20.07.2018
BB BIOTECH AG CH0038389992
DGAP-News: BB Biotech shares hold steady in the second quarter
DGAP-News: BB BIOTECH AG / Key word(s): Half Year Results
BB Biotech shares hold steady in the second quarter (news with additional
features)
20.07.2018 / 07:00
The issuer is solely responsible for the content of this announcement.
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Media release as of July 20, 2018
Interim report of BB Biotech AG as of June 30, 2018
BB Biotech shares hold steady in the second quarter -
Substantial portfolio adjustments, new investments in attractive small and
mid-sized biotech firms
Major headwinds caused by various factors such as the talk of the US federal
government imposing drug price controls and the general impression that the
bull market is on its last leg weighed on investor sentiment in the
healthcare sector during the second quarter. BB Biotech shares were not
completely immune to these developments and delivered a return of -0.4% in
CHF and 1.2% in EUR for the second quarter of 2018. Its Net Asset Value
(NAV) fell by 2.8% in CHF, resulting in a net loss of CHF 98 mn. This
compares to the net profit of CHF 103 mn reported for the second quarter of
2017. After a thorough review of all portfolio shareholdings, BB Biotech
made several adjustments to its portfolio, guided by its time-tested
strategy of investing in innovation leaders working on groundbreaking
therapies and technologies. Valuations are now well off their highs from
2016 and 2017, which raises BB Biotech's confidence in future performance.
Overall, equities are roughly back to where they started the year. Yet the
first six months of 2018 have seen market oscillations driven by a wide
range of macro, sector- and stock-specific events.
The early-year market rally evaporated in association with the threat or
actual start of international trade wars. After a good first quarter run,
major US share indices have returned to early January levels - the S&P
(+2.7%), and Dow Jones (-0.7%) were little changed (all values as total
returns in USD) by mid-year.
European markets underperformed relative to the US indices, as the Euro
Stoxx50 (-0.5%), the DAX (-4.7%, both in EUR) and the SPI (-4.0%, in CHF)
ended June lower than at the start of the year.
Worldwide healthcare equities followed the broader US indices. The MSCI
World Healthcare Index (+1.9%, in USD) was not appreciably changed at the
end of 6 months, while pharmaceutical companies once again underperformed
broad healthcare markets. The Nasdaq Biotechnology Index performed slightly
better (+2.9%, in USD) driven by small and mid cap companies.
Sector concerns for drug stocks were fueled once more by political rhetoric,
policy papers, and Presidential Tweets, variously pointing to potential US
government-led price controls, and more likely setting up campaign platforms
in anticipation of the midterm elections later this year.
Investors have been cautious about the risk of drug price control
legislation (or its alternative executive orders or agency actions) - and
this sentiment has been associated with continuous negative fund flows for
the biotech sector. These generalist investor reactions are understandable,
but as one of the biotech sector leaders, BB Biotech also believes that some
of the strategic ideas being discussed in US healthcare are constructive,
while others are not.
In the complex US healthcare system, improved transparency and the removal
of inefficient incentives will ultimately spur innovation. The best
innovation will create the best drugs, which, when priced for cost
effectiveness and responsible budget-impact, will continue to create
enormous value for shareholders.
BB Biotech's experts are less enamored with short term, under-informed snap
judgements or irresponsible price hikes which threaten to undercut
sustainable growth and curtail capital flows into one of the most important
and exciting drivers of the global economy today - biotechnology.
The US Department of Health and Human Services (HHS) has proved to be a
steadying influence on the White House so far. As for drugs (for which
biotechnology drives the lion's share of innovation), the Food and Drug
Administration (FDA) is leaning firmly in support of authentic innovation -
despite FDA challenges of expert staffing and need for other resources. Both
the FDA and its parent, the HHS, will play key roles in shaping the US
government's position vis-a-vis the drug industry: Specifically, BB Biotech
anticipates sensible executive actions to (a) reduce drug development
timelines, lower complexity and contain costs; (b) administer intellectual
property rights in ways which reward innovation; (c) call out price gouging;
and (d) shine a light on some of the US market's arcane incentives
associated with the commercial value chain to reduce out-of-pocket expenses
for patients and rebates for market intermediaries.
As indicated for several years now, BB Biotech sees smart evolution, not
sizzling revolution in US drug access, pricing and reimbursement despite the
leaders who are anxious to score popular votes. Over the foreseeable future,
BB Biotech believes that the US healthcare system will restructure,
reorganize and reassign capital steadily and successfully to create an
increasingly competitive, information-rich, efficient and value-based
market. In several ways, such change is already here. New players such as
Alphabet, Apple, Amazon, Berkshire Hathaway and many others are driving
novel ways of working to deliver care, with more to come. These ideas are
more promising than punishing for smart biotech firms - because although the
US government will be tough on the biotech sector, market forces will be
more important than government intervention per se.
Overall at this time one sees more attractive emergent biotech innovation,
which carries the potential to improve health, than ever before in our
25-year successful run. BB Biotech's leading companies are paying careful
and explicit attention to the very real question of value for money in
healthcare and it remains highly attentive to the opportunities created by
and for sector experts in these remarkable times. Despite turbulence, this
is a time to invest judiciously, not a time to retrench and eschew
innovation.
BB Biotech second quarter and half year 2018 performance
Yet progress is not necessarily linear nor is it assured for every reporting
period. And the second quarter of 2018 serves as a reminder of the
complexity inherent with investing in the biotech sector.
Second quarter 2018 share return for BB Biotech was -0.4% in CHF, 1.2% in
EUR and -3.9% in USD. The NAV pulled back 2.8% in CHF, 1.1% in EUR and 6.2%
in USD. Consequently, second quarter net loss was CHF 98 mn, compared to a
gain of CHF 103 mn for the same period in 2017.
Half year 2018 performance was consequently mixed. The total return for the
share price including the dividend (+8.4% in CHF, +8.2% in EUR and +6.6% in
USD) was higher than the portfolio's Net Asset Value return (-2.5% in CHF,
-1.3% in EUR and -4.1% in USD) which led to a half year 2018 net loss of CHF
70 mn, compared to a gain of CHF 478 mn for the same period in 2017.
The disconnect between share price and NAV was the result of a continued
modest share price premium through the first six months of the year.
Some of the portfolio companies also had a challenging first half of 2018.
Important holdings such as Incyte and Esperion announced imperfect clinical
trial results for key pipeline compounds. In a short-term investor
environment, such results can drive aggressive generalist selling - as it
did for these two firms. Other large cap holdings such as Celgene also
performed sub-par.
Thorough review of portfolio positions
Given these and other challenges of biotech markets, the companies have been
re-analyzed once more and the portfolio has been adjusted promptly and
decisively. BB Biotech remains highly committed to best-of-breed innovators
with exciting new technologies as follows:
First, it continued to build up its RNA-platform positions - by buying back
shares in Alnylam that had been sold at higher levels, and by adding to the
position in Wave Life Sciences. Drugs that rely on RNA are here to stay.
Second, it bought additional shares in its gene therapy holding, Voyager,
given the company's progress - and the US FDA's positive stance in support
of such ambitious innovation.
Third, it took advantage of short term market overreactions. As Esperion and
Tesaro gave up around half of their respective valuations during the first
half of 2018, BB Biotech increased its exposure to both, confident that they
have meaningful products and potential for value creation. By contrast
significant profits were realized from positions in Agios, Novo Nordisk and
Halozyme - and some of the position in Probiodrug was sold in response to
the company's change in strategy.
Fourth, BB Biotech reaped the rewards of its commitment to innovation when
Novartis offered USD 218 per share in cash for Avexis, valuing the company
at USD 8.7 bn. An initial investment in Avexis in late 2016 resulted in an
exit at almost 5-fold the invested capital. Central to this successful
investment was the novelty and transformative potential of AVX-101, a gene
therapy for newborns with the most severe form of spinal muscular atrophy.
Fifth, the value of a long term view was illustrated once more with the
disinvestment of the remaining position in Idorsia - spun out from Actelion
as part of the Johnson & Johnson deal in June 2017. This ends a long and
very successful strategic investment cycle.
Finally, other decisive steps were taken. The position in Prothena was
closed after the Elan spinout company reported that their development
candidate NEOD001 failed in Phase II clinical trials - resulting a rare
overall loss on this investment.
BB Biotech's investment experts then set about deploying the capital
released by these moves - initiating four new positions in cutting-edge,
authentic innovation assets in potentially high growth rate, smaller cap
companies: G1 Therapeutics, Exelixis, Nektar Therapeutics and Myokardia.
G1 Therapeutics focuses on the discovery and development of cancer
treatments with selective inhibitors of cyclin-dependent kinases 4/6 (CDK4/6
inhibitor), trilaciclib and G1T38. The lead candidate, trilaciclib, is an
intravenous CDK4/6 inhibitor designed to preserve myeloid cells in cancer
patients undergoing chemotherapy.
Nektar Therapeutics is focused on developing novel drugs for oncology,
autoimmune disease, and chronic pain. The most important product in their
pipeline is NKTR-214, a CD122-biased agonist designed to stimulate the
patient's own immune system to fight cancer.
Exelixis'primary focus is on small molecule tyrosine kinase inhibitors
(TKIs). Cabozantinib is approved in two indications, renal cell carcinoma
(Cabometyx tablets) and medullary thyroid cancer (Cometriq capsules).
Myokardia is one of only a few small biotech companies in the cardiovascular
disease area. The company's initial focus is on the treatment of inheritable
cardiomyopathies, a group of rare, genetically-driven forms of heart failure
that result from biomechanical defects in cardiac muscle contraction. The
most advanced pipeline asset is MYK-461 (mavacamtem).
Overall portfolio restructuring during the first half of 2018 increased the
investment grade from 103% at the beginning of 2018 to 109% at the end of
the first quarter and to 110% at the close of the first half of 2018.
Milestones in the second quarter
Important clinical trial results were reported by portfolio companies in the
second quarter.
Incyte and partner Merck announced that epacadostat, an IDO inhibitor being
tested in combination with Keytruda, did not add clinical benefit in
patients with unresectable or metastatic melanoma. The companies decided to
discontinue ongoing registration studies of the combination in other cancer
types as well. This was disappointing, but the market reaction was overblown
and so BB Biotech picked up more Incyte shares at a low price. It has high
conviction that the company is temporarily undervalued.
Esperion failed to impress all investors with its top line release for their
Phase III, long-term study, testing bempedoic acid (BA). The "bad
cholesterol" (LDL-C) lowering effect of BA was adequate, but investors were
apparently concerned by what they saw as disappointing safety data. While
the results were not pristine, BB Biotech believes that the trial's
underlying population characteristics, background treatment (e.g. with
statins) and small frequency of adverse events provide reasonable confidence
that Esperion has a useful drug on its hands for a meaningful segment of an
enormous global market - atherosclerotic cardiovascular disease. As the
Esperion share price was, like Incyte's, cut in half, BB Biotech assessed
the information in detail and took the opportunity to increase the position.
Meantime, Novo Nordisk announced further positive clinical studies for the
oral semaglutide program, announcing significant lowering of both HbA1c, a
measure for blood glucose control, as well as weight loss with good
performance relative to injectable drugs. The medication shows considerable
promise in diabetes - and BB Biotech is keen to see how this and potential
strategic moves signaled by the company during the first half of 2018 play
out.
Celgene and Acceleron announced positive results from a Phase III study for
Luspatercept. Patients with low-to-intermediate risk myelodysplastic
syndromes benefited from Luspatercept with more patients achieving red blood
cell transfusion independence. This is welcome news given Celgene's
dependence on Revlimid and recent missteps. BB Biotech continues to follow
Celgene very closely indeed.
Product approvals remain an important driver of BB Biotech's
above-industry-average growth rates. During the second quarter of 2018, BB
Biotech was pleased to see Eli Lilly and Incyte announce the FDA approval of
Olumiant (baricitinib), as a once-daily oral medication for adults with
moderate-to-severely active rheumatoid arthritis who have had an inadequate
response to TNF inhibitors. Olumiant was readily approved in Europe and
Japan, while the US approval has been more convoluted. Advisors to the FDA
recommended - and FDA agreed - that the agency should approve the lower, but
not the higher and more efficacious dose of Olumiant. The competitiveness of
the product label may be sufficient nevertheless - and in addition Eli Lilly
and Incyte continue to test Olumiant for other indications such as atopic
dermatitis, alopecia and moderate to severe psoriasis.
Gilead won CHMP recommendation for European approval of Biktarvy to treat
HIV-infected individuals. The same meeting of CHMP came up with a positive
recommendation for Akcea's Tegsedy to treat patients suffering from
hereditary transthyretin amyloidosis (TTR).
In the US, Akcea received a positive FDA advisory committee vote for another
product - Waylivra - to treat patients with familial chylomicronemia
syndrome (FCS), an ultra-rare disease characterized by severe elevation of
triglycerides. The anticipated date for US approval is August 30, 2018.
Outlook for the second half of 2018
More pipeline progress including important product approvals and Phase III
data reports for new drugs in US and Europe is anticipated during the second
half of 2018. News flow should come from:
* Alnylam (Patisaran) and Akcea/Ionis (Inotersen), who seem set to receive
US FDA approvals for treating transthyretin amyloidosis
* Sage Therapeutics is expected to gain FDA approval for Brexanalone to
treat post-partum depression
* Agios should achieve FDA approval for Ivosidenib to treat relapsed and
refractory AML patients carrying an IDH1 mutation
* Esperion is expected to report Phase III data for the fixed-dose
combination of bempedoic acid and ezetimibe to treat patients with high
levels of LDL-C as well as the final Phase III safety study for
monotherapy
* Alnylam is expected to report interim Phase III data for givosiran to
treat patients with acute hepatic porphyria
* Incyte is likely to report Phase III data for its FGF123 inhibitor to
treat cholangiocarcinoma
Despite Takeda's challenging offer for Shire, sector M&A activities did not
meet investors' expectations in the second quarter of 2018. Some large
pharma companies have declared interest in acquisitions, but no other major
deals were struck.
Since valuations are now well off their 2016-17 highs, BB Biotech's analysis
shows no reasons for despondency. One can reasonably expect selective M&A
events to offer attractive exits for some positions in the portfolio. In the
meantime, BB Biotech looks forward to attractive fundamental growth in the
sector and will continue to marshal its portfolio including further new
investments in leading smaller and mid cap positions which promise high
growth rates.
As always, BB Biotech is following an innovation-driven investment strategy.
It will continue to seek leading companies working on technologies which
address unmet medical needs, cost-effectively - with the goal to produce
superior returns for BB Biotech shareholders.
The complete interim report as at June 30, 2018 is available on
www.bbbiotech.com.
For further information:
Investor Relations
Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland,
tel. +41 44 267 67 00
Dr. Silvia Schanz, [email protected]
Maria-Grazia Iten-Alderuccio, [email protected]
Claude Mikkelsen, [email protected]
Media Relations
Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland,
tel. +41 44 267 67 00
Tanja Chicherio, [email protected]
TE Communications AG, Bleichestrasse 11, 9000 St. Gallen, Switzerland, tel.
+41 79 423 22 28
Thomas Egger, [email protected]
www.bbbiotech.com
Company profile
BB Biotech invests in companies in the fast growing market of biotechnology
and is one of the world's largest investors in this sector. BB Biotech is
listed in Switzerland, Germany and Italy. Its investments are focused on
listed companies that are developing and commercializing novel medical
treatments and cures. BB Biotech's investment selection process is guided by
the fundamental research and analysis of physicians and molecular
biologists. Its Board of Directors has many years of experience in industry
and science.
Disclaimer
This release contains forward-looking statements and expectations as well as
assessments, beliefs and assumptions. Such statements are based on the
current expectations of BB Biotech, its directors and officers, and are,
therefore, subject to risks and uncertainties that may change over time. As
actual developments may significantly differ, BB Biotech and its directors
and officers accept no responsibility in that regard. All forward-looking
statements included in this release are made only as of the date of this
release and BB Biotech and its directors and officers assume no obligation
to update any forward-looking statements as a result of new information,
future events or other factors.
Composition of BB Biotech's portfolio as of June 30, 2018
(in % of securities, rounded values)
Ionis Pharmaceuticals 9.9%
Neurocrine Biosciences 8.9%
Celgene 7.2%
Incyte 6.9%
Vertex Pharmaceuticals 6.5%
Agios Pharmaceuticals 5.1%
Radius Health 5.0%
Gilead 4.6%
Sage Therapeutics 4.6%
Alexion Pharmaceuticals 4.6%
Halozyme Therapeutics 3.8%
Esperion Therapeutics 3.4%
Alnylam Pharmaceuticals 3.1%
Tesaro 3.0%
Novo Nordisk 2.9%
Regeneron Pharmaceuticals 2.6%
Myovant Sciences 2.2%
Moderna Therapeutics1) 1.9%
Akcea Therapeutics 1.6%
Macrogenics 1.5%
Voyager Therapeutics 1.4%
Intercept Pharmaceuticals 1.3%
Wave Life Sciences 1.2%
Intra-Cellular Therapies 1.1%
Argenx SE 1.0%
Alder Biopharmaceuticals 1.0%
Nektar Therapeutics 0.7%
Myokardia 0.7%
Exelixis 0.6%
Five Prime Therapeutics 0.4%
G1 Therapeutics 0.4%
Cidara Therapeutics 0.3%
Novavax 0.3%
Achillion Pharmaceuticals 0.1%
Probiodrug 0.1%
Radius Health Warrants, 19.02.2019 <0.1%
Total securities CHF 3 607.6 mn
Other assets CHF 43.6 mn
Other payables CHF (365.7) mn
Net Asset Value CHF 3 285.5 mn
1) Unlisted company
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Additional features:
Document: http://n.eqs.com/c/fncls.ssp?u=NBAQOQJKRV
Document title: BION_MM_Q22018_EN
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20.07.2018 Dissemination of a Corporate News, transmitted by DGAP - a
service of EQS Group AG.
The issuer is solely responsible for the content of this announcement.
The DGAP Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
Archive at www.dgap.de
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Language: English
Company: BB BIOTECH AG
Schwertstrasse 6
8200 Schaffhausen
Switzerland
Phone: +41 52 624 08 45
E-mail: [email protected]
Internet: www.bbbiotech.ch
ISIN: CH0038389992
WKN: A0NFN3
Listed: Regulated Market in Frankfurt (Prime Standard); Regulated
Unofficial Market in Berlin, Dusseldorf, Hamburg, Hanover,
Munich, Stuttgart; SIX
End of News DGAP News Service
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