International Biotechnology Trust (IBT) 650p

Gain to date: 4.8%

We said to buy shares in International Biotechnology Trust (IBT) on 1 June 2022 at 620.1p as there was an opportunity to buy cheaply into a sector that had been heavily sold off.

Biotech can be a high-risk place to invest and so using an investment trust or fund is often a better way to get exposure as the risks are spread across a portfolio of holdings rather than betting on a single stock.

WHAT HAS HAPPENED SINCE WE SAID TO BUY?

On 13 February 2023, investment adviser SV Health gave notice that it would no longer manage the investment trust, standing down from 9 February 2024 or earlier if agreed by the relevant parties. SV Health said it wanted to focus on its core healthcare venture business.

The news caused International Biotechnology’s share price to fall 10% over the space of a month.

On 3 August, International Biotechnology announced Schroders would be its new manager, with existing fund managers Ailsa Craig and Marek Poszepczynski moving over.

The trust will be run with the same approach and dividend policy, while benefiting from Schroders’ marketing and distribution strength. The ongoing charge is expected to marginally reduce in 2024 (currently 1.4%), and further over time.

The discount to net asset value on the shares has narrowed from 10% to 6% and Numis believes it could narrow further given the clarity over the future management, among other factors.

WHAT SHOULD INVESTORS DO NOW?

Numis analysts believe biotech could come back into favour, commenting: ‘We believe the outlook is positive with key drivers of returns being strong innovation and an uptick in US Food and Drug Administration approvals, an ageing population and rising middle class, as well as attractive valuations which may be crystallised by M&A activity as big pharma seeks to fill holes from patent cliffs by acquiring innovation.’

Shares retains a positive view on International Biotechnology and sees it as a good trust to own as part of a diversified portfolio. Keep buying the shares.

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