Quarterly update

Major headwinds caused by various factors such as the talk of the US federal government imposing drug price controls and the general impression that the bull market is on its last leg weighed on investor sentiment in the healthcare sector during the second quarter. BB Biotech shares were not completely immune to these developments and delivered a return of -0.4% in CHF and 1.2% in EUR for the second quarter of 2018. Its Net Asset Value (NAV) fell by 2.8% in CHF, resulting in a net loss of CHF 98 mn. This compares to the net profit of CHF 103 mn reported for the second quarter of 2017. After a thorough review of all portfolio shareholdings, BB Biotech made several adjustments to its portfolio, guided by its time-tested strategy of investing in innovation leaders working on groundbreaking therapies and technologies. Valuations are now well off their highs from 2016 and 2017, which raises BB Biotech’s confidence in future performance..

Performance

Performance HY1 2018

1.1.2018-30.6.2018 USD CHF EUR
Nasdaq Biotech Index +2.9% n.a. n.a.
BB Biotech NAV -4.1%% -2.5% -1.3%
BB Biotech Share +6.6% +8.4% +8.2%

Portfolio adjustments in the second quarter

Given the challenges of biotech markets, the companies have been re-analyzed once more and the portfolio has been adjusted promptly and decisively. BB Biotech remains highly committed to best-of-breed innovators with exciting new technologies.

Positions build up:

  • Alnylam
  • Wafe Life Sciences
  • Voyager Therapeutics
  • Esperion
  • Tesaro

Reduced positions:

  • Agios
  • Novo Nordisk
  • Halozyme
  • Probiodrug

Positions sold

  • Prothena
  • Idorsia
  • Avexis (Takeover Novartis)

New positions

  • G1 Therapeutics
  • Nektar Therapeutics
  • Exelixis
  • Myokardia

Outlook

More pipeline progress including important product approvals and Phase III data reports for new drugs in US and Europe is anticipated during the second half of 2018.

Despite Takeda’s challenging offer for Shire, sector M&A activities did not meet investors’ expectations in the second quarter of 2018. Some large pharma companies have declared interest in acquisitions, but no other major deals were struck.

Since valuations are now well off their 2016-17 highs, BB Biotech’s analysis shows no reasons for despondency. One can reasonably expect selective M&A events to offer attractive exits for some positions in the portfolio. In the meantime, BB Biotech looks forward to attractive fundamental growth in the sector and will continue to marshal its portfolio including further new investments in leading smaller and mid cap positions which promise high growth rates.

As always, BB Biotech is following an innovation-driven investment strategy. It will continue to seek leading companies working on technologies which address unmet medical needs, cost-effectively – with the goal to produce superior returns for BB Biotech shareholders.