Innovative biotech companies lead efforts in global challenge

Intro

Biotech markets demonstrated remarkable resiliency in the face of the COVID-19 crisis and biotech stocks made convincing gains. The Nasdaq Biotech Index advanced 26.9% in the second quarter (in USD). BB Biotech’s share price rose by 32.1% in CHF and 32.9% in EUR over the quarter. The Net Asset Value of its portfolio showed even better gains of 48.2% in CHF, 47.7% in EUR and 51.2% in USD, resulting in net profit of CHF 1.18 bn for the second quarter compared to a net loss of CHF 336 mn for the same period in 2019. Net profit for the first half of 2020 amounted to CHF 422 mn, relative to the corresponding prior-year figure of CHF 544 mn. During the pandemic, BB Biotech's investment management team maintained its long-term investment strategy. It continues to focus on companies that are developing innovative medicines for severe and/or chronic diseases. One new position was added to the portfolio in the second quarter, namely Generation Bio. Fundamental developments in the biotechnology sector will support further IPOs and share offerings. Biotech companies are working hard to deliver solutions in the fight against COVID-19 and are also expected to make progress in treating many other diseases.

Performance

Performance HY1 

01.01.2020-30.06.2020 USD CHF EUR
BB Biotech NAV 18.2% 15.7% 18.0%
BB Biotech Share   11.4% 13.2%

 

Portfolio

During the pandemic, BB Biotech’s investment management team maintained its long-term investment strategy and focused on companies that are developing innovative medicines for severe and/or chronic diseases. It opened one new position in the second quarter, a small cap company called Generation Bio. Shares of BB Biotech’s top holdings were sold at a profit and further gains were realized on its position in Moderna, which reported rapid progress with mRNA-1273, a vaccine candidate for COVID-19. The cash was re-invested to buy more shares of Molecular Templates, Fate Therapeutics, Arvinas and other recently opened positions.

Portfolio exposure to genetic medicines was further increased in the second quarter of 2020 through participation in Generation Bio’s initial public offering. This comes on the heels of BB Biotech's successful investments in other gene therapy companies such as Avexis (acquired by Novartis) and Audentes (acquired by Astellas). Generation Bio is still at an early stage of the development cycle but it is developing promising new gene therapy approaches that have the potential to accommodate large genetic inserts or that could allow tissue targeting or re-dosing for patients with rare or common diseases.

Outlook

With lockdowns putting pressure on the global economy and society, governments invested in diagnostic testing and began negotiating bulk buying arrangements for COVID-19 therapeutics and vaccines. These and other developments must be closely monitored.

Against the evolving picture of COVID-19 diagnosis, treatment and vaccination, trials of importance for both individual pipeline assets as well as platform technologies for the upcoming months include the following:

  • Homology is expected to report results from its HMI-102 gene therapy program for adult patients with phenylketonuria
  • Scholar Rock is expected to announce interim efficacy and safety findings from its Topaz program, testing SRK-015 in patients with type 2 and type 3 spinal muscular atrophy
  • Moderna has announced it will publish further data on its SARS-CoV-2 vaccine candidate mRNA-1273 in the coming weeks
  • Wave Life Sciences is expected to present data for the higher dose cohorts for WVE-120101 and WVE-120102 in Huntington’s disease patients
  • Arvinas has indicated that it will present data from the ARV-110 higher dose cohort in prostate cancer patients and initial data for ARV-471 for breast cancer patients

A number of regulatory review decisions are also expected in the second half of 2020, including:

  • Lumasiran (Alnylam) for the treatment of primary hyperoxaluria type 1, with an FDA target action date of December 3, 2020
  • Margetuximab (Macrogenics) for the treatment of breast cancer, with an FDA target action date of December 18, 2020
  • Relugolix (Myovant) for the treatment of prostate cancer, with an FDA target action date of December 20, 2020
  • Obeticholic acid (Intercept), with an FDA Type A meeting likely to be convened within the next few weeks to determine the way forward

In addition, the momentum in the biotechnology sector should support further IPOs and capital increases, strengthening the balance sheet of firms pursuing the development of next-generation technology and assets.