HBM set to gain on Lilly buyout of investee Armo
Swiss-listed HBM Healthcare (HBMN) looks set to see a significant boost to its already strong investment performance this year as a result of a deal that will see Eli Lilly buy one of its investee companies, the US biotech ARMO Biosciences. Lilly’s agreed deal to acquire Armo for $1.6bn in cash will provide the Indiana-based drugmaker with a drug candidate, pegilodecakin, which is in a Phase III trial for pancreatic cancer and in earlier-stage trials for lung and renal cell cancer, melanoma and other solid tumours. HMB holds a stake equivalent to 3.2% of its NAV in Armo Biosciences, which has seen its shares rise by 70% today in line with the premium paid by the US pharmaceuticals group.
Meanwhile, HBM’s differentiated investment approach helped it achieve the top performance among the biotech-specialist closed end funds so far this year. HBM recorded a 1.7% increase in NAV and a 13% rise in share price, both Sterling-adjusted, in the first four months of this year, in contrast to most of other funds in the group monitored by Marten & Co, which have mostly seen falls in NAV and price in line with the declines across the sector. HBM was in fact one of only two trusts to record an absolute increase in price this year, the other being BB Biotech.
HBM Healthcare is unusual among its peers for selecting individual biotech stocks that are largely, if not exclusively, outside of the leading components of the Nasdaq Biotechnology index, as well as having a long/short approach, which should ameliorate the effect of a down market such as has been seen in the year to date period. Most of the out-performance came in the first quarter, with HBM’s growth in NAV in April alone ranking sixth among the 13 funds at 0.9%, although well above the Nasdaq biotechnology index’s 1.2% decline.
HBM’s stock currently trades at CHF160, and its reported an NAV of CHF170.4, suggesting it is trading at a 6% discount. The stronger share price rise YTD, relative to NAV, reflects a narrowing of the discount.
HBM’s top 10 holdings as of the end of April are shown in the table below.
| Apr-18 | |
| Cathay | 7.0% |
| Vectura | 4.5% |
| Argenx | 3.4% |
| Armo Biosciences | 3.2% |
| Pacira | 2.8% |
| Harmony Biosciences | 2.5% |
| Genmab | 2.2% |
| ObsEva | 2.2% |
| Cardiac Assist | 2.1% |
| Immunomedics | 2.1% |