The Lemon Fool

After last night's results has anyone any thoughts on the future for Biotechnology ITs?

After the loss of NAV this year due to the threats from the Clinton camp of clamping down on the pharma companies, will there
be renewed interest in the sector?

With Trump's election I think the short-term pressure on biotech funds is off. In the long term, I do believe that biotech will produce some remarkable treatments for a wide range of illnesses, hence it is an excellent long term bet.
I understand that IBT will soon be offering a 4% yield, so it will be at home in both growth and income portfolios.
Regards
ermintrade

ermintrade wrote:I understand that IBT will soon be offering a 4% yield, so it will be at home in both growth and income portfolios.

I would take a close look at how a 4% dividend yield is derived from a market sector that is low-yielding or no-yielding. Amgen has a decent yield but most of the others do not, although that is gradually changing as the sector matures

Any fund claiming to be a biotech fund that yields twice the yield of the S&P 500 is either investing also in big pharma, or is selling options or some other such device.

bonrepos wrote:After last night's results has anyone any thoughts on the future for Biotechnology ITs?

After the loss of NAV this year due to the threats from the Clinton camp of clamping down on the pharma companies, will there
be renewed interest in the sector?

Well, my holding in Worldwide Health Trust shot up by over 8% today, so I guess the answer is yes!

The other IT in this area that I look at (Biotech Growth) behaved similarly.

I've held IBT for a few years. Up over 7% today with the rising tide.

Haven't looked at it recently, but I guess I should look into that yield. Could they be returning capital?

Yes, it must be return of capital so it is similar to European Assets, in that respect.

toofast2live wrote:Yes, it must be return of capital so it is similar to European Assets, in that respect.

EAT is domiciled overseas and so is freed from any UK rules about distinguishing capital and dividends. If IBT is not then I can easily see some tax issues arising, since distributions cannot be simply regarded as income.

Lootman wrote:EAT is domiciled overseas and so is freed from any UK rules about distinguishing capital and dividends. If IBT is not then I can easily see some tax issues arising, since distributions cannot be simply regarded as income.

I never let that kind of thing bother me.

The only non-cash investments I hold outside a SIPP or ISA are my VCT portfolio and a handful of EIS-qualifying companies. So no tax. But I'd still much rather ITs[1] didn't go around returning capital, at least until/unless they decide they can't invest it!

[1] Other than VCTs, where the up-front tax relief changes the whole dynamic.

If you are interested in biotech, Battle Against Cancet IT (BACT) is transforming itself from a alternative-asset, low-fee IT, to a big UK life-sciences fund. See the 7th November announcement:

http://www.bacitltd.com/announcements/general/

Personally, I'm actually annoyed by this as it will clearly totally transform its return profile and mean it won't really fit in my plans any more, but it might be interesting to a whole new set of investors.

I love it when these city spivs cheerfully spew up "we aim to generate an IRR of 15%pa".

Yep. So do I.

Now let me count up how many of my investments have returned an IRR of >15% for ten years or more? After a brief look, perhaps 3%.

Good luck BACIT.

The forthcoming trust from BB Biotech may be of interest (IPO applications close on 29th November, I think):

http://citywire.co.uk/money/swiss-biote ... st/a963137

There's an article in the FT yesterday that may be of interest by the 'Adventurous Investor' on the soon to be reconstituted BACIT. It seems to moving from being a cheap way into the alternative investment sector to a Life Sciences/Biotech (I'm presuming they're the same thing?) fund.

"How to invest in a cure for cancer"
https://www.ft.com/content/d486164e-a83 ... a99e2a4de6

"Most importantly, though, a lot of IP-driven businesses in the life sciences space trade at a colossal premium to book value — and still must prove their mettle as life science opportunity spotters. This reconstituted fund has that credibility in spades, but you’re buying at close to current net asset value — so there is upside potential if this is rated like its UK and US peers."

I'm a keen supporter of the BACT cause and an investor in it.

Is there Foolish opinion to hand on whether the implementation of the proposed UK Life Science mandate will make the Trust dovetail in complimentary fashion with the mainstream USA oriented Biotech trusts such as BIOG and IBT, or will it be quite different in risk profile to those - a racier alternative?