BB Biotech remains a top performer in Feb
Switzerland’s BB Biotech (BBB.S) recorded a 2% fall in its NAV in February, but achieved a robust 7.8% rise in its portfolio value in the two month year-to-date (YTD) period, on the back of the strong rise in January. BB Biotech enjoyed the second best investment performance in February and the best YTD among the 13 sector specialist investment trusts monitored by Marten & Co, based on sterling-adjusted NAV total return (see article) and outperformed the benchmark Nasdaq biotechnology index. It should be noted that the sterling denominated changes were, in absolute terms, lower than those in Swiss francs as a results of the appreciation of the UK currency over the period.
As with most other sector specialist collective investment vehicles, BB Biotech was hit by the decline in value of Celgene (-13.9% in February in USD), its second largest holding, following the receipt of a refuse-to-file (RTF) letter from the FDA for ozanimod for multiple sclerosis. BB Biotech also noted the decline for Tesaro (-18.1%, in February in USD), on the basis of lower than expected long term guidance for sales of Zejula, reflecting the competitive changes in the PARP inhibitor space. Tesaro was BB Biotech’s 16th largest holding as of 31 December (see page 19 of annual report).
On the positive side, BB’s portfolio saw a significant gains on its holdings in Voyager Therapeutics (+39.2% in February, in USD), following a partnership deal with AbbVie to develop gene therapies to express microtubule-associated protein tau antibodies to treat Alzheimer’s disease (AD) and other tauopathies, and for Wave Life Sciences (+27.4% in February in USD), on the back of a deal with Takeda to develop nucleic acid therapies for CNS diseases. BB’s shareholdings in Voyager and Wave Light represented 0.7% and 0.8% of NAV at the year end respectively. Earlier today, Voyager disclosed longer-term data from a phase Ib study of the gene therapy VY-AADC for Parkinson’s disease.
BB’s investment strategy is to maintain a portfolio of 20-35 holdings, almost all of which are in the US, with what it considers large positions in five to eight companies. In addition, it has three significant over-weight positions, in Radius Health (5.0% of NAV), Probiodrug and Cidara Therapeutics (both 0.4% of NAV), all three represent 11-13% stakes in the companies.
Radius Health is a US women’s health company commercialising Tymlos, a transdermal patch for treatment of osteoporosis, and developing elacestrant for estrogen receptor positive (ER+) breast cancer. Probiodrug is a German company developing the glutaminylcyclase (QC) inhibitor PQ912 for AD and reported positive phase II study results for PQ912 in a 12 week study last year, which showed target engagement and some signals of activity in mild AD patients. However, given the high cost of further studies in AD, Probiodrug will have to partner this agent for further development and its investment proposition almost entirely rests of the timing and nature of any such deal. It is also noteworthy that unlike its peers, BB Biotech has no exposure to Biogen, which represents 8% of the Nasdaq biotech index, suggesting the investment managers have taken a very bearish position on the outcome of Biogen’s phase III trials in AD, which is the highest profile effort in this indication in the industry.
Cidara is a US company focused on antimicrobials. Its lead product, rezafungin, is in a Phase II study for candidemia and invasive candidiasis that should have a data read-out in the next three weeks. Rezafungin is a novel antifungal echinocandin and is the only once-weekly product candidate in development for the treatment and prevention of life-threatening invasive fungal infections.
Eight of BB Biotech’s top ten holdings were showing gains in the YTD period to 8 March (see table below). Neurocrine seems to have been the best performer, with an almost 19% increase, helped by a positive phase III study of elagolix in uterine fibroids that was conducted by AbbVie.
| % of NAV as of 31/12/2017 | share price % change 2/1/18-8/3/18 | |
| Ionis | 11.0% | 4.6% |
| Celgene | 9.6% | -12.0% |
| Incyte | 9.4% | -0.7% |
| Neurocrine | 7.2% | 18.9% |
| Vertex | 5.9% | 15.5% |
| Gilead | 5.3% | 12.7% |
| Radius Health | 4.9% | 8.4% |
| Halozyme | 4.6% | 2.3% |
| Sage | 4.6% | 0.2% |
| Alexion | 4.3% | 3.2% |
BB Biotech remains a top performer in Feb