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Biotech Growth doubles down on Biogen and Alexion

Biotech Growth's NAV shrinks by a quarter

Biotech Growth doubles down on Biogen and Alexion

OrbiMed-managed Biotech Growth Trust (BIOG) appears to have increased its already substantial positions in Biogen and Alexion and reduced (or possibly even sold) its previously large stake in Regeneron in the last month, according to its an analysis of its top holdings by Marten & Co. The trust’s shareholdings in Biogen, which now accounts for 11.6% of NAV (vs a 7.7% contribution to the Nasdaq biotechnology index or NBI), Vertex (9.6% vs 5.6% of NBI) and Alexion (6.7% of NAV vs 3.4% of NBI) are all overweight positions and presumably must represent the manager’s highest conviction ideas.

The trust’s position on Biogen is however not new. Biotech Growth has been maintained a stake in the US CNS company equivalent to ~12-13% of NAV throughout 2017 and up to February this year. However, the proportion reduced to 9.6% in March as a result of a fall in Biogen’s stock price. Given Biogen’s stock was broadly flat in April and the trust’s overall NAV declined, the new figure of 11.6% suggests Biotech Growth must have topped up its position.

Biogen has on the horizon one of the largest binary events in the history of the biotech sector in the form of the outcome of two large phase III studies of aducanumab for Alzheimer’s disease, whose results are due in late 2019 and early 2020. Discussion among investors currently centres on the “zero pipeline” value of Biogen and the relative contribution of aducanumab. Some analysts suggest this could be in the $225-275/share range with some $50-75/share in the stock for aducanumab, a figure that could double if the two trials are successful. Earlier this month, Biogen signalled its confidence in the programme by agreeing to make a one-time payment of $50m to the drug’s originator, Neurimmune in exchange for a 5% reduction in the royalty rates. The deal follows an earlier one in which it obtained a 15% reduction in royalty rates. The new royalty rate will be between a high single digit to low-teen percentage on sales.

The trust reported an NAV of 733p as of end April, a 2.0% fall over the month which was slightly more than the 1.2% decline in the value of the NBI in Sterling. The share price rose by 0.6% to 706p, however. Biotech Growth reported that Alexion, Deciphera and Insmed were its top positive contributors in the month, while Alnylam, Acadia and Regeneron were the largest negative contributors to performance.

The trust’s top 10 holdings, as at the end of April, are shown in the table below.

Stock Apr (% of NAV)
Biogen 11.6%
Vertex 9.6%
Celgene 7.2%
Alexion 6.7%
Illumina 4.9%
Amgen 4.5%
Gilead 4.4%
Puma Biotech 3.7%
Alnylam 3.6%
Amicus 3.1%
Total top 10 65.6%

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