Preliminary Announcement of Results
NEWS RELEASE
To: City Editors
For immediate release
23 November 2011
The Biotech Growth Trust PLC
Unaudited Interim Results for the six months ended 30 September 2011
Financial Highlights 30 September 31 March % Change
2011 2011
Net asset value per share 183.2p 186.0p -1.5
Share price 173.5p 166.0p +4.5
Discount of share price to net asset value 5.3% 10.8% -
per share
NASDAQ Biotechnology Index (sterling 619.7 647.9 -4.4
adjusted)
No interim dividend is proposed.
The following are attached:
* Chairman's Statement
* Review of Investments
* Top and Bottom Five Contributors to Net Asset Value Performance
* Income Statement
* Statement of Changes in Equity
* Statement of Financial Position
* Cash Flow Statement
* Notes to the Interim Financial Statements
This Announcement is not the Company's interim report. It is an abridged
version of the Company's full interim report for the six months ended 30
September 2011. The full interim report will be sent to shareholders on 29
November 2011. The full interim report, together with a copy of this
announcement, will also be available on the Company's website:
www.biotechgt.com
For further information please contact:
Mark Pope, Frostrow Capital LLP 020 3 008 4913
Jo Stonier, Quill Communications 020 7758 2230
Chairman's Statement
Performance
Against a background of severe economic and political difficulties in many
parts of the world, stock markets experienced periods of high volatility during
the Company's half year and the MSCI World Index fell by 15.1% in sterling
terms during the period. Thanks, however, to its defensive qualities, the
Biotechnology sector substantially outperformed the wider market. The Company's
benchmark, the NASDAQ Biotechnology Index, measured in sterling terms, fell by
4.4% over the same period. The Company's net asset value per share fell by 1.5%
during the period and, while disappointing in absolute terms, this represents a
substantial outperformance of both the benchmark and the wider market. The
Company's share price performed better still, rising by 4.5% as the discount of
the share price to the net asset value per share narrowed from 10.8% at 31
March 2011 to 5.3% at 30 September 2011.
I am pleased to report that the Company's Investment Manager has won the
techMARK Technology Fund Manager of the Year award for its management of the
Company's portfolio which was the best performing technology fund for the
period 1 October 2010 to 30 September 2011.
Further information on investment performance and the outlook for the Company
is given in the Review of Investments.
Discount Management Policy and Share Buyback Policy
The Board has continued to implement its policy of active discount management
and to buy back shares for cancellation when the discount of the share price
against the net asset value per share is greater than 6%. During the six months
under review the Company repurchased a total of 1,084,144 shares for
cancellation at a cost of £1,947,000 (including expenses).
Revenue and Dividends
The revenue loss for the period was £170,000 (six months ended 30 September
2010: loss of £202,000) and no interim dividend is declared (six months ended
30 September 2010: nil).
Outlook
There is enormous uncertainty regarding the outlook for the markets for the
remainder of 2011 and beyond. Massive global economic imbalances persist, the
euro zone is in chronic turmoil, growth in many countries is stubbornly low and
employment in the U.S. is apparently an intractable problem. Nevertheless, in
spite of these worrying circumstances, your Board believes that historically
low valuations in the Biotechnology sector, the sector's role as a key source
of innovative new drugs and continuing merger and acquisition activity will
together enable the long term investor in the sector to be well rewarded.
John Sclater CVO
Chairman
23 November 2011
Review of Investments
The Company's net asset value per share decreased by 1.5% during the period.
The Company's benchmark index, the NASDAQ Biotechnology Index (measured on a
sterling adjusted basis), declined by 4.4% during this period.
The top contributors to performance in the portfolio were Pharmasset,
Pharmacyclics, Idenix Pharmaceuticals, Cubist Pharmaceuticals and Biogen Idec.
* Pharmasset continued to be a top performer due to emerging data showing
that its nucleotide polymerase inhibitors are likely to be leaders among
the next generation of hepatitis C treatments. The strong potency and high
barrier to resistance of these compounds make them ideal candidates to
replace Interferon-containing regimens as standard of care with potentially
higher cure rates and more favorable side-effect profiles. Since the period
end Gilead Sciences confirmed its agreement to acquire Pharmasset for
approximately U.S. 11 billion. This represents an 89% premium to
Pharmasset's closing share price on 18 November.
* Pharmacyclics performed strongly due to positive phase II data presented at
the American Society of Clinical Oncology annual meeting demonstrating
robust activity of its lead compound PCI-32765 for the treatment of chronic
lymphocytic leukemia and mantle cell lymphoma. We continue to believe that
this is one of the most exciting compounds currently in clinical
development against cancer.
* Idenix Pharmaceuticals' shares strengthened due to the rising profile of
polymerase inhibitors against hepatitis C based on the Pharmasset data, and
increased optimism that its own polymerase inhibitor would prove safe in
the clinic.
* Cubist's shares advanced after the company announced a settlement in its
patent dispute with Teva concerning lead drug Cubicin. The patent issue had
long been an overhang on the stock that compressed the valuation. The
settlement delays the launch of a generic version of the drug until 2018.
* Biogen Idec shares rose due to better than expected phase III data for
BG-12 for Multiple Sclerosis. We expect this drug to compete favourably
against existing treatments.
The largest losses were from positions such as in K-V Pharmaceutical, Illumina,
and Life Technologies.
* K-V Pharmaceutical shares declined in part due to the U.S. Food and Drug
Administration's decision to not block compounding pharmacies from making
generic versions of the company's drug Makena. As a result, the launch of
the product has fallen short of expectations.
* Illumina and Life Technologies, both providers of equipment and reagents
for academic and commercial research, declined due to concerns about
cutbacks in the research budget of the U.S. National Institutes of Health.
Additionally, Life Technologies was affected by supply disruptions for its
sequencing instruments due to the Fukushima earthquake.
Outlook
Macroeconomic worries intensified during the period concerning slowing global
growth and the debt crisis in Europe and biotechnology stocks were not
completely immune from this. However, the fundamentals of the industry remain
strong. Valuations are at the low end of the historical range and the major
biotechnology companies have generally met or exceeded financial expectations.
Although healthcare reform in the U.S. had been a concern previously, it has
not had significant negative consequences for the biotechnology sector.
Biotechnology continues to be a key source of innovative new drugs, and the
potential reward to investors of correctly identifying these drug candidates at
an early stage is very significant.
The number of holdings in the portfolio is approximately 40, exclusive of
unquoted investments and warrants. The geographic distribution of assets is 90%
North America, 6% Europe and 4% Asia. Currently approximately 45% of the
Company's assets are invested in major capitalisation companies, and 55% are
invested in small and mid-capitalisation companies. We believe that the Company
is well positioned to capitalise on the opportunities in the sector.
Sven Borho
OrbiMed Capital LLC
Investment Manager
23 November 2011
Top and Bottom Five Contributors to Net Asset Value Performance
For the Six Months to 30 September 2011
Contribution Contribution
for the six per Share (p)
months to 30 *
September 2011
£'000
Top Five contributors
Pharmasset 6,736 10.5
Pharmacyclics 4,375 6.8
Idenix Pharmaceuticals 1,581 2.5
Cubist Pharmaceuticals 1,239 1.9
Biogen Idec 1,024 1.6
14,955 23.3
Bottom Five contributors
K-V Pharmaceutical (2,350) (3.7)
Illumina (2,047) (3.2)
Warner Chilcott (1,496) (2.3)
Life Technologies (1,486) (2.3)
Insmed (1,312) (2.0)
(8,691) (13.5)
*based on 64,268,350 ordinary shares being the weighted average number of
shares in issue during the period ended 30 September 2011
Source: Frostrow Capital LLP
Income Statement
For the six months ended 30 September 2011
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 2011 30 September 2010 31 March 2011
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Investment
income
Investment 85 - 85 7 - 7 69 - 69
income
Total income 85 - 85 7 - 7 69 - 69
(note 2)
Gains and
losses on
investments
(Losses)/ - (1,199) (1,199) - (8,913) (8,913) - 2,691 2,691
gains on
investments
held at fair
value through
profit or
loss
Exchange - 351 351 - 223 223 - 402 402
gains on
currency
balances
Expenses
Investment - (857) (857) - (512) (512) - (752) (752)
management,
management
and
performance
fees
(note 3)
Other (225) - (225) (199) - (199) (398) - (398)
expenses
(Loss)/profit (140) (1,705) (1,845) (192) (9,202) (9,394) (329) 2,341 2,012
before
finance costs
and taxation
Finance costs (18) - (18) (10) - (10) (11) - (11)
(Loss)/profit (158) (1,705) (1,863) (202) (9,202) (9,404) (340) 2,341 2,001
before
taxation
Taxation (12) - (12) - - - (1) - (1)
(Loss)/profit (170) (1,705) (1,875) (202) (9,202) (9,404) (341) 2,341 2,000
for the
period/year
(Loss)/ (0.3)p (2.6)p (2.9)p (0.3)p (14.0)p (14.3)p (0.5)p 3.5p 3.0p
earnings per
share (note
4)
The Company does not have any income or expenses which are not included in the
profit for the period. Accordingly, the "loss/profit for the period" is also
the "total comprehensive income for the period", as defined in IAS 1 (revised)
and no separate Statement of Comprehensive Income has been presented.
All of the (loss)/profit and total comprehensive income for the period is
attributable to the owners of the Company.
The total column of the statement is the Income Statement of the Company
prepared in accordance with IFRS. The supplementary revenue and capital columns
are presented for information purposes as recommended by the Statement of
Recommended Practice issued by the Association of Investment Companies. All
items in the above statement derive from continuing operations. No operations
were acquired or discontinued during the period.
Statement of Changes in Equity
Six months
ended 30
September
2011
(Unaudited)
Ordinary Share Special Capital Capital Revenue Total £
Premium Redemption Reserve Reserve '000
Share Account Reserve Reserve £
Capital '000 £'000 £'000
£'000 £'000
£'000
At 31 March 16,239 19,300 30,420 4,893 53,311 (3,345) 120,818
2011
Net loss for - - - - (1,705) (170) (1,875)
the period
Buyback of (271) - (1,947) 271 - - (1,947)
shares
At 30 15,968 19,300 28,473 5,164 51,606 (3,515) 116,996
September
2011
Six months
ended 30
September
2010
(Unaudited)
Ordinary Share Special Capital Capital Revenue Total £
Premium Redemption Reserve Reserve '000
Share Account Reserve Reserve £
Capital '000 £'000 £'000
£'000 £'000
£'000
At 31 March 16,490 19,298 32,021 4,642 50,970 (3,004) 120,417
2010
Net loss for - - - - (9,202) (202) (9,404)
the period
Buyback of (23) - (134) 23 - - (134)
shares
Refund of - 2 - - - - 2
issue costs
At 30 16,467 19,300 31,887 4,665 41,768 (3,206) 110,881
September
2010
Year ended
31 March
2011
(Audited)
Ordinary Share Special Capital Capital Revenue Total £
Premium Redemption Reserve Reserve '000
Share Account Reserve Reserve £
Capital '000 £'000 £'000
£'000 £'000
£'000
At 31 March 16,490 19,298 32,021 4,642 50,970 (3,004) 120,417
2010
Net profit/ - - - - 2,341 (341) 2,000
(loss) for
the year
Buy back of (251) - (1,601) 251 - - (1,601)
shares
Refund of - 2 - - - - 2
issue costs
At 31 March 16,239 19,300 30,420 4,893 53,311 (3,345) 120,818
2011
Statement of Financial Position
as at 30 September 2011
(Unaudited) (Unaudited) (Audited)
30 30 31 March
September September
2011 2010 2011
£'000 £'000 £'000
Non current assets
Investments held at fair value through 112,731 113,061 128,346
profit or loss
Current assets
Other receivables 5,466 643 1,161
Cash and cash equivalents 3,870 5,294 5,691
9,336 5,937 6,852
Total assets 122,067 118,998 135,198
Current liabilities
Other payables 5,071 8,117 14,380
5,071 8,117 14,380
Net assets 116,996 110,881 120,818
Equity attributable to equity holders
Ordinary share capital 15,968 16,467 16,239
Share premium account 19,300 19,300 19,300
Special reserve 28,473 31,887 30,420
Capital redemption reserve 5,164 4,665 4,893
Capital reserve 51,606 41,768 53,311
Revenue reserve (3,515) (3,206) (3,345)
Total equity 116,996 110,881 120,818
Net asset value per share (note 5) 183.2p 168.3p 186.0p
Cash Flow Statement
for the six months ended 30 September 2011
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 2010 31 March 2011
2011
£'000 £'000
£'000
Net cash (outflow)/inflow (298) 13,692 15,376
from operating activities
(note 6)
Net cash (outflow)/inflow (298) 13,692 15,376
before financing
Net cash outflow from (1,874) (8,621) (10,087)
financing activities
Net (decrease)/increase in (2,172) 5,071 5,289
cash and cash equivalents
Cash and cash equivalents 5,691 - -
at start of period
Realised gain on foreign 351 223 402
currency
Cash and cash equivalents 3,870 5,294 5,691
at period end
Notes to the Interim Financial Statements
1. Accounting Policies
The condensed financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of investments, and in
accordance with applicable accounting standards and with the revised Statement
of Recommended Practice `Financial Statements of Investment Trust Companies and
Venture Capital Trusts' dated January 2009 ("the SORP"). Where presentational
guidance set out in the revised SORP is consistent with the requirements of
International Financial Reporting Standards, the Directors have sought to
prepare the condensed financial statements on a basis compliant with the
recommendations of the SORP.
The same accounting policies used for the year ended 31 March 2011 have been
applied.
2. Income
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 30 ended 30 31 March
September September
2011
2011 2010
£'000 £'000 £'000
Investment income 85 7 69
Total income 85 7 69
3. Investment Management, Management and Performance Fees
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 30 ended 30 31 March
September September
2011
2011 2010
£'000 £'000 £'000
Investment management fee 397 336 711
Management fee 176 158 322
Performance fee charged/(written 284 18 (281)
back) in the period/year*
857 512 752
*In accordance with the performance fee arrangements described on page 12 of
the 2011 Annual Report, a performance fee of £284,000 was accrued at the period
end (six months ended 30 September 2010: £506,000; year ended 31 March 2011: £
nil).
Notes to the Interim Financial Statements (continued)
4. (Loss)/Earnings per Share
The (loss)/earnings per share figure is based on the net loss for the six
months of £1,875,000 (six months ended 30 September 2010: £9,404,000 loss; year
ended 31 March 2011: £2,000,000 gain) and on 64,268,350 (six months ended 30
September 2010: 65,934,855 and year ended 31 March 2011: 65,687,388) shares,
being the weighted average number of shares in issue during the period.
The (loss)/return per share detailed above can be further analysed between
revenue and capital as follows:
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 30 ended 30 31 March
September September 2011
2011 2010
£'000
£'000 £'000
Net revenue loss (170) (202) (341)
Net capital (loss) gain (1,705) (9,202) 2,341
Net total (loss)/gain (1,875) (9,404) 2,000
Weighted average number of shares 64,268,350 65,934,855 65,687,388
in issue during the period/year
Pence Pence Pence
Revenue loss per share (0.3) (0.3) (0.5)
Capital (loss)/earnings per share (2.6) (14.0) 3.5
Total (loss)/earnings per share (2.9) (14.3) 3.0
5. Net Asset Value per Share
The net asset value per share is based on the net assets attributable to equity
shareholders of £116,996,000 (30 September 2010: £110,881,000; 31 March 2011: £
120,818,000) and on 63,870,537 shares (30 September 2010: 65,869,809; 31 March
2011: 64,954,681), being the number of shares in issue at the period end.
Notes to the Interim Financial Statements (continued)
6. Reconciliation of (Loss)/Profit Before Taxation to Net Cash (Outflow)/Inflow
From Operating Activities
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 30 ended 30
September 2011 September 2010 31 March
£'000 £'000 2011
£'000
(Loss)/profit before taxation (1,863) (9,404) 2,001
Losses/(gains) on investments held 848 8,690 (3,093)
at fair value through profit or
loss
Movements in investments held at 417 14,674 17,294
fair value through profit or loss
Decrease/(increase) in other 33 18 (15)
receivables
Increase/(decrease) in other 267 (286) (811)
payables
Net cash (outflow)/inflow (298) 13,692 15,376
7. Transaction Costs
Purchase and sale transaction costs for the six months ended 30 September 2011
were £229,000 (six months ended 30 September 2010: £256,000; year ended 31
March 2011: £530,000). These costs comprise mainly commission.
8. Comparative Information
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 435 (1) of the Companies Act 2006. The
financial information for the six months ended 30 September 2011 and 2010 has
not been audited or reviewed by the auditors.
The information for the year ended 31 March 2011 has been extracted from the
latest published audited financial statements. The audited financial statements
for the year ended 31 March 2011 have been filed with the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report, and did not contain statements
under section 498 of the Companies Act 2006.
Frostrow Capital LLP
Company Secretary
23 November 2011
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