The manager says that biotechnology companies are becoming much closer in profile to large pharmaceutical groups in size, revenues and profitability, but have better growth prospects. Innovation from the previous decade is contributing to growth, but there is also a strong new pipeline of drugs, which is generating momentum for the sector.
Among portfolio holdings, Gilead and Biogen saw stronger-than-expected drug launches. Gilead's hepatitis C drug Sovaldi, delivered sales of $136m in one month on the market. Biogen has seen a strong launch of its multiple sclerosis drug, Tecfidera, with full year 2014 sales expected to be in excess of $2bn. There is also increased interest around new oncology drugs, particularly for groups such as Incyte.
The trust's net asset value rose 21.5% over the six months to 28 February, reaching an all-time high of 397.3p. The share price return was 23% after the discount narrowed. However, it has now widened out to 21% of net asset value after the recent rout in technology companies.
The quoted portfolio, which represents 88% of net assets, contributed the higher returns, rising 25.7%. The unquoted portfolio grew by 4.2%. The effect of currency moves negatively impacted the portfolio with an overall loss of £17.1m.
The biotechnology sector has been caught up with the general concern over technology valuations and the four trusts in the biotechnology sector have fallen an average of 5.4% for the year to date. The International Biotechnology trust has fallen more than the other three trusts in the sector – dropping 14.2% in 2014. The discount has also widened considerably. Over three years, the trust is third out of four funds in the sector.
The investment manager says that valuations are not expensive for large cap biotechnology companies and when adjusted for growth, are close to long-term average levels.
