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BB Biotech reports strong third quarter results

October 18, 2012 - London

BB BIOTECH AG /BB Biotech reports strong third quarter results. Processed and transmitted by Thomson Reuters ONE.The issuer is solely responsible for the content of this announcement.

Biotech sector still inexpensively valued despite this year's rally

Interim report of BB Biotech AG as at September 30, 2012

The biotech sector maintained its upward momentum during the third quarter of 2012, allowing the Nasdaq Biotech Index (NBI) to advance another 10% during the period and bringing it just shy of its all-time high set at the turn of the millennium. Share prices were driven higher by the solid fundamentals throughout the sector. Successful stock selection and a high investment ratio of 109.0% paid off for BB Biotech. The Net Asset Value increased by 12.2% in CHF and 13.2% in USD. Profit for the third quarter amounted to CHF 148.6 million. Its stock ended the third quarter with a gain of 24.3% in CHF and 24.1% in EUR. Important news and events regarding portfolio companies will be forthcoming in the coming months and could trigger considerable upside potential.

The Nasdaq Biotech Index (NBI) has advanced 37.0% (in USD) since the beginning of the year, clearly outperforming the broader S&P 500, which has so far gained 14.6%. Rising prices in the biotech sector are underpinned by solid operating results. Moreover, biotech companies have launched a number of novel new products and released promising clinical data on pipeline candidates targeting diseases that are incurable or difficult to treat. Sector valuations are generally higher now but the ratio of price/earnings multiples to estimated earnings growth is still less than 1, which is very attractive.

BB Biotech's Net Asset Value (NAV) rose by 12.2% in CHF and 13.2% in USD during the third quarter. In the first nine months of the year its NAV has grown 57.8% in CHF and 57.6% in USD. Profit for the third quarter amounted to CHF 148.6 million. During the quarter BB Biotech's stock price gained 24.3% in CHF and 24.1% in EUR.

As communicated earlier, the company aims to return the equivalent of 10% of equity to shareholders annually in the form of a cash payment of CHF 4.50 from capital contribution reserves and the ongoing use of share buyback programs.  The current program to repurchase up to 10% of outstanding shares is still under way and BB Biotech purchased 114 700 shares through the second line of trading during the third quarter.

BB Biotech is also pleased to have been re-admitted to the TecDAX Index after Deutsche Börse confirmed that the company met all of its listing requirements, ending a brief three-month suspension from the TecDAX Index.

Portfolio developments in the third quarter of 2012 and company news

Celgene (+19.1%, in USD) recovered from disappointing news that it withdrew its application for EU approval of Revlimid as an initial therapy for newly diagnosed patients with multiple myeloma (bone marrow cancer) at the end of the second quarter. The FDA will issue a decision about the potential fast-track approval of pomalidomide as a treatment for patients with relapsed or refractory multiple myeloma by February 2013 at the latest. Pomalidomide would be the third product in the new class of IMiD drugs for treatment of this kind of cancer, the other two being Thalomid and Revlimid. Celgene announced that it met the primary endpoint in Phase III psoriatic arthritis trials with apremilast, a key candidate in its pipeline that could enhance the company's product diversification profile. In three large studies, apremilast showed a significant treatment advantage over placebo. With these encouraging data Celgene can prepare its filing for regulatory approval and we anticipate that the company will thereby add a new revenue growth driver to its portfolio.

Actelion's shares (+21.0%, in CHF) pulled further ahead of the general market during the third quarter. Both cost-cutting initiatives and its efforts to improve capital allocation were received positively by the investment community. The keenly awaited presentation of data from the Phase III study with Macitentan at this year's CHEST conference will enable a better assessment of the drug's sales potential. We remain invested in Actelion; the stock's valuation is attractive considering the current value of the company's products in the market and the potential value associated with the ongoing clinical trials with Macitentan und Selexipag.

Gilead (+29.4%, in USD) received regulatory approval in late August for Stribild, a once-a-day pill that combines four different drugs, and it is now available for treatment-naïve HIV patients. Gilead's shares were also marked up as potential competitors to its hepatitis C virus (HCV) product GS-7977 were either dropped from development or placed on clinical hold for safety reasons.

Vertex (-0.1%, in USD) was able to recover from the weak sales performance of Incivek in the second quarter and the recent deep cut in its full-year guidance by presenting positive clinical data from its cystic fibrosis pipeline. It was also announced that Kalydeco had received European approval as a treatment for patients with cystic fibrosis who have the genetic mutation G551D. Vertex's share price ended the third quarter roughly unchanged from the second-quarter closing but it has clearly been a major value driver for BB Biotech's portfolio in 2012 with a year-to-date performance of +68.3%.

Isis (+17.3%, in USD) made further progress towards receiving regulatory approval for Kynamro in both the USA and Europe. Investor attention is focused on the upcoming recommendation of an FDA advisory panel that is reviewing the clinical data, which will be issued on October 18, 2012. Kynamro would be the first drug approved for the treatment of patients with homozygous familial hypercholesterolemia, a genetic disorder that leads to high cholesterol levels.

Investors in Novo Nordisk (+8.0%, in DKK) are eagerly awaiting the recommendation of the FDA advisory committee scheduled for release on November 8, 2012. The committee is reviewing Novo Nordisk's application for regulatory approval of Tresiba (insulin degludec), an ultra-long-acting basal insulin administered once-daily. The news of this advisory committee meeting caught investors by surprise and raised concerns about the possibility of negative side-effects. Novo Nordisk recently received approval for Tresiba from the Japanese regulatory authorities, however, which is a good sign.

Among BB Biotech's smaller participations, the following news deserves special mention:

  • Ariad (+40.7%, in USD) is still climbing as investors acknowledge the potential of Ponatinib in the treatment of leukemia and the company's early pipeline candidates such as AP26113 for the treatment of NSCLC (lung cancer). Ponatinib is in the final stages of the approval process and marketing approval should be granted in the coming months.  
  • Shareholders of Onyx Pharmaceuticals (+27.2%, in USD) welcomed the news of regulatory approval for two of the company's products during the third quarter. Accelerated approval for Kyprolis (carfilzomib) for the treatment of multiple myeloma was a particularly important announcement for the company. In other news, its marketing partner Bayer announced that the US FDA had approved Stivarga (regorafenib) for the treatment of metastatic colorectal cancer.   
  • Swedish Orphan Biovitrum (+56.6%, in SEK) wowed investors with the clinical data on its long-acting factor IX Fc fusion protein in the treatment of hemophilia. Study participants were administered the drug on average twice a month compared to biweekly injections for the control group, which represents a significant reduction in the treatment burden associated with this chronic disease.    
  • Achillion (+67.8%, in USD) recouped its losses from the second quarter thanks to good news from its hepatitis C pipeline. The clinical data on its protease inhibitor ACH-1625, currently in Phase II trials, as well as on ACH-3102, a pan-genotypic NS5A inhibitor in a Phase I trial, was promising. 
  • The news that Bristol-Myers Squibb was discontinuing the development of its INX-189 candidate caused investors to dump the shares of its competitor Idenix (-55.6%, in USD). After serious cardiovascular side effects surfaced in a HCV trial with INX-189 the US FDA placed a clinical hold on IDX-184 and its related early stage candidate IDX-19368. Idenix is now seeking to prove that its own nucleotide polymerase inhibitors do not trigger any serious cardiac-adverse events.  

During the course of the third quarter BB Biotech added the following two companies to the portfolio after conducting thorough due diligence:

  • Medivation (+23.3%, in USD) continued to perform well during the past quarter. It reached a major milestone when regulators approved Xtandi (enzalutamide) in the treatment of patients with metastatic castration-resistant prostate cancer. Investor interest has now turned to the outcome of PREVAIL, an important clinical trial studying Xtandi's effectiveness in pre-chemo patients. A successful outcome would significantly increase the addressable patient population and, of course, the drug's sales potential.     
  • BB Biotech has rounded out its investments in India by opening a position in Ipca Laboratories (+35.0%, in INR), a fast growing supplier of active pharmaceutical ingredients and intermediates. As a result, BB Biotech is now invested in four Indian companies. Together they account for about 4% of total portfolio investments.   

Outlook and positioning

Despite the biotech sector's latest gains, valuations are still at reasonable levels and share prices have room to climb. Looking ahead at the next few months, there will be numerous regulatory decisions and company-specific events that could turn out to be major value drivers for the portfolio. Positive newsflow is expected from regulatory agencies on Degludec (Novo Nordisk) and Mipomersen (Isis) as well as Pomalidomide (Celgene). Furthermore, Celgene is expected to provide more clarity regarding its EU application for Revlimid as a first-line treatment for patients with multiple myeloma. Regulatory approval could also be given for Ponatinib (Ariad), clearing the way for another innovative therapy for leukemia patients.  

The presidential elections in November injects some uncertainty into stock markets during the fourth quarter but the biotech industry is fundamentally very well positioned so BB Biotech presumes that the outcome of the elections will have a neutral to positive effect on the sector regardless who wins.

The complete interim report as of September 30, 2012 can be viewed at

For further information:

Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland
Thomas Egger, Tel. +41 44 267 67 09,

Company profile
BB Biotech invests in companies in the fast growing market of biotechnology and is one of the world's largest investors in this sector with CHF 1.4 billion in assets under management. BB Biotech is listed in Switzerland, Germany and Italy. Its investments are focused on listed companies that are developing and commercializing novel medical treatments and cures. BB Biotech's investment selection process is guided by the fundamental research and analysis of physicians and molecular biologists. Its Board of Directors has many years of experience in industry and science.

This release contains forward-looking statements and expectations as well as assessments, beliefs and assumptions. Such statements are based on the current expectations of BB Biotech, its directors and officers, and are, therefore, subject to risks and uncertainties that may change over time. As actual developments may significantly differ, BB Biotech and its directors and officers accept no responsibility in that regard. All forward-looking statements included in this release are made only as of the date of this release and BB Biotech and its directors and officers assume no obligation to update any forward-looking statements as a result of new information, future events or other factors.

Composition of BB Biotech's portfolio as of September 30, 2012
(in % of securities, rounded values)

Celgene 13.2%
Actelion 12.4%
Gilead 8.9%
Vertex Pharmaceuticals 8.2%
Isis Pharmaceuticals 6.7%
Novo Nordisk 5.9%
Incyte 5.5%
Ariad Pharmaceuticals 4.0%
Immunogen 3.3%
Alexion Pharmaceuticals 3.3%
Medivation 2.9%
Onyx Pharmaceuticals 2.9%
Halozyme Therapeutics 2.6%
The Medicines Company 2.6%
BioMarin Pharmaceutical 2.5%
Swedish Orphan Biovitrum 2.5%
Glenmark Pharmaceuticals 1.8%
Theravance 1.4%
Optimer Pharmaceuticals 1.3%
Endocyte 1.2%
Achillion Pharmaceuticals 1.1%
Lupin 1.0%
Bavarian Nordic 0.9%
Strides Arcolab 0.7%
Ipca Laboratories 0.5%
Dendreon 0.5%
Idenix Pharmaceuticals 0.4%
Intercell 0.3%
Probiodrug 1) 1.1%
Radius Health 1) 0.6%
Total securities CHF 1 486.7 mn
Other assets CHF 57.8 mn
Other payables CHF (164.1) mn
Total shareholder's equity CHF 1 380.4 mn
Treasury shares (in % of company) 2) 11.6%

1) Unlisted company
2) Correspond to the total of all own shares held including the second trading line

Complete Interim Report (PDF)
Press Release (PDF)

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information contained therein.

Source: BB BIOTECH AG via Thomson Reuters ONE



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