Sadly I was unable to attend last month's seminar so I was especially keen to make this April meeting and the chance to learn about four unfamiliar companies. Actually that's not quite true as I had heard of Beeks Financial Cloud on the grapevine but that's about it. All new names here then.
International Biotechnology Trust (IBT)
Kicking off the evening Carl Harald Janson, from International Biotechnology Trust, explained how the trust has been successfully investing in the biotech space since 1994. The reason for focusing on this sector is it's a high growth area (12.9% p.a. over last 20 years) with several growth drivers for the future. In a virtuous circle the worldwide population is becoming increasingly elderly, which means more disease, and a rising number of new drugs are in development to treat these diseases. At the same time the regulatory environment is favourable to commercialising new drugs with various schemes (orphan, breakthrough, first in class) set up to expedite the approval process of exceptional drugs. This all leads to growth in global pharma sales and a market conducive to M&A activity as larger companies gobble up small ones for their intellectual property.
Now International Biotechnology Trust aren't in the business of selecting companies just because they might be taken over but in the past eighteen months 9 of their holdings did just that. What they actually have is a portfolio made up, more or less equally, of large, medium and small companies (where small is <$1bn) with these firms again split between those that are profitable, in drug development or only producing revenue. This diversification is all about reducing the risk of capital loss and the team don't stop there. They also heavily reduce positions before a binary event (such as a drug trial result) on the basis that they'd rather pay a higher price later on (when the result is known) than expose themselves to risk. This approach does lead to a very high turnover (150-200%) but Carl believes that overall the tactic improves returns.
Curiously the trust used to trade at a significant discount to net assets, of around 15%, despite good performance. As a result the board decided to implement a dividend of 4% of NAV back in 2016 and now the discount has entirely closed. Given that this dividend is paid from capital reserves Carl spent some…
