Resilient biotech sector despite widespread market turmoil

by | Apr 24, 2020

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The first quarter of 2020 was quite a challenge for investors. After stock markets surged to new all-time highs in February, panic selling triggered by the rapid spread of Covid-19 swept almost every asset class, equities included. Stocks in the healthcare sector, especially the large caps, were more resilient than the broad market indices. BB Biotech shares’ total return for the first quarter of 2020 was -15.7% in CHF and -14.8% in EUR. The Net Asset Value (NAV) corrected 22.0% in CHF, 20.1% in EUR and 21.4% in USD, which reflects the portfolio’s mid and small cap bias. The figures above include the dividend payout of CHF 3.40 per share approved at the Annual General Meeting on March 19, 2020. The net loss for the first quarter of 2020 was CHF 758 mn compared to a net profit of CHF 890 mn for the same period in 2019. Prof. Dr. Mads Krogsgaard Thomsen and Dr. Susan Galbraith were elected as new directors at the General Meeting. Despite the Covid-19 crisis and market turbulence, many biotech companies continued to report important clinical trial results and negotiated important licensing agreements. Once the Covid-19 pandemic is overcome, global health risks and healthcare systems worldwide are likely to be viewed in a different light. BB Biotech believes the biotech sector could gain in prominence as a result. Share price appreciation of many portfolio companies in the first weeks of April provide initial evidence and have led to NAV recovery to levels of the beginning of the year.

The MSCI World Healthcare Index declined 11.3% in USD in the first quarter of 2020. Companies engaged in delivering or developing diagnostics tools, medicines, or vaccines for treating Covid-19 patients generally avoided the worst of the sell-off and some even made substantial gains. Pharmaceutical companies – generally seen as defensive plays – outperformed the broad healthcare sector indices. The Nasdaq Biotech Index shed 10.3% of its value (in USD), in line with the MSCI World Healthcare Index. For the biotechnology sector, market capitalization and liquidity were the key determinants of total returns for the period under review.

Enlarged Board of Directors and no change in dividend policy

Shareholders at this year’s AGM elected Prof. Dr. Mads Krogsgaard Thomsen and Dr. Susan Galbraith as new members of the Board of Directors. Dr. Susan Galbraith’s term of office will begin on October 1, 2020. BB Biotech’s board has now achieved its goal of having five directors on the Board, all of whom have world-leading expertise in the development of innovative medicines and in the global healthcare system. This highly qualified board will continue to make strategic decisions that sustain and expand BB Biotech’s long-term value. BB Biotech paid out the proposed dividend of CHF 3.40 per share. The Board reaffirmed its commitment to keep its current dividend policy unchanged and expects to continue paying out a regular dividend equivalent to 5% of the prior December’s average share price in the years to come.


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