With heightened volatility in markets before and after the US presidential election and large-cap biotech stocks trading at near record lows, the sector as a whole suffered big losses last year with the Nasdaq Biotech Index down 21.3%.
However, while suffering from the downturn with its net asset value down more than 20%, BB Biotech reported it share price managed to beat the index by 19.9% in US dollars.
In its report it said: “Large cap biotech stocks were trading near record-low price/earnings multiples as the year came to an end; mid and small caps experienced an even greater valuation contraction. None of these stock market developments were attributable to any adverse changes regarding biotechnology itself or to the fundamental news flow from biotech companies.”
A key trend that favours the biotech industry, the firm said, was the purchasing of biotech products by pharmaceutical firms looking to keep their product list growing which has resulted in a steadily maturing industry that is still managing to meet expectations in drug development and growth.
In a letter to shareholders, the firm revealed it had added to its positions in Juno and remained optimistic on the prospects for Alnylam, but trimmed back on Actelion based on an evaluation of the risk against returns and used the proceeds to invest into a new portfolio addition, Myovant.
The letter said: “With biotechnology valuations at very attractive levels, more acquisitions by large players, including pharmaceutical firms, are expected. Actions of the incoming presidential administration in the
US may accelerate this likely trend – and BB Biotech expects investors to follow suit. Repeal and replacement of the Affordable Care Act (ACA) will be front and centre throughout the year, and there may be choppy reactions to possible drug price controls or moderation in the US.
“Despite these transitional events that may cause near-term volatility, BB Biotech remains strongly convinced that the future of the biotechnology industry is bright.”
It added that BB Biotech had “strengthened its market position” despite the difficult stock-market environment and proposed a regular dividend of CHF 2.75 per share, equivalent to a 5% dividend yield based on its average share price in December 2016.