USD3.3 billion specialist biotech investment company, BB Biotech, has enjoyed 28 years of being in the right sector at the right time, returning an annualised share performance of 12.5 per cent since launch.
Dallas Webb, Portfolio Manager at BB Biotech says that the fund is one of the oldest, if not the oldest, biotech fund, originally founded in Zurich, Switzerland, and now traded on three exchanges across Europe, in Germany, Italy and Switzerland.
The fund’s investor base is drawn from Swiss and German investors but there is a substantial level of support from the UK as well. Investors are both from the retail and institutional investor base.
“Investors in BB Biotech are looking for exposure to the biotech sector,” Webb explains. “Everyone understands this is a sector of growth and has never been stronger in terms of innovation, science and chemistry but investors may not have inhouse expertise to do the required due diligence across the sector so they use BB Biotech.”
The biotech sector is in pretty much the same boat facing the macro headwinds of war in Ukraine, inflation and interest rates rising, Webb says, also commenting that the aftereffects of the Covid pandemic still overhang.
“But on a positive note, Covid restrictions are being lifted and people are getting back to normal which is positive for the sector,” he says.
The biotech sector has not been immune to the disruptions caused by Covid, in terms of supply chain issues. “It’s all coming back now,” Webb says. “But more importantly, Covid impacted patients as they were unable to visit doctors or do clinical trials. The headwinds for new products are now easing up and we are seeing a back to normal trend and hoping that continues to go forward in a positive direction.”
Webb says that one of the themes the firm is seeing in biotech in general from a broad standpoint is that it is somewhat immune to the inflation and interest rate increases in the US.
However, those trends could impact large merger and acquisition activity with firms that want to use debt to finance their activities. But many of these companies are sitting on cash.
“One of the themes we watch closely is M&A as we haven’t seen as much as we would have liked to over thev last 18 months, so we are looking for that to pick up,” Webb says. “Valuations have come down in the sector over time so a lot of these companies are looking extremely attractive in terms of investment opportunities, both for specialists and companies looking to make acquisitions.”
Webb comments that even small to mid-cap companies have cash and strong balance sheets which allow them to continue with clinical trials, and in expanding their pipelines shifting away from being a one asset company to having a pipeline, which in turn diversifies risk.
Another trend is the growth of the genetic medicine space. “There is tremendous progress in gene therapy and editing these are small and mid-cap companies as well, but they also have the cash to invest in their pipelines and technology and chemistry which leads to further innovation in a rapidly evolving field,” Webb says.
“Despite what’s happening on a macro level, the biotech sector in terms of innovation and capital strength is in a strong position. It is such an exciting field and investment will continue to go into the field.”