Historic low sector valuations – Biotech Investments

London, UK, 9 October 2023

The Biotech Growth Trust: Historic low sector valuations

The Biotech Growth Trust (BIOG) now has two co-managers, Geoff Hsu and Josh Golomb, at global healthcare specialist OrbiMed Capital. The trust has experienced a difficult period of relative performance due to the managers’ approach of focusing on emerging (smaller-cap) biotech stocks rather than large-cap biotech businesses, because of their higher growth prospects. This strategy has been out of favour in an uncertain macroeconomic environment. Hsu and Golomb highlight attractive valuations in the biotech sector, which are not reflecting favourable industry fundamentals, including high levels of innovation across a range of therapeutic areas and an acceleration in mergers and acquisitions (M&A) ahead of an upcoming patent cliff.

BIOG’s managers have a broad mandate and can seek out the best opportunities in both developed and emerging markets, and can hold up to 10% of the fund in unlisted securities. They can draw on the extensive resources of OrbiMed, which is one of the leading global healthcare investors. The company has recently extended its research reach by opening an office in London. BIOG’s discount is wider than its three-, five- and 10-year historical averages, offering scope for a higher valuation once the trust’s performance gets back on track.

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