MIDAS SHARE TIPS: Get dividends for helping to combat coronavirus – International Biotechnology Trust targets the most exciting firms in the field
The relentless march of Covid-19 has shone a new light on the healthcare sector.
Companies involved in developing vaccines or treatments have received most attention but the pandemic has highlighted the need for continued investment and innovation across the pharmaceutical industry.
Biotech companies fall fairly and squarely into this bracket. Established to create and develop new drugs, these firms are at the forefront of the fight against not just Covid-19 but a wide range of pernicious diseases.
Drugs fight: Trust gives investors access to top biotech firms
International Biotechnology Trust (IBT) offers investors exposure to some of the most exciting businesses in the field. The company has a long and impressive track record and it pays a dividend, unlike most individual biotech firms.
The shares are £7.86 and should move higher as the company invests in more winning businesses and sentiment improves towards the industry.
IBT was formed in 1994 to give British investors access to the global biotech market.
To reduce risk, the trust mostly invests in listed firms, ranging from large companies valued at more than $10billion (£7.8billion) to smaller firms yet to generate a profit. Just over 10 per cent of the portfolio is allocated to unquoted firms, in the hope that these will deliver value when they are floated or sold to bigger operators.
Most firms in the portfolio are based in America. The UK is renowned for early-stage research but successful players generally migrate across the Atlantic once they reach a certain size, because the US is the biggest market for healthcare and most money for investment is found there.
IBT also invests in firms that treat a variety of problems, including cancer, Parkinson’s and inflammatory conditions such as rheumatoid arthritis. Almost a third of the group’s portfolio is dedicated to rare diseases, as this sector is growing particularly fast, with double-digit sales forecast for many years ahead.
The trust’s top ten investments include several notable successes. Cancer specialist Immunomedics, the group’s second largest investment, has seen its share price increase almost eightfold in six months, after it was snapped up by larger rival Gilead, also in IBT’s portfolio.
And shares in the group’s biggest investment Horizon Therapeutics have more than doubled in recent months. Earlier this year, the firm launched a new drug to treat a rare eye condition, Thyroid Eye Disease. Even though the development coincided with lockdowns in much of the world, sales have soared.
These gains count because IBT’s dividend equates to 4 per cent of the value of all its holdings combined. The calculation is made at IBT’s year-end, August 31, and dividends are paid twice a year.
Last month, IBT’s assets were valued at £284million, equivalent to £7.39 a share, so a dividend of 30p is expected for the current year, divided equally between next January and August 2021.
Over time, the company should deliver both capital and dividend growth. The group’s managers have more than 75 years’ combined experience and include Kate Bingham, chair of the UK Vaccine Taskforce. Their ability to pick successful companies is based on rigorous stock selection and a deep network of industry contacts.
IBT also benefits from two major healthcare trends. First, there is more innovation in this industry than ever, meaning more new drugs coming to market and better treatments for people who fall seriously ill. Second, the population is ageing exponentially and over55s account for more than half of all healthcare spending, according to US research.
Midas verdict: At £7.86, IBT’s share price has done well in recent weeks, moving in line with the value of its assets, now approximately £7.88 per share. Over time, the stock should continue to make good progress as its portfolio is diverse and managers are highly competent. Investors in the business should be rewarded with income, capital gains and the knowledge that they are funding companies whose work can make a tangible difference to people’s lives. Buy.
Traded on: Main market Ticker: IBT Contact: ibtplc.com or 020 7421 7070