Solid business results, new wave of takeovers
Reporting season for the past year is now getting under way and most companies should meet expectations. Questions still linger over Gilead Sciences and Novo Nordisk, two companies that lowered their growth forecasts last year. Novo Nordisk has been compelled to adjust its pricing policy for diabetes products to the ongoing market developments in the US. The company also expects new clinical results in 2018.
The good funding levels in the biotech sector combined with low valuations and potentially favorable tax changes in the US, such as reductions in corporate tax rates or incentives for companies to repatriate of foreign profits held overseas, are expected to give takeover activity a big boost.
The recently announced acquisition of Ariad Pharma by Takeda and the ongoing takeover negotiations between Johnson & Johnson and Actelion, the Swiss company that has long been one of BB Biotech’s core investments, mark just the beginning of this trend.
In conclusion, we believe mid-cap stocks are likely to be where the action is over the next two to three years as they will be introducing innovative new therapeutic pathways to the marketplace. At BB Biotech, we are positioned for this development with the investments in our portfolio.
While we expect the share of portfolio assets invested in firms investigating infectious diseases will be slightly reduced due to recent setbacks in clinical trials with antibodies, we expect a growing number of new drug approvals in the field of neurological disorders. Most of our positions in this therapeutic area are small in order to balance the greater risks involved in these clinical trials.
