RCS - Intnl. Biotechnology - Results analysis from Kepler Trust Intelligence

International Biotechnology Trust

03/05/2023 13:53

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RNS Number : 3111Y  Intl. Biotechnology Trust PLC  03 May 2023

International Biotechnology Trust (IBT)

03/05/2023

Results analysis from Kepler Trust Intelligence

·    In the half year to 28/02/2023, rising M&A and steadying
valuations in the biotechnology sector helped power strong outperformance for
International Biotechnology Trust (IBT), with the trust reporting NAV total
returns of 6.1% and share price total return of 8.0% against a NASDAQ
Biotechnology Index (NBI) total  return of 1.8%

·    Both the quoted and unquoted portfolios benefited from M&A
activity, with three holdings in total the subject of takeover bids. A
particular highlight was the acquisition of Horizon, at the time 13.5% of the
portfolio, by Amgen at a 48% premium

·    The managers argue the raised interest rate environment and
technology rotation are now baked into valuations, and they anticipate
continued M&A activity going forward, with the trust's portfolio firmly
tilted towards mid- and small-cap holdings at the half-year end

·    With biotechnology still broadly out of favour, IBT's discount
currently stands at -7.7%, with the board exercising buybacks in the half-year
in order to bring the discount in

·    Overall gearing was reduced over the half year, from 14% at
31/08/2022 to 8.2% at 28/02/2023

·    The trust's board is in the advanced stages of finding a new fund
management firm

 

Kepler View

International Biotechnology Trust (IBT) has proved its mettle over a
tumultuous two years for the biotechnology industry, as its half-year results
confirm. The technology sell-off thrust biotechnology into the limelight as
capital rotated into the sector, before rising rates saw it quickly fall out
of favour.

The lead managers of IBT, Ailsa Craig and Marek Poszepczynski, have invested
in the sector through several cycles. While they freely admit that it is
cyclical, their experience means that they feel they are able to see where
opportunities are most attractive at any one point in this cycle. Currently,
the maturing patent expiration cycle for many of the larger pharmaceutical
businesses, means that those companies are looking for new revenue-producing
products.

With that in mind, Ailsa and Marek have focused the trust's portfolio on
revenue-generating mid-cap companies, which in their view are likely to be the
targets of larger companies looking to maintain their revenues in the medium
term. This approach has already borne fruit, with three of the trust's quoted
holdings the targets of takeover bids in the six months to 28/02/2023. The
more significant of these was the acquisition of Horizon, at that time 13.5%
of the portfolio, by Amgen at a premium of 45% to the share price at the point
of the deal's announcement.

Earlier this year, the trust's board announced that its investment manager, SV
Health Investors Ltd, had given notice on its management agreement for the
trust. The board says that is in the advanced stages of finding a new manager,
with six shortlisted firms having presented to it.

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