Performance Review 2006
The fund was managed during that time by other fund managers, hence no comment is made.
Performance Review 2007
The fund was managed during that time by other fund managers, hence no comment is made.
Performance Review 2008
Irene Püttner: "Although 2008 was fundamentally a difficult year for the healthcare sector, the biotechnology industry substantially outperformed the broader equity markets. We think that the main reason for this relative resilience towards an economic slowdown is the defensive nature of the biotech business. The large cap Biotech companies generate positive cash flow, have strong cash positions and little debt. During the downturn, the fund benefited from its largest holdings in Amgen, Gilead, Celgene and Genentech, a non-benchmark holding, which received a takeover offer from Roche. Despite large caps providing protection from substantial declines, the top absolute performers including Osiris, Myriad, Isis and Vertex were in the small and mid cap group."
Performance Review 2009
Irene Püttner: "With the election of US President Obama in 2008, the discussions around a US healthcare reform heated up creating insecurity in the market about the potential impact on the sector. The fund was favorably positioned by overweighting the mid cap names, which started to outperform at the beginning of March. Stock selection was essential as product success or failure determined performance: the fund benefited from the unprecedented clinical data of the lupus drug Benlysta, developed by Human Genome Sciences and Glaxo. In contrast, Dendreon was a major performance detractor as we missed the share price jump when the stock more than doubled based on surprising Phase III data of its immunodrug for treating prostate cancer. During the last four months of the year the fund diverged significantly from the benchmark, due to an outperformance of generic stocks."
Performance Review 2010
Irene Püttner: "Main drivers for the Biotech industry were again successful clinical study results, marketing approvals for new products and alliances and acquisitions. The fund favored mid cap names versus small and large cap stocks. Alexion and Biomarin, both focusing on rare or orphan diseases, reported successful clinical data. Together with the overweight holdings, these stocks belonged to the best performance contributors. The fund was also profiting from the acquisitions of OSI Pharmaceuticals, Zymogenetics and from the offer of Sanofi-Aventis for Genzyme. An underweight position of Dendreon during the first half year was the top performance detractor: Dendreon gained FDA approval and a surprisingly high price level for its immunotherapy Provenge for treating prostate cancer, resulting in a significant share price jump."
Performance 2011 - Year-to-Date
Irene Püttner: "At the onset of 2011 we thought that this year should be transformational for a couple of companies with breakthrough medicines either gaining marketing authorization or reporting successful study data. We assumed that clinical success would bring back positive momentum to the biotech group. Indeed, after three months with flat performance, product approvals and favorable clinical data sparked renewed investor interest in the sector. The FDA approved Human Genome Sciences´ lupus drug Benlysta, and Vertex´s medication to treat Hepatitis C, Incivek. Main contributors to performance were Ariad, Regeneron, Vertex Pharmaceuticals, Medivation and Progenics. Pharmasset was the top performer in absolute terms, but an underweight versus the benchmark detracted from relative performance. After the run up we expect some profit taking, but see enough clinical events in the second half of 2011 to act as catalysts."
Performance since 2006
Irene Püttner (since February 2008): "During the past five years, Biotechnology suffered from slowing growth of the large cap companies, from the expectation of biosimilar products entering the market and a difficult regulatory environment that resulted in a multiple contraction with valuations reaching a historical low. New growth drivers were needed to re-accelerate top-line growth: A number of recently approved products, including Amgen´s Prolia or Dendreon´s Provenge should ensure growth acceleration. Reasons for the underperformance in the past years are due to stock selection and outperformance of generic names, which are contained in the Nasdaq Biotechnology Index, but not in the fund."
Investment Process and Strategy – How does the fund manager invest?
Irene Püttner: "The fund is actively managed and is invested globally into equities of Biotechnology companies, with a bias towards US equities. The fund invests in stocks of companies with innovative, patent protected products and does not invest into stocks of generics manufacturers. Investment decisions are based on thorough scientific due diligence and fundamental research.
Out of an investment universe of around 200 stocks, shares of companies are identified, which develop product candidates with high unmet medical need, differentiating mechanisms of action and an attractive commercial potential. Companies with these qualities are further analyzed according to pipeline catalysts, top-line growth, the financial situation and capabilities, and valuation. On average, this analysis results in around 40 to 50 portfolio holdings. The pipeline progress and the success or failure of the clinical validation of products and the risks connected with this process are different for each product and each company. Therefore, after each event, the investment is reanalyzed and the upside potential to valuation and the risks newly assessed.
The fund is diversified across therapeutic and diagnostic companies that develop innovative products in various stages of development and that provide superior benefits for patients. The investment focus is on large- and mid-cap companies with favorable earnings potential and upcoming catalysts in their pipelines to provide future growth."
Investment Outlook
Irene Püttner: "Biotechnology companies are less sensitive towards economic cycles, because the demand and growth are driven by patients and products. Several new potential blockbusters and continued pipeline progress position Biotechnology for sustainable growth outpacing other segments within healthcare. The new product approvals of Vertex´s Hepatitis C treatment, Human Genome Sciences´ lupus drug, Dendreon´s immunotherapy against prostate cancer and Amgen´s Prolia/Xgeva will be among the top-line growth drivers. In addition, we expect clinical and regulatory news flow in the small and mid cap space also during the second half of 2011 and 2012, which should help the industry to maintain the positive momentum."
