REG - Intnl. Biotechnology - Half-year Report
13/05/2025 07:00
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RNS Number : 3241I Intl. Biotechnology Trust PLC 13 May 2025
INTERNATIONAL BIOTECHNOLOGY TRUST PLC
HALF YEAR REPORT
International Biotechnology Trust plc (the "Company") hereby submits its Half
Year Report for the six months ended 28 February 2025 as required by the
Financial Conduct Authority's Disclosure Guidance and Transparency Rule 4.2.
Key Highlights
· Performance during the six-month period was strong, generating a positive
return for shareholders. The NAV per share produced a total return of 2.9%,
outperforming the Reference Index, which delivered a negative total return of
-3.0%.
· The Company paid a first interim dividend for the year ending 31 August 2025
of 15.56 pence per share. As at 28 February 2025, the dividend yield for the
Company was 4.4%.
· The Portfolio Managers continue to focus on identifying high-quality,
innovative biotechnology companies that are attractively valued by the market,
whether as future M&A targets, or as long-term success stories in their
own right.
Kate Cornish-Bowden, Chair of International Biotechnology Trust plc,
commented:
"There is no doubt that we are in a period of great uncertainty for equity
investors. However, the Board believes, the long-term fundamentals for the
biotechnology industry remain very much intact. Increasing demand for
medicines to treat disease and help us live healthier, longer lives is
inevitable as populations across the globe age. Combine this with the
extraordinary progress in drug development in the last few years and the
future for the sector looks very promising."
The Half Year Report is also being published in hard copy format and an
electronic copy of that document will shortly be available to download from
the Company's web pages www.ibtplc.com (http://www.ibtplc.com) .
The Company has submitted a copy of its Half Year Report to the National
Storage Mechanism and it will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
Enquiries:
Schroder Investment Management Limited
Charlotte Banks / Kirsty Preston (Press) 020 7658 6000
Kerry Higgins (Company Secretarial) 020 7658 6000
HALF YEAR REPORT FOR THE SIX MONTHS ENDED 28 FEBRUARY 2025
CHAIR'S STATEMENT
Dear Shareholders
I am pleased to report that the net asset value (NAV) of International
Biotechnology Trust plc (the "Company") has again beaten the Nasdaq
Biotechnology Index (NBI), (the "Reference Index"), during the six-month
period under review. The NAV delivered a total return of 2.9% per share, while
the NBI fell by 3.0% over the period. The share price total return per share
was 3.2%(1).
The six-month period to the end of February 2025 included the election of a
new US president, and the short lived euphoria of markets anticipating
business friendly policies, followed by the reality check of the economic
implications of global trade wars. A mixed picture on the probable direction
of interest rates, expectations for slower growth and increasing confusion as
to the likely course of conflicts in the Middle East and Ukraine have shaken
investor confidence. This was reflected primarily in the share price falls of
the dominant technology companies in the S&P 500, but the risk averse
environment also impacted the biotechnology sector. The political appointment
of Robert F Kennedy Jr, a renowned vaccine sceptic, as Health and Human
Services (HHS) Secretary has further shaken confidence. Moreover, the
administration's decision to cut funding for the National Institute of Health
(NIH) and make staff cuts at the US Food and Drug Administration (FDA), could
impact future drug approvals.
Your Portfolio Managers, Ailsa Craig and Marek Poszepczynski performed well in
this volatile environment comfortably outperforming the Reference Index during
the six-month period under review. Since taking over the management of the
Company in March 2021, they have delivered a NAV return of 14.7%,
substantially ahead of the NBI which rose by 2.9% (sterling adjusted with
dividends reinvested) over the period.
In May last year the Company celebrated its 30th anniversary. At the end of
February 2025, The Association of Investment Companies (AIC) released a list
of 50 investment trusts which would have made investors more than £1 million
if they had invested the full annual ISA allowance in the same investment
trust each year from 1999, when ISAs were first introduced. We were delighted
to see the Company on this list(2).
QUOTED PORTFOLIO
During the six months under review, the NAV per share of the quoted portfolio
returned 4.3% (gross of management and performance fees) outperforming the
Reference Index, which fell by 3.0%.
The biggest contributor to performance came from Uniqure, a Netherlands listed
gene therapy company. The most significant therapy under development in
Uniqure's pipeline is a potentially transformational treatment, AMT-130, which
appears to slow the progression of the rare neurodegenerative Huntington's
Disease. There is a high unmet medical need for patients and a lack of
currently available treatment for people with this fatal disease. In December
2024, the company announced that they had reached agreement with the FDA on
key elements of an accelerated approval pathway for AMT-130, which led to the
share price doubling.
Once again, the successful identification of mergers and acquisitions
(M&A) targets has also been a significant contributor to outperformance.
US listed Intra-Cellular Therapies, a company focused on therapeutics for
central nervous system (CNS) disorders, was the largest holding in the
portfolio when Johnson & Johnson (J&J) made a conditional bid for the
company in January of this year. Intra-Cellular's Caplyta is an FDA-approved
treatment for depression and schizophrenia. The deal is subject to the usual
regulatory approvals, but J&J has agreed to pay a 39% premium to the pre
bid price.
The main detractor from performance to the end of February 2025 was the
underweight position in the large capitalisation biotechnology anti-infectives
company, Gilead. Gilead reported strong results from sales of its HIV
medication but the Portfolio Managers believe market estimates of future sales
are too high. Gilead also benefited from investors' flight to defensive cash
generating companies which occurred towards the end of the period.
UNQUOTED PORTFOLIO
The unquoted portfolio, which comprised 7.6% of the Company's total
investments at the period end, continued to be primarily invested in two
venture capital funds managed by SV Health, SV Fund VI and SV Biotech
Crossover Opportunities Fund LP (SV BCOF), as well as a small number of
directly held unquoted companies, most of which have been exited with
potential contingent milestone payments still remaining. We believe this
diversified exposure to unquoted assets has proved lucrative for the Company's
shareholders and the venture capital funds have performed well in spite of the
difficult funding environment for very early-stage companies.
SV FUND VI
As at 28 February 2025, SV Fund VI represented 3.0% of total investments.
Since the Company's initial investment in 2016, the fund has performed well,
delivering a net currency adjusted internal rate of return (IRR) of 14.9% per
annum. SV Fund VI, which includes a range of early-stage biotechnology,
medical device and healthcare services companies, is now a mature portfolio
with 90% of the capital committed drawn down.
SV BCOF
SV BCOF, the newer fund which invests in later stage and/or pre-initial public
offering (IPO) opportunities, represented 3.0% of total investments at the
period end. The $30 million commitment is only 49% drawn down. In February
2025, SV Health initiated a new investment in AdvanCell Therapeutics, an
Australian company targeting cancer diagnosis and treatment. During the period
under review, the share prices of the two listed companies in the SV BCOF
portfolio have fallen. In December 2024, BioAge stopped the trial of its
experimental obesity drug after reporting liver toxicity, leading to a
significant fall in the share price. Bicycle Therapeutics has also fallen
during the six-month period, but the company has recently announced positive
results in its early-stage trials for ovarian and bladder cancers. In spite of
these issues, as at 31 December 2024, SV BCOF has delivered a net IRR of over
100%, an excellent performance, albeit very early in the life of this venture
capital fund.
Of the small number of directly held legacy assets, the most significant is
the discounted value of the royalty streams from Ikano Therapeutics which was
sold to Belgian listed UCB in 2006. This holding represents 1.4% of total
investments as at 28 February 2025.
DIVIDENDS
The Company's dividend policy, which was last approved at the Annual General
Meeting (AGM) held in December 2024, is to make dividend payments equivalent
to 4% of the Company's NAV, as at the last day of the preceding financial year
being 31 August, through two semi-annual distributions. The first dividend,
for the year ending 31 August 2025 of 15.56 pence per share, was paid on 24
January 2025. As at 28 February 2025, the dividend yield for the Company was
4.4%. The Board intends to declare the second dividend for the year, in
accordance with the above policy, in July 2025 for payment in August 2025.
DISCOUNT MANAGEMENT
The share price discount to NAV was 11.2% as at 28 February 2025, largely
unchanged from the 11.3% discount at the end of the financial year. The Board
continues to keep the Company's share price discount to NAV under close review
and is committed to buying back its shares to help manage the position. The
Board bought back 1,290,971 shares to be held in treasury during the period.
The Board believes that buying back shares at a discount to NAV is not only
accretive to our shareholders but demonstrates our confidence in the
underlying fundamental value of our investments.
COSTS AND FEES
Outperformance of both the quoted and unquoted portfolios for the six-month
period, led to a performance fee of £1,885,000 accruing. In respect of the
quoted portfolio, a performance fee of £1,814,000 accrued to the Manager
whilst a fee of £71,000 has also accrued to SV Health in respect of the
performance of the unquoted portfolio. The ongoing cost ratio remained flat at
1.2%.
BOARD AND SUCCESSION
The Board was pleased to welcome Alexa Henderson on 1 January 2025 as Chair
Designate of the Audit Committee, to succeed Caroline Gulliver. Alexa has a
wealth of finance, accounting and audit experience whilst also having served
as a non-executive Director on the Board of a number of investment companies.
As announced on 10 April 2025, Caroline Gulliver retired from the Board on 30
April 2025 and Alexa has now been appointed as Chair of the Audit Committee.
The Board and I would like to record our thanks to Caroline for her invaluable
contribution and tireless efforts on behalf of the Company's shareholders; and
to wish her well for the future.
OUTLOOK
There is no doubt that we are in a period of great uncertainty for equity
investors. The aggressive implementation of global trade tariffs by the
American administration has knocked confidence and will be highly likely to
lead to inflation and slower economic growth worldwide. At the time of
writing, the position regarding tariffs in the biotechnology and
pharmaceutical sectors remains unresolved. The new US Health Secretary has
recently announced plans to reduce the number of employees at the Food and
Drug Administration (FDA) by 25% which includes many eminent scientists. This
is likely to impact the pace of drug reviews and approval timelines for
innovative new treatments.
However, we believe, the long-term fundamentals for the biotechnology industry
remain very much intact. Increasing demand for medicines to treat disease and
help us live healthier, longer lives is inevitable as populations across the
globe age.
Combine this with the extraordinary progress in drug development in the last
few years and the future for the sector looks very promising. Innovations such
as messenger RNA molecule (mRNA) technology which is now being trialled to
target cancer and autoimmune disease, and the recent historic approval of the
first gene therapy using clustered regularly interspaced short palindromic
repeats (CRISPR-Cas9) technology, Calgevy for sickle cell disease, are
reshaping the industry. Rapid and cost-effective sequencing of DNA has led to
targeted, more effective personalised therapies; and the application of
artificial intelligence (AI) has revolutionised drug discovery allowing for
faster analysis of data including genomic, clinical and lifestyle information
to predict disease and optimise treatment strategies.
The Portfolio Managers and the Board believe that recent share prices falls
have created an extraordinary valuation opportunity for investors who
understand that these long term industry fundamentals should prevail.
KATE CORNISH-BOWDEN
Chair
12 May 2025
1 Source: Morningstar, on a sterling-adjusted total return basis, with
dividends reinvested.
2 Source: AIC,
https://www.theaic.co.uk/aic/news/press-releases/the-50-investment-trusts-that-would-have-made-you-an-isa-millionaire.
Investors allocating their full ISA allowance to the Company and investing in
its shares every year since 1999 would have amassed assets of nearly £1.4
million by the end of January 2025, a share price total return of 2,139% over
the 25-year period.
PORTFOLIO MANAGERS' REVIEW
We are pleased to present the Portfolio Managers' Review for the six months
ended 28 February 2025. Despite a challenging period for the biotechnology
sector, the Company's NAV total return was 2.9% and the share price total
return was 3.2% over the period(1). In contrast, the Reference Index(2)
delivered a negative total return of -3.0%, while small-capitalisation
biotechnology stocks(3) experienced a sharper fall.
MARKET OVERVIEW
In the early weeks of the period, stocks traded broadly flat as the market
held its breath awaiting the US presidential election. In early November 2024,
the sector rallied on expectations of a more pro-business stance under the new
US administration, echoing the strong performance seen during the previous
Trump Presidency. However, this momentum subsequently waned following the
nomination of Robert F Kennedy Jr as Secretary of Health and Human Services,
which introduced uncertainty due to his views on vaccines. Further declines
occurred in February 2025 after the announcement of new tariffs on imports
from a range of countries, leading to an increasing risk aversion among
investors, a broader market sell-off and recession fears.
M&A activity in the biotechnology sector was subdued during the period,
reflecting regulatory uncertainty and a cautious approach from pharmaceutical
companies towards large-scale acquisitions. This followed a challenge by the
US Federal Trade Commission (FTC) of two major deals, Amgen's acquisition of
Horizon Therapeutics in 2022 and Merck's bid for Seagen in 2023, creating an
uncertain environment that has since kept many potential buyers on the
sidelines. However, both deals did eventually gain approval and close
successfully. The appointment of Andrew Ferguson as FTC Chairman in January
2025, potentially signals a shift towards a more business-friendly regulatory
environment, and we expect the re-emergence of deal activity to be a feature
of 2025 and beyond.
Towards the end of the period under review, the Company benefited from the
biggest biotechnology deal since 2023, when the portfolio's largest holding,
Intra-Cellular Therapies, was acquired by Johnson & Johnson for $14.6
billion(4). It is the third time that the Company's largest holding has been
acquired since we took over as lead Portfolio Managers in March 2021. Twenty
six companies within the portfolio have been acquired by major pharmaceutical
companies since 2020. These transactions underscore pharmaceutical companies'
enduring search for innovative biotechnology companies and highlight the
Company's ability to identify value-creating opportunities.
The structural forces underpinning biotechnology M&A are stronger than
ever. Large pharmaceutical companies have progressively scaled back their
in-house research and development (R&D) efforts in recent years, shifting
their focus from early-stage drug discovery to late-stage commercialisation
and distribution. This has left the bulk of medical innovation in the hands of
biotechnology firms - the proportion of new drug approvals originating from
biotechnology companies has risen from 24% in 2013 to 73% in 2024(5). Yet,
pharmaceutical companies continue to face a pressing need to replace lost
revenues from upcoming patent expirations. The obvious solution is to acquire,
or in-license, assets from biotechnology as they approach the point of
commercialisation. What results is a symbiotic relationship within the
healthcare industry, in which biotechnology serves as the engine of innovation
while pharmaceutical provides the infrastructure to bring new therapies to
market. This represents a strong, natural, and enduring rationale for
continued M&A.
Meanwhile, innovation in the biotechnology industry has continued at a rapid
pace, as reflected in another strong year of new drug approvals by the FDA.
Additionally, there are signs that the biotechnology funding environment is
gradually improving with optimism about the initial public offering (IPO)
pipeline and established companies readily accessing additional equity
financing.
2024 saw an improvement in the number of IPOs making it to market but was
still significantly behind the boom years of 2020 and 2021 which saw many
early stage companies(6) whose products had not yet started testing for
efficacy coming to market. The slowdown in IPOs that followed has resulted in
many businesses staying private for longer, suggesting they should represent
lower-risk, higher-quality investment opportunities as and when they do seek
to list.
From the perspective of valuations, there is now a striking divergence across
the market capitalisation spectrum. At the start of 2025,
larger-capitalisation biotechnology companies rallied as investors, seeking
safety amid market weakness especially in the technology sector, rotated into
the biotechnology sector but favoured more liquid, established, profitable
names. This we believe has left many small and mid-capitalisation
biotechnology stocks trading at very attractive valuations. Despite
significant fundamental progress, the Russell 2000 Biotechnology Index is
revisiting the levels seen five years ago. Not only are smaller biotechnology
stocks trading at much better value than their larger peers, we believe they
also offer significantly higher growth rates. With this dynamic in place, the
opportunity ahead looks clear for investors willing to look beyond short-term
market trends.
PERFORMANCE REVIEW
The Company delivered a solid performance during the six-month period,
generating a positive return for shareholders, despite the broader declines
seen by the biotechnology sector. The NAV per share produced a total return of
2.9%, outperforming the Reference Index, which delivered a total return of
-3.0%. The share price also posted a positive total return of 3.2%. The
discount to NAV at which the Company's shares traded narrowed marginally from
11.3% at the beginning of the period to 11.2% on 28 February 2025.
QUOTED PORTFOLIO
The NAV of the quoted portfolio produced a total return of 4.3% (gross of
management and performance fees), for the six-month period, outperforming the
Reference Index, which delivered a total return of -3.0%, and the
small-capitalisation-focused Russell 2000 Biotechnology Index, which declined
by 9.8%(7).
M&A
The Company benefited from two acquisition deals during the period under
review, despite the lull in M&A activity seen across the biotechnology
sector as a whole. By far the most impactful was the acquisition of
Intra-Cellular Therapies, the Company's largest holding representing 7.1% of
NAV at the time, by Johnson & Johnson for approximately $14.6 billion(8).
Announced in January 2025, the deal valued Intra-Cellular at $132 per share,
representing a 39% premium to its previous share price. The acquisition was
driven by the strength of Caplyta (lumateperone), Intra-Cellular's
fast-growing treatment for schizophrenia and bipolar depression, which has
been gaining significant market traction. With further pipeline assets in
development for neuropsychiatric and neurodegenerative disorders,
Intra-Cellular was a prime target for large capitalisation pharmaceutical
businesses looking to expand in this area.
Meanwhile, the Company also benefited from the acquisition of Marinus
Pharmaceuticals by the Swedish company Immedica for approximately $151
million(9). Announced in December 2024, the deal came at a 48% premium to the
closing share price prior to the announcement. The acquisition was driven by
the strategic value of Ztalmy (ganaxolone), Marinus' FDA-approved treatment
for a rare and severe form of childhood epilepsy.
Other positive contributors to NAV
Uniqure is a gene therapy company from the Netherlands focused on developing
one-time treatments for severe genetic disorders. Its most advanced program,
AMT-130, is a potential first-in-class gene therapy for Huntington's disease.
Its share price rose sharply after securing FDA alignment in December 2024 on
the key elements of an accelerated approval pathway for this asset, which
represents a major step towards its potential commercialisation. In our view,
the valuation uplift was justified as even before this news, Uniqure had a
very low enterprise value (market capitalisation less cash).
SpringWorks Therapeutics is a biopharmaceutical company developing treatments
for rare diseases and cancer. In February 2025, the company received a major
boost when the FDA approved mirdametinib, its lead drug, for the treatment of
a type of neurofibromatosis, a rare genetic condition that causes painful,
tumour-like growths in nerves. This long-awaited approval provides strong
validation of SpringWorks' approach and significantly enhances its commercial
prospects. Shortly after, reports emerged that Merck was in advanced
discussions to acquire the company, driving further interest in the stock. The
combination of regulatory success and takeover speculation led to a sharp
re-rating, reflecting renewed and fundamentally justified investor confidence
in SpringWorks' potential.
Relative negative detractors to NAV
Gilead Sciences is not held in the portfolio, but its strong performance
during the period was a source of relative underperformance. Investors have
become increasingly enthusiastic about the anticipated launch of Gilead's new
HIV prevention drug, lenacapavir, which has prompted a significant rise in its
share price and valuation. Moreover, we have concerns on the new
administration's stance regarding funding HIV infection prevention as, shortly
after the period under review, dozens of grants to study how to prevent new
HIV infections were cancelled. Gilead hopes to launch a new, more convenient
version of pre-exposure prophylaxis (PrEP) this year which may struggle with
market adoption when a cheaper, less convenient option is already available.
Additionally, as a large, liquid defensive stock, Gilead benefited from the
'flight to safety' towards the end of the period. We remain underweight in
Gilead as we continue to believe that the current valuation is driven more by
investor enthusiasm than the potential value in the company, even taking into
account its prospects for growth.
Rocket Pharmaceuticals is a clinical-stage company developing gene therapies
for rare childhood disorders. During the period, its share price faced
pressure due to slower-than-expected patient enrolment in trials for RP-A501,
its gene therapy for Danon Disease, a rare genetic disorder affecting the
heart. This also reflects the therapy's relatively small target market, which
may ultimately limit its potential commercial value. While market sentiment
has largely focused on this programme, we continue to see broader value in
Rocket's pipeline, which includes multiple gene therapy candidates for other
rare diseases. In combination, the potential commercial value of this pipeline
is ultimately much greater.
Olema Pharmaceuticals is focused on developing targeted therapies for women's
cancers, particularly breast cancer. A relatively small position within the
portfolio's emerging oncology basket, its stock declined during the period
amid scepticism over whether its lead candidate, palazestrant (OP-1250), an
oral therapy designed to block and degrade the estrogen receptor, will prove
more effective than existing treatments. The company continues to advance
clinical trials to validate its approach.
UNQUOTED PORTFOLIO
The Company's unquoted portfolio which represented 7.6% of total investments
as at the end of February 2025, comprises principally investments in two
venture funds run by SV Health.
SV FUND VI
SV Fund VI, launched in 2016 is now in run-off mode, and gradually returning
capital to shareholders. During the period under review, SV Health has
continued to support the SV Fund VI portfolio with follow-on investments made
to JetHealth, Ribometrix, Enara and TrexBio. Despite the continued uncertainty
in the funding environment for unquoted companies and pressure on valuations,
SV Fund VI has performed well, delivering a net IRR of 14.9% since inception.
SV BCOF
The more recent investment is in a crossover fund, SV BCOF, which is designed
to include investments in companies which have therapeutics in the clinic,
and/or are closer to valuation realisation through either strategic deals,
acquisition or listing. Since we initially invested in BCOF in 2021, the fund
has delivered a net IRR of 100%, an excellent performance, albeit still early
in the life of this venture capital fund.
In February 2025, SV Health led the Series C funding round for AdvanCell, an
innovative radiopharmaceuticals company based in Australia, as it aims to
establish its operations in the US and expand its international investor base.
AdvanCell is focused on developing novel targeted alpha therapies for cancer
diagnosis and treatment. The financing will support AdvanCell in generating
meaningful clinical data for its lead programme while also facilitating the
scaling up of manufacturing capabilities in the US. In September 2024 SV
Health successfully closed the Seed round for Draig Therapeutics, built around
a portfolio of clinical and pre-clinical assets in the field of precision
psychiatry. Draig's lead programme is already in the clinic making it a
suitable investment for SV BCOF, with its late-stage investment focus. The
Company continues to advance well. BioAge (NASDAQ: BIOA), which is centred on
next-generation obesity therapeutics, faced a significant decline in share
price following the discontinuation of its lead programme due to liver-related
side effects in certain trial participants. Nevertheless, after its IPO in
September 2024, BioAge maintains a solid cash reserve of over $350 million,
positioning it well to navigate these challenges and continue its research
efforts. Similarly, Bicycle Therapeutics (NASDAQ: BCYC) has experienced a
considerable drop in share price over the past quarter, despite holding cash
balances of $880 million as of December 2024. The company continues to show
promising efficacy signals in its Phase 2 studies for patients with heavily
pre-treated ovarian and bladder cancer, indicating that market perceptions may
not accurately reflect the underlying value and potential of the company.
The Company retains an exposure to potential income from previous portfolio
companies which have been acquired but have milestone payment agreements with
previous shareholders including SV Health. The most significant of these is
Ikano, a company focused on developing nasal drug delivery systems. Ikano was
sold to Belgian pharmaceutical company UCB in 2007; the current valuation
represents the discounted cash flows of future royalty streams based on
achieving certain milestones. During the period under review the Company
received a further £334,183 from Ikano in royalty streams from this
investment.
PORTFOLIO POSITIONING
Our investment strategy remains focused on identifying companies with
innovative technologies addressing unmet medical need, strong intellectual
property and solid growth potential. Stock selection is informed by a clear
top-down view of the biotechnology opportunity set, which evolves over time,
as does our appetite for risk.
When we took over the lead Portfolio Manager role for the portfolio in 2021,
our initial strategy focused on larger, more liquid biotechnology stocks to
manage risk and volatility. This approach reflected the backdrop of rising
interest rates and the potential for a pullback after a period of strong gains
from the biotechnology sector, while ensuring exposure to high-quality,
cashflow-generating companies with strong fundamentals.
However, since late 2023, we have become increasingly confident in the
improving risk-reward balance in the sector and have elected to progressively
shift down the market capitalisation spectrum by increasing exposure to small
and mid-capitalisation biotechnology stocks. With valuations in this segment
at historically low levels, we see a compelling opportunity to invest in
companies with strong fundamentals that should be the key beneficiaries of
improving investor sentiment and a recovering M&A environment.
Importantly, this shift has not come at the expense of revenue-generating
businesses. Approximately half of the portfolio remains invested in companies
with approved products and commercial traction, ensuring a finely tuned
balance between innovation, clinically validated assets and significant future
potential. Yet, many of these businesses are trading at valuations that, in
our view, significantly undervalue the long-term commercial potential of their
technology. Meanwhile, this segment is a sweet spot for M&A activity, as
larger pharmaceutical companies look to replenish their pipelines with proven
assets.
We also take a 'basket approach' to therapeutic areas where the ultimate
winners are still somewhat harder to predict, such as emerging oncology,
central nervous system (CNS) and obesity. This involves a lower risk,
diversified strategy of taking smaller positions across a range of the most
promising assets, rather than backing a single opportunity, with the aim of
refining our selection as their relative prospects become clearer.
These changes result in a less concentrated portfolio with more holdings,
where the top ten positions account for a lower percentage of the overall
portfolio. We strongly believe this is an appropriate strategy for the current
opportunity set, which should allow the portfolio to generate significant
value as the sector moves through the more rewarding phases of the
biotechnology investment cycle.
OUTLOOK
The structural growth drivers underpinning biotechnology remain firmly intact.
As populations become older, richer and sicker, demand for healthcare
innovation continues to rise. Against this backdrop, it is clear that
biotechnology must continue to play a central role in delivering both
significant societal benefits and attractive investment opportunities.
Despite these long-term tailwinds, biotechnology valuations remain at
compellingly low levels, particularly among small and mid capitalisation
companies where we believe the opportunity for future growth looks
significant. We believe 2025 is shaping up to be a major year for product
launches, with several portfolio companies bringing their therapies to market
independently without additional marketing and distribution muscle from a
pharmaceutical partner. This is perhaps a reflection of the recent M&A
lull, but these businesses are obvious bid targets for large pharmaceutical
companies looking to replace revenues that are under threat from patent
expiries, should the industry's appetite for deals return.
Biotechnology remains the engine of healthcare innovation, with 70% of new
drug approvals now originating from the sector. Ten years ago, the inverse was
true, with 70% of new drug approvals emanating from big pharmaceutical
R&D. One of the few missing ingredients in an otherwise attractive
backdrop has been IPO activity, which has remained subdued since the
speculative wave of 2021. The return of IPO activity would be a welcome
development, but we do not view it as essential for the sector to perform
well.
Ironically, the paucity of IPOs has contributed to a steady decline in the
number of constituents in the Reference Index. This should not be mistaken for
a lack of opportunity - on the contrary, it reflects a 'survival of the
fittest' dynamic which results in a stronger set of businesses that are better
positioned for long-term success.
Although healthcare did not feature prominently in the US election campaign
last year, President Trump's victory has introduced elements of uncertainty
for the biotechnology sector. This has been exacerabated by the new tariff
framework, where the pharmaceutical sector was not included in the first wave
of announced tariffs. The sector's complexity means that more analysis is
required and the expectation is that it will be a few months before any
clarity on pharmaceutical tariffs emerges.
As mentioned previously, the appointment of Robert F Kennedy Jr unsettled the
market due to his history of vaccine scepticism. More broadly, other key
appointments for the sector, such as Dr Martin Makary for Commissioner of the
FDA and Dr Jayanta Bhattacharya for Director of the NIH, initially appeared
relatively benign. However, recent changes to senior management at the FDA
alongside widespread staffing cuts, have caused some market turbulence and, in
combination with the prospect of tariff impositions, may continue to do so. In
addition, NIH funding cuts are already being implemented, with grant
terminations and budget reductions affecting some early-stage research and
academic institutions. While this could create near-term challenges for
companies reliant on early-stage funding, we believe the strongest and most
innovative biotechnology businesses will continue to attract capital and
advance new treatments.
The Inflation Reduction Act (IRA), introduced by the Biden administration, is
expected to remain in place, though discussions about possible modifications
are ongoing. These could ease pressure on the healthcare sector, but
legislative changes would take time and remain uncertain. It is worth noting
that during President Trump's previous term, the biotechnology sector
experienced a 40% increase, suggesting that political uncertainty does not
necessarily prevent the sector from outperforming.
CONCLUSION
At the time of writing, the sector is experiencing renewed pressure, with
concerns over tariffs and broader political uncertainty driving market-wide
risk aversion. As capital rotates into perceived safe havens,
large-capitalisation biotechnology stocks, where we are underweight, have
outperformed, pushing their valuations to levels that now look even more
stretched and imply successful execution of their strategies. While the
precise timing of a rebound is difficult to predict, we do not expect this
dislocation to persist for long. In the meantime, the most compelling
valuation opportunities are found further down the market capitalisation
spectrum. Where share prices have weakened due to external factors and not by
fundamentals, we are taking the opportunity to add to holdings at these
levels.
Indeed, we believe the current biotechnology investment environment presents a
significant opportunity. Our investment approach remains unchanged, we
continue to focus on identifying high-quality, innovative biotechnology
companies that are attractively valued by the market, whether as future
M&A targets, or as long-term success stories in their own right.
Over the past three years, we have delivered solid outperformance versus the
Reference Index through a range of market conditions. Looking ahead, we are
confident that biotechnology is now in a protractedly positive phase of its
investment cycle, one that should benefit the sector as a whole, but where
experienced, active, specialist investors are especially well-placed to create
additional value.
We appreciate your continued support and look to the future with great
confidence.
AILSA CRAIG AND MAREK POSZEPCZYNSKI
Portfolio Managers
12 May 2025
1 The Investment Manager invests on a discretionary basis and there
are no restrictions on the extent to which the Company's portfolio and
performance may deviate from the Reference Index. The Investment Manager will
invest in companies or sectors not included in the Reference Index in order to
take advantage of specific investment opportunities.
2 Reference Index is the measure against which the Company compares
its performance. It is the NASDAQ Biotechnology Index (with dividends
reinvested) sterling adjusted.
3 Source: Russell 2000 Biotech Index, Bloomberg.
4 Source: J&J Company Announcement 13/01/2025.
5 Source: Bank of America global research. FDA.gov
(http://www.FDA.gov) (novel NDA/BLA approvals). Company reports.
6 Companies which are in Phase 1 of clinical trials or earlier. Phase
1 is the first time a potential drug is tested in humans and focuses
predominantly on safety.
7 Source: Bloomberg.
8 Source: J&J Company Announcement 13/01/2025.
9 Source: Immedica Company Announcement 30/12/2024.
Past Performance is not a guide to future performance and may not be repeated.
The value of investments and the income from them may go down as well as up
and investors may not get back the amounts originally invested. Exchange rate
changes may cause the value of investments to fall as well as rise. Any
reference to regions/ countries/ sectors/ stocks/ securities is for
illustrative purposes only and is not a recommendation to buy or sell any
financial instruments or adopt a specific investment strategy. The material is
not intended to provide, and should not be relied on for, accounting, legal or
tax advice, or investment recommendations. Reliance should not be placed on
any views or information in the material when taking individual investment
and/or strategic decisions.
INVESTMENT PORTFOLIO AS AT 28 FEBRUARY 2025
QUOTED INVESTMENTS
Equities
As at 28 February 2025
Investment Therapeutic area Geographic location £'000 %
SpringWorks Therapeutics Oncology United States 25,567 8.2
Ascendis Pharma Rare diseases Europe 13,046 4.2
Cytokinetics Other United States 12,634 4.1
Uniqure Haematology Europe 11,213 3.6
BioMarin Rare diseases United States 10,271 3.3
Travere Therapeutics Auto-immune United States 10,065 3.2
KalVista Pharmaceuticals Rare diseases United States 9,792 3.1
Vera Therapeutics Auto-immune United States 9,601 3.1
Insmed Rare diseases United States 8,260 2.7
Madrigal Pharmaceuticals Liver United States 8,232 2.6
Biogen Central nervous system United States 7,793 2.5
Supernus Pharmaceuticals Central nervous system United States 6,792 2.2
Structure Therapeutics Other United States 5,159 1.7
Apellis Rare diseases United States 5,045 1.6
Sarepta Therapeutics Rare diseases United States 4,975 1.6
Regeneron Ophthalmology United States 4,815 1.5
Legend Biotech Oncology United States 4,654 1.5
Acadia Pharmaceuticals Central nervous system United States 4,168 1.3
Vir Biotechnology Infectious Diseases United States 4,131 1.3
Xenon Pharmaceuticals Other Canada 4,033 1.3
Viking Therapeutics Metabolic United States 3,870 1.2
Edgewise Therapeutics Cardiovascular United States 3,867 1.2
Summit Therapeutics Oncology United States 3,838 1.2
Denali Therapeutics Central nervous system United States 3,833 1.2
Alnylam Pharmaceuticals Rare diseases United States 3,755 1.2
Incyte Oncology United States 3,749 1.2
Indivior Other United Kingdom 3,650 1.2
BioCryst Rare diseases United States 3,574 1.1
Biohaven Central nervous system United States 3,213 1.0
Rocket Pharmaceuticals Rare diseases United States 3,100 1.0
Altimmune Metabolic United States 3,044 1.0
Amicus Therapeutics Rare diseases United States 2,778 0.9
Viatris Infectious Diseases United States 2,674 0.9
Avidity Biosciences Rare diseases United States 2,661 0.9
Ionis Rare diseases United States 2,653 0.9
Dyne Therapeutics Rare diseases United States 2,621 0.8
Vanda Pharmaceuticals Central nervous system United States 2,519 0.8
Zai Lab Oncology United States 2,516 0.8
Neurocrine Biosciences Central nervous system United States 2,464 0.8
Axsome Therapeutics Central nervous system United States 2,444 0.8
Avadel Central nervous system United States 2,309 0.7
UroGen Pharma Oncology United States 2,279 0.7
AstraZeneca Oncology United Kingdom 2,263 0.7
CG oncology Oncology United States 2,223 0.7
Crinetics Pharmaceuticals Other United States 2,200 0.7
Silence Therapeutics Cardiovascular United States 2,150 0.7
Vaxcyte Rare diseases United States 2,147 0.7
Ideaya Biosciences Oncology United States 2,029 0.7
Zealand Pharma Metabolic Europe 1,993 0.6
Alkermes Central nervous system United States 1,980 0.6
Immunome Oncology United States 1,970 0.6
Novo Nordisk Metabolic Europe 1,960 0.6
Scholar Rock Metabolic United States 1,864 0.6
Olema Pharmaceuticals Oncology United States 1,850 0.6
Janux Oncology United States 1,834 0.6
Krystal Rare diseases United States 1,795 0.6
Akero Therapeutics Other United States 1,765 0.6
Iovance Biotherapeutics Oncology United States 1,688 0.5
Autolus Cell therapy United States 1,638 0.5
Immunocore Oncology United States 1,529 0.5
Immatics Oncology United States 1,492 0.5
Apogee Therapeutics Auto-immune United States 1,460 0.5
Aurinia Pharmaceuticals Auto-immune United States 1,242 0.4
Merus Oncology United States 1,231 0.4
Tango Therapeutics Oncology United States 1,082 0.3
Kymera Auto-immune United States 1,050 0.3
BridgeBio Rare diseases United States 962 0.3
Arvinas Oncology United States 814 0.3
Celldex Therapeutics Auto-immune United States 786 0.3
Blueprint Medicines Oncology United States 785 0.3
Rhythm Pharmaceuticals Metabolic United States 767 0.2
Syndax Oncology United States 716 0.2
Solid Biosciences Rare diseases United States 695 0.2
Beam Therapeutics Rare diseases United States 491 0.2
Kura Oncology Oncology United States 373 0.1
Terns Pharmaceuticals Metabolic United States 303 0.1
Skye Bioscience Metabolic United States 249 0.1
Intellia Therapeutics Rare diseases United States 192 0.1
Corbus Pharmaceuticals Metabolic United States 187 0.1
--------------- ---------------
Total equities 287,412 92.4
========= =========
UNQUOTED INVESTMENTS
Investments held through a venture fund
As at 28 February 2025
Investment Sector classification Geographic location £'000 %
SV Fund VI Venture Fund United States 9,478 3.0
SV BCOF Venture Fund United Kingdom 9,162 3.0
--------------- ---------------
Total investments held through a venture fund 18,640 6.0
========= =========
Exited investments with contingent milestones
Exited unquoted companies for which the Company retains rights to receive
future contingent performance-based payments are shown below:
As at 28 February 2025
Investment Therapeutic area Geographic location £'000 %
Ikano Therapeutics Auto-immune United States 4,236 1.4
Convergence Auto-immune United States 376 0.1
--------------- ---------------
Total exited investments with contingent milestones 4,612 1.5
========= =========
Exited investments in liquidation
As at 28 February 2025
Investment Therapeutic area Geographic location £'000 %
Topivert Other United Kingdom 40 -
--------------- ---------------
Total exited investments in liquidation 40 -
========= =========
Directly-held unquoted investments
Directly-held unquoted investments held by the Company are shown below:
As at 28 February 2025
Investment Therapeutic area Geographic location £'000 %
Autifony Therapeutics Other United Kingdom 341 0.1
--------------- ---------------
Total directly-held unquoted investments 341 0.1
========= =========
Investments in unquoted companies that have previously been written down to
nil net book value, but where ownership in the company is retained, are not
disclosed in this table.
SUMMARY OF INVESTMENTS
As at 28 February 2025
Investment £'000 %
Equities 287,412 92.4
Investments held through a venture fund 18,640 6.0
Exited investments with contingent milestones 4,612 1.5
Exited investments in liquidation 40 -
Directly-held unquoted investments 341 0.1
--------------- ---------------
Total investments 311,045 100.0
========= =========
PORTFOLIO COMPOSITION
Therapeutic area Geography Development stage Size
Rare Diseases 23.5% US and Canada 85.5% Development 49.8% Mid Cap USD 2bn-10bn 41.2%
Oncology 16.1% EU and UK 13.7% Revenue Growth 32.2% Small Cap < USD 2bn 35.8%
CNS 14.9% Rest of world 0.8% Profitable 13.8% Large Cap USD 10bn-30bn 12.0%
Other 13.2% Other 4.2% Unquoted Funds 6.0%
Metabolic 8.1% Mega Cap >USD 30bn 2.9%
Endocrinology 5.7% Directly-held Unquoted 1.6%
Cardiology 5.3% Other 0.5%
Cell Therapy 4.1%
Auto-Immune 2.8%
Pulmonary 2.7%
Infectious Diseases 2.0%
Ophthalmology 1.6%
INTERIM MANAGEMENT STATEMENT
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risks associated with the Company's business fall into the
following risk categories: strategic; performance/investment;
operational/service provider and emerging. A detailed explanation of the risks
in each of these categories can be found on pages 32 to 34 and in note 19 on
pages 77 to 85 of the Company's published Annual Report and Financial
Statements for the year ended 31 August 2024.
In the view of the Board, the Company's principal risks and uncertainties have
not changed during the six months ended 28 February 2025. However, the
severity of some of the risks has increased. The Board undertook a review of
the principal and emerging risks for the Company while reviewing these
financial statements and noted that, following the election of President
Trump, geopolitical and economic risks have heightened for a number of
reasons, most notably the global trade wars unfolding due to the evolving
tariff regime of the Trump administration and the ongoing conflict in Ukraine,
where initial hopes that a resolution to the conflict may be brokered by the
incoming US administration seemed to diminish. These matters will be closely
monitored and reported on in the next Annual Report, as appropriate.
GOING CONCERN
Having assessed the principal and emerging risks and uncertainties, and the
other matters discussed in connection with the viability statement as set out
on page 35 of the published Annual Report and Financial Statements for the
year ended 31 August 2024, the Directors consider it appropriate to adopt the
going concern basis in preparing the financial statements.
RELATED PARTY TRANSACTIONS
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 28 February 2025.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge:
- the condensed set of financial statements contained within the
Half Year Report has been prepared in accordance with International Accounting
Standard 34, Interim Financial Reporting; and
- the Interim Management Report, together with the Chair's
Statement and Portfolio Managers' Review includes a fair review of the
information required by Disclosure Guidance and Transparency Rules 4.2.7R and
4.2.8R.
The Half Year Report has not been reviewed or audited by the Company's
auditors.
The Half Year Report for the six months ended 28 February 2025 was approved by
the Board on 12 May 2025 and the above responsibility statement was signed on
its behalf by the Chair.
KATE CORNISH-BOWDEN
Chair
12 May 2025
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2025 (UNAUDITED)
(Unaudited) (Unaudited) (Audited)
For the six months
For the six months
For the year
ended 28 February 2025
ended 29 February 2024
ended 31 August 2024
Note Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Gains on investments held at fair value through profit or loss - 12,404 12,404 - 31,764 31,764 - 41,620 41,620
Net foreign currency gains/(losses) - (1,457) (1,457) - 629 629 - 1,656 1,656
Income 4 291 - 291 650 - 650 1,263 - 1,263
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Total income 291 10,947 11,238 650 32,393 33,043 1,263 43,276 44,539
========= ========= ========= ========= ========= ========= ========= ========= =========
Expenses
Management fee 10 (885) - (885) (799) - (799) (1,297) - (1,297)
Performance fee 10 - (1,885) (1,885) - (1,859) (1,859) - (904) (904)
Administrative expenses (499) - (499) (721) - (721) (1,129) - (1,129)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) before finance costs and taxation (1,093) 9,062 7,969 (870) 30,534 29,664 (1,163) 42,372 41,209
Finance costs (917) - (917) (1,260) - (1,260) (2,198) - (2,198)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Profit/(loss) before taxation (2,010) 9,062 7,052 (2,130) 30,534 28,404 (3,361) 42,372 39,011
Taxation (18) - (18) (71) - (71) (135) - (135)
--------------- --------------- --------------- --------------- --------------- --------------- --------------- --------------- ---------------
Net profit/(loss) for the period/year (2,028) 9,062 7,034 (2,201) 30,534 28,333 (3,496) 42,372 38,876
========= ========= ========= ========= ========= ========= ========= ========= =========
Earnings/(loss) per share (pence) 5 (5.60) 25.00 19.40 (5.66) 78.53 72.87 (9.16) 110.97 101.81
========= ========= ========= ========= ========= ========= ========= ========= =========
The "Total" column of this statement represents the Company's Statement of
Comprehensive Income prepared in accordance with UK-adopted International
Accounting Standards.
The Company does not have any other comprehensive income and hence the net
profit/(loss) for the period/year, as disclosed above, is the same as the
Company's total comprehensive income.
The "Revenue" and "Capital" columns represent supplementary information
prepared under guidance set out in the Statement of Recommended Practice for
investment trust companies (the "SORP") issued by The Association of
Investment Companies in July 2022.
All revenue and capital items in the above statement derive from continuing
operations.
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2025 (UNAUDITED)
Note Share Share Capital Capital Revenue Total
capital
premium
redemption
reserves
reserve
£'000
£'000
£'000
reserve
£'000
£'000
£'000
At 31 August 2024 10,346 29,873 31,482 264,591 (54,027) 282,265
Net profit/(loss) for the period - - - 9,062 (2,028) 7,034
Dividend paid in the period 7 - - - (5,626) - (5,626)
Repurchase of ordinary shares into treasury - - - (9,089) - (9,089)
--------------- --------------- --------------- --------------- --------------- ---------------
At 28 February 2025 10,346 29,873 31,482 258,938 (56,055) 274,584
========= ========= ========= ========= ========= =========
FOR THE SIX MONTHS ENDED 29 FEBRUARY 2024 (UNAUDITED)
Note Share Share Capital Capital Revenue Total
capital
premium
redemption
reserves
reserve
£'000
£'000
£'000
reserve
£'000
£'000
£'000
At 31 August 2023 10,346 29,873 31,482 249,147 (50,531) 270,317
Net profit/(loss) for the period - - - 30,534 (2,201) 28,333
Dividend paid in the period 7 - - - (5,391) - (5,391)
Repurchase of ordinary shares into treasury - - - (6,750) - (6,750)
--------------- --------------- --------------- --------------- --------------- ---------------
At 29 February 2024 10,346 29,873 31,482 267,540 (52,732) 286,509
========= ========= ========= ========= ========= =========
FOR THE YEAR ENDED 31 AUGUST 2024 (AUDITED)
Note Share Share Capital Capital Revenue Total
capital
premium
redemption
reserves
reserve
£'000
£'000
£'000
reserve
£'000
£'000
£'000
At 31 August 2023 10,346 29,873 31,482 249,147 (50,531) 270,317
Net profit/(loss) for the year - - - 42,372 (3,496) 38,876
Dividends paid in the year 7 - - - (10,768) - (10,768)
Repurchase of ordinary shares into treasury - - - (16,160) - (16,160)
--------------- --------------- --------------- --------------- --------------- ---------------
At 31 August 2024 10,346 29,873 31,482 264,591 (54,027) 282,265
========= ========= ========= ========= ========= =========
STATEMENT OF FINANCIAL POSITION
AS AT 28 FEBRUARY 2025 (UNAUDITED)
Note (Unaudited) (Unaudited) (Audited)
At 28 February
At 29 February
At 31 August
2025
2024
2024
£'000
£'000
£'000
Non-current assets
Investments held at fair value through profit or loss 6 311,045 305,068 297,507
--------------- --------------- ---------------
311,045 305,068 297,507
========= ========= =========
Current assets
Receivables 906 6,474 215
Cash and cash equivalents 4,247 9,227 10,433
--------------- --------------- ---------------
5,153 15,701 10,648
========= ========= =========
Total assets 316,198 320,769 308,155
========= ========= =========
Current liabilities
Loan (35,738) (27,669) (22,827)
Payables (5,876) (6,591) (3,063)
--------------- --------------- ---------------
(41,614) (34,260) (25,890)
========= ========= =========
Net assets 274,584 286,509 282,265
========= ========= =========
Equity attributable to shareholders
Share capital 10,346 10,346 10,346
Share premium 29,873 29,873 29,873
Capital redemption reserve 31,482 31,482 31,482
Capital reserves 258,938 267,540 264,591
Revenue reserve (56,055) (52,732) (54,027)
--------------- --------------- ---------------
Total equity attributable to shareholders 274,584 286,509 282,265
========= ========= =========
Net asset value per share (pence) 9 772.52 748.90 766.30
========= ========= =========
International Biotechnology Trust plc
Registered in England and Wales as a public company limited by shares.
Company registration number: 02892872
CASH FLOW STATEMENT
FOR THE SIX MONTHS ENDED 28 FEBRUARY 2025 (UNAUDITED)
Note (Unaudited) (Unaudited) (Audited)
For the six
For the six
For the
months ended
months ended
year ended
28 February
29 February
31 August
2025
2024
2024
£'000
£'000
£'000
Operating activities
Profit before finance costs and taxation 7,969 29,664 41,209
Adjustments for:
Net foreign currency losses/(gains) 1,457 (629) (1,656)
Gains on investments at fair value through profit or loss (12,404) (31,764) (41,620)
Net (purchases)/sales of investments at fair value through profit or loss (254) 29,172 50,463
Dividend income (198) (577) (1,045)
Interest income (93) (73) (218)
Decrease/(increase) in receivables 20 (41) 14
Increase/(decrease) in payables 1,189 468 (746)
Overseas taxation paid (18) (71) (134)
--------------- --------------- ---------------
Net cash (outflow)/inflow from operating activities before dividends and (2,332) 26,149 46,267
interest
========= ========= =========
Dividends received 172 527 1,098
Interest received 115 44 185
Interest paid (880) (1,176) (2,198)
--------------- --------------- ---------------
Net cash (outflow)/inflow from operating activities (2,925) 25,544 45,352
========= ========= =========
Financing activities
Bank loan drawdown 23,558 38,143 46,186
Bank loan repaid (12,236) (9,836) (21,456)
Repurchase of ordinary shares into treasury (9,089) (6,750) (16,160)
Dividends paid 7 (5,626) (5,391) (10,768)
--------------- --------------- ---------------
Net cash (outflow)/inflow from financing activities (3,393) 16,166 (2,198)
========= ========= =========
Increase in cash and cash equivalents (6,318) 41,710 43,154
========= ========= =========
Cash and cash equivalents at the start of the period/year 10,433 (32,474) (32,474)
Effect of foreign exchange rates on cash and cash equivalents 132 (9) (247)
--------------- --------------- ---------------
Cash and cash equivalents at the end of the period/year 4,247 9,227 10,433
========= ========= =========
NOTES TO THE FINANCIAL STATEMENTS
1. FINANCIAL STATEMENTS
The information contained within the financial statements in this Half Year
Report has not been audited or reviewed by the Company's independent auditors.
The figures and financial information for the year ended 31 August 2024 are
extracted from the latest published financial statements of the Company and do
not constitute statutory financial statements for that year. Those financial
statements have been delivered to the Registrar of Companies, and included the
report of the auditors which was unqualified and did not contain a statement
under either section 498(2) or 498(3) of the Companies Act 2006.
2. ACCOUNTING POLICIES
(a) Basis of accounting
The financial statements have been prepared in accordance with International
Accounting Standard 34 "Interim Financial Reporting" and the accounting
policies set out in the statutory financial statements of the Company for the
year ended 31 August 2024. Where presentational guidance set out in the
Statement of Recommended Practice (the "SORP") for investment trusts issued by
The Association of Investment Companies in July 2022, is consistent with the
requirements of International Financial Reporting Standards, the financial
statements have been prepared on a basis compliant with the recommendations of
the SORP.
All of the Company's operations are of a continuing nature.
The accounting policies applied to these financial statements are consistent
with those applied in the financial statements for the year ended 31 August
2024.
(b) Presentation of the Cash Flow Statement
The presentation of the Cash Flow Statement, as permitted under IFRS, has been
changed to present the 'Net cash flows from operating activities' in a manner
that is consistent with that of the other investment trusts managed by the
AIFM. As a result, certain comparative information was reclassified to conform
with the current period's presentation. There is no change to the 'Net cash
inflow from operating activities' or the other sections of the Cash Flow
Statement as presented in the previous half year report.
In addition, prior period borrowings, which included the overdraft facility
with the previous custodian, were contained within cash and cash equivalents.
The repayment of this facility has not been included within financing
activities but instead reflected as part of the overall movement in cash and
cash equivalents.
3. TAXATION
The tax charge comprises irrecoverable overseas withholding tax.
4. INCOME
(Unaudited) (Unaudited) (Audited)
For the six
For the six
For the
months ended
months ended
year ended
28 February
29 February
31 August
2025
2024
2024
£'000
£'000
£'000
Income from investments held at fair value through profit or loss:
Overseas dividends 115 473 899
UK dividends 83 104 146
--------------- --------------- ---------------
198 577 1,045
========= ========= =========
Other income:
Deposit interest 93 73 218
--------------- --------------- ---------------
291 650 1,263
========= ========= =========
5. EARNINGS/(LOSS) PER SHARE
(Unaudited) (Unaudited) (Audited)
For the six
For the six
For the
months ended
months ended
year ended
28 February
29 February
31 August
2025
2024
2024
£'000
£'000
£'000
Net revenue loss (2,028) (2,201) (3,496)
Net capital profit 9,062 30,534 42,372
--------------- --------------- ---------------
Total profit 7,034 28,333 38,876
========= ========= =========
Weighted average number of shares in issue* 36,243,354 38,879,847 38,184,030
Revenue loss per share (pence) (5.60) (5.66) (9.16)
Capital profit per share (pence) 25.00 78.53 110.97
--------------- --------------- ---------------
Total earnings per share (pence) 19.40 72.87 101.81
========= ========= =========
* Excluding those held in treasury (28 February 2025: 5,839,878; 29
February 2024: 3,126,410; 31 August 2024: 4,548,907).
6. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS
The Company's portfolio of investments, comprising investments in companies
and any derivatives, are carried in the Statement of Financial Position at
fair value. Other financial instruments held by the Company may comprise
amounts due to or from brokers, dividends and interest receivable, accruals,
cash and drawings on the secured revolving credit facility. For these
instruments, the Statement of Financial Position amount is a reasonable
approximation of fair value. The recognition and measurement policies for
financial instruments measured at fair value have not changed from those set
out in the statutory financial statements of the Company for the year ended 31
August 2024.
The investments in the Company's portfolio are categorised into a hierarchy
comprising the following three levels:
Level 1 - valued using quoted prices in active markets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted market prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset.
At 28 February 2025, the Company's investment portfolio was categorised as
follows:
(Unaudited) (Unaudited) (Audited)
At 28 February
At 29 February
At 31 August
2025
2024
2024
£'000
£'000
£'000
Level 1 287,412 280,846 270,883
Level 2 - - -
Level 3 23,633 24,222 26,624
--------------- --------------- ---------------
Total 311,045 305,068 297,507
========= ========= =========
There have been no transfers between Levels 1, 2 or 3 during the period
(period ended 29 February 2024 and year ended 31 August 2024: nil).
7. DIVIDENDS PAID
(Unaudited) (Unaudited) (Audited)
For the six
For the six
For the
months ended
months ended
year ended
28 February
29 February
31 August
2025
2024
2024
£'000
£'000
£'000
First interim dividend of 15.56p (2024: 13.90p) 5,626 5,391 5,391
Second interim dividend of 14.50p - - 5,377
--------------- --------------- ---------------
Total dividends paid in the period/year 5,626 5,391 10,768
========= ========= =========
8. SHARE CAPITAL
Changes in the number of shares in issue during the period/year were as
follows:
(Unaudited) (Unaudited) (Audited)
For the six
For the six
For the
months ended
months ended
year ended
28 February
29 February
31 August
2025
2024
2024
£'000
£'000
£'000
Ordinary shares of 25p each, allotted, called-up and fully paid:
Opening balance of shares in issue, excluding shares held in treasury 36,834,910 39,318,183 39,318,183
Repurchase of shares into treasury (1,290,971) (1,060,776) (2,483,273)
Closing balance of shares in issue, excluding shares held in treasury 35,543,939 38,257,407 36,834,910
Shares held in treasury 5,839,878 3,126,410 4,548,907
--------------- --------------- ---------------
Closing balance of shares in issue 41,383,817 41,383,817 41,383,817
========= ========= =========
9. NET ASSET VALUE PER SHARE
(Unaudited) (Unaudited) (Audited)
At 28 February
At 29 February
At 31 August
2025
2024
2024
£'000
£'000
£'000
Net assets attributable to shareholders (£'000) 274,584 286,509 282,265
Ordinary shares in issue at end of period/year* 35,543,939 38,257,407 36,834,910
Net asset value per share (pence) 772.52 748.90 766.30
========= ========= =========
* Excludes those held in treasury (28 February 2025: 5,839,878; 29
February 2024: 3,126,410; 31 August 2024: 4,548,907.
10. RELATED PARTY TRANSACTIONS
There have been no related party transactions that have materially affected
the financial position or the performance of the Company during the six month
period to 28 February 2025.
a) Transactions with the AIFM/Investment Manager
With effect from 20 November 2023, Schroder Unit Trusts Limited ("SUTL") was
appointed as the Company's Alternative Investment Fund Manager ("AIFM"). SUTL
agreed to waive the management fee for the first six months from 20 November
2023, after which the management fee payable by the Company on its quoted
portfolio was 0.7% per annum.
Fees paid to the investment manager/adviser (Unaudited) (Unaudited) (Audited)
At 28 February
At 29 February
At 31 August
2025
2024
2024
£'000
£'000
£'000
Management fee paid by the Company directly to SUTL 885 -** 498**
Management fee paid through unquoted funds to SV Health - 154 154
Adviser fee paid through unquoted funds to SV Health 336 200 537
Management fee paid by the Company directly to SV Health - 799* 799*
Accounting and administration fee payable by the Company directly to SUTL 50 28 78
--------------- --------------- ---------------
Total 1,271 1,181 2,066
========= ========= =========
* Includes a termination fee of £289,439 paid to SV Health.
** Reflects SUTL agreed waiver of six months management fees from 20
November 2023 to 20 May 2024 under the terms of the new AIFM agreement.
A performance fee of £1,885,000 accrued for the six month period ended 28
February 2025 (29 February 2024: £1,859,000; 31 August 2024: £904,000). Of
the £1,885,000 accrued, £71,000 was outstanding to SV Health and £1,814,000
was outstanding to SUTL.
Under the terms of the AIFM agreement, SUTL is entitled to receive an annual
fee of £100,000 in respect of the accounting and administration services it
provides to the Company. As at period end 28 February 2025, £17,000 (29
February 2024: £28,000; 31 August 2024: £17,000) was outstanding to SUTL.
SV Health will continue to provide ongoing investment management assistance to
the Company in respect of the exited investments with contingent milestones,
the exited investments in liquidation and the directly held unquoted
investments in consideration for payment of a performance fee.
b) Directors' remuneration
The Directors of the Company are key management personnel. The total
remuneration payable to Directors in respect of the six months ended 28
February 2025 was £92,000 (29 February 2024: £132,000*; 31 August 2024:
£218,000), of which £31,000 (29 February 2024: £132,000*; 31 August 2024:
£27,000), was outstanding at the period end.
* This includes a one off fee of £47,000 for the additional work in
relation to the change of AIFM.
11. EVENTS AFTER THE REPORTING PERIOD
The Directors have evaluated the period since the half year date and have not
noted any significant events requiring disclosure after the end of the
reporting period to the date of this Half Year Report.
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