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

International Biotechnology Trust

13/11/2023 11:11

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RNS Number : 2558T  Intl. Biotechnology Trust PLC  13 November 2023

International Biotechnology Trust (IBT)

13/11/2023

Results analysis from Kepler Trust Intelligence

The quoted portfolio, which represents 91.6% of IBT's total investments, rose
by 3.8% during the financial year ending 31/08/2023, beating the Nasdaq
Biotechnology Index by 5.2%, which fell 1.4% over the same period.
Outperformance was due to careful selection of mid cap revenue-generating
biotech opportunities, which became acquisition targets. In particular,
Horizon and Seagen represented the two largest portfolio holdings before they
became the subject of takeover bids. In both cases shareholders benefitted
significantly from the performance uplift, and the investment managers
subsequently took the decision to reduce the positions to lower exposure to
the transaction risks. This has proved prescient as both share prices have
been volatile following announcements of investigations into the deals by the
Federal Trade Commission (FTC).

The unquoted portfolio, which comprises 8.4% of total investments, is
primarily invested in two venture capital funds, SV Fund VI and SV BCOF. SV
Fund VI has delivered a currency adjusted Internal Rate of Return (IRR) of
17.7% per annum for investors. SV BCOF has delivered a currency adjusted IRR
of 109% since it was launched in January 2022.

The transition of management to Schroders, which is due to occur on
20/11/2023, ensures continuity of the existing mandate combined with the
benefit of the significant investment trust expertise which Schroders brings
to the table. Ailsa Craig and Marek Poszepczynski are moving to Schroders and
will continue to manage the quoted portfolio with the same investment
philosophy. Chair Kate Cornish-Bowden said: "We are excited about the
opportunities for IBT within the Schroders stable and are looking forward to
the future with confidence".

Kepler View

The underperformance of the biotechnology sector globally may pique the
interest of contrarian investors, it now having had a third successive year of
difficult markets. The team point to demographics and the cyclicality of the
biotech sector as long-term supporting factors which mean it may be an
interesting time to look at the sector.

That said, Biotech remains a high-risk area of the stock market, arguably best
navigated by experts in this complex field. Over the last financial year,
International Biotechnology Trust (IBT) has continued to do the job for
investors that it has long aimed to do: deliver outperformance of the
benchmark, with lower volatility.

IBT remains exposed to the most innovative areas of science. The managers are
recycling proceeds from M&A into small and mid-cap opportunities, whose
share prices have been hit hard by global risk aversion. Rather than make
binary bets on specific companies, the team have identified clusters of
smaller companies focussing on the same disease areas but with different
technologies or approaches.

We think IBT continues to provide an interesting combination of growth
potential and yield, achieved through the board's policy of making dividend
payments equivalent to 4% of the Company's 31/08/2023 NAV, through two
semi-annual distributions. Despite the distractions of the board negotiating
alternative management arrangements, we think it is impressive that Ailsa and
Marek have nonetheless outperformed the benchmark by a significant margin
during the last financial year.

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