The Biotech Growth Trust (BIOG) has released the annual results for its financial year ending 31 March 2024.
- BIOG reported a 12 month NAV total return of 26.5% and share price total return of 27.1%, outperforming its benchmark, Nasdaq Biotechnology Index, which returned 5.0%. Note that the benchmark will be changed to the Nasdaq Biotechnology Total Return Index, to account for the effect of dividends.
- The board continued its share buyback programme, repurchasing 5.25m shares (13.6% of issuance) at an average 7.3% discount to NAV. The board continues to target a 6% maximum share price discount. BIOG currently trades on a 7.2% discount.
- Key drivers of the positive returns were the trust’s overweight position in small and mid-cap biotech stocks, which sharply outperformed large caps during the year as the biotech sector began to recover from depressed valuation levels. Stock section was also a positive contributor.
- The turnover in BIOG’s portfolio was 102% over the year and investors should expect that level of turnover going forward. The portfolio had an average of 56 positions during the fiscal year with 20 names added and 17 names exited over the course of the year.
- At a stock level the largest contributors were Vera Therapeutics, a clinical-stage biotech company focusing on kidney autoimmune disease, which added 5.0% to NAV returns; Scholar Rock Holding which contributed 4.6%, having announced plans to advance programmes in obesity and completing an upsized public offering that extended its cash runway; and Janux Therapeutics, a clinical-stage immuno-oncology company, which contributed 3.4% to NAV returns, having released promising phase 1 data for its lead prostate cancer drug candidate.
- The fund managers intend to maintain their overweight to small and mid-cap stocks which they believe can continue to outperform, finding attractive opportunities in key areas like obesity, oligonucleotide therapeutics and oncology.
Roger Yates, chair, commented:
“It has been a volatile few years for the biotechnology sector and the Company. 2020 and 2021 saw a surge in investment in healthcare and biotechnology driven by low interest rates, merger and acquisition (M&A) activity and of course, the COVID pandemic. In 2022, as interest rates and inflation rose, the pandemic waned and the valuations of smaller biotech companies fell to all-time lows. This generated a performance headwind for the Company.
“In the past year, I am glad to report that there have been signs of recovery which are reflected in the Company’s good performance over the past year, with an increase in regulatory approvals and a potential revival in the IPO market. The challenges facing the sector are still present: regulatory hurdles, uncertainty around funding and more broadly, a difficult macroeconomic environment characterised by persistent inflation and high costs of capital. However, the global biotech industry is expected to continue its growth trajectory, with groundbreaking innovations and new technologies improving and saving lives, creating value for shareholders and, ultimately, driving performance. The Company is exposed to a wide variety of the most promising technologies.
“Our Portfolio Manager and the Board are excited about the innovation taking place in the sector and the portfolio companies we hold. As a consequence, our overall investment strategy remains unchanged and, assuming relatively benign markets, we look forward with confidence to good long-term returns for the Company.”