London, UK, 6 September 2022
Edison issues review on The Biotech Growth Trust (BIOG)
The Biotech Growth Trust (BIOG) is managed by global healthcare specialist OrbiMed Capital. Despite a reversal in the trust's relative performance following a very successful FY21 (ending 31 March 2021), manager Geoff Hsu is continuing to favour smaller-cap, emerging biotech stocks, as he says these companies are where the bulk of industry innovation occurs, and this is the primary driver of the biotech sector's long-term positive performance. The manager believes that the latest drawdown in biotech stocks, which is unprecedented in both magnitude and duration, has led to a very large disconnect between favourable industry fundamentals and very low biotech company valuations. Over the last year, BIOG's portfolio has become increasingly concentrated as Hsu and his team are focusing more on their highest-conviction investments.
BIOG's valuation has been volatile since early 2021, which coincides with the trust's period of relative underperformance. Its 8.3% discount to cum-income NAV compares with a 4.0% to 4.9% range of average discounts over the last one, three, five and 10 years. If BIOG can build on its very long-term record of outperformance, there is potential for the trust to be afforded a higher valuation.
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