Become a Creator today!Start creating today - Share your story with the world!
Start for free
00:00:00
00:00:01
15. Bull, Bear & Beyond – International Biotechnology Trust: executive interview
7 Plays1 year ago
In this interview, we speak with Ailsa Craig and Marek Poszepczynski, portfolio managers at International Biotechnology Trust (IBT), a UK-based investment company that targets innovative biotech companies which address high unmet medical needs, while offering investors the opportunity for financial returns.
**************************************************************************************
About ‘Bull, Bear & Beyond’
Bull, Bear & Beyond': features candid conversations with senior executives and from our own team of experts from across industries, exploring strategy, innovation, and the opportunities shaping their markets and 60-second pieces are a compressed summary of content designed to convey our message in a single, easily shareable hit.
About Edison:
Edison is a content-led IR business. We believe quality investment content should inform all investors, not just brokers. Our mission: engage and build bigger, better-informed investor audiences for our clients.
Edison covers 50+ investment trusts, read about them here: https://www.edisongroup.com/equities/investment-companies/
Original interview published on 29/10/2024 and reposted as a podcast
Recommended
Transcript
Introduction to Edison TV and Guest Analysts
00:00:07
Speaker
Hello everyone and welcome to Edison TV. My name is Aaron Atkar, an analyst in the healthcare and investment trust teams here at Edison. Today we are joined by Elza and Marek from the International Biotechnology Trust, a UK based investment company offering access to the rapidly expanding biotech sector for an actively managed diversified investment approach.
00:00:28
Speaker
Welcome Elza and Marek. Hi Aaron, good to be here. Thank you.
Overview of International Biotechnology Trust
00:00:34
Speaker
So to get started, can you give us a high level introduction and overview of the International Biotechnology Trust?
00:00:41
Speaker
Sure. So um IBT or International Biotech Ministry Trust is um about £300 million pounds in size. And what it does is gives our shareholders exposure to the whole cross spectrum of the biotech industry. And what I mean by that is early stage venture names coming out of the university all the way up to the mega cap NASDAQ listed biotech companies over in the US.
00:01:05
Speaker
The board of directors who appoints the manager of the trust has agreed to have between 5 to 15 percent in venture funds. So that gives a bit of spice to the performance
History and Management of the Trust
00:01:17
Speaker
in the past. Historically, the fund itself has been around for 30 years, so it's been it's pretty significant. established, managed by Merrick and myself, who you can see on the line now, certainly on the public markets. And then the venture part the portfolio is managed by a venture firm called Espy Health Investors. The umbrella firm is Schroder's. So we used to be at Espy and we moved to Schroder's in November 23.
00:01:42
Speaker
And Merrick and I took over as lead fund managers back in March 21. So we're well after our three year track record. And finally, I should mention that we have a dividend, 4% of NAV that's paid out twice a year. So 2%, 2% from the trust to our shareholders.
00:02:01
Speaker
And I think that's it. Yeah, that's the summary. Fantastic.
Advantages of Investment in Biotech Sector
00:02:07
Speaker
So more generally, can we hear in your own words, the potential benefits of gaining exposure to the healthcare care sector through an investment company as opposed to direct holdings?
00:02:16
Speaker
Yeah, sure. so an investment company is a fund effectively that means we can have numerous biotech companies in there, therefore diversifying your risk. So ah everyone that's going to listen to this call knows that biotech is not the safest sector. It's one of the riskiest sectors.
00:02:35
Speaker
So when you have more than one or two direct companies, immediately you're going to be diversifying risk. We have circa 60 names to 70 names, in the public part of the portfolio.
00:02:46
Speaker
And what we also do is um mitigate risk on a particular level on on the company level. But in terms of being a closed ended fund, When you have an open-ended fund and you get redemptions, um if the market crashes, open-ended fund managers have to sell stock in the market low.
00:03:04
Speaker
And the inverse if that's true. They have to issue in the highs and buy stocks on the high because people tend to have money flows going into open-ended or funds generally in good times. So close-ended fund, you're less likely to have that sort of impact.
00:03:18
Speaker
um Also, you can gear. So we can um up gear up to £55 million pounds in our trust. We use it actively. So if we feel that the market's oversold, we can gear up. And if we feel like the market's looking a bit toppy, we can take the gearing off.
00:03:36
Speaker
We don't tend to have more than 15% gearing, however. So and you' also you can have venture. So open ended funds can have venture investments, but people have shied away from that in recent years. But closed ended is seen as a much more sort of sensible vehicle to have exposure to to the venture part of the industry.
00:03:55
Speaker
Excellent.
Successful M&A Deals in Biotech
00:03:57
Speaker
So we see that the fund has performed particularly well in recent years in terms of m and a deal flow. Can you share a couple of recent examples of important transactions across your holdings and outline the outcome this had on the portfolio performance?
00:04:10
Speaker
and's ah It's a really, really good question. And we at IBT, we try to operate like a business development department in Bytec. My background is from within the industry. so I've been looking at in-licensing and out-licensing deals all my career prior to joining IBT. So how we view projects and companies is that they need to address a high medical need. They need to have a good patent estate, et cetera. This is what pharma looks for. And those companies become attractive and subsequently get acquired. So we are not like focusing on M&A per se. We just look at the features that we like and those companies tend to be acquired. And during the last couple of years, since 2020, we've had 25 deals. And I would say SIAGEN, which was acquired by Pfizer, was our biggest holding at the time of acquisition. Same it applies to Horizon, which was acquired by Amgen.
00:05:10
Speaker
And also in the Uncoded portfolio, relatively recently, iBio was acquired by Merck. So had a very good hit rate, but this probably because we we look at the features that makes these companies attractive.
00:05:24
Speaker
Excellent.
Future Therapeutic Areas for M&A
00:05:26
Speaker
So on the theme of M&A, what do you believe will be the most attractive therapeutic areas or targets looking ahead? And how do you go about positioning your portfolio to maximise the potential benefit from these insights?
00:05:38
Speaker
and That's a really good question. how How we try to operate at IBT when it comes to to these therapeutic areas. We always know, and we we have been for many years, that we believe the orphan or rare disease space has always been attractive because it offers addressing a very high medical need. If you get approved, you are one of the few or maybe the only drug available which makes it easy to reimburse and it's relatively profitable at that sense.
00:06:06
Speaker
ah Relatively recently, we have seen central nervous system and me coming out in vogue, epilepsy, depression, ADHD, which has become a bigger issue since the pandemic. People are sitting at home and and we see that these are being made in this field and the unmet medical need is ever increasing. And always due to demography, we know that cancer is on the rise, has been for many years. But the good thing of it is that we have better and better tools to address that. So we know that new drugs coming through will be acquired by a larger companies because we also know how the industry's ecosystem works. Biotech is responsible for majority of innovation and also innovation.
00:06:51
Speaker
I would say I think between 60% and 80% of new drugs approved emanate from biotech or academia, which means the pharma needs to fill their pipelines. And with these ah attractive areas, this is where we see these. so it's not a theme, it's a general ah way the industry works. And of recent, we have also seen that obesities have come up, obesity as as a therapeutic area, which we know since Novonorisk and Lili have come through with that with their drugs approved. And we think the next generation drugs addressing administration, less side effects will probably be the attractive for pharma to acquire.
Impact of US Elections on Drug Pricing
00:07:32
Speaker
There's been a lot of discussion recently around high drug prices and how this is being managed in the US, and particularly following the Inflation Reduction Act in 2022. How do you see the results of the upcoming US presidential election impacting this and the overall healthcare care sector in general?
00:07:49
Speaker
Yes, um so this is a very popular question from our shareholders at the moment. ah You're absolutely right. The Inflation Reduction Act was passed in 2022 by the Dems. Within that, um they attached a section about drug pricing.
00:08:04
Speaker
Now, this has been a ah political football ah for generations, at least decades, going into the US presidential election. um It's battered about and very highly contentious and also bipartisan.
00:08:17
Speaker
um ah So in the bill, what's going to happen is from 2026, the top 10 selling drugs will be negotiated by Medicare. Now, Medicare makes up about just over 20 percent of the payer um in the US. So it's a significant portion of who buys these drugs.
00:08:34
Speaker
And it they' basically their priority of me Medicare is to treat elderly people. So we're looking at big diseases that affect the elderly. Those are the drugs that are going to be most impacted.
00:08:47
Speaker
um We don't really know the finer details of how much they're going to be discounted just yet. We're getting an idea and it doesn't look massively immaterial. Suffice to say, it's our view that um this will put more pressure on the pharma industry to acquire biotech companies because some of their revenues and are going to be shaved earlier than the IP expiries, for example.
Closing Remarks and Future Outlook
00:09:09
Speaker
Fantastic. Elza, Marek, thank you very much for the insightful discussion. Look forward to following the progress of the company and the sector in the years to come. Thanks again, everyone, for your time. Have a good day.
00:09:20
Speaker
Thanks, Aaron. Thank you.