BB Adamant Global Biotech (CH)

Global stock markets marched higher in August. The S&P Index ended the month 3.0% higher, while the Nasdaq Biotech Index showed a gain of 4.2%.

The re-opening of the global economy continued in August. Many industrialized countries have eased their pandemic restrictions and this was reflected in the good economic data published in August. However, the rapid spread of the delta variant, which has caused new cases to climb, especially among unvaccinated people, is a cause for concern. Data from the UK and Israel suggest that vaccine effectiveness declines about six to eight months after vaccination. For this reason, some countries have begun to administer a booster dose to particularly vulnerable people. The US central bank said it could start to dial back its expansionary monetary policy sometime this year, but any such action would depend on a further improvement in employment data and the repercussions of the delta variant.

The following companies made the best contribution to the portfolio's performance in August: Early in the month Regeneron reported strong quarterly results, driven by the sales of its REGEN-CoV antibody cocktail for COVID-19 patients. The New York-based biotech company also benefited from good news about Dupixent and Eylea, two drugs that were developed in collaboration with business partners. Seagen added a second bladder cancer program to its pipeline by acquiring rights to a HER2 antibody drug conjugate (ADC) from RemeGen. Alnylam, a specialist in RNAi therapeutics, was marked up after publishing strong sales for its approved products Onpattro, Givlaari and Oxlumo, and it increased its sales guidance for the current fiscal year.

Immuno-oncology firm Beigene was a performance detractor. Its shares retreated in the wake of political action in China and the repercussions that had on the country's stock market. This political action also pressured the shares of two other companies in the portfolio, Innovent and Zai Labs. Jazz Pharmaceuticals plunged after releasing its quarterly results, which raised fears of generic competition gaining entry into the narcolepsy market. Fate Therapeutics presented good data for its B-cell lymphoma program, but could not beat investors’ high expectations.

We sold Dicerna, Jazz, Acadia shares and invested the proceeds in companies such as Harmony Biosciences and Kymera Therapeutics.

Our stance towards the biotech sector remains positive in view of its strong fundamentals and very attractive valuations (average 2022 P/E of 14x and PEG of 1.1 for large caps). These are still very attractive multiples compared to the biotech sector's historical valuations and the current ratios for the pharma sector (P/E 16x, PEG 2.4) and the S&P Index (P/E 21x, PEG 2.1).

The companies in our portfolio are working on technologies or products for novel treatment solutions. We are also invested in selected specialty pharma companies that offer high growth rates and moderate valuations. The BB Adamant Global Biotech Fund is well-positioned to profit from the milestones that are expected to be reached in 2021 and 2022. The regulatory environment favors the innovation coming out of biotech labs and the coronavirus crisis has improved the image of drug developers. Large pharma companies have acquired a number of companies in the fund's portfolio – Loxo, Array, Medicines Company, Myokardia and Alexion – and we expect more M&A deals to be announced during the coming months.