INTERNATIONAL BIOTECHNOLOGY TRUST has a healthy attitude towards paying investors

The managers of investment trust International Biotechnology will celebrate their third anniversary at the helm of the £262 million listed fund on Friday.

Although it has been a challenging time, Ailsa Craig and Marek Poszepczynski are optimistic that the bear market in biotech stocks that has unfolded under their watch – caused by a mix of company overvaluations and higher interest rates – is now over.

“Company valuations are looking attractive again,” says Craig. ‘The biotech sector is in a good position. New companies are entering the market and merger and acquisition activity is picking up.’

The turnaround is reflected in short-term performance figures. Over the past three months, the trust has delivered a positive return of 11 percent, compared to a small loss of 0.7 percent over the past three years. In the longer term, the fund has achieved a return of 169 percent over ten years.

The fund, which celebrated its 30th anniversary in May, is the nation’s oldest biotech investment trust. Over the past year, SV Health Investors’ management transferred to Schroders following SV’s decision to focus on venture capital funds.

“The key shareholders were keen to keep the management team and investment mandate the same,” says Craig. “That’s why Marek and I stayed put.”

She believes Schroders’ influence in investment trusts – which manages 12 other funds in addition to International Biotechnology – will help the fund grow. It also complements the company’s two existing healthcare trusts: Schroders Capital Private Equity Healthcare and Schroders Healthcare Innovation.

“It’s a positive step on so many levels,” Craig explains. ‘International Biotechnology is a nice slot-in, somewhere between a fund that invests in early-stage companies and a fund that holds the healthcare companies that tend to buy the kind of stocks we invest in.’

The trust currently has 70 equity holdings, most of which are US listed. Some are household names, such as Gilead Sciences, a company that led the way in developing antiviral drugs to fight Covid during the 2020 pandemic. It is also a leader in HIV treatment.

“Gilead is a well-established company,” says Poszepczynski. ‘It makes a lot of money.’ Another important company is Vera Therapeutics, which has developed a treatment for kidney disease that eliminates the need for dialysis or a transplant.

Biotech is an exciting investment theme that has become indispensable. As the world’s population ages and healthcare spending increases, the need for new treatments will continue to rapidly emerge – and it is the biotech industry that will develop them.

Yet it is a theme that is cyclical in nature, with periods of market exuberance followed by strong stock price corrections. Timing is therefore everything for investors. Investing monthly is probably the best option.

International Biotechnology’s board has attempted to address this volatility problem by paying shareholders a regular dividend twice a year. In the financial year to September 2023, it paid a total of 28.2 pence per share.

The share price fluctuates around €6.80. Shareholder feedback on the dividend payments has been largely positive, according to Craig. A recent note on biotech funds, issued by analysts at investment bank Stifel, supports Craig’s enthusiasm. It concluded that 2024 could be a ‘good year’ for biotech as interest rates fall and acquisitions of biotech companies continue.

The trust’s total annual expenses are just under 1.4 percent. The exchange code is 0455934 and ticker IBT. Other biotech trusts include Biotech Growth and RTW Biotech Opportunities.