The world wakes up to the reality of a pandemic

We are pleased to present International Biotechnology Trust’s factsheet for February 2020

The ongoing COVID-19 pandemic has reduced the growth and earnings potential of the global economy. Sectors related to travel and energy have been amongst those most severely affected. In contrast, we expect that the healthcare sector might be less affected since demand remains unchanged, supply constraints are expected to be limited, and while some clinical trials and FDA AdComs could be delayed this may impact individual companies rather than the sector as a whole. Both antiviral drugs and vaccines are currently being developed, but timescales are too long to have any significant short-term impact on the pandemic. Instead, society must rely upon historically proven methods to combat the pandemic, namely preventative measures such as quarantining. In China where the coronavirus pandemic hit first and where a quarantine was first applied, early signs indicate that the pandemic has been significantly reduced. This is a positive sign and gives comfort to other countries, such as Italy, who are implementing similar measures in an attempt to prevent the virus from spreading further. Our thinking is that the pandemic is going to be short lived but during its course it will have a very large effect on most parts of the global economy. In response to COVID-19, the Company has taken a conservative approach during the early stages of the pandemic and is currently not geared.

The ongoing Democrat Party primaries have given Joe Biden a lead over Bernie Sanders. Biden is considered a more moderate candidate and is less likely to introduce any fundamental changes to the U.S. healthcare system. We continue to expect that the biotech sector will trade sideways until the market has gained more certainty regarding the outcome of the U.S. election in November 2020. In the medium-to-long term, we expect that the COVID-19 pandemic will be resolved, and the U.S. election will not bring about any significant changes to the healthcare sector. Consequently, we are looking for the right time to increase our holdings in companies with compelling valuations in the current volatile market.

One of our largest holdings is in Gilead. We saw value in this company, with its solid HIV franchise and low valuation, and included this company within our portfolio before the COVID-19 pandemic hit. HIV is a chronic infection which, at this stage, requires a lifelong treatment. Coincidently, Gilead has a potential drug (remdesivir) in development for COVID-19 and, consequently, the stock has performed well since the start of the pandemic. It is still too early to say if it remdesivir works or not, but we look favourably upon Gilead with its strong fundamentals and forwards PE multiple of approximately 11.5x for 2020.

Regardless of the impact of COVID-19, we continue business as usual, working to find the best value-driving investments for the Company and its shareholders.

Thank you for taking the time to read our February factsheet and some important highlights for the year thus far.

February Factsheet (click link to open)