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Biotech trusts bounce after Immunomedics doubles on Gilead bid

14 September 2020

Shares in Biotech Growth and International Biotechnology jump after Gilead Sciences' $21bn takeover of cancer specialist.

Shares in Biotech Growth and International Biotechnology trusts jumped today after Gilead Sciences announced a $21bn takeover of cancer specialist Immuonemedics in the latest sign of renewed deal making in the sector.

Biotech Growth (BIOG ), a £498m investment trust with a top 10, 4.6% weighting in Immunomedics (IMMU.O) according to its July fact sheet, leaped 85p or 6.9% to £13.25.

Rival £283m International Biotechnology (IBT) advanced 33.4p or 4.5% to 768.4p. It held 5.5% of its assets in Immunomedics at the end of July but had taken profits on a stock that has soared this year, reducing the  position by a third from 475,000 shares to 316,000 shares this month.

It also owns a stake in Gilead (GILD.O), accounting for 5.8% of the portfolio on 31 July.

Immunomedics shares more than doubled today, spiking $44 to $86.29, just short of the $88 agreed bid unveiled by Gilead on Sunday. They have quadrupled this year, valuing the company at $9.7bn. 

Gilead shares - which have stalled this year on concerns over its  lack of drug development - dropped 2% in early trading, valuing it at about $82bn. They recovered to stand 0.9% up as investors came to terms with the 108% premium paid for Immunomedics, 300% more than the stock’s starting level in the New Year.

Gilead chief executive officer Daniel O’Day said the high price was worth it as Gilead gains Trodelvy, Immunomedics’ treatment for an aggressive and hard-to-treat form of breast cancer which the US Food and Drug administration granted accelerated approval in April.

It is also on track to file the antibody-drug, which targets tumours with cytotoxins more accurately than traditional chemotherapy, for approval in Europe in the first half of next year.

‘This acquisition represents significant progress in Gilead’s work to build a strong and diverse oncology portfolio,’  said in a statement. 

‘Trodelvy is an approved, transformational medicine for a form of cancer that is particularly challenging to treat. We will now continue to explore its potential to treat many other types of cancer,’ he said.

This is the third and largest cancer deal by Gilead this year. It bought a 49.9% stake in drug developer Pionyr Immunotherapeutics in June for $275m, and earlier in 2020 paid $4.9bn for Forty Seven Inc, provider of an experimental treatment for blood cancer.

It is paying for Immunomedics with $15bn cash and $6bn in newly issued debt.

The appeal of companies with a cutting edge in oncology was underlined today as drugs giant Merck & Co (MRK.N) paid $4.2bn to partner with Seattle Genetics (SGEN.O) to promote its two cancer treatments.

Although the biotech sector has performed well compared to mainstream equity markets during the pandemic, the 10% gain in the Nasdaq Biotech this year has been modest compared to the 23% surge in the Nasdaq Composite, reflecting the boost to technology and internet firms by the social distancing restrictions in the lockdown.

Despite this, both BIOG and IBT have performed strongly, rising 33% and 20% respectively to stand at 1% premiums over net asset value on Friday’s close. 

BIOG, run by Geoffrey Hsu at Orbimed and recovering from an earlier bout of poor performance, has better one- and three-year figures than IBT, lead managed by Carl Harald Janson at SV Health Investors, although the two are neck and neck over five years with total shareholder returns of 65.4% and 61.4% respectively.

 

Investment company news brought to you by Citywire Financial Publishers Limited.

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