BB Biotech - Optimistic about biotech's long-term prospects

During 2024 and early this year, the biotech sector began to show signs of a structural recovery, supported by positive clinical data, regulatory approvals, lower interest rates, commercial execution and Johnson & Johnson's acquisition of Intra-Cellular Therapies, one of BION's core holdings. However, more recently, the sector has been hit by uncertainties about the macroeconomic outlook, US tariffs and the regulatory policies of the new US administration. This has increased market volatility, especially in the small- and mid-cap companies that BION favours, and the company's performance has declined accordingly, even though BION's portfolio holdings are performing well, with several delivering regulatory and clinical milestones. BION's peers have also struggled in this challenging environment. Yet the news is not all bad. BION's manager has taken action to protect returns by reducing the number of holdings, increasing the focus on larger-cap names and enhancing risk management. Furthermore, lower valuations have created opportunities for BION to expand exposure to high-quality companies pursuing significant market opportunities via the development of breakthrough therapies. And, most importantly, the biotech sector still has a very positive long-term outlook, with commensurate rewards for those willing to wait out near-term volatility.

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