BB Biotech closes 2011 with a positive performance and confirms upward trend

Thursday, 26. January 2012 07:31
BB BIOTECH AG /
BB Biotech closes 2011 with a positive performance and confirms upward trend
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Portfolio of BB Biotech AG as of December 31, 2011

Despite strong headwinds from the financial markets, BB Biotech achieved a
positive performance of 5.6% in CHF and 8.6% in EUR (incl. dividends) in 2011
with a strong recovery during the fourth quarter. 2011 was a gratifying year for
the global biotechnology industry. Regulators approved 13 new biotech products
and major R&D milestones were reached all while the industry's revenues and
profits exceeded market expectations. The expected news flow from biotech
pipelines in 2012 also bodes well for the current year. BB Biotech continued to
restructure its portfolio during the past year by gradually reducing large
positions in order to build smaller investments in companies with high growth
potential.

The biotechnology sector made impressive progress during the past year. Neither
the government debt crisis nor recessionary pressures nor all the turmoil on the
currency front were able to stop the Nasdaq Biotech Index from closing the year
in positive territory. In the fourth quarter alone, the index advanced 11.9% (in
USD), which ultimately led to a gain of 11.8% for the year as a whole. BB
Biotech's share price increased by an even better 14.9% (in CHF) and 16.8% (in
EUR) during the fourth quarter of 2011, while its performance for the full year
stood at 5.6% in CHF and 8.6% in EUR (incl. dividends). The Net Asset Value
(NAV) ended the fourth quarter with a sequential gain of 12.9% in CHF and 13.0%
in EUR. The main reason for the divergence to the Nasdaq Biotech Index was the
over-weighted position in Actelion, which had a disappointing 2011. BB Biotech
repurchased in the fourth quarter a total of 565 125 shares via a second line of
trading, ensuring the smooth and well measured implementation of its share
buyback program. As a result, the discount was steadily reduced from 23.8% at
the beginning of the year to 20.0% at the end of Q3, down to 18.5% by the end of
the year. The goal for 2012 is to bring the discount within the targeted range
of 10% to 15%, and maintain that level.

2011 was a year of progress for the global biotechnology industry. Regulators
approved 13 new biotech products, numerous milestones were reached on the
research and development front, and sector sales and profits grew at above-
average rates, all of which helped the industry to repeatedly beat market
expectations. That said, the overall gains obscure a certain polarity within the
sector where a cluster of companies came out clearly on top and several
companies ended on the bottom.

The major product approvals that were anticipated at the beginning of 2011
became reality. Several of the companies in BB Biotech's portfolio cleared this
all-important hurdle and were able to bring new products to the market. Vertex
reported an impressive market uptake of Incivek, its drug for treating hepatitis
C (HCV) patients. Dendreon disappointed when it withdrew its sales guidance for
its prostate cancer immunotherapy, Provenge. The announcement from Dendreon
caused an immediate sell-off in several other launch and pre-launch stories, and
this trend carried through the entire H2 of 2011. Other companies in BB
Biotech's portfolio that received regulatory approval for their products during
the course of the past year were Incyte (Jakafi), Optimer (Dificid) and Gilead
(Complera). In contrast to the successful US companies, the share prices of most
European biotechnology stocks suffered big losses.

Once again, M&A activity had a major influence on market sentiment towards the
biotech sector. The transaction of the year was clearly Gilead's USD 11 bn offer
for Pharmasset, which valued the company's shares at a 90% premium to their
previous closing price. This deal closed in January 2012 and will give Gilead a
dominant position in HCV, in addition to its strong HIV franchise. BB Biotech
had invested 4 percentage points of its NAV in Pharmasset at the time the offer
was announced and it subsequently sold most of the shares at a correspondingly
high profit. Pharmasset became the most heavily weighted stock in the Nasdaq
Biotech Index thanks to Gilead's takeover bid and ended the year with a
remarkable gain of 489%.

Portfolio performance and valuation in the fourth quarter of 2011

Celgene (+9.2%, in USD), the largest investment in the portfolio, rose to its
year-to-date high at the end of the fourth quarter. It presented strong data at
the ASH meeting (hematology) in December bolstering Revlimid's long-term sales
potential. Data on Pomalidomide, an IMiD compound in the pipeline for relapsed
and refractory multiple myeloma patients, was also greeted with enthusiasm.

Actelion's stock (+6.4%, in CHF) stabilized during the fourth quarter. Investors
are beginning to take positions ahead of the release of important trial data on
Macitentan during the first half of 2012.

Investors welcomed Gilead's (+5.5%, in USD) takeover bid for Pharmasset.
Although some critical voices were raised about the hefty price tag, the general
consensus is that the price of this strategic acquisition was justified by the
potential of Pharmasset's nucleotide analog PSI-7977 for HCV.

Vertex (-25.3%, in USD) was marked down due to soft monthly sales numbers for
Incivek and the release of positive trial data from potential competitors.
Investor focus in the coming months will shift to the regulatory decision on its
Kalydeco drug for the treatment of cystic fibrosis patients. A decision by the
FDA will be announced in April 2012 after priority review was granted in
December.

Novo Nordisk (+18.7%, in DKK) profited from its positive sales and profit
guidance for 2012 as well as from investor portfolio reallocation into large
caps.

Among BB Biotech's mid-sized participations, Pharmasset (+55.6%, in USD),
Halozyme (+54.9%, in USD) and Micromet (+49.8%, in USD) made stellar gains in
the final quarter of the year. Halozyme pleased investors when it announced that
it had signed more PH20 technology licensing agreements. Micromet's share price
jumped after the presentation of promising data on Blinatumomab at the ASH
meeting. The share price reaction was based on the fact that a very high rate of
response had been achieved in adult patients with relapsed or refractory ALL and
that management might seek accelerated approval for this lead product candidate.
On the other hand, some companies in the midst of launching new products had
disappointing news. As previously mentioned, Dendreon (-15.6%, in USD) suffered
due to lower than forecasted sales. In addition, while the market launch of
Benlysta by Human Genome Sciences (-41.8%, in USD) is proceeding according to
schedule, its sales have been short of market expectations. We continue to
forecast significant sales potential for Benlysta in the medium term.

Reallocation and repositioning of portfolio assets in 2011

The large portfolio positions held at the beginning of the year were reduced to
allow diversification into faster growing companies. We reduced our positions in
Celgene, Vertex, Gilead and Actelion, selling CHF 321 mn of our holdings in
their stocks. Adding more exposure to small and mid-cap stocks has, we believe,
enhanced our growth prospects.

We have two positions with a more than 10% weighting of Net Asset Value at the
end of 2011: Celgene, the market leader for blood cancer treatment (multiple
myeloma) with a strategically strong position and a very attractive valuation,
and Actelion, which faces a landmark year in 2012 after disappointing
shareholders in 2011. Four companies each had a weighting of 5% to 10% of NAV:
Vertex, Gilead, Novo Nordisk and Incyte. Like Vertex, Incyte also achieved an
important milestone in 2011 when Jakafi received regulatory approval. Incyte
expects to generate initial sales with this product in 2012. Consequently, every
major company in the portfolio has products in the market and, with the
exception of Incyte, is highly profitable and generating excellent cash flows.

A total of seven companies have a weighting of 3% to 5% of NAV. Two of these are
BioMarin and Alexion, companies that are likewise achieving sales and profits.
Our other investments in this segment are focused on companies with promising
drug candidates and technology platforms - Micromet, Immunogen, Isis, Halozyme
and Ariad. The portfolio is rounded out with an additional 16 positions, each
accounting for less than 3% of NAV. Here we have made two investments in
private, unlisted companies - Probiodrug and Radius - and three of these
positions are in India - Glenmark, Lupin and Strides. Most of the profits
realized from the position in Pharmasset in the fourth quarter were invested in
Ariad. Ariad is developing Ponatinib as the next generation BCR-ABL tyrosine
kinase inhibitor (TKI). Promising data from a pivotal study of Ponatinib in
patients with chronic myeloid leukemia (CML) were presented at the 2011 ASH
meeting. A high rate of response was achieved in CML patients who were resistant
or intolerant to prior therapy with Gleevec or approved second-generation TKIs.
Ariad should be able to file for approval in 2012 if the final outcome of the
study is positive.

Positioning and outlook for 2012

The problem of government debt and related cost-cutting in healthcare will
remain a major issue. Yet repercussions for biotech companies are expected to be
mitigated by strong fundamentals in this sector and the provision of high value
medicines. Globally, BB Biotech expects drug prices to remain under pressure. An
increasingly important aspect in this context is that drugs should not only have
a beneficial effect on the patient population but also be of value for the
healthcare system and insurers. These are criteria that are also reflected in
our investment decisions, as the portfolio has long been structured around
innovative and effective drugs with a positive cost/benefit ratio.

Portfolio performance in 2012 will be influenced by clinical news flow, key
product approvals, and by new product launches. Celgene appears to be on the
verge of receiving European approval for Revlimid as a first-line treatment for
patients with multiple myeloma. It will also be releasing Phase III data from
several studies of its lead late-stage candidate Apremilast in patients with
psoriasis and psoriatic arthritis. The year 2012 will be decisive for Actelion,
the second-largest position held by BB Biotech. If Macitentan exhibits a better
profile than Tracleer in an ongoing long-term study, it will bolster Actelion's
leadership position in pulmonary arterial hypertension. Actelion may also be
able to strengthen its market presence with Selexipag. For Vertex, efforts to
maintain dominance in the HCV market with Incivek and the timely development of
other drugs in pipeline will be key drivers. In particular, we anticipate that
Kalydeco, the Vertex personalized drug for selected patients with cystic
fibrosis, should be approved for marketing in April. Incyte will be measured by
the success of the Jakafi launch. It will also be releasing important Phase II
data from a study with its JAK inhibitor for the treatment of arthritis that is
being conducted through a partnership with Eli Lilly.

Our portfolio consists of well established, highly profitable companies with
strong top-line growth and a complementary selection of companies with late-
stage product candidates that also have excellent growth prospects. We are
confident that we are well positioned for the future.


A webcast with Dr. Daniel Koller can be viewed at www.bbbiotech.com. The
complete annual report as of December 31, 2011 will be published on February
23, 2012.



For further information:

Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland
Thomas Egger, telephone +41 44 267 67 09,teg@bellevue.ch

www.bbbiotech.com



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 around CHF 1.2 bn 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.


Composition of BB Biotech's portfolio as of December 31, 2011
(in % of securities, rounded values)


Celgene   15.9%

Actelion   12.3%

Vertex Pharmaceuticals   8.4%

Gilead   6.7%

Novo Nordisk   6.7%

Incyte   6.4%



Isis Pharmaceuticals   4.4%

Micromet   4.0%

Immunogen   3.9%

Halozyme Therapeutics   3.8%

Ariad Pharmaceuticals   3.3%

BioMarin Pharmaceutical   2.8%

Alexion Pharmaceuticals   2.7%

Amylin Pharmaceuticals   2.3%

Pharmasset   1.6%

Theravance   1.6%

Idenix Pharmaceuticals   1.5%

Optimer Pharmaceuticals   1.5%

Achillion Pharmaceuticals   1.3%

Swedish Orphan Biovitrum   1.3%

Human Genome Sciences   1.2%

Dendreon   1.0%

Bavarian Nordic   1.0%

Lupin   0.8%

Glenmark Pharmaceuticals   0.8%

Strides Arcolab   0.4%

Endocyte   0.2%

Probiodrug (1))   1.3%

Radius Health (1))   0.8%



SWAP agreement on treasury shares   <0.1%



Total securities   CHF 1 117.9 mn



Other assets   CHF 33.7 mn

Other payables   CHF (149.9) mn



Total shareholder's equity   CHF 1 001.7 mn

Treasury shares (in % of company) (2))   19.7%










1) Unlisted company

2) Correspond to the total of all own shares held in Switzerland, Germany and
Italy including the second trading line




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BB BIOTECH AG
Vordergasse 3 Schaffhausen Switzerland

WKN: AONFN3;ISIN: CH0038389992;

BB Biotech Media Release (PDF):
http://hugin.info/130285/R/1580013/493271.pdf




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