Biotech Growth (BIOG) passed its five-yearly continuation vote yesterday with 76.7% of votes in favour, but with over 23% of votes cast against the resolution, the £198m company could be vulnerable to consolidation in the sector, broker Deutsche Numis believes.
Shares in the global biotech fund have slumped around 40% since the last vote in 2020, eradicating its previous sector-leading performance as sentiment turned bearish on smaller drug discovery companies.
Under City rules, a company is required to explain how it will consult shareholders when 20% or more votes go against a board recommendation for a resolution. In a statement after the annual general meeting the board said it had engaged with major shareholders before the AGM and was encouraged to learn that the majority supported BIOG’s continuation.
It added: “The board was recently made aware of concerns raised by a dissenting shareholder. The board will engage further with them and remains committed to constructive dialogue with all shareholders.”
Deutsche Numis, which is corporate broker to three of BIOG’s rivals in the life sciences sector, International Biotechnology Trust (IBT), RTW Biotech Opportunities (RTW) and Syncona (SYNC), said the fund would likely remain under pressure unless performance improved ahead of an additional continuation vote in 2028.
“In addition, it has suffered significant shrinkage through a combination of poor returns and an active share buyback, leaving it with net assets of £216m, which we believe could leave it susceptible to merger with a better-performing vehicle,” said analyst Gavin Trodd.
Turnout of 34% at the AGM means that 26% of share capital backed the company and 8% voted against.
Orbimed fund manager Geoff Hsu told shareholders that biotech valuations remained at “unprecedented” and “compelling” lows. He said the share prices of nearly a quarter of companies in the sector traded below the net cash on their balance sheets, holding out the prospect of a sharp recovery as advances in cures and treatments for a wide range of diseases and conditions generated improved sales.
Ahead of the meeting, BIOG’s discount narrowed to 7% from a one-year average of 8.5%.
