During the six months to 29 February 2016, International Biotechnology’s NAV fell by 17.7% from 585.1p to 481.7p. Over the same period, the share price fell by 22.9% from 551.5p to 425.0p. This compares with a decline in the NASDAQ Biotechnology Index (NBI) of 18.0% and a fall in the FTSE All-Share Index of 1.2%. The discount closed on 11.8%, up from 5.7% at the previous year end.
Within the portfolio, the quoted portfolio returned -20.3%, whilst the unquoted portfolio fell by 1.0%.
In November 2015, AstraZeneca acquired ZS Pharma for $2.7bn. ZS Pharma was selected for inclusion in the IBT portfolio on the basis of its wholly owned asset, ZS-9, a late stage treatment for hyperkalemia. The position in ZS Pharma contributed £0.9m to the NAV as a result.
Also in November 2015, Genmab AS, based in Denmark, received FDA approval for Darzalex (daratumumab) for multiple myeloma. This was the first monoclonal antibody approved for multiple myeloma and the first US sale shortly after approval triggered receipt of a $45m milestone payment from partner Johnson&Johnson. IBT’s holding of Genmab contributed £2.2m to the NAV over the period.
Ophthotech, a former investment from the unquoted portfolio that the fund managers chose to remain invested in, contributed £3.1m in the six months to 29 February 2016. Following a fall in share price in October that was not supported by the fundamentals, the manager doubled the fund’s position in the company after recognising the fall as a buying opportunity. Despite the difficult market conditions in 2016, the Ophthotech share price remains above cost.
In December 2015, Chimerix announced that their lead asset brincidofovir did not achieve its primary endpoint in the phase 3 SUPPRESS trial. This event, combined with the market falls in the autumn, led to an overall reduction in the value of the portfolio of £5.1m.
Regeneron was also negatively affected in the period after warning that Eylea sales were expected to slow in 2016. The launch of Praluent was also slower than anticipated, with only $7m generated in fourth quarter end-user sales. Combined with the market decline, this led to a £2.7m decrease in the NAV over the period.
In January 2016, an FDA advisory panel voted against approval of Duchenne muscular dystrophy asset, Kyndrisa, the drug BioMarin acquired through the purchase of biotechnology company Prosensa in 2014 for up to $840m. BioMarin will continue to pursue ongoing Kyndrisa studies, however the negative news flow, combined with market conditions, led to a decrease in NAV of £2.6m.
Within the unquoted portfolio, changes in the valuation inputs led to slight increases in the valuation of Reshape and ESBATech, and decreases in the valuation of EBR Systems and OncoEthix. The value of Atopix/Oxagen was written down by 50% due to a lack of clinical efficacy in the Phase 2 trials for CRTH2 in moderate to severe atopic dermatitis. Phase 2 trials are ongoing for CRTH2 in asthma, supporting the remaining value of the investment. Novartis have validated the mechanism in severe asthmatics with a similar molecule and have recently commenced Phase 3 trials. The write down led to a reduction of £0.7m in the NAV.
IBT : International Biotechnology Trust held back by Chimerix