Why biotech is back: IBT portfolio manager’s view

Hello, you are doing proactive. I'm joined by Elsa Craig, portfolio manager for the International

Biotechnology Trust. Elsa, very good to meet you. You delivered a stand-on, you're beating the

biotech index. We're striving that momentum. Yes, it sort of feels a bit long overdue.

So we've had a long, protracted bear market in biotech. And let you say yes, performance was great

last year. So it seems to be coming back in Vogue. Really, it was driven by two things. So we're

a closed-ended fund, and we can gear up. So when stocks were hit on Liberation Day, we geared up

to one of the highest levels we've had since the financial crisis, and that helped returns.

And then secondly, we had nine acquisitions out of the fund, making performance really strong.

Elsa, for those muted trust, how do you invest across the biotech space?

Yeah, we don't do a buy-and-hold strategy. What we do is a basket approach

of all the different companies looking in the certain area that we like. And then as they move

through the clinic, we sell the losers and increase our weightings in the stocks that look

most interesting to us and having the best in-class approach to a specific disease.

And then secondly, we do top-down and bottom-up approach to the fund. So if we think the sectors

oversold, we can go into the slightly higher risker names. And if we think it's overbought,

we can go into the lower risk names. And that's why over the long term, we've outbought

our peer group because we've managed to exploit the cyclicality of the market.

We're seeing a wave of takeovers. How important is M&A to return right now?

I think it's, I mean, it's part of the evolution of a biotech company. Often companies will be

acquired by large farmers. We're seeing a pickup in M&A right now because big farmer companies

are facing massive patent expires. So we would expect momentum to pick up there.

It is important and we expect a number of our companies this year to probably go as well.

Despite the rally, you say valuations are still attractive. Where are you seeing the opportunities?

Absolutely. So we, when I mentioned we do top-down versus bottom-up, we're positioned at the moment

in late-stage biotech companies. So on the cost of launching their own products or already just

launched. We think that's where the opportunity is. In terms of valuations, these companies can

go within a range of five to eight times sales and right now they're looking at sort of three, four

times sales. So a lot of upside there still to go. I'm pure activity picking up. Does that signal

biotech is back in favour? I think you've already answered that, but give us your thoughts.

I think it does. We went to the largest healthcare conference in January, the JP Morgan healthcare

conference in San Francisco and the bank has always given an opening speech and they talk about

things like hyperactivity and they said that there were 20 or 30 in the pipe for this year

and that certainly is a signal that things are back to normal for the sector and gives us optimism

for 2026. For investors on the sidelines, why is it not a good time to look at biotech?

I think it's the M&A. We've had a record number of deals last year, not only in the front,

but across the sector. And like I said, the demand for revenues for big farmer who are very cash

rich is incredibly high. They've got mega pattern expires facing them and they're in trouble.

Why choose international biotechnology, trust answer? Well, we have a lot of tools in our box.

So we are closed-ended. We can gear up. We compare dividends. So a lot of the cash that we've

been getting in from M&A transactions. We're giving back to our shareholders at a 4% of NAB

per year. We've got the best performance in our peer group over five years. It's actually our five-year

anniversary last weekend of the American and the co-lead fund managers. So we're very proud of

those numbers. Also, thank you very much for the introduction to the Trust. Great speaking

with you. Thank you, Stephen. I also create portfolio manager for the international biotechnology

Trust.