The Biotech Growth Trust
Valuations starting to improve with more to come
20 August 2024
The Biotech Growth Trust (BIOG) has two experienced managers, Geoff Hsu and Josh Golomb, at leading global healthcare specialist OrbiMed. They remain very positive on the outlook for the biotech sector, believing that industry valuations became disconnected from positive industry fundamentals during a period of elevated interest rates. BIOG’s strategy favours emerging (smaller-cap) over large-cap biotech companies, as, while aggregate risks are higher, they can be more than outweighed by superior returns. This strategy has proved successful over the longer term, but was detrimental to the trust’s performance between Q121 and Q323. Investor focus is starting to return to company fundamentals but Hsu and Golomb also believe that when the US Federal Reserve starts to cut interest rates, it should be a positive catalyst for small-cap stocks, including those of emerging biotech companies. MORE »
Onwards and upwards for performance recovery
20 March 2024
The Biotech Growth Trust’s (BIOG’s) two co-managers, Geoff Hsu and Josh Golomb, at global healthcare specialist OrbiMed, believe that now could be an opportune time to consider the biotech sector as it is recovering from the longest and largest absolute and relative drawdown since 2006. The sector was negatively affected by sharply rising interest rates rather than a deterioration in industry fundamentals; indeed, the managers continue to refer to a ‘golden era’ of innovation within the biotech sector. BIOG’s relative performance has been through a difficult period given its high weighting in emerging (smaller-cap) biotech stocks, which performed significantly worse than the shares of large-cap biotech businesses during the sector sell-off. MORE »
Performance setback may provide an opportunity
8 September 2021
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu of OrbiMed Capital, which is a specialist healthcare investor with 11 offices across the globe including in Hong Kong and Shanghai. The manager remains very positive on the outlook for the biotech sector primarily due to the current elevated level of industry innovation that he refers to as a ‘golden era’; the number of late-stage pipeline products increased by 50% between 2015 and 2020. He also believes that biotech stocks will be supported by ongoing merger and acquisition (M&A) activity, levels of which have remained robust despite the pandemic as there is high demand from larger-cap healthcare companies seeking to boost their pipelines. MORE »
Favourable industry fundamentals
9 March 2021
The Biotech Growth Trust (BIOG) generated another year of positive absolute and relative performance in 2020. Manager Geoff Hsu of global specialist healthcare investor OrbiMed Capital remains constructive on the outlook for biotech stocks, although he is mindful about the extended bull run in the US stock market. The manager is particularly encouraged by the high levels of biotech industry innovation; he believes that the favourable regulatory environment will continue and does not consider healthcare legislation to be a high priority for President Biden. Hsu comments that the biotech industry has ‘come of age’ over the last decade; he highlights the high number of initial public offerings (IPOs) in the sector, while the level of merger and acquisition (M&A) activity has remained robust despite the shift to working from home during the COVID-19 pandemic. MORE »
Firing on all cylinders
10 August 2020
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu, who is able to draw on the considerable resources of specialist healthcare investor OrbiMed Capital. While biotech stocks have rallied strongly following the coronavirus-led stock market sell-off earlier in 2020, the manager believes they could have further to go. He is confident that a successful COVID-19 vaccine will be developed and positive fundamentals are supportive for the biotech sector’s future performance. Repositioning of BIOG’s portfolio during FY20 has been accretive to the trust’s returns in recent quarters; it has now outperformed its benchmark NASDAQ Biotechnology index over the past one, three, five and 10 years, and investors have also enjoyed very solid absolute total returns of more than 20% pa over the past decade. MORE »
Positive outlook for 2020
24 January 2020
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu and Richard Klemm at OrbiMed Capital. They remain optimistic about the prospects for the sector in 2020 due to high levels of innovation and a relaxed regulatory environment, while a continuation in merger and acquisition (M&A) activity would also likely provide further support for biotech shares. The managers are very encouraged by the trust’s much-improved investment performance in recent months, noting they are being rewarded by the market for their in-depth fundamental research and portfolio positioning in favour of emerging rather than large-cap biotech stocks. BIOG’s NAV has now outperformed the NASDAQ Biotechnology index benchmark over the last one, three, five and 10 years. MORE »
Bright start to 2019
29 July 2019
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu and Richard Klemm of OrbiMed Capital and aims to generate long-term capital growth from a diversified portfolio of global biotech equities. Investment performance has improved markedly in 2019, following a tough few years, and the managers retain their record of long-term outperformance versus the NASDAQ Biotechnology index. They remain very optimistic on the prospects for the global biotech sector, citing a favourable regulatory environment, a ‘golden era of innovation’ and an uptick in merger and acquisition activity, and believe that political noise in the run-up to the 2020 US presidential election will be manageable for the industry. MORE »
Industry backdrop remains favourable
15 February 2019
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu and Richard Klemm at OrbiMed Capital, one of the leading global healthcare asset managers. The year 2018 proved to be tough for the trust’s performance as biotech companies delivering negative news were heavily penalised, while those delivering good news went unrewarded. However, the managers are optimistic about BIOG’s prospects. They cite a rich industry innovation pipeline that includes a series of technologies with multi-billion-dollar revenue potential; a favourable regulatory environment; and a higher level of deal activity, including major pharma company Bristol-Myers Squibb’s recent bid for Celgene (one of BIOG’s largest holdings) at a significant premium to its pre-bid share price. MORE »
Reasons to be optimistic
30 July 2018
The Biotech Growth Trust (BIOG) is managed by Geoff Hsu and Richard Klemm of OrbiMed Capital. They aim to generate long-term capital growth from a diversified portfolio of global biotech equities. The managers are very optimistic on the industry outlook, citing a more benign political environment, a high level of innovation, a favourable regulatory regime, and reasonable valuations. In addition, following US tax reform, they expect an acceleration in merger and acquisition activity, which has historically been an important driver of share prices within the biotech sector. The managers acknowledge that BIOG’s performance in the last three financial years has been disappointing and they are looking to build on the trust’s long-term record of outperformance versus the benchmark NASDAQ Biotechnology index. MORE »
Positive outlook for the biotech sector
22 February 2018
The Biotech Growth Trust (BIOG) aims to generate long-term capital growth from a concentrated portfolio of global biotech companies. It is jointly managed by Richard Klemm and Geoff Hsu of OrbiMed Capital, who are positive on the outlook for the biotech industry due to a favourable regulatory backdrop, continued industry innovation, an anticipated uptick in M&A activity and reasonable company valuations. The trust is benchmarked against the NASDAQ Biotech index, which it has outperformed in NAV total return terms over 10 years, while trailing over shorter periods. Recent investment performance has been affected by negative newsflow from one of BIOG’s top 10 holdings, Celgene, in October 2017. MORE »
Positive outlook for the biotech sector
22 February 2018
The Biotech Growth Trust (BIOG) aims to generate long-term capital growth from a concentrated portfolio of global biotech companies. It is jointly managed by Richard Klemm and Geoff Hsu of OrbiMed Capital, who are positive on the outlook for the biotech industry due to a favourable regulatory backdrop, continued industry innovation, an anticipated uptick in M&A activity and reasonable company valuations. The trust is benchmarked against the NASDAQ Biotech index, which it has outperformed in NAV total return terms over 10 years, while trailing over shorter periods. Recent investment performance has been affected by negative newsflow from one of BIOG’s top 10 holdings, Celgene, in October 2017. MORE »
Celebrating its 20th birthday
25 July 2017
The Biotech Growth Trust (BIOG) was launched in 1997, aiming to generate long-term capital growth from a global portfolio of biotech stocks. Since 2005, the trust has been managed by OrbiMed Capital, the largest global specialist healthcare investor; over this period, BIOG has significantly outperformed its benchmark NASDAQ Biotech Index (sterling adjusted), despite less compelling short-term performance. The trust’s managers are bullish on the outlook for the biotech industry due to continued innovation, and suggest that investor concerns about drug price controls are overdone and have led to attractive biotech company valuations, especially for the larger-cap stocks. They believe that greater clarity surrounding US tax policy, including the potential repatriation of overseas cash, could lead to more industry mergers and acquisitions (M&A), which should be an important driver for the sector and could lead to a positive revaluation of the industry. MORE »
Industry fundamentals remain positive
21 February 2017
The Biotech Growth Trust (BIOG) is a specialist vehicle, aiming to generate long-term capital growth via investment in global biotech stocks. Following a particularly volatile period for the biotech industry, where concerns about drug pricing and investor risk aversion have weighed heavily on stock prices, the managers are hopeful that greater clarity regarding US healthcare policy will lead to continued improved performance of biotech stocks. Industry fundamentals remain attractive, including continued innovation and valuations are very supportive, which offers the potential for higher industry merger and acquisition activity. MORE »
Positive industry fundamentals
20 July 2016
The Biotech Growth Trust (BIOG) is a specialist investment trust that aims to generate capital growth from a portfolio of global biotech stocks. The fund is concentrated, currently holding 32 positions invested across the market capitalisation spectrum. Over the last 12 months, the industry has been volatile following controversy over US drug pricing and heightened risk aversion. However, the managers believe that industry fundamentals remain intact and companies that develop novel treatments will be able to price their products accordingly. Industry valuations look attractive compared with other sectors and there is evidence of an upturn in merger and acquisition activity. BIOG’s recent investment performance has been affected by disappointing data from some holdings, but medium- and longer-term performance remains positive. MORE »
Positioned for clinical success
15 December 2015
The Biotech Growth Trust (BIOG) invests worldwide in the innovative area of biotechnology, with the aim of achieving capital growth. Biotech has been one of the strongest-performing market sectors in recent years, but controversy over drug pricing in the US caused a sell-off in September, denting returns over shorter periods. BIOG’s managers argue that truly innovative and effective new treatments will continue to have strong pricing power. The trust’s investment approach is catalyst-driven, with specialist managers and analysts assessing the likelihood of clinical success and positioning the portfolio accordingly. This strategy has worked well in the long term but a small number of company-specific events has affected recent performance, and BIOG’s discount is currently towards the wider end of historical ranges, with potential for rerating. MORE »
Outlook favourable despite extended bull run
18 February 2015
The Biotech Growth Trust (BIOG) is an established specialist investor in the worldwide biotechnology industry. Biotech has performed strongly in the three years to 31 January, with the benchmark NASDAQ Biotech index producing a total return of 195% and BIOG achieving NAV total returns of 223%. However, the managers point to valuations for major biotech stocks that compare favourably with big pharmaceutical firms, and greater potential earnings growth, as evidence that relative value still remains. Scientific advances and a more favourable regulatory environment are feeding through into a healthy drug pipeline. BIOG’s shares currently trade close to par, with buybacks used if the discount to NAV exceeds 6%. MORE »
Correction provides value opportunity
25 June 2014
The Biotech Growth Trust (BIOG) aims to achieve growth by investing in biotechnology companies around the world, though in practice it is heavily weighted to North America (86%). A recent change to its investment mandate has allowed it to invest more in larger companies, reflecting both the growth in the sector and the managers’ view that many major biotech firms have a more attractive growth and valuation profile than earlier-stage companies, although it continues to have a significant weighting (c 34% of the portfolio) in emerging biotech. A sharp correction in biotech stocks since March may present an attractive entry point for investors, with BIOG shares moving to a discount after trading at a premium for much of 2013. MORE »
Policy tweaked for greater flexibility
20 January 2014
The Biotech Growth Trust provides exposure to both major and emerging biotech companies and has a strong long-term record of outperformance against its benchmark, the NASDAQ Biotechnology Index (NASBIOT). Sector drivers, including ageing populations, important new scientific discoveries and acceleration in new product development, are supportive and recent amendments to BIOG's investment policy will allow the manager greater flexibility to invest in large-cap biotech names. Biotech valuations have expanded, but in the manager's view are still reasonable given the sector's growth prospects. PEG ratios are attractive. MORE »
Strong performance continues
26 April 2013
The Biotech Growth Trust (BIOG) has continued its strong track record of outperformance during the past 12 months. Share price and NAV total returns have been 56.2% and 55.9% respectively, which are both appreciably ahead of its benchmark, the NASDAQ Biotechnology Index (sterling adjusted) over the same period at 48.9%. Recent price gains have moved ahead of earnings growth so that average P/E ratios have moved up during the last two years, having fallen for the previous 10 years. However, the manager believes valuations remain attractive in a historical context, he reports that attractive opportunities remain and that, in their view, there is still strong growth potential for the sector. MORE »
Further strong performance
26 July 2012
The Biotech Growth Trust (BIOG) has continued its strong track record of performance over the past 12 months, with share price and NAV total returns of 44.8% and 36.9% respectively. It has outperformed the NASDAQ Biotechnology Index (sterling adjusted) over the same period, and this has outperformed the broader market, returning 30.3% vs a fall of 3.8% for the FTSE All-Share Index. Despite share price gains, earnings growth leaves P/E valuations near 15-year lows. M&A support is likely to continue with 2012 marking a peak in patent expirations for large pharma companies who remain eager to re-fill their product pipelines. MORE »
Outperformance over the long term
10 November 2011
During the past 12 months The Biotech Growth Trust’s (BIOG) share price and NAV have risen by 5.9% and 10.8% respectively. It has outperformed its benchmark, the NASDAQ Biotechnology Index (sterling adjusted), by 1.1% in terms of NAV total return and underperformed by 3.8% in terms of share price total return during the past year. BIOG has a long-term record of outperformance against both broader biotech benchmarks and the FTSE All-Share. Over the next six months, there are a number of significant regulatory decisions and pivotal trial results that the manager believes will create value and drive momentum. Healthcare and large-cap pharma companies still seek to replenish their product pipelines and, with valuations at 15-year lows, the outlook for M&A is positive. MORE »
