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Investment trust insider on Biotech Growth

Investment Trust Insider on Perpetual Income and Growth

Investment trust insider on Biotech Growth – James Carthew: BIOG believes the biotech tide has turned

Following my recent look at the biotech sector, I thought I would return to Biotech Growth (BIOG) which held its annual general meeting last week when investors got to hear from fund manager Geoff Hsu of Orbimed.

The sector has had a torrid time and, within that, BIOG has underperformed quite markedly, giving back the outperformance of earlier years. Over five years, it is now the worst-performing fund in its peer group in both share price terms and the underlying growth in net asset value (NAV). However, Hsu thinks things may already be moving back in its favour.

Smaller biotech stocks, which BIOG has an overweight exposure to relative to the Nasdaq Biotech index (NBI), have lagged large caps considerably. From 31 March 2021 to 30 June 2022, large-cap stocks worth over $10bn fell by 7.4% on average, mid-caps tumbled 38.4% and small-caps under $2bn) slumped 46.4%, a significant factor in the trust’s underperformance.

Biotech started underperforming ahead of the wider growth sell-off, but when that kicked in there was a low prospect of cheaper share prices attracting meaningful numbers of bargain hunters. As we know, investors are shunning unproven and unprofitable companies and their focus has shifted from – how much revenue might this stock have in a few years? – to – how long can this company keep going at the current rate that it is burning cash?

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