Final Results
Intl. Biotechnology Trust PLC
23 September 2004
INTERNATIONAL BIOTECHNOLOGY TRUST Plc
The Board of International Biotechnology Trust Plc ('IBT') today announces its
unaudited Annual Results for the twelve months ended 31 August 2004.
Summary
• Net asset value per share rose by 2.3% to 115.4p
• NASDAQ Biotech Index fell 17.9% (sterling adjusted), Merrill Lynch
Small Cap Biotech Index fell by 14.9% (sterling adjusted) and the
Bloomberg UK Biotech Index rose by 6.7%
• Return on IBT's quoted portfolio of 19.3% (monthly time-weighted return
basis assuming mid-month cash flows) and 17.1% (unweighted basis
ignoring timing of transactions)
• Unquoted writedowns reduced net assets by £5.4m
• Eyetech, CancerVax, and Auxilium completed initial public offerings
(IPOs)
• Three new investments in quoted companies; sales of six quoted
companies
• Three new unquoted investments; follow-on investments in Auxilium and
Genosis
• Partial sale of Eyetech realising £5.9m
• Total net assets at 31 August 2004: £55.2m (31 August 2003: £53.9m)
Andrew Barker, Chairman, commented:
'Three of our unquoted companies have completed initial public offerings (IPOs)
in the U.S. The IPO and subsequent performance of Eyetech have been a key driver
of our own performance during the year under review, adding approximately £10m
to net assets after currency changes.
The IBT portfolio gives shareholders an exposure to both quoted and unquoted
companies within a volatile sector where fundamentals remain strong. We remain
optimistic about the prospects for the IBT portfolio although, as usual, a long
term investment view is recommended, given the volatility of the sector and the
risk associated with investments in biotech companies.'
For further information, please contact:
International Biotechnology Trust plc
Andrew Barker, Chairman 020 7658 3206
Schroder Ventures Life Sciences
Kate Bingham / Josee Gray 020 7421 7070
Lansons Communications
Henrietta Guthrie / Amy Fisher 020 7490 8828
Website: www.internationalbiotrust.com
CHAIRMAN'S STATEMENT
PERFORMANCE
I am pleased to report an increase in the net asset value (NAV) per share of
International Biotechnology Trust plc (IBT) of 2.3% from 112.8p to 115.4p, and
an 11.8% rise in the share price from 85.0p to 95.0p during the twelve months to
31 August 2004. This increase builds on the rise of 14.5% in NAV per share
during the year to 31 August 2003, and compares to a fall in the NASDAQ Biotech
Index (NBI) over the same period of 17.9%, a fall in the Merrill Lynch Small Cap
Biotech Index (MLSCI) of 14.9% and a 6.7% increase in the Bloomberg UK
Biotechnology Index, all in sterling terms. Over the twelve months under review
the discount of the share price to NAV reduced from 24.6% to 17.6% and as at 21
September 2004, the date of the most recently published NAV, the discount was
20%.
Three of our unquoted companies have completed initial public offerings (IPOs)
in the U.S. The IPO and subsequent performance of Eyetech have been a key driver
of our own performance during the year under review, adding approximately £10m
to net assets after currency changes. This provides an illustration of how a
concentrated portfolio strategy may generate value. As at 21 September 2004, the
investment in Eyetech comprised 10.8% of NAV. The holding is valued at a 25%
discount to the closing daily share price to reflect the fact that, from time to
time, through the board seat that one of the Schroder Ventures Life Sciences
(SVLS) team holds, there will be constraints on the ability to realise the value
of this holding.
The performance of IBT's quoted portfolio calculated on a time-weighted return
basis (assuming mid-month cash flows) showed a rise of 19.3%. On an unweighted
basis (ignoring the timing of transactions) the return was 17.1%. These
calculations include the changes in the discounted valuations of the holdings in
Auxilium, CancerVax and Eyetech, since their respective IPOs. This performance
compares with a fall in the MLSCI of 14.9% in sterling terms.
During the period under review the net effect of the total change in the
Director's valuation of unquoted companies was a reduction in net assets of
£5.4m. At 31 August 2004 22% of net assets were invested in unquoted companies.
This has fallen from 42% at 31 August 2003, largely due to successful IPOs, and
the writedowns of some of our unquoted holdings. As a guideline up to
approximately 40% of net assets will be invested in unquoted companies, although
this figure may be substantially lower as investments mature and will vary
according to when individual investment opportunities arise.
The U.S. dollar weakened considerably against sterling towards the end of 2003
and currency changes reduced the net asset value by approximately £6m during the
year under review. Whilst the situation is kept under regular review, it remains
our current policy not to hedge the currency exposure of the portfolio.
At 31 August 2004 the level of cash, money market instruments and other net
current assets levels was £11.9m, or 21% of net assets. This is higher than
usual, largely due to proceeds from the sale of Eyetech shares which raised
£5.9m in total during the year under review.
VALUATIONS
In the last annual report we outlined the basis of valuation of investments. We
continue to use this policy in the interim report, which is to apply the
Association of Investment Trust Companies' Statement of Recommended Practice ('
SORP') and the British Venture Capital Association ('BVCA') Valuation Guidelines
to the NAV released weekly. Valuations are considered on an ongoing basis and
information that impacts the valuation of a private company or the discount
applied to an investment in a public company is incorporated into the valuation
and, if there is a material impact on NAV, then a new NAV is released to the
market. The discounts on quoted investments range in size between 10% and 25%
and the effect of the discounts was to reduce NAV by £3.2m at 31 August 2004.
NEW DIRECTOR
As indicated in the Interim Report, Dr David Clough, aged 57, was appointed as a
Director of the Company on 2 March 2004 and he offers himself for election at
the forthcoming Annual General Meeting in accordance with the Articles of
Association. He was Director of Research at Roche in the UK between 1986 and
1999. He was responsible for over 300 staff with departments covering chemistry,
biology and preclinical development. During this time, two products discovered
by staff in the research group under Dr Clough progressed to the market place,
namely Inhibace and Invirase. Dr Clough has received several national and
international awards for his role in the discovery of Invirase, including the UK
and International Prix Galien, the PhRMA Discoverers Award and the UK Millennium
Product Award.
Dr Clough is currently on the Board of Fulcrum Pharma PLC and on the Scientific
Advisory Boards of Anadys and Kinetique. He holds a PhD from Glasgow University.
CORPORATE GOVERNANCE
During 2003 the FSA adopted the Combined Code as part of the Listing Rules of
the Stock Exchange and the Association of Investment Trust Companies produced
its own Code of Corporate Governance(c) for its member companies - of which
IBT is one. IBT is an unusual investment trust, investing as it does in the
quoted and unquoted securities of young companies involved in the biotechnology
business; they tend to be highly risky but potentially very rewarding
investments. The governance of such an investment trust will, therefore of
necessity, be somewhat different from others and as a consequence your Board has
given careful consideration to the appropriate governance in the light of the
recommendations and principles espoused by the two codes. In the Annual Report,
we set out how we govern the Company, drawing to shareholders' attention unusual
procedures and any major divergence from the two codes.
SHARE BUY BACK
During the year ended 31 August 2004, the Directors did not purchase any shares
for cancellation and have not utilised the authority given to them at the last
Annual General Meeting. To provide maximum flexibility, a resolution to
authorise the Directors to purchase up to 14.99% of the share capital in issue
will be proposed at the forthcoming Annual General Meeting. When shares are
available in reasonable volumes and at a high discount to net assets, we shall
consider further purchases while maintaining sufficient liquidity for existing
commitments and for making new investments.
PROSPECTS
The IBT portfolio gives shareholders an exposure to both quoted and unquoted
companies within a volatile sector where fundamentals remain strong. We remain
optimistic about the prospects for the IBT portfolio although, as usual, a long
term investment view is recommended, given the volatility of the sector and the
risk associated with investments in biotech companies.
ANNUAL GENERAL MEETING
The Annual General Meeting will be held at 12.00 noon.on Friday 19 November 2004
at 31 Gresham Street, London, EC2V 7QA. The meeting will include a presentation
from SVLS, as in previous years.
Andrew Barker
Chairman
INVESTMENT ADVISERS REVIEW
MARKET REVIEW
Biotech stocks began to outperform the broader market in March 2003 following
strong earnings announcements from profitable companies. A number of companies
achieved high-profile milestones including the approval and launch of Avastin,
the first anti-angiogenesis treatment to reach the market and the survival
benefit shown in the treatment of non small cell lung cancer (NSCLC) shown by
Tarceva from portfolio company OSI Pharmaceuticals.
The NBI peaked in April 2004 as investors took profits from investments in the
sector following the rise of more than 80% in dollar terms, since the lows of
the previous year. Markets as a whole have been weaker in recent months due to
geopolitical uncertainty and fears of rising interest rates and rising oil
prices.
Over the same time frame investors have become more risk averse and have moved
into more defensive, lower beta stocks, hitting biotech as a group, and
especially the earlier stage, smaller companies. Smaller biotech companies
outperformed their larger peers during the first half of the year under review,
only to give back most of these gains after the peak in April. The MLSCI fell by
14.9% in the period under review, in comparison with a fall in the NBI of 17.9%,
all in sterling terms.
The lack of recent significant biotech newsflow has also not helped the sector,
although profitable companies have continued to report good earnings. As
mentioned in the interim report, expectations for the biotech sector were high
in early 2004 and got ahead of the capacity of some development stage companies
to deliver, making it difficult to surprise on the upside. The NBI fell more
than 25% in dollar terms between April and mid August 2004, although there has
been some recovery in prices in the last month.
During the year under review, the IPO window has opened in the U.S. and, to a
lesser extent, in Europe. Three IBT portfolio companies have completed IPOs in
the U.S.; Auxilium, CancerVax and Eyetech. At 21 September 2004, the share
prices of Eyetech and Auxilium have risen 61% and 27% respectively, from their
IPO prices, while the share price of CancerVax is trading below issue in common
with many other newly listed companies. The recent fall in the market has made
it more difficult to go public with some offerings being pulled and others being
completed at increasing discounts to initial filing ranges.
Despite this, global biotech is on course to have a good overall year for
financing in 2004. The global biotech industry has raised $14.5bn in 2004 (to 20
September 2004) from IPOs, follow-ons, venture capital and other financing
compared with 2003 when a total of $19.6bn was raised (Source:BioCentury
Financial Center). A number of IBT's quoted portfolio companies have raised
money during the year under review including Adolor, Alexion, AnorMED, Aradigm,
Auxilium, CancerVax, Encysive, Epimmune, Eyetech, Inflazyme, Inspire, Kosan,
Nektar, Phase Forward, Progenics, OSI and XOMA.
OUTLOOK
Although sector fundamentals remain strong and companies are relatively well
funded following the recent robust financing climate, it may be difficult for
biotech, especially smaller companies, to outperform unless the overall market
appetite for risk increases and strength continues to return to the broader
market. That said the NBI has begun to recover from the lows of mid August this
year.
Key milestones are approaching for a number of IBT's portfolio companies. These
include the outcome of regulatory review in the U.S. of Macugen for wet
age-related macular degeneration (AMD) from Eyetech, of Tarceva from OSI for
advanced NSCLC, of Entereg from Adolor for the management of post-operative
ileus and of Shire's phosphate binder FOSRENOL. In addition Nektar's version of
inhaled insulin has been submitted for regulatory review in the European Union.
Cambridge Antibody Technology expects to report preliminary data from a Phase II
/III glaucoma trial in Q4 2004, Encysive expects to release data from a pivotal
pulmonary arterial hypertension study in Q1 2005 and Inspire expects to report
results of a pivotal dry eye trial, and, if positive, submit an amendment to its
U.S. regulatory filing, by mid-2005.
Data from Progenics' Phase III trial for the relief of opioid-induced
constipation in patients with advanced medical illness should be released in
2005. Data is expected to be released by Atherogenics from a pivotal Phase III
trial for the treatment of atherosclerosis in 2005, although further Phase IIb
data is expected later this year which may shed more light on the potential
clinical utility of the compound.
PORTFOLIO NEWS
In February 2004 Eyetech Pharmaceuticals completed an IPO at a share price of
$21 raising net proceeds of $153m. During the period under review IBT sold a
portion of the Eyetech holding realising £5.9m (cost £1.3m). At 31 August 2004
IBT owned 511,910 shares, valued at £7.4m (cost £2.1m), after a liquidity
discount of 25% to the closing share price. The complete new drug application
(NDA) for Macugen as a treatment for wet AMD, has been accepted by the U.S. Food
and Drug Administration (FDA).
Auxilium Pharmaceuticals completed an IPO in July 2004, raising net proceeds of
approximately $37m, at a price of $7.50 per share. Auxilium has received U.S.
regulatory approval to market Testim, a testosterone replacement therapy for the
treatment of hypogonadism. Testim was launched in 2003 in the U.S. through the
company's own specialty sales force and Auxilium has received regulatory
approval to market Testim in the UK and scientific approval for Testim in 14
additional European countries. IBT's holding was valued at £0.5m (cost £0.8m) at
31 August 2004 after a liquidity discount of 25% to the closing share price.
CancerVax completed an IPO at a price of $12 per share in November 2003, raising
net proceeds of approximately $65m. IBT's holding was valued at £1.3m at 31
August 2004 (cost £2.5m) after a discount of 25% to the closing share price. The
company's lead product candidate, Canvaxin, for the treatment of patients with
melanoma, is currently being studied in two international Phase III trials. In
August 2004 CancerVax announced that it was on track to complete enrolment in
the Phase III trial in the treatment of patients with Stage III melanoma by the
end of September 2004 and in the treatment of patients with Stage IV melanoma in
2006.
In April 2004 results from a Phase III trial of OSI's Tarceva for the treatment
of patients with advanced NSCLC showed a 42% improvement in median survival and
an improvement in one-year survival of 45%. On the day of the announcement the
share price of the company more than doubled. These results make Tarceva the
first and only targeted therapy to demonstrate an improvement in survival for
NSCLC patients. The submission of the NDA for Tarceva has been completed and the
company projects a possible approval in the U.S. in the first quarter of 2005
assuming a full six-month review by the FDA. The company's international
partner, Roche, has filed a marketing application for Tarceva with the European
Health Authorities.
Genosis has received U.S. and European regulatory clearance for the sale of its
diagnostic tests for screening male and female infertility. These are designed
to be sold over the counter for couples trying to conceive or deferring
conception and will provide couples with the opportunity to monitor their
fertility and improve chances of successful conception. The company is in
negotiations with a major UK distributor regarding a product launch in the UK
for which additional funds will be required.
Indevus Pharmaceuticals announced the regulatory approval of SANCTURA in the
U.S. for the treatment of overactive bladder and the drug was launched in August
2004. This followed the announcement of a co-promotion and licensing agreement
between Indevus and PLIVA for commercialisation in the U.S.
In October 2003 the FDA approved Forest Labs' Namenda, for the treatment of
moderate to severe Alzheimer's disease and Namenda was launched in the U.S. in
January 2004. However, data released from a Phase III trial for severe
Alzheimer's disease with another of Forest's compounds, Neramexane, showed the
primary endpoint of the trial was not met.
Nektar Therapeutics developed and provides the inhalers and the powdered insulin
for a version of inhaled insulin called Exubera, in development for patients
with diabetes, through a collaboration between Pfizer and Aventis. The European
Medicines Evaluation Agency has accepted the filing of a marketing authorisation
application for Exubera and Nektar's partners have been working with the FDA to
determine the appropriate timing for submission of the Exubera NDA in the U.S.
AMD3100 is in development at AnorMED, and blocks a specific cellular receptor
triggering the movement of stem cells out of the bone marrow and into the
circulating blood. Initial Phase II data has shown that AMD3100, in combination
with the standard agent, increases the number of stem cells available for
collection and transplant. AnorMED plans to complete the Phase II trials in
2004, and to start a Phase III program in 2005.
Epimmune uses multiple epitopes to specifically activate the body's immune
system and is conducting two Phase I/II clinical trials of its cancer vaccine
candidate in NSCLC and colorectal cancer patients. Preliminary data from 10
patients in these ongoing trials was released in June 2004 indicating that the
vaccine was safe and well tolerated, and suggested that the multi-epitope
approach could induce an immune response in patients when delivered
appropriately.
Trine Pharmaceuticals (formerly Essential Therapeutics) is focused on the
development of novel pharmaceuticals for the treatment of life-threatening
diseases. The company has in-licensed a clinical stage compound and expects to
start a Phase IIa trial in diarrhoea-predominant irritable bowel syndrome
patients later in 2004. Negotiations are underway regarding other in-licensing
opportunities.
Sunesis announced collaborations with Merck, to discover novel oral drugs for
the treatment of viral infections, and with Biogen Idec to discover and develop
small molecule cancer therapeutics targeting kinases. In June 2004 the company
started the first of two planned Phase I clinical studies of a cell cycle
modulator that kills proliferating cancer cells by inducing programmed cell
death.
In December 2003, Pfizer announced that it had entered into an agreement to
acquire IBT portfolio company Esperion, for $1.3bn and in May 2004 Celltech was
acquired by UCB valuing the company at £1.5bn.
In June 2004 QLT and Atrix Laboratories signed an agreement for QLT to acquire
Atrix for approximately $855m. The new company will focus on ocular disease,
oncology, dermatology and urology.
Galen Holdings changed its name to Warner Chilcott PLC in June 2004 to emphasise
its exclusive focus on the U.S. market, following the disposal of the company's
UK-based pharmaceuticals business.
Affibody is an affinity ligand and biotherapy company that uses protein
engineering technologies to create novel small, robust protein ligands
(affibodies) that mimic antibodies. Recent data have confirmed that labelled
affibodies can be used for medical imaging to visualise tumors in the diagnosis
of cancer. Affibodies are also being investigated as potential therapeutics for
cancer in preclinical models.
During the year under review the holding in Axxima Pharmaceuticals was written
down by £0.9m to zero due to lack of progress in the company's programs. In June
2004 Axxima raised 10m Euro in an internal financing round, in which IBT did not
participate.
The valuation of the holding in Aderis was written down by £0.7m to £2.1m in
June 2004. Following the departure of the CEO earlier this year, the search for
a replacement continues. Aderis is currently exploring strategic alternatives
which may include one or more M&A transactions. The two members of SVLS who were
on the Board of the company resigned in September 2004 in order to facilitate a
more efficient M&A process. The company filed to go public in 2003 but later
withdrew its registration statement due to prevailing market conditions and
valuation. The company's programs continue to make progress and the company had
more than a year of cash remaining at the end of August 2004. In June 2004,
partner Schwarz Pharma, presented pivotal Phase III data on rotigotine, the
Parkinson Patch, and expects to submit applications for market approval in the
third quarter of 2004. A Phase III program for rotigotine in restless legs
syndrome is scheduled to start in the spring of 2005. A pivotal Phase III trial
with binodenoson for cardiac pharmacologic stress testing is underway with
partner King Pharmaceuticals. Fujisawa has completed Phase II trials for the
acute care use of selodenoson in atrial fibrillation, however, in light of a
pending merger with Yamanouchi, Fujisawa has decided not to develop the
intravenous form further and has returned all rights to Aderis.
In August 2004 the valuation of IBT's holding in KuDOS was reduced by £0.7m to
£0.7m to reflect the current fund raising climate. Development timelines have
slipped somewhat and the company has less than a year of cash remaining as at
end August 2004 and needs to raise funds. KuDOS currently has two drugs in
clinical trials: Patrin, which is being developed for the treatment of cancers
resistant to alkylating agents, and AQ4N, which targets hypoxic regions of
tumours. In 2003 Novacea licensed the North American rights to develop and
commercialise AQ4N. Research continues on other DNA repair inhibitors, with a
candidate for PARP inhibition in preclinical assessment.
During the year under review the valuation of the holding in Micromet was
reduced by a total of £3.1m to £0.5m. This was a consequence of a continuing
contract dispute arising in connection with a collaboration agreement for the
development of the company's anti-cancer antibody MT201 and consequent shortfall
in 2004 income. The company currently has less than a year of cash and the
valuation reflects the current fundraising climate. Phase II studies are ongoing
with MT201 in prostate and breast cancer and proof of concept data is expected
in 2005 although recruitment for these trials has been slow. A Phase I safety
study for MT103 has restarted using a revised infusion protocol and preliminary
data looks encouraging to date. The company hopes to determine the optimum dose
in 2005 with clinical proof of concept in 2006.
In June 2004 Inflazyme announced that a Phase IIa asthma study had not met its
primary endpoint. The company has restructured in a move to conserve cash and
refocused on its complement inhibition and Prodaptin drug tethering
technologies. In addition to seeking partnerships the company plans to continue
to evaluate M&A and in-licensing opportunities to grow the pipeline.
Despite the approval and launch in the U.S. of XOMA's RAPTIVA for psoriasis,
XOMA shares have performed poorly during the period under review. In August 2004
the company reported disappointing results from a Phase II acne trial, following
the failure of RAPTIVA in a Phase II study in psoriatic arthritis.
In April 2004 Aradigm reported the interim analysis of the first Phase III of
the company's pulmonary insulin product. The trial met its primary safety
endpoints, however analysis showed delayed post-meal plasma glucose suppression
in type 1 diabetics. In order to investigate this, partner Novo Nordisk
announced plans to conduct a pharmacokinetic extension study with results
expected in the first half of 2005. Novo has said that it is working closely
with Aradigm to move the program forward and Aradigm is preparing to support the
start of further Phase III trials in 2005.
Progenics is developing methylnaltrexone, which is in two pivotal Phase III
trials for the treatment of opioid-induced constipation in patients with
advanced medical illness. The company anticipates the completion of enrolment in
first of these trials during the fourth quarter of 2004 and in the second in
mid-2005. This is a significant delay in comparison with the company's previous
projections.
Other portfolio company news is covered in the outlook and investment activity
sections.
PORTFOLIO SUMMARY AT 31 AUGUST 2004
IBT has investments in 36 companies - 25 quoted companies (representing 57% of
NAV) and 11 unquoted companies (comprising 22% of NAV). The remaining 21% is
made up of cash, money market instruments and other net current assets (£11.9m)
and has been boosted by proceeds from the sale of part of the Eyetech holding
which raised £5.9m in the year under review.
Members of SVLS sat on the Boards of twelve portfolio companies at the end of
the period under review - Aderis, Affibody, Archemix, CancerVax, Dynogen,
Eyetech, Genosis, KuDOS, Micromet, PowderMed, Trine and Warner Chilcott. Since
31 August 2004 the two SVLS members on the board of Aderis have resigned.
In terms of the geographical split of the portfolio, at 31 August 2004, 63% of
NAV was invested in the US, 5% in Canada, 5% in the UK/Ireland and 6% in
Continental Europe. By sub-sector, 67% of NAV was invested in
biopharmaceuticals, 4% in drug delivery, 3% in medical devices and 5% in other
areas. The remaining 21% is made up of cash, money market instruments and other
net current assets.
Analysing the investments by the stage of their most advanced product in drug
development; nine companies have a product on the market, three have filed for
regulatory approval, seven are in Phase III trials, six are in Phase II or Phase
I/II, five are in Phase I and two are at a preclinical stage. Of the remaining
four, one is a medical data management company, one has received regulatory
approval for a diagnostic device and the other two are platform technology
companies.
In terms of the cash positions of the portfolio companies, it is estimated
that at 31 August 2004, seven have two or more years of cash remaining (23%of
net assets less cash, money market instruments and other net current assets),
nineteen have more than one but less than two years of cash remaining (59% of
net assets less cash, money market instruments and other net current assets) and
ten have less than a year of cash remaining (18% of net assets less cash, money
market instruments and other net current assets).
The companies that SVLS estimate to have less than a year of cash remaining at
the end of the period under review are Aradigm, Atherogenics, Axxima, CancerVax,
Encysive, Genosis, KuDOS, Micromet, PowderMed and XOMA. Subsequent to the period
end Encysive has raised money. Within this group the unquoted companies are
Axxima, Genosis, KuDOS, Micromet and PowderMed. Axxima has been written down to
zero, only the first of three milestone-based tranches has been invested in
PowderMed, and Genosis, Micromet and KuDOS are exploring fundraising options.
The portfolio gives investors a broad spread of exposure to different stages of
clinical development across a variety of different clinical areas - cancer,
infectious disease, diabetes, central nervous system disorders, women's health,
urology, cardiovascular complications, rheumatoid arthritis, ophthalmology and
management of the side effects of opioids for pain relief.
VALUATION
At 31 August 2004 IBT's unquoted portfolio (value £11.9m) represented 22% of net
assets, down from 42% at the end of the previous financial year (value £22.7m).
As Auxilium, CancerVax and Eyetech have completed IPOs and are all quoted, the
percentage of NAV in unquoted investments has been reduced. The total carrying
value of these three investments was £6.0m at 31 August 2003. New investments
totalling £1.0m were made in Archemix, PowderMed and Dynogen. Follow-on
investments in Genosis and Micromet added £0.6m to unquoted investments during
the reporting period.
During the year under review the net effect of the total change in the
Directors' valuations of unquoted companies was a reduction in NAV for the
period of £5.4m. This represents 10% of the net assets at the start of the
reporting period.
The valuation of Micromet was written down by £3.1m in total during the period
under review (carrying value at 31 August 2003 £3.7m and cost £3.2m). At 31
August 2004 the investment was valued at £0.5m. The valuation of Aderis was
written down by £0.7m (carrying value at 31 August 2003 £3.2m and cost £3.5m).
At 31 August 2004 the investment was valued at £2.1m. The valuation of KuDOS was
written down by £0.7m (carrying value at 31 August 2003 £1.4m and cost £1.4m).
At 31 August 2004 the investment was valued at £0.7m. The holding in Axxima was
written down by £0.9m to zero (carrying value at 31 August 2003 £0.9m and cost
£1.4m).
Currency movements decreased the valuation of the unquoted portfolio by £1.1m
during the year under review.
At 31 August 2004 the holdings in Affibody, Archemix, Dynogen, Genosis,
PowderMed and Sunesis were held at cost (total value £7.8m), the investments in
Aderis, KuDOS, Micromet and Trine were written down from cost (total value
£4.1m) and the holding in Axxima was held at zero. This equates to 66% of the
unquoted portfolio held at cost and 34% written down (calculated by value). The
unquoted portfolio is now valued at 52% of original cost (excluding the costs of
ValiGen and Entigen which were written down to nil in previous years and
including the initial costs of Trine and Axxima).
Of the 25 quoted investments, six were held at a discount to their mid market
prices at 31 August 2004 due to disposal restrictions, including SVLS membership
on the Board of the company and limited liquidity - Auxilium, CancerVax,
Epimmune, Eyetech, LION Bioscience and Warner Chilcott. The discounts ranged in
size between 10% and 25% and the effect of these discounts was to reduce the NAV
by £3.2m at 31 August 2004.
INVESTMENT ACTIVITY
Unquoted Companies
In May 2004 IBT invested £0.1m out of a planned total investment of £0.5m in
UK-based company PowderMed. The company was created through a spin-out of the
powder injection DNA vaccines technology from Chiron and has acquired the rights
to the PowderJect powder mediated epidermal delivery technology which it plans
to use in the development of therapeutic DNA vaccines in the areas of chronic
viral diseases and cancer. The company's clinical and preclinical programs
target genital herpes, hepatitis B, genital warts, lung cancer and AIDS/HIV
(partnered with GlaxoSmithKline). A member of SVLS is on the board of the
company.
£0.3m has been invested in the US-based company, Archemix, out of a planned
total investment of £0.9m. Following the period end a further £0.3m of the total
has been invested (total investment £0.6m). A member of SVLS is on the board of
the company. Archemix's mission is to develop aptamers as novel synthetic
therapeutics that can be used in a wide range of disease areas. Archemix and
partner, Nuvelo, have started a Phase I trial of an anti-thrombin aptamer that
is being developed as an anticoagulant/anti-thrombotic for potential use in
coronary artery bypass graft surgery.
£0.6m has been invested in the US-based company Dynogen, out of a planned total
investment of £1.1m. Dynogen is a neuroscience-based company focused on
genitourinary (GU) and gastrointestinal (GI) disorders including overactive
bladder (OAB), irritable bowel syndrome (IBS) and sexual dysfunction. A member
of SVLS is on the board of the company. The entry of the lead compound into
Phase II trials has been delayed by manufacturing issues and is now expected to
occur in late 2004. In the meantime, additional preclinical work has provided
additional supportive data for the compound in OAB and related disorders. An IBS
program is on track to enter Phase I clinical trials in Q3 2004 as planned.
As at 31 August 2004, IBT has committed to invest a further total of £1.4m in
milestone based tranches in Archemix, Dynogen and PowderMed. This includes the
£0.3m invested in Archemix following the end of the period under review. The
commitments for Archemix and Dynogen are in dollars (total $1.9m) so the future
costs of these investments in sterling will vary with the exchange rate.
In November 2003, a further £0.1m was invested in Auxilium (total investment
£0.8m) and the guarantee for a revolving line of credit was released.
Accordingly, the contingent liability in the accounts has also been removed.
During the period under review two investments totalling £0.6m were made in the
fertility diagnostics company Genosis (total investment £1.1m).
During the period under review IBT purchased some common shares from leaving
members of Micromet management for £0.03m (total investment £3.2m).
There were no sales of unquoted companies during the year under review. The
originally unquoted companies, Auxilium, CancerVax and Eyetech have completed
IPOs and subsequently a portion of the holding in Eyetech has been sold.
Quoted Companies
In July 2004 IBT invested £0.4m in the IPO of Phase Forward, a provider of
integrated enterprise-level software products, services, and hosted solutions
for use in clinical trials. The company had sales of $62m in 2003 and has a base
of over 220 customers, comprised of pharmaceutical, biotechnology, medical
device and clinical research organizations, as well as academic institutions and
other entities engaged in clinical trials. Another SVLS-advised fund has been an
investor in Phase Forward since 1999 although SVLS no longer has a board seat on
the company.
As discussed in the Interim Report, new investments have been made in
Atherogenics (total investment £0.5m) and Kosan (total investment £0.3m).
AtheroGenics' lead compound is being evaluated in a pivotal Phase III trial, as
an oral therapy for the treatment of atherosclerosis. Data from this trial is
not expected until 2005 although another trial investigating this compound is
expected to report later this year along with data from a Phase II trial with an
oral agent for the treatment of rheumatoid arthritis.
Phase II clinical trials with Kosan's lead epothilone are ongoing for the
treatment of NSCLC and breast cancer. Kosan plans to start a Phase II trial in
prostate cancer, while terminating a phase II trial in colorectal cancer due to
unanticipated toxicities in patients who had been previously treated with
oxaliplatin. Kosan's lead geldanamycin analog, has entered into a Phase II trial
for the treatment of metastatic melanoma, and a proprietary formulation of the
compound is in a Phase I trial for the treatment of multiple myeloma.
A further investment of £0.4m (total investment £1.7m), was made in Alexion.
Enrolment has commenced in pivotal Phase III trials for patients undergoing
coronary artery bypass graft surgery and for patients experiencing acute
myocardial infarction. In addition, eculizumab has completed a pilot clinical
trial for the treatment of paroxysmal nocturnal hemoglobinuria and the FDA has
agreed to protocols for a pivotal Phase III program.
A further investment of £0.3m (total investment £0.6m) was made in Inspire
Pharmaceuticals. In June 2004 Inspire announced the initiation of a Phase III
trial of diquafosol for the treatment of dry eye following a meeting with the
FDA to clarify requirements for approval which indicated that an additional
clinical study was required. The company expects to report results and, if
positive, submit an amendment to the NDA by mid-2005.
The holdings in Celltech, Crucell, Esperion, Novuspharma, Sirna Therapeutics and
Targeted Genetics were sold in their entirety. Part of the holding in Eyetech
was sold during the period under review, raising proceeds of £5.9m.
Ten Largest Quoted Investments at 31 August 2004
Investment Carrying % of Country Business activity
value Shareholders'
£'000 Funds
1 Eyetech 7,410 13.44 USA Eyetech specialises in the development and
Pharmaceuticals commercialisation of novel therapeutics to
treat diseases of the eye. The company's most
advanced product candidate is Macugen, which is
being developed for the treatment of the wet
form of age-related macular degeneration and
diabetic macular edema.
2 OSI Pharmaceuticals 3,727 6.76 USA OSI Pharmaceuticals is focused on the
discovery, development, and commercialisation
of high-quality, next-generation oncology
products that both extend life and improve the
quality of life for cancer patients worldwide.
3 Encysive 2,919 5.29 USA Encysive is focused on the discovery,
Pharmaceuticals development and commercialisation of small
molecules. Argatroban, Encysive's first
FDA-approved product, is marketed by
GlaxoSmithKline for heparin-induced
thrombocytopenia.
4 AnorMED 1,995 3.62 Canada AnorMED is a chemistry-based biopharmaceutical
company focused on the discovery, development
and commercialisation of new therapeutic
products in the areas of haematology, HIV and
oncology.
5 Atrix Laboratories 1,955 3.54 USA Atrix Labs is an emerging speciality
pharmaceutical company focused on advanced drug
delivery. With sustained release and topical
technologies, Atrix is developing a portfolio
of proprietary products, including oncology and
dermatology products.
6 Nektar Therapeutics 1,416 2.57 USA Nektar's drug delivery capabilities are
designed to enable the company's partners to
solve drug development challenges, from
development of new molecular entities to life
cycle management of established products.
7 Alexion 1,302 2.36 USA Alexion is engaged in the discovery and
Pharmaceuticals development of therapeutic products aimed at
treating patients with a wide array of severe
disease states, including cardiovascular and
autoimmune disorders, inflammation and cancer.
8 CancerVax 1,265 2.29 USA CancerVax is focused on the research,
development and commercialisation of novel
biological products for the treatment and
control of cancer. The company's lead product
candidate, Canvaxin, is one of a new class of
products being developed in the area of
specific active immunotherapy.
9 Indevus 1,031 1.87 USA Indevus is engaged in the development and
Pharmaceuticals commercialisation of a portfolio of product
candidates. SANCTURA, marketed in the US for
overactive bladder, is the company's most
advanced product.
10 Shire 916 1.66 UK Shire is a global specialty pharmaceutical
Pharmaceuticals company with a strategic focus on meeting the
needs of the specialist physician focusing in
the areas of central nervous system,
gastrointestinal, and renal diseases.
Total 23,936 43.40
Unquoted Investments at 31 August 2004
Investment Cost Carrying % of Business activity and valuation basis
£'000 value Shareholders'
£'000 Funds
1 Affibody 2,687 2,960 5.37 The company is a leader in the field of
(Sweden) combinatorial protein engineering and is using
this technology to create a new generation of
antibodies called affibodies: small, novel,
robust ligands which can be engineered to bind
to any desired target protein. These have
potential as therapeutics and in medical
imaging. The valuation basis is cost in local
currency.
2 Sunesis 3,312 2,779 5.04 Sunesis is a biopharmaceutical company focused
Pharmaceuticals on discovering and developing small molecule
(USA) medicines for oncology and inflammatory
disease. The company has established a pipeline
using its proprietary fragment-based drug
discovery engine, in-licensing a promising
compound within its therapeutic areas of focus
and forming partnerships for the development of
certain Sunesis-discovered leads. The valuation
basis is cost in local currency.
3 Aderis 3,519 2,085 3.78 Aderis is engaged in small molecule drug
Pharmaceuticals development to treat central nervous system,
(USA) cardiovascular and renal disorders. Aderis has
a strategic alliance with Schwarz Pharma, for
the development of rotigotine CDS, a
proprietary dopamine agonist formulated
transdermal patch, which has completed Phase
III trials for Parkinson's disease. The
valuation has been written down to our best
estimate of fair market value.
4 Genosis 1,116 1,002 1.82 Genosis has received U.S. and European
(USA) regulatory clearance for the sale of its
diagnostic tests for screening male and female
infertility. These are designed to be sold over
the counter for couples trying to conceive or
deferring conception and will provide couples
with the opportunity to monitor their fertility
and improve chances of successful conception.
The valuation basis is cost in local currency.
5 Trine 5,279 834 1.51 Trine is a drug development company that
Pharmaceuticals develops and commercialises pharmaceutical
(USA) products in the areas of renal,
gastrointestinal and metabolic diseases. Trine
in-licenses development stage compounds with
high potential as drug candidates. The
valuation has been written down to our best
estimate of fair market value.
6 KuDOS 1,400 698 1.27 KuDOS is focused in the discovery and
Pharmaceuticals development of drugs based upon the science of
(UK) DNA damage sensing, signalling and repair to
address unmet medical needs in cancer
treatment. The company develops small molecule
drugs that selectively inhibit the repair
process in cancer cells thus facilitating their
destruction and improving cancer management.
The valuation has been written down to our best
estimate of fair market value.
7 Dynogen 639 650 1.18 Dynogen is building a pipeline of drugs for
Pharmaceuticals genitourinary (GU) and gastrointestinal (GI)
(USA) disorders. The company is utilising its
knowledge of the nexus between neurology and GU
/GI disorders, as well as its predictive in
vitro and in vivo pharmacology platforms to
build a pipeline of drug candidates. The
valuation basis is cost in local currency.
Unquoted Investments at 31 August 2004 . .. continued
Investment Cost Carrying % of Business activity and valuation basis
£'000 value Shareholders'
£'000 Funds
8 Micromet 3,152 449 0.81 Micromet is building a pipeline of innovative drug
(Germany) candidates for the treatment of cancer,
inflammation and autoimmune disease. The company
has established a drug development platform based
on its BiTE technology (Bispecific T cell
engagers), a drug format that leverages the
outstanding cytotoxic potential of T cells. The
valuation has been written down to our best
estimate of fair market value.
9 Archemix (USA) 308 313 0.57 Archemix is developing therapeutic products based
on nucleic acid aptamers, novel synthetic
oligonucleotides that retain 3D structure and
specifically recognise and bind to various
targets. Aptamers have potential therapeutic
applications in a wide range of diseases. The
valuation basis is cost in local currency.
10 PowderMed (UK) 144 144 0.26 PowderMed is focused on the development of
therapeutic DNA vaccines and was created through a
spin-out of the powder injection DNA Vaccines
technology from Chiron Vaccines, a business unit
of Chiron Corporation. The company has acquired
the rights to the PowderJect powder mediated
epidermal delivery technology which it plans to
use, in the first instance, in the development of
therapeutic DNA vaccines in the areas of chronic
viral diseases and cancer. The valuation basis is
cost.
12 Axxima 1,395 - - Axxima is a small molecule drug discovery company.
Pharmaceuticals It focuses on protein kinases as drug targets,
(Germany) based upon a core understanding of signal
transduction pathways. The valuation has been
written down to zero.
Total 22,951 11,914 21.61
Note on Merrill Lynch Small Cap Biotech Index (MLSCI)
The MLSCI represents stocks with market caps under US$1 billion. The Merrill
Lynch published report (BIO-STATS) as at 2 September 2004 states the movement in
the index in U.S. $ terms, for the period under review, to be -3.2%. The
movement in £ terms has been calculated using the prevailing exchange rates at
the start and end of the reporting period, sourced from Factset and Bloomberg.
The data underlying the MLSCI changes regularly in line with changes in the
index constituents, price adjustments and corporate actions. The historic data
is then retrospectively adjusted. As a result the performance for the reporting
period, if calculated at a future date, is likely to be different from the
previously published number.
International Biotechnology Trust plc
Unaudited Preliminary Results
Unaudited Statement of Total Return (incorporating the Revenue Account)
Group Company
For the year ended 31 August 2004 For the year ended 31 August 2003
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments - 2,641 2,641 - 7,613 7,613
Exchange (losses)/gains on
currency balances - (226) (226) - 53 53
Income 204 - 204 112 - 112
Management fees (788) - (788) (638) - (638)
Administrative
expenses (608) - (608) (488) - (488)
Net (deficit)/return on
ordinary activities before
taxation (1,192) 2,415 1,223 (1,014) 7,666 6,652
Tax on ordinary
activities - - - - - -
Net (deficit)/return on
ordinary activities after
taxation (1,192) 2,415 1,223 (1,014) 7,666 6,652
Transfer (from)/to reserves (1,192) 2,415 1,223 (1,014) 7,666 6,652
(Deficit)/surplus per share (2.49)p 5.05p 2.56p (2.09)p 15.82p 13.73p
The revenue column of this statement is the profit and loss account of the
Group.
(Company for the year ended 31 August 2003).
All revenue and capital items in the above statement derive from continuing
operations.
International Biotechnology Trust plc
Unaudited Balance Sheets as at 31 August
Group Company 2003
2004 2004
£'000 £'000 £'000
Fixed assets
Investments 43,242 42,211 49,911
Investment in subsidiary _ _ _
undertaking
Current assets
Debtors 1,935 3,035 73
Investments 6,018 6,018 2,742
Cash at bank 4,337 4,337 1,615
12,290 13,390 4,430
Creditors: amounts falling
due within one year 378 378 410
Net current assets 11,912 13,012 4,020
Net assets 54,154 55,223 53,931
Capital and reserves
Called up share capital 11,954 11,954 11,954
Capital redemption reserve 11,043 11,043 11,043
Share purchase reserve 66,467 66,467 66,467
Capital reserve (24,097) (24,028) (26,512)
Revenue reserve (10,213) (10,213) (9,021)
Equity shareholders' funds 55,154 55,223 53,931
Net asset value per share 115.35p 112.79p
International Biotechnology Trust plc
Unaudited Cash Flow Statement
Group Company
For the year ended For the year ended
31 August 2004 31 August 2003
£'000 £'000
Operating activities
Income 25 56
Management fees paid (785) (617)
Other cash payments (657) (537)
Net cash outflow from operating
activities (1,417) (1,098)
Servicing of finance
Interest paid _ _
Cash outflow from servicing of finance _ _
Taxation
UK income tax recovered _ _
Tax recovered _ _
Capital expenditure and financial
Investment
Purchase of investments (3,776) (7,838)
Disposal of investments 11,241 8,994
Net cash inflow from capital expenditure and
financial investment 7,465 1,156
Net cash inflow before management of liquid
resources and financing 6,048 58
Management of liquid resources (3,100) (793)
Financing
Repurchase of shares for cancellation _ (615)
Net cash outflow from financing _ (615)
Net cash inflow/(outflow) 2,948 (1,350)
Notes:
1. Audit status
These accounts consolidate the accounts of the Company 'International
Biotechnology Trust plc and its wholly-owned subsidiary, IBT 2004 Limited. The
subsidiary was incorporated on 8 December 2003 and commenced operations during
the period.
The financial information set out in the announcement does not constitute the
Company's statutory accounts for the year ended 31 August 2004 or 31 August
2003. The financial information for the year ended 31 August 2003 is derived
from the statutory accounts for that year which have been delivered to the
Registrar of Companies. The auditors reported on those accounts; their report
was unqualified and did not contain a statement under section 237(2) or (3) of
the Companies Act 1985. The statutory accounts for the year ended 31 August 2004
will be finalised on the basis of the financial information presented by the
Directors in this preliminary announcement and will be delivered to the
Registrar of Companies following the Company's Annual General Meeting.
This announcement is prepared on the basis of the accounting policies set out in
the annual financial statements.
2. As permitted by Section 230 (4) of the Companies Act 1985, the
Company has not presented its own revenue account. The net revenue deficit after
taxation for the year of the Company, dealt within the accounts of the Group was
£1,192,000.
3. Transactions in foreign currency, whether of a revenue or capital
nature, are translated into sterling at the rates of exchange ruling on the
dates of such transactions. Foreign currency assets and liabilities at the
balance sheet date are translated into sterling at the rates of exchange ruling
on that date. Exchange gains or losses on fixed asset investments are included
within realised or unrealised gains or losses on investments. Other exchange
movements are shown separately in the Group Statement of Total Return.
4. The net asset value shown as at 31 August 2004 of 115.35p relates to
group assets of £55,154,000 and on 47,815,467 shares in issue.
5. Annual General Meeting
The Annual General Meeting of International Biotechnology Trust plc will be held
at 12.00 noon on Friday 19 November 2004 at 31 Gresham Street, London, EC2V 7QA.
6. Annual Report and Accounts
The Annual Report and Accounts will be mailed to registered shareholders at
their registered addresses in October 2004 and from the date of release copies
of the Annual Report will be made available to the public at the Company's
registered office, 31 Gresham Street, London EC2V 7QA.
This information is provided by RNS
The company news service from the London Stock Exchange
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