INTERNATIONAL BIOTECHNOLOGY TRUST: Biotech fund with a healthy track record
There has been a changing of the guard at investment trust International Biotechnology.
But as far as shareholders are concerned, little has changed as the £305million fund continues to offer a mix of income and capital return from a portfolio of companies striving to make money-spinning medical breakthroughs.
Longstanding manager Dr Carl Harald Janson stepped aside this March, leaving the fund in the hands of Ailsa Craig and Marek Poszepczynski.
Given the pair have been involved in running the fund for the past 15 and seven years respectively, it’s very much business as usual. Like Janson, they work for SV Health Investors, a specialist in healthcare investments.
‘There will be no major change in strategy,’ says Craig, ‘just a nuance here and there, maybe a little less portfolio turnover.’
Although investing in biotech firms is inherently risky – with no guarantee of therapies developed by companies going on to receive regulatory approval – the trust’s approach is all about ‘risk management’.
First, it is well diversified, investing in some 60 quoted biotech companies, most of which are based in the United States.
Some are well established such as Gilead Sciences which has just donated 450,000 doses of its Covid-19 drug Veklury to help India fight a surge in coronavirus cases and deaths.
The trust also has exposure to unquoted biotech firms through a 7 per cent stake in fund SV Health Investors VI, a portfolio overseen by Kate Bingham who last year headed up the UK Vaccine Task Force, a group appointed by the Government to ensure access to coronavirus vaccines.
‘Some of our most exciting investment opportunities lie in the mid and large cap space,’ says Craig – US companies with market capitalisations of between $2billion and $30billion.
They include US firm Horizon Therapeutics that last year received regulatory approval for medicine Tepezza that treats thyroid eye diseases. ‘Sales of this treatment were $800million last year,’ adds Craig, ‘but there is potential for annual sales of $3billion.’
Another key holding is PTC Therapeutics, a US firm specialising in rare diseases. Among its successes is Evrysdi, a treatment for paediatric and adult patients with spinal atrophy. The drug is marketed by Swiss healthcare giant Roche with PTC receiving royalties on sales.
Risk management also involves trading stocks to avoid ‘binary’ events. These tend to be based around either the outcome of clinical trials for treatments – or regulatory acceptance (or rejection) of therapies.
For example, the trust will hold a company’s shares on the back of an exciting treatment development. But ahead of the results of a clinical test or regulatory decision, it will sell them. T
hen, when the decision comes through, it will either buy them back (if good news) or move on to a new investment opportunity (if bad). ‘It’s an effective risk reduction strategy,’ says Poszepczynski.
Until recently, the trust had a position in Arcadia Pharmaceuticals and benefited enormously as the share price rose from 2019 onwards – from around $15 a share to $60.
But ahead of a regulatory decision on whether its pimavanserin drug could be used as a treatment for dementia-related psychosis, it sold out. It proved a shrewd move because the drug did not get approval, sending the share price plunging.
The trust’s performance numbers are healthy – with returns of 14 per cent and 50 per cent over the past one and three years respectively. Some of this is delivered as income with dividends paid twice a year. The stock market code is 0455934 and the annual charges total 1.3 per cent.