BB BIOTECH AG / BB Biotech: Stabilization of biotech sector in the
second quarter of 2016 . Processed and transmitted by NASDAQ OMX
Corporate Solutions. The issuer is solely responsible for the content of
this announcement.
Interim Report of BB Biotech AG as of June 30, 2016
BB Biotech returned to profit in Q2 2016
The biotech sector stabilized during the second quarter. BB Biotech's
Net Asset Value (NAV) increased by +1.4% in CHF and +2.3% in EUR,
resulting in a net profit of CHF 36 mn. Despite the positive trend
witnessed during the past few months, BB Biotech's net result for the
first half was a negative CHF 1170 mn due to the loss reported for the
first quarter. BB Biotech shares closed the second quarter slightly
lower, down -2.7% in CHF and -1.2% in EUR. An increasing disconnect has
been observed between the share prices of companies in BB Biotech's
portfolio and their positive operational performance. Valuations of
biotech blue chips have dropped to levels last seen in 2010/11.
Meanwhile company fundamentals remain positive, notwithstanding the
increasing attention that drug-pricing practices have received. From an
operating standpoint, the companies are performing well and setting new
milestones.
The global equity markets showed continued volatility in Q2 2016. The US
Federal Reserve Bank's decision to defer again interest rate increases
and the UK referendum to leave the European Union were notable. Overall
market performance for Q2 2016 was mixed. Positive total returns were
recorded for the S&P 500 of 2.5% in USD, European indices such as the
DAX showed negative 2.9% performance in EUR, the SMI was positive 4.7%
in CHF, and the Nasdaq Biotechnology Index (NBI) more or less stable
with negative 1.1% in USD.
The disconnect in value between strong progress reported in
biotechnology relative to the equity market valuation continued to
widen. Biotechnology stocks have underperformed general equity markets
by around 20% since January 2016. The following can be summarized for
the biotech sector in 2016:
-- Valuations for biotech blue chip companies have fallen to previous lows
of 2010/11, trading significantly below large pharmaceutical company
multiples and below the average S&P multiple. Many small and midsized
market cap biotech firms continue to trade at record low pipeline
valuations.
-- Healthcare reform discussions continue, and the drug industry has become
more assertive about new product value propositions. The US presidential
election process will highlight payer complexities of the US healthcare
system and continue to rattle investors.
-- Payer recalcitrance continues to impair the pace of new product launches
such as the PCSK9 antibodies Praluent and Repatha for
hypercholesterolemia. Future launches will face similar pushback on price
and volume.
-- Investor's fund flows were negative in January and February 2016 but have
begun to stabilize in recent months. Large asset managers reduced
biotechnology holdings in the second half of 2015 and in 2016, but
overall pressure diminished in the second, compared to the arduous first
quarter 2016.
-- Positive biotech pipeline news was only recently reflected in equity
gains. This is encouraging compared to the first quarter 2016, when good
news hardly moved the needle.
It was therefore appropriate that BB Biotech's strategy meeting in June
included an expert panel on global drug pricing and reimbursement
trends. Encouragingly, genuine innovation is anticipated to command
premium pricing as long as innovators address market price realities.
Experts believe that innovation continues as the strongest foundation
for attractive prices. Health economic arguments are also gaining in
importance and can help solve the equation of payer profitability -
which remains their first priority. BB Biotech continues to monitor the
political and legal landscape for healthcare reforms and changes but
expects incremental rather than dramatic change particularly in the US.
Strong progress by many of the portfolio holdings was evident once more.
At several companies this progress was not adequately reflected in
equity valuations. Conversely, two negative news events were associated
with sharp share price reactions. However, BB Biotech believes the share
price corrections of Ionis and Agios in connection with clinical news
were overreactions. Furthermore, new investment candidates were
identified in the small- and mid-cap category with attractive investment
cases and which have the potential to develop into highly valued biotech
companies in the future.
BB Biotech Q2 2016 and H1 2016 performance
For the second quarter 2016, BB Biotech's share return was -2.7% in CHF
and -1.2% in EUR while the NAV gained +1.4% in CHF and +2.3% in EUR. The
resulting gain for Q2 2016 was to CHF 36 mn.
For the first six months of 2016, BB Biotech's total share return was
-18.8% in CHF and -18.4% in EUR. The total return for the NAV for the
same period was -29.1% in CHF and -28.9% in EUR, corresponding to a net
loss of
CHF 1,170 mn.
BB Biotech investment leverage remained in double digits with an
investment grade of 112.3% by end of June 2016. The year 2016 began with
the fund 103.5% invested, by March 31 it was 112.8%.
BB Biotech's portfolio continued to deliver milestones
Net asset value began to stabilize - outperforming the biotech industry
benchmark in the second quarter - while still slightly behind that
benchmark year-to-date. Clinical trial results, product approvals,
launches and one M&A announcement contributed to positive results in the
second quarter. The NAV was pushed back by news of unexpected adverse
events reported for two of Ionis' late-stage pipeline assets and also by
Infinity's Pi3k inhibitor Duvelisib data which investors rated as
underwhelming.
Other company news items were reported. Gilead received multiple product
approvals for products in its leading HIV and HCV franchises. Both the
US FDA and the European Agency EMEA approved the fixed-dose combination
product Descvoy (Emtricitabine, TAF) for treating HIV patients in April
2016. Gilead's HIV franchise was further strengthened with the positive
CHMP opinion for Odefsey (Emtricitabine, Rilpivirine, TAF). Gilead also
received US approval for Epclusa (Sofosbuvir, Velpatasvir) and a
positive CHMP opinion for Epclusa. Despite these significant successes,
Gilead's share price declined further in the second quarter as Q1 2016
financial results were below market expectations and investors continued
to fret about the trajectory and longevity of the company's HCV
business.
Actelion was granted European marketing authorization for Uptravi to
treat PAH patients in the second quarter. We believe this further
strengthens the company. Intercept was granted accelerated approval for
Ocaliva (obeticholic acid) for the treatment of patients with PBC
(primary biliary cirrhosis) by the FDA. Swedish Orphan Biovitrum was
granted EU approval for Alprolix, a recombinant Factor IX-Fc for the
treatment of hemophilia B. In contrast to these positive regulatory
events, Clovis terminated development of Rociletinib in lung cancer
after receiving a complete response letter from the FDA.
Both Radius and Cempra made progress with lead assets. Radius submitted
a new drug application (NDA) for Abaloparatide-SC for the treatment of
postmenopausal women with osteoporosis. The submission was accepted for
filing by the FDA and an approval decision is expected in early 2017.
Also during the second quarter, Cempra submitted its NDA for
Solithromycin for the treatment of community-acquired bacterial
pneumonia in the US and Europe.
Late-stage clinical trial results lifted market sentiment during the
second quarter. Tesaro doubled in market valuation after announcing
strong Phase III data for Niraparib - a new class of anticancer drugs
called PARP inhibitors in specific types of ovarian cancer. The trial
met its primary endpoint of improved progression-free survival in the
germline BRCA mutant cohort and in the non-germline BRCA mutant cohort,
including both the HRD-positive and overall analysis populations. Tesaro
plans to submit regulatory applications in the US and Europe later in
2016.
Regeneron and its partner Sanofi announced positive Dupilumab data in
patients with inadequately controlled moderate-to-severe atopic
dermatitis.
Alexion did not reach statistical significance for the primary efficacy
endpoint with Soliris in patients with refractory generalized myasthenia
gravis (gMG). Alexion's share price fell as investors registered
concerns over long-term growth of Soliris.
Infinity announced results for its Pi3K inhibitor Duvelisib in patients
with refractory indolent non-Hodgkin lymphoma. An overall response rate
of 46%, all partial responders, is not considered competitive compared
to other treatment options. Abbvie consequently returned worldwide
marketing rights for Duvelisib.
Unexpected safety findings for Ionis' two late-stage pipeline candidates
IONIS-TTRrx and Volanesorsen resulted in a sharp decline in the
company's valuation. While time will tell, BB Biotech regarded this as
an overreaction by a sensitive biotech market.
Agios presented promising early-stage data for AG-348 in PK deficient
patients.
Acquisition news played a minor role for BB Biotech's portfolio.
Although large pharma and biotechnology companies emphasized their
appetite for acquisitions at current low prices, none has yet landed a
transaction. Sanofi offered USD 52 per share for Medivation in late
April 2016. The company and the market was not impressed, but this story
is anticipated to play out - Medivation has traded around USD 60 per
share since the hostile take-over offer - and recently another buyer
made a potentially better offer. BB Biotech will follow the situation
(MORE TO FOLLOW) Dow Jones Newswires
July 22, 2016 01:01 ET (05:01 GMT)
