BB BIOTECH AG - Investors rediscover biotech sector

Thursday, 19. April 2012 07:31
BB BIOTECH AG - Investors rediscover biotech sector
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Interim Report of BB Biotech AG as of March 31, 2012

The first quarter of 2012 showed encouraging developments for BB Biotech based
on productive stock-picking and positive performance of the biotechnology
sector. BB Biotech shares rose by 19.8% in CHF and 20.1% in EUR during the
quarter. Our restructured portfolio - including increased weight in midcap
companies - paid off. We believe that the sector will continue to perform well
during the second quarter based on anticipated news-flow and good operational

The biotech sector maintained its strong performance from late 2011 in the first
quarter of 2012. Given positive clinical news flow and M&A developments, the
sector was able to withstand continued investor fears around the European debt
crisis. Absolute sector performance was positive - so was performance relative
to broader stock-market indices. The Nasdaq Biotech Index (NBI) gained 18.2% (in
USD) in the first three months of the year while the MSCI World advanced 11.7%
(in USD).

We believe that the strength of the sector is still not fully priced in.
Valuations for biotech firms remain attractive with an average price/earnings
ratio of about 18 for 2012 on projected earnings growth of approximately 24%. As
before, three performance drivers can be identified: 1) regulatory authorities
approved various new drugs that have high sales potential; 2) several prominent
biotech companies published breakthrough clinical trial results; and 3) several
acquisitions are underway at significant premiums. We expect these fundamentals
to remain intact for the foreseeable future.

Active portfolio management
We benefited also from portfolio-specific stock selection. The constant
assessment and realignment of our investment portfolio toward mid-cap stocks
contributed to satisfying performance. The weightings of the top holdings were
reduced and the resulting proceeds were invested in small and mid-cap stocks. We
have made considerable progress towards our goal of optimizing the risk/return
profile of the portfolio. BB Biotech continues to take an active portfolio
management approach to take advantage of new investment ideas and newsflow

Two of the mid-cap companies in BB Biotech's portfolio were acquired during the
first quarter. Micromet was bought by Amgen and Gilead completed its acquisition
of Pharmasset. Significant premiums were offered in these transactions and BB
Biotech realized profits of CHF 59.0 mn on these two holdings alone. These
contributed to increased Net Asset Value (NAV) in the first quarter (+21.6% in
CHF and +26.5% in USD). BB Biotech shares were also up (+19.8% in CHF and
+20.1% in EUR), also better than the sector performance.

Efforts to add promising mid-cap companies continued. Several of these mid-cap
companies are now in position to provide attractive shareholder returns as they
wind down capital-intensive investment R&D projects and approach
commercialization. Investors in BB Biotech can expect to benefit from a
diversified portfolio of highly profitable products sold by leading or rapidly
emerging companies (top holdings), companies in the early stage of
commercialization as well as smaller companies with highly interesting pipelines
that offer future growth opportunities.

All of the proposals of the Board of Directors presented to shareholders at the
recent Annual General Meeting (March 19, 2012) were approved by a large majority
- including the strategy of earnings accretion. Accretive action was intensified
with the repurchase of 1.07 million shares via the second trading line and the
company was given authorization to buy back an additional 1.3 million shares via
a new share buyback program. The discount to the NAV was 19.7% at the end of
March 2012. BB Biotech will continue to pursue its goal of reducing and
stabilizing the discount to a level below 15% within the foreseeable future.

Convincing performance by top holdings
Celgene (+14.7%, in USD) published strong results for 2011 driven by Revlimid
sales of USD 3.2 bn. The company continues to outgrow the broader market with
reported sales growth of 34% and net income growth of 39%. Management is
expecting Revlimid to generate sales of USD 3.75 to 3.85 bn in 2012, which would
roughly correspond to an 18% increase.

Actelion (+2.3%, in CHF) did not perform in-line with the biotech sector.
Investors are still awaiting the outcome of the ongoing SERAPHIN study with
Macitentan, and they are showing little trust in the company's ability to carry
out the necessary corporate restructuring. BB Biotech remains invested based on
its opinion that Actelion's valuation is attractive and that the risk/reward
situation is favorable ahead of the Phase III Macitentan data expected in Q2.

Vertex (+23.5%, in USD) achieved an important milestone in January when it
received marketing approval for Kalydeco for the treatment of cystic fibrosis.
Kalydeco is the first available therapy that targets a genetic mutation
responsible for this disease. Incivek, its drug for the treatment of patients
with hepatitis C (HCV) and approved in the second quarter of 2011, generated
sales of USD 950 mn last year. Vertex expects Incivek to generate sales of USD
1.5 to 1.7 bn in 2012.

Gilead (+19.4%, in USD) completed its USD 11 bn acquisition of Pharmasset in
January 2012. Initial data from a study of GS-7977 in combination with Ribavirin
for the treatment of resistant/refractory patients with HCV did not meet the
necessary endpoints in one clinical study. However, data from studies with GS-
7977 and Ribavirin in treatment-naive patients, as well as other important
studies, are eagerly anticipated in the weeks ahead.

Incyte (+28.6%, in USD) launched Jakafi in November 2011 and, according to
doctor surveys, the drug is already being widely used to treat moderate to
severe cases of myelofibrosis, a bone marrow disease.

Novo Nordisk (+19.1%, in DKK, incl. dividends) announced strong operating
results for 2011 and said it expected another year of double-digit sales and
profit growth in 2012. The potential use of Victoza for the treatment of obesity
could provide significant upside to revenue estimates, and hence be a source of
share price appreciation.

Highlights for smaller participations
Amylin (+119.3%, in USD) received regulatory approval for Bydureon, the first
once-weekly GLP-1 analog for the treatment of type 2 diabetes. According to the
initial data, market uptake has been strong. At the end of March, Bloomberg
reported that Bristol-Myers had made a take-over bid of USD 3.5 bn for Amylin,
which moved the stock up significantly. The Amylin board has rejected the offer.

Immunogen (+24.3%, in USD) and its partner Roche announced promising clinical
data from the EMILIA study with T-DM1 for the treatment of patients with
metastatic breast cancer. Patients in the T-DM1 group displayed a significant
increase in progression-free survival compared to patients who received Tykerb
(tyrosine kinase inhibitor) and Xeloda (a cytotoxic drug). These data will form
the basis of the marketing approval application and the drug could be launched
in 2013.

Halozyme (+34.2%, in USD) and its partner Roche announced Phase III results for
subcutaneous Herceptin. This simpler form of administration offers patients
greater comfort and convenience and would be less costly for the healthcare
system. Furthermore, subcutaneous injection of a fixed dose of Herceptin showed
a clinical advantage over intravenous administration based on patient weight.

New portfolio investments
BB Biotech initiated a position in The Medicines Company (+7.7%, in USD) during
the first quarter of 2012. The fundamentals of the company improved
significantly based on its successful patent strategy with its main product,
Angiomax. The Medicines Company reached an agreement with generic manufacturers
that will keep Angiomax under patent protection until 2019. BB Biotech also
added Onyx Pharmaceuticals to its oncology portfolio, a company which already
has a marketed product, Nexavar (for kidney and liver cancer), and is also
developing carfilzomib for the treatment of multiple myeloma.

Outlook and positioning for 2012
The remainder of 2012 will likely see important news-flow and R&D milestones
which can continue to strengthen the fundamentals of the biotech sector.

Regulatory decisions for Degludec (Novo Nordisk), a once-daily basal insulin;
Revlimid (Celgene) as a first-line treatment for patients with multiple myeloma;
and Mipomersen (Isis) for homozygous familial hypercholesterolemia (HoFH) are
eagerly anticipated.

Market adoption of recently launched products will be at the center of investor
attention. These updates will provide an indication of the sales potential of
these drugs, which is instrumental for a company's valuation early in a product
launch. Six companies: Dendreon (Provenge), Incyte (Jakafi), Optimer (Dificid),
Human Genome Sciences (Benlysta), Amylin (Bydureon) and Vertex (Kalydeco) are in
launch phases for innovative drugs.

Several companies will report data from major clinical trials, including:
* GS-7977 for treatment-naive patients with HCV (Gilead)
* Macitentan Phase III data in the treatment of PAH (Actelion)
* Apremilast Phase III data in the treatment of patients with psoriasis and
rheumatoid arthritis (Celgene)
* Kalydeco/VX-804 combination study in the treatment of cystic fibrosis

Strategic partnerships may also drive biotech stock valuations. They serve as an
important source of non-dilutive capital for smaller and mid-sized companies.
M&A activity is likely to continue in the biotech sector as big pharma seeks new

The non-cyclical biotech industry remains an attractive investment story. We
hold a positive view of the sector due to its proven innovation credentials and
successful track record in bringing products to market as well as the promising
sector outlook for sales and profits. This positive stance is reflected in our
current investment strategy where the portfolio is more than 100% invested in
the sector.

The complete interim report as of March 31, 2012 and a webcast with Dr. Daniel
Koller can be viewed at

For further information:

Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland
Thomas Egger, telephone +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 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 March 31, 2012
(in % of securities, rounded values)

Celgene   15.0%

Actelion   11.5%

Vertex Pharmaceuticals   8.6%

Gilead   7.6%

Incyte   7.1%

Novo Nordisk   6.1%

Isis Pharmaceuticals   4.7%

Halozyme Therapeutics   4.5%

Amylin Pharmaceuticals   4.3%

Immunogen   3.9%

Ariad Pharmaceuticals   3.7%

Alexion Pharmaceuticals   3.1%

BioMarin Pharmaceutical   2.5%

The Medicines Company   2.1%

Swedish Orphan Biovitrum   1.7%

Optimer Pharmaceuticals   1.5%

Human Genome Sciences   1.2%

Theravance   1.2%

Dendreon   1.2%

Probiodrug (1))   1.1%

Achillion Pharmaceuticals   1.1%

Bavarian Nordic   1.1%

Lupin   1.1%

Idenix Pharmaceuticals   1.0%

Glenmark Pharmaceuticals   0.9%

Radius Health (1))   0.7%

Strides Arcolab   0.6%

Onyx Pharmaceuticals   0.5%

Endocyte   0.3%

SWAP agreement on treasury shares   <0.1%

Total securities   CHF 1 215.8 mn

Other assets   CHF 18.0 mn

Other payables   CHF (117.4) mn

Total shareholder's equity   CHF 1 116.4 mn

Treasury shares (in % of company) (2))   18.3%

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

--- End of Message ---

Vordergasse 3 Schaffhausen Switzerland

WKN: AONFN3;ISIN: CH0038389992;

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