for high-risk melanoma patients. In contrast, immunogenicity results from Modernas Phase III trial of an influenza vaccine in the Southern hemisphere reported mixed outcomes.
Ionis announced encouraging topline results from the Phase III NEURO-TTRansform study of eplontersen, a treatment for transthyretin amyloidosis with polyneuropathy (ATTRv-PN). Ionis also reported a positive FDA advisory committee vote (9-0) for potential accelerated approval of tofersen, an investigational treatment for amyotrophic lateral sclerosis (ALS) associated with mutations in the superoxide dismutase 1 gene. The FDA action date is April 25, 2023.
Intra-Cellular Therapies reported positive topline results for lumateperone (branded as Caplyta) monotherapy for major depressive episodes in patients with major depressive disorder and bipolar depression.
Incyte and Macrogenics received a surprising approval for Zynyz (retifanlimab) for metastatic or recurrent locally advanced merkel cell carcinoma (MCC) after an earlier FDA rejection.
Outlook for 2023
Central bank interest rate increases to tame Inflation without triggering recession are set to continue albeit at a slower pace. Despite interest rate uncertainty, the fundamental progress and quality of biotechnology players, including most of BB Biotech's portfolio holdings, remain positive.
The US healthcare system continues to struggle with its high costs. Implementation of the Inflation Reduction Act (IRA) will gain attention in the fall of 2023 when the first ten drugs selected for discounting in 2026/27 will be published.
The investment management team continues to believe that these firms are attractive investments; not only due to their currently depressed valuations but also because development, regulatory and commercialization milestones can boost shareholder returns. In the meantime, the team expects all of its investee firms to manage cash carefully.
The team expects news from Argenx, Neurocrine Biosciences, Moderna, Sage, Alnylam as well as Ionis later this year.
Valuation of small-cap and mid-cap segments of the biotech industry are attractive. In view of the pressure on larger companies to drive growth through external innovation, M&A and licensing are expected to remain as an important factor for overall biotech sector growth.
For further information:
TE Communications AG, Bleichestrasse 11, 9000 St. Gallen, Switzerland, tel. +41 79 423 22 28
Composition of BB Biotechs portfolio as at March 31, 2023
1) Unlisted company
21.04.2023 CET/CEST Dissemination of a Corporate News, transmitted by EQS News - a service of EQS Group AG.
|Company:||BB BIOTECH AG|
|Phone:||+41 52 624 08 45|
|Listed:||Regulated Market in Frankfurt (Prime Standard); Mailand, SIX|
|EQS News ID:||1613109|
|End of News||EQS News Service|
1613109 21.04.2023 CET/CEST