Interim Results
Intl. Biotechnology Trust PLC
29 April 2005
For release 29 April 2005
INTERNATIONAL BIOTECHNOLOGY TRUST PLC
The Board of International Biotechnology Trust Plc (IBT) today announces its
unaudited Interim Results for the six months ended 28 February 2005.
Summary
• Net asset value per share increased by 4.9% to 121.0p
• Total net assets at 28 February 2005: £57.9m (31 August 2004: £55.2m)
• NASDAQ Biotech Index fell by 6.3% (sterling adjusted), Merrill Lynch Small
Cap Biotech Index fell by 1.8% (sterling adjusted) and the Bloomberg UK
Biotech Index rose by 15.7%
• Return on IBT's quoted portfolio of 11.3% (monthly time-weighted return basis
assuming mid-month cash flows) and 10.1% (unweighted basis ignoring timing of
transactions)
• Completed sale of Eyetech - total capital gain of £13.8m equivalent to a five
times multiple on cash invested in sterling terms
• Net write-ups of unquoted companies increased net assets by £0.1m
• Two new quoted company investments - Barrier Therapeutics and Oscient
Pharmaceuticals
• Follow-on investments in four unquoted companies
Andrew Barker, Chairman of IBT, commented: 'The IBT portfolio gives shareholders
an exposure to both quoted and unquoted companies within the biotechnology
sector where share prices are volatile and the fundamentals remain strong. We
remain optimistic about the prospects for the IBT portfolio although I stress as
I have in the past that a long term investment view is recommended.'
For further information, please contact:
International Biotechnology Trust plc
Andrew Barker, Chairman 020 7658 3206
SV Life Sciences Managers LLP
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 4.9% from 115.4p to 121.0p during
the six months to 28 February 2005.
Over the same period the share price of IBT rose 10.0%, the NASDAQ Biotech Index
(NBI) fell by 6.3%, the Merrill Lynch Small Cap Biotech Index (MLSCI) fell by
1.8% and the Bloomberg UK Biotechnology Index (BUKBI), rose by 15.7%, all in
sterling terms.
Over the six months under review the discount of the share price to NAV fell
from 17.6% to 13.6% and at 26 April 2005, the date of the most recently
published NAV, the discount was 11.5%.
Net assets rose by £2.7m during the reporting period. The major contributors to
the rise were Eyetech Pharmaceuticals (+£3.9m), Progenics Pharmaceuticals
(+£1.0m) and Encysive Pharmaceuticals (+£0.9m). The larger negative impacts were
a writedown of the holding in Affibody (-£1.4m) and a fall in the share price of
Inspire Pharmaceuticals (-£0.9m). These movements include the impact of currency
changes which reduced net assets by a total of £2.6m during the six months under
review.
The performance of IBT's quoted portfolio calculated on a time-weighted return
basis (assuming mid-month cash flows) showed an increase of 11.3%. On an
unweighted basis (ignoring the timing of transactions) the return was 10.1%.
Excluding the returns from the investment in Eyetech, the time-weighted return
was 0.7% and the unweighted return was -0.6%.
During the reporting period the net effect of the change in the Director's
valuations of unquoted companies was a rise in net assets of £0.1m. At 28
February 2005 23% of net assets were invested in unquoted companies. At 26 April
2005, the date of the most recently published NAV, a further £0.4m had been
invested in unquoted companies. Subject to future milestones, a further £0.9m
will be invested in currently held unquoted portfolio companies. In addition the
Investment Manager has approved milestone-based investments of up to a total of
£4.2m in two new unquoted companies. As a guideline, up to approximately 40% of
net assets may be invested in unquoted companies, although this figure will vary
over time.
During the period under review IBT completed the sale of shares in Eyetech. IBT
made an initial unquoted investment in the company in 2001 when its lead
clinical candidate Macugen had completed Phase II trials for the treatment of
wet age-related macular degeneration (AMD), a leading cause of severe vision
loss and blindness. A second investment was made in 2002 increasing the amount
invested to £3.4m. In 2003 positive results were announced from the first year
of pivotal clinical trials and in 2004 the company completed an initial public
offering (IPO) and Macugen was approved in the U.S.A. IBT's investment in
Eyetech generated a total capital gain of £13.8m, equivalent to a five times
multiple on cash invested in sterling terms. The return on this investment
illustrates how a concentrated portfolio approach can add significant value to
shareholders funds.
At 28 February 2005 the level of cash, money market instruments and other net
current assets was £17.3m or 30% of net assets. This is higher than usual,
largely due to the receipt of proceeds of the sale of the remaining Eyetech
shares which raised £11.3m during the six months under review. At 26 April 2005,
the date of the most recently published NAV, the cash position was £13.9m, or
27% of net assets. Future milestone-based commitments to invest in unquoted
portfolio companies, two new unquoted investments and further investments in two
quoted portfolio companies approved by the Investment Manager and an agreement
to invest in a new quoted company are outlined in the Investment Manager's
Review (total of up to £7.5m or 14% of the most recently published NAV).
INVESTMENT MANAGER
On 1 January 2005, SV Life Sciences Managers LLP (SVLSM) became Investment
Manager of IBT. Prior to 31 December 2004, the previous Investment Manager,
Schroder Investment Management Ltd (SIM), was advised by Schroder Ventures Life
Sciences Advisers (UK) Ltd, a sister company of SVLSM.
The change in the Investment Manager fulfils a commitment by SV Life Sciences to
the Board of IBT to become Investment Manager as soon as an entity could be
authorised by the Financial Services Authority. A new agreement has been signed
between IBT, SVLSM and SIM, which mirrors the terms and conditions previously
agreed in 2000 for the management and administration of the Trust.
On 1 January 2005, the Schroder Ventures Life Sciences group announced a name
change to SV Life Sciences. This reflects the independence in ownership and
identity from Schroders plc since 2001.
VALUATIONS
In the last annual report we outlined the basis of valuation of our investments.
We continue to use this policy in the interim report, applying the Association
of Investment Trust Companies' Statement of Recommended Practice 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 an unquoted company or the discount applied to an
investment in a quoted 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 the NAV by £0.6m at 28 February 2005.
SHARE BUY BACK
During the period ended 28 February 2005, IBT did not purchase any shares for
cancellation and has not utilised the authority given to it at the Annual
General Meeting held on 19 November 2004. When shares are available in
reasonable volumes and at a high discount to net assets, we will continue to
consider purchases while maintaining sufficient liquidity for existing
commitments and making new investments.
PROSPECTS
The IBT portfolio gives shareholders an exposure to both quoted and unquoted
companies within the biotechnology sector where share prices are volatile and
the fundamentals remain strong. We remain optimistic about the prospects for the
IBT portfolio although I stress as I have in the past that a long term
investment view is recommended.
Andrew Barker
Chairman
INVESTMENT MANAGER'S REVIEW
MARKET REVIEW
Newsflow from the biotech sector was largely positive in 2004, with a number of
high profile launches of new potential blockbuster drugs, positive clinical
trial data and multiple new drug approvals. However 2004 was a bad year for drug
safety with heavy criticism of the U.S. regulator, the Food and Drug
Administration (FDA). In September 2004 Merck withdrew the painkiller Vioxx from
the market due to concerns about the increased risk of cardiovascular events. In
February 2005, Biogen Idec and Elan suspended sales of the multiple sclerosis
drug, TYSABRI, following the observation of serious side effects. TYSABRI was
one of the biotech success stories of 2004 with analysts expecting peak sales in
the billions of dollars. Withdrawal of the drug from the market came only three
months after FDA approval.
The NBI rose from a low in August 2004 to peak towards the end of the year.
However at 26 April 2005, the date of the most recently published NAV, the index
had fallen 13% in sterling terms since the start of 2005. The suspension of
sales of TYSABRI has increased the perception of industry risk and investors are
concerned about the effect on drug development timelines if the FDA tightens the
criteria required for marketing approval. This has been compounded by an
oversupply of new biotech paper and lower risk tolerance in the overall market
with a backdrop of rising oil prices and interest rates. Smaller biotech
companies have been hit particularly hard in 2005 following an outperformance of
their larger peers during the latter part of 2004.
The BUKBI significantly outperformed the NBI during the reporting period driven
both by the good performance of Shire Pharmaceuticals which has a heavy
weighting in the BUKBI, and due to the weakness of the U.S. dollar which
depressed U.S. investment returns to sterling-based investors during the period.
The current financing window has been open since the second quarter of 2003 and
2004 was the best financing year for biotech since 2000 with a total of $23bn
raised (Source: BioCentury). Approximately 30 biotech companies completed IPOs
in the U.S.A. in 2004 including portfolio companies Eyetech Pharmaceuticals and
Auxilium Pharmaceuticals. European IPOs have been more limited in number and in
valuation. Public market investors have become very valuation sensitive making
biotech IPOs challenging. In general, biotech companies have had to take
significant cuts on proposed offering prices and subsequent share price
performances have been mixed. In recent months there have been a number of
acquisitions of unquoted biotech companies by pharmaceutical and larger biotech
companies with the relatively tough IPO market making trade sales a more
attractive option in these cases.
OUTLOOK
IBT's portfolio companies are making good overall progress and are generally
well funded. Key milestones are approaching for a number of these companies.
Barrier Therapeutics is expected to report Phase III data for Hyphanox for
vaginal candidiasis and a response is expected from the U.S. regulator regarding
Zimycan for diaper dermatitis. Encysive is expected to file for U.S. regulatory
approval of Thelin for pulmonary arterial hypertension and the FDA is expected
to consider approval of Adolor's Entereg for postoperative ileus and QLT's
Aczone for acne. Progenics is expected to release results from a second pivotal
trial with methylnaltrexone for the treatment of opioid-induced constipation in
patients with advanced medical illness.
Despite the recent drug safety issues the fundamentals of the biotech sector
remain solid. Companies remain relatively well financed with a greater number of
drug candidates in development than ever before. That said, any trend regarding
regulatory decisions will be key for the performance of biotech stocks going
forward. The recent falls in the biotech indices mean that there are more
interesting opportunities available for investment although, as always, a long
term investment view is recommended given the inherent volatility of the sector.
SUMMARY PORTFOLIO COMPANY NEWS
QUOTED COMPANIES
During the period under review both Eyetech and OSI Pharmaceuticals announced
U.S. approvals for their lead compounds, Macugen and Tarceva, for the treatment
of wet AMD and advanced non small-cell lung cancer (NSCLC) respectively. Both
products have been launched in the U.S.A. Partners Shire Pharmaceuticals and
AnorMED received FDA approval of FOSRENOL for the treatment of high phosphate
levels in the blood.
Nektar Therapeutics develops 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 Sanofi-Aventis. The FDA
has accepted for filing a new drug application for Exubera.
Encysive Pharmaceuticals and Progenics Pharmaceuticals both released positive
pivotal trial data. Encysive's Thelin is in development for pulmonary arterial
hypertension and Progenics' methylnaltrexone is for the relief of opioid-induced
constipation in patients with advanced medical illness.
Following the announcement of the discontinuation of Kosan Biosciences' lead
compound in NSCLC, the company announced that a Phase II trial in metastatic
breast cancer would proceed to full enrollment following the successful
completion of an interim analysis.
AtheroGenics' lead compound is being evaluated in a Phase III trial for the
treatment of atherosclerosis. Amendments to the trial protocol mean that the
company now expects the trial to complete in Q1 2006. Final results from a Phase
IIb trial showed a statistically significant reduction in plaque volume but this
reduction was not significantly larger than that seen in the standard of care
group.
Warner Chilcott was acquired by a consortium of investors and Epimmune announced
plans to merge with the unquoted French company Immuno-Designed Molecules (IDM).
Aradigm and Novo Nordisk restructured their licensing agreement for the AERx
insulin diabetes management system, with Novo Nordisk assuming all further
responsibilities for development and funding.
Trials of Adolor's Entereg have reported mixed results. A Phase III
postoperative ileus study conducted by partner GlaxoSmithKline (GSK) to support
a European marketing application did not report statistically significant
results. The FDA has requested information from this trial and has extended the
Prescription Drug User Fee Act (PDUFA) action date for Entereg until July 2005.
A Phase IIb trial in opioid-induced bowel dysfunction reported positive results
whilst a PIIa study in chronic idiopathic constipation did not show efficacy.
Inspire Pharmaceuticals reported that a Phase III study of diquafasol for the
treatment of dry eye did not demonstrate a statistically significant improvement
in the primary endpoint of the trial although this was achieved for a number of
secondary endpoints. The company plans to file an amendment to the U.S.
regulatory filing for diquafasol in 2005.
CancerVax announced plans to discontinue the Phase III trial of Canvaxin in
patients with Stage IV melanoma based upon a recommendation of the Data and
Safety Monitoring Board following completion of an interim analysis of the data
from this study. The Phase III trial in Stage III melanoma will continue. In
late 2004 CancerVax and Serono announced a global development and
commercialisation agreement for Canvaxin.
Cambridge Antibody Technology (CAT) has terminated development of Trabio
following a failure to meet the primary endpoint in two pivotal trials in
glaucoma patients. CAT prevailed in the High Court against Abbott Labs over the
royalty rate owed to CAT for rheumatoid arthritis drug Humira although Abbott
has been granted permission to appeal. In addition, CAT and AstraZeneca
announced a strategic alliance to jointly discover and develop antibodies for
the treatment of inflammatory disorders.
Inflazyme announced the departure of its CEO and plans to reinitiate an asthma
programme following the failure of its lead compound to meet the primary
endpoint in a Phase IIa trial in 2004. The company is looking for partners and
is considering M&A.
UNQUOTED COMPANIES
Aderis Pharmaceuticals continues to explore M&A options. Partner Schwarz Pharma
announced that the FDA had accepted the New Drug Application (NDA) for Neupro, a
patch formulation of rotigotine for the treatment of Parkinson's disease. The
European Medical Agency has also accepted the submission. Phase III trials
with rotigotine for the treatment of Restless Legs Syndrome are expected
to start in Q2 2005. A pivotal Phase III programme with binodenoson for cardiac
pharmacologic stress testing is underway with partner King Pharmaceuticals. At
28 February 2005 the holding in Aderis was valued at £2.0m.
The valuation of Affibody was written down by £1.5m to £1.5m during the period
under review to reflect the European fundraising environment. Affibody uses
protein engineering technologies to create novel small, robust protein ligands
called affibodies that mimic antibodies. The company is developing a HER2
affibody for breast cancer imaging in order to demonstrate the concept of use of
affibodies as imaging agents and a HER2 therapeutic affibody is in very early
stage preclinical development. The company is planning a financing round in
2005. At 28 February 2005 the holding in Affibody was valued at £1.5m.
Archemix's mission is to develop aptamers as a class of directed therapeutics. A
Phase I trial is underway with partner Nuvelo of an anti-thrombin aptamer that
is being developed as an anticoagulant/anti-thrombotic for potential use in
coronary artery bypass graft surgery. A second preclinical development candidate
has been selected which triggered the second of three financing tranches. At 28
February 2005 the holding in Archemix was valued at £0.6m. IBT has committed to
invest a further £0.3m in the company subject to milestones.
The holding in Axxima Pharmaceuticals was written down to zero during the
previous financial year due to lack of progress in the company's programmes.
Axxima filed for insolvency in December 2004 and the assets were transferred to
a newly formed holding company which was acquired in March 2005 by another
German company. As IBT was not a shareholder in the holding company it did not
receive any consideration from the transaction.
Dynogen Pharmaceuticals is developing drugs for genitourinary and
gastrointestinal (GI) disorders, including constipation, irritable bowel
syndrome and overactive bladder (OAB). Dynogen has inlicensed a clinical stage
compound, DDP 733, from Mitsubishi and plans to start Phase II trials in the GI
area in 2005. The company has now in-licensed three clinical stage compounds.
DDP225 has successfully completed Phase I and proof of concept trials are
planned to start in 2005. Outlicensing discussions are ongoing for DDP200 for
the treatment of OAB. At 28 February 2005 the holding in Dynogen was valued at
£0.6m. IBT has committed to invest a further £0.4m in Dynogen subject to
milestones.
Genosis remains in negotiations with a major UK distributor regarding a product
launch of its diagnostic tests for screening male and female infertility. The
company may need to raise more money in 2005. At 28 February 2005 the holding in
Genosis was valued at £1.1m. Following an additional investment of £0.4m by IBT,
the holding in Genosis was valued at £1.5m at 26 April 2005, the date of the
most recently published NAV.
During the period under review the valuation of KuDOS Pharmaceuticals was
written up in total by £0.7m to £1.4m to reflect the liquidation seniority of
IBT's investment. 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. Research continues
on other DNA repair inhibitors, with a candidate for PARP inhibition in
preclinical assessment. The company is planning an internal financing round in
which IBT is likely to participate. At 28 February 2005 the holding in KuDOS was
valued at £1.4m.
Micromet and Serono have signed an agreement for the development and
commercialisation of Micromet's drug candidate MT201, which is currently being
tested in Phase II trials for the treatment of prostate and metastatic breast
cancer. The company received an initial license fee of $10m and may receive
further conditional milestone payments and royalties. The company's first
bispecific antibody-derived molecule, MT103, is in Phase I trials. The company
is planning an internal financing round in which IBT is likely to participate.
The valuation of Micromet was written up by £0.7m during the period under review
to £1.2m and a further investment of £0.9m was made in the company. At 28
February 2005 the holding in Micromet was valued at £2.1m.
PowderMed announced positive results from a Phase I study of a proprietary
prophylactic DNA influenza vaccine. Rolf Stahel, the former CEO of Shire
Pharmaceuticals was appointed non-executive Chairman. Phase I trials are ongoing
for the treatment of genital herpes, cancer and HIV/AIDS. At 28 February 2005
the holding in PowderMed was valued at £0.2m. IBT has committed to invest a
further £0.2m in PowderMed subject to milestones.
In December 2004 Sunesis Pharmaceuticals filed a registration statement relating
to a proposed IPO in the U.S.A. In October 2004 Sunesis started the second Phase
I study of a cell cycle modulator that kills proliferating cancer cells by
inducing programmed cell death. The investment in Sunesis was valued at £2.6m at
28 February 2005.
Trine Pharmaceuticals in-licenses clinical stage compounds for development and
commercialisation in the areas of renal, gastrointestinal and metabolic
diseases. A Phase II trial in irritable bowel syndrome patients is underway and
negotiations are ongoing regarding potential in-licensing opportunities. The
company is planning an internal financing round in which IBT is likely to
participate. At 28 February 2005 the holding in Trine was valued at £1.0m.
Other portfolio company news is covered in the outlook and investment activity
sections.
PORTFOLIO SUMMARY AT 28 FEBRUARY 2005
IBT has investments in 36 companies - 25 quoted companies (representing 47% of
NAV) and 11 unquoted companies (comprising 23% of NAV). The remaining 30% is
made up of cash, money market instruments and other net current assets (£17.3m)
and has been boosted by proceeds from the sale of the remainder of the Eyetech
holding which raised £11.3m in the reporting period.
Members of SVLSM sat on the Boards of eight portfolio companies at the end of
the period under review - Affibody, Archemix, CancerVax, Dynogen, KuDOS,
Micromet, PowderMed, and Trine.
In terms of the geographical split of the portfolio, at 28 February 2005, 53% of
NAV was invested in the US, 5% in Canada, 6% in the UK/Ireland and 6% in
Continental Europe. By sub-sector, 57% of NAV was invested in
biopharmaceuticals, 4% in drug delivery, 4% in medical devices and 5% in other
areas. The remaining 30% 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; eleven companies have a product on the market, two have filed for
regulatory approval, seven are in Phase III trials, six are in Phase II or Phase
I/II, four are in Phase I and two are at a preclinical stage. The remaining four
are classified as other.
The portfolio gives investors exposure to varying stages of clinical development
across a number of different clinical areas including cancer, infectious
disease, diabetes, central nervous system disorders, fertility, urology,
cardiovascular complications, dermatology, rheumatoid arthritis, ophthalmology
and management of the side effects of opioids for pain relief.
In terms of the cash positions of the portfolio companies, it is estimated that
at 28 February 2005, eight have two or more years of cash remaining, 18 have
more than one but less than two years of cash remaining and ten have less than a
year of cash remaining (27%, 41% and 32% respectively of net assets less cash,
money market instruments and other net current assets).
SVLSM estimates that the following companies have less than a year of cash
remaining at 28 February 2005; Affibody, Axxima, Dynogen, Encysive, Epimmune,
Genosis, KuDOS, PowderMed, Sunesis and Trine. Of these Affibody, KuDOS and Trine
are planning financings, Genosis may need to raise money in 2005 and further
milestone-based tranches are expected to be invested in Dynogen and PowderMed.
Sunesis filed a registration statement in December 2004 relating to a proposed
IPO, Axxima has been written down to zero, Encysive has subsequently raised
money and Epimmune has announced plans for a merger and estimates that the
combined company will have more than a year of cash.
VALUATION
At 28 February 2005 IBT's unquoted portfolio (value £13.1m) represented 23% of
net assets, up from 22% at 31 August 2004 (value £11.9m).
No new unquoted investments were made during the period under review. Follow-on
investments in Archemix, Genosis, Micromet and PowderMed added £1.5m to unquoted
investments during the reporting period.
During the year under review the net effect of the change in the Directors'
valuations of unquoted companies was an increase in NAV for the period of £0.1m.
This represents 0.2% of the net assets at the start of the reporting period.
The valuation of Micromet was written up by £0.7m during the period under review
(carrying value at 31 August 2004 £0.5m and cost £3.2m). At 28 February 2005 the
investment was valued at £2.1m which includes an investment of £0.9m during the
period under review (total cost £4.1m). The valuation of KuDOS was written up in
total by £0.7m (carrying value at 31 August 2004 £0.7m and cost £1.4m). This
returned the holding to cost. At 28 February 2005 the investment was valued at
£1.4m. The valuation of Affibody was written down by £1.5m (carrying value at 31
August 2004 £3.0m and cost £2.7m). At 28 February 2005 the investment was valued
at £1.5m. The valuation of Trine was written up by £0.2m during the period under
review (carrying value at 31 August 2004 £0.8m and cost £5.3m). At 28 February
2005 the investment was valued at £1.0m.
Currency movements decreased the valuation of the unquoted portfolio by £0.4m
during the period under review.
At 28 February 2005 the holdings in Archemix, Dynogen, Genosis, KuDOS, PowderMed
and Sunesis were held at cost (total value £6.5m), the investments in Aderis,
Affibody, Micromet and Trine were written down from cost (total value £6.6m) and
the holding in Axxima was held at zero. Calculated by value, 50% of the unquoted
portfolio is held at cost and 50% has been written down. At 28 February 2005 the
unquoted portfolio was valued at 53% of original cost (including the initial
costs of Axxima and Trine).
Of the quoted investments, CancerVax, Epimmune, and LION Bioscience were held at
a discount to their mid-market or last traded prices at 28 February 2005 due to
disposal restrictions such as SVLSM membership on the Board of the company and
limited liquidity. The discounts ranged in size between 10% and 25% and the
effect of these discounts was to reduce the NAV by £0.6m at 28 February 2005.
The discount on LION Bioscience has subsequently been removed.
INVESTMENT ACTIVITY
UNQUOTED COMPANIES
No new unquoted investments were made during the period under review.
During the period under review IBT invested a further £0.9m into Micromet (total
cost £4.1m) and a further £0.2m into Genosis, with a further £0.4m invested in
Genosis subsequent to the end of the reporting period (total cost £1.6m). Two
companies achieved pre-specified milestones triggering further investments. A
further £0.1m out of a planned total investment of £0.5m was made in PowderMed
(total cost £0.2m), and a further £0.3m was invested in Archemix, (total cost
£0.6m) out of a planned total investment of £0.9m.
The Investment Manager has approved a milestone-based investment of up to $3m
(£1.6m) in a U.S. unquoted anti-infectives company. It is currently anticipated
that the first tranche of this investment will be invested by mid 2005. In
addition the Investment Manager has approved a milestone-based investment of $5m
(£2.6m) in a new U.K. based unquoted company, Oxagen. Oxagen is a preclinical
stage company focused on the discovery and development of drug candidates for
the treatment of inflammatory disease. Oxagen's lead compound is an oral drug
candidate for the treatment of asthma which is expected to enter the clinic in
2005 with early proof of concept data in asthma next year. It is currently
anticipated that the first tranche of this investment will be invested in May
2005.
As at 28 February 2005, IBT had committed to invest a further total of £0.9m in
milestone-based tranches in Archemix, Dynogen and PowderMed. The commitments for
Archemix and Dynogen are in dollars (total $1.3m) so the future costs of these
investments in sterling will vary with the exchange rate.
There were no sales of unquoted companies during the six months under review.
QUOTED COMPANIES
During the period under review IBT invested £0.6m in a new portfolio company
Barrier Therapeutics. Barrier is a specialty pharmaceutical company with a focus
on the dermatology market. Barrier's portfolio includes marketed compounds as
well as drug candidates in clinical development. Barrier is developing a novel
class of molecules known as retinoic acid metabolising blocking agents. Two of
these compounds, Liarozole and Rambazole, are expected to enter Phase II/III and
Phase IIb trials for congenital ichthyosis and psoriasis respectively in 2005.
At 26 April 2005, the date of the most recently published NAV, a further £0.3m
had been invested (total cost £0.9m).
During the period under review IBT invested £1.3m in a new portfolio company
Oscient Pharmaceuticals. Oscient markets FACTIVE, a tablet approved by the FDA
for the treatment of acute bacterial exacerbations of chronic bronchitis and
community-acquired pneumonia and is developing an intravenous formulation for
use in hospitalised patients. In addition the company is developing a novel
antibiotic candidate, Ramoplanin, for the treatment of Clostridium
difficile-associated diarrhoea.
During the reporting period IBT invested a further £0.5m in CancerVax (total
cost £3.0m), £1.0m in Inspire (total cost £1.6m), £1.4m in Phase Forward (total
cost £1.8m) and £0.9m in Progenics (total cost £1.2m).
Subsequent to the end of the reporting period IBT has made two new quoted
investments. £1.4m was invested in Critical Therapeutics which is focused on the
discovery, development and commercialisation of products for respiratory,
inflammatory and critical care diseases. A supplemental NDA has been submitted
to the FDA for in-licensed investigational asthma drug ZYFLO and the company
anticipates a launch in the second half of 2005, contingent upon regulatory
approval. The FDA approved ZYFLO in 1996 for the prevention and chronic
treatment of asthma but it has been commercially unavailable since early 2004.
At 26 April 2005, the date of the most recently published NAV, £0.4m had been
invested in Exelixis, a genomics-based drug discovery company with a development
pipeline in the areas of cancer and metabolism. Lead compound XL119 is in a
Phase III trial in patients with bile duct tumors, XL784 has completed a Phase I
trial and is being developed as a treatment for renal disease, and three
anticancer compounds are currently in Phase I trials. Exelixis has a product
development and commercialisation agreement with GSK which gives GSK the option
to elect to develop a certain number of compounds after completion of Phase IIa
clinical trials.
IBT has entered into a definitive agreement to invest $2.0m (£1.1m) in Solexa as
part of a $32.5m private financing announced in April 2005. The investment by
IBT would be as part of the second closing of the financing which remains
subject to a Solexa shareholder vote. Solexa is developing and preparing to
commercialise a new platform for genetic analysis and anticipates an initial
product launch by the end of 2005. Solexa's long-term goal is to reduce the cost
of human re-sequencing to a few thousand dollars for use in a wide range of
applications from basic research through clinical diagnostics.
At 26 April 2005, the date of the most recently published NAV, the Investment
Manager had approved further investments of up to approximately £1.3m in two
quoted portfolio companies.
The remaining investment in Eyetech was sold raising £11.3m. Atrix Labs merged
with the Canadian company QLT and as a result IBT received a mixture of cash and
QLT shares. Warner Chilcott was acquired by a consortium of investors and IBT
received cash.
International Biotechnology Trust plc
Ten Largest Equity
Holdings
At 28 February 2005
--------------- ------ --------- ----- ------------------------
Company Value of % of Group Country Business Activity
Holdings Shareholders
£'000 Funds
--------------- ------ --------- ----- ------------------------
1 Encysive
Pharmaceuticals 3,803 6.57 USA Argatroban, Encysive's
FDA-approved product, is
marketed by GlaxoSmithKline
for heparin-induced
thrombocytopenia. Encysive
has completed final Phase
III trials of Thelin for
the treatment of pulmonary
arterial hypertension.
--------------- ------ --------- ----- ------------------------
2 OSI
Pharmaceuticals 3,192 5.52 USA OSI is focused on the
discovery, development and
commercialisation of
products that extend life or
improve the quality of life
for cancer and diabetes
patients. Tarceva, OSI's
flagship product, has
demonstrated the ability to
improve survival in non-
small cell lung cancer and
pancreatic cancer.
--------------- ------ --------- ----- ------------------------
3 Sunesis
Pharmaceuticals* 2,596 4.49 USA Sunesis is a clinical stage
biopharmaceutical company
focused on the discovery,
development and
commercialisation of small
molecule therapeutics for
oncology, inflammatory
diseases, and unmet medical
needs. The company's lead
product candidate is a cell
cycle inhibitor intended for
the treatment of cancer.
--------------- ------ --------- ----- ------------------------
4 Progenics
Pharmaceuticals 2,368 4.09 USA Progenics focuses on the
development and
commercialisation of products
to treat patients with
debilitating conditions and
life threatening diseases.
The company is developing
methylnaltrexone to treat the
constipation associated with
opioid-based pain relievers
without interfering with the
pain relief.
--------------- ------ --------- ----- ------------------------
5 Micromet* 2,108 3.64 Germany Micromet is building
a pipeline of drug candidates
for the treatment of cancer,
inflammation and autoimmune
disease. Two drug candidates
are currently in clinical
trials. The company has
established a drug
development platform based on
its BiTE (Bispecific T cell
engagers)technology, a drug
format that leverages the
cytotoxic potential of T
cells.
--------------- ------ --------- ----- ------------------------
6 Aderis
Pharmaceuticals* 1,947 3.37 USA Aderis is engaged in small
molecule drug development to
treat central nervous system,
cardiovascular and
inflammatory disorders. The
company has a strategic
alliance with Schwarz Pharma
for the development of
Neupro, a patch formulation
of rotigotine for the
treatment of Parkinson's
disease. Submissions for
regulatory approval of Neupro
have been made in the U.S.
and Europe.
--------------- ------ --------- ----- ------------------------
7 Nektar
Therapeutics 1,801 3.11 USA Nektar provides drug delivery
technologies, expertise and
manufacturing to enable the
development of high-value,
differentiated therapeutics.
Nektar develops and provides
the inhalers and the powdered
insulin for the Exubera
product for which Pfizer and
Sanofi-Aventis are seeking
approval to market for
patients with type 1 and type
2 diabetes.
--------------- ------ --------- ----- ------------------------
8 Alexion
Pharmaceuticals 1,736 3.00 USA Alexion is engaged in the
discovery and development of
therapeutic products aimed at
treating patients with severe
disease states, including
hematologic and
cardiovascular disorders,
autoimmune diseases
and cancer. Alexion's two
lead product candidates are
currently undergoing
evaluation in Phase III
clinical trials.
--------------- ------ --------- ----- ------------------------
9 AnorMED 1,635 2.83 Canada AnorMED is a chemistry-based
biopharmaceutical company
focused on the discovery,
development and
commercialisation of new
therapeutics in the areas of
hematology, HIV and oncology.
The company has four drug
candidates in clinical
development.
--------------- ------ --------- ----- ------------------------
10 Affibody * 1,522 2.63 Sweden Affibody uses protein
engineering technologies to
create novel small, robust
protein ligands called
affibodies that mimic
antibodies. The company is
developing a HER2 affibody
for breast cancer imaging in
order to demonstrate the
concept of use of
affibodies as imaging agents
and a HER2 therapeutic
affibody is in very early
stage preclinical
development.
--------------- ------ --------- ----- ------------------------
22,708 39.25
--------------- ------ --------- ----- ------------------------
*Unquoted investments
International Biotechnology Trust plc
Unaudited Preliminary Results
Unaudited Statement of Total Return (incorporating the Revenue Account)
Group Group
For the six months ended For the six months ended
28 February 2005 29 February 2004
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on - 3,344 3,344 - 8,029 8,029
investments
Exchange losses on - (285) (285) - (333) (333)
currency balances
Income 289 - 289 72 - 72
Administrative (648) - (648) (635) - (635)
Expenses
--------------- ------- -------- -------- -------- ------- -------
(Deficit)/ return
before (359) 3,059 2,700 (563) 7,696 7,133
taxation
Taxation - - - - - -
--------------- ------- -------- -------- -------- ------- -------
(Deficit)/ return on
ordinary activities
after taxation (359) 3,059 2,700 (563) 7,696 7,133
--------------- ------- -------- -------- -------- ------- -------
(Deficit)/ return per (0.75)p 6.40p 5.65p (1.18)p 16.10p 14.92p
ordinary share
The revenue column of this statement is the profit and loss account of the Group
(where appropriate).
All revenue and capital items in the above statement derive from continuing
operations.
International Biotechnology Trust plc
Balance Sheets
28 February 2005 31 August 2004
Group Company Group Company
£'000 £'000 £'000 £'000
(unaudited) (unaudited) (audited) (audited)
Fixed assets
Investments 40,541 40,541 43,242 42,211
Investment in subsidiary - - - -
undertaking
Current assets
Debtors 100 100 1,935 3,035
Investments 14,901 14,901 6,018 6,018
Cash at bank 2,475 2,475 4,337 4,337
--------------------- --------- --------- --------- ---------
17,476 17,476 12,290 13,390
--------------------- --------- --------- --------- ---------
Current liabilities
Creditors: amounts
falling (163) (674) (378) (378)
due
within one year
--------------------- --------- --------- --------- ---------
Net current assets 17,313 16,802 11,912 13,012
--------------------- --------- --------- --------- ---------
Net assets 57,854 57,343 55,154 55,223
--------------------- --------- --------- --------- ---------
Capital and reserves
Called up share capital 11,954 11,954 11,954 11,954
Capital redemption 11,043 11,043 11,043 11,043
reserve
Share purchase reserve 66,467 66,467 66,467 66,467
Capital reserve (21,038) (21,549) (24,097) (24,028)
Revenue reserve (10,572) (10,572) (10,213) (10,213)
--------------------- --------- --------- --------- ---------
Equity shareholders' 57,854 57,343 55,154 55,223
funds --------- --------- --------- ---------
---------------------
Net asset value per share 120.99p 115.35p
International Biotechnology Trust plc
Unaudited Cash Flow Statement
Group Group
For the For the
six months six months
ended ended
28 February 29 February
2005 2004
£'000 £'000
Operating activities
Income 150 19
Management fee paid (591) (359)
Other cash payments (276) (320)
------------------------ -------------- ---------------
Net cash outflow from operating
activities (717) (660)
------------------------ -------------- ---------------
Capital expenditure and
financial investment
Purchase of investments (5,252) (1,845)
Sale of investments 13,142 6,352
------------------------ -------------- ---------------
Net cash inflow from capital expenditure
and financial investment 7,890 4,507
------------------------ -------------- ---------------
Net cash inflow before management of
liquid resources and financing 7,173 3,847
------------------------ -------------- ---------------
Management of liquid resources (8,750) (3,100)
------------------------ -------------- ---------------
Net cash (outflow)/inflow (1,577) 747
------------------------ -------------- ---------------
Notes
1. These accounts consolidate the accounts of the Company 'International
Biotechnology Trust plc' and its wholly-owned subsidiary, IBT 2004 Limited.
All Group operations are of a continuing nature.
2. The Interim Report will be mailed to registered shareholders in May 2005
and from the date of release copies of the Interim Report will be made
available to the public at the Company's Registered Office at 31 Gresham
Street, London EC2V 7QA.
3. Note on Merrill Lynch Small Cap Biotech Index (MLSCI) (£ adjusted).
The MLSCI represents stocks with market capitalisation of under US$1
billion. The movement in the MLSCI from 31 August 2004 to 28 February 2005
in $ terms, based on the data received from Merrill Lynch is 5.1%. 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.
This information is provided by RNS
The company news service from the London Stock Exchange
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