The Pictet GSF Biotech is a Luxembourg investment fund that invests in the global biopharmaceutical ...
The Pictet GSF Biotech is a Luxembourg investment fund that invests in the global biopharmaceutical sector.
The dollar-denominated fund, listed on the Luxembourg Stock Exchange, was launched in March 1995 and is co-managed by Michael Sjöström and Vincent Ossipow.
The fund also has a five-strong scientific advisory board, made up of experts in the fields of neurology, cardiology and oncology.
Sjöström said: "The fund is a bottom-up fund. It focuses on stock selection and that process is done by myself and Ossipow."
The two managers complement each other, Sjöström having an expertise in finance and Ossipow having a PhD in molecular biology.
Stock selection is done in two stages. First, each company is given a summary analysis, essentially a due diligence process. The second stage is divided into three - the science and technology of the company is judged, then its business finance model is analysed. Finally, a valuation process is undertaken.
"There is no set rule as to how we narrow down our choices. The initial ideas are generated through our work, rumours, input from the scientific advisory body and so on," Sjöström said.
He spends two to three months every year visiting companies, which he regards as an essential part of his work.
"We have valuations at hand and we can check whether the science is okay and the products competitive. If we decide to move on, we will spend a lot of time with the management.
"We will visit the company one, two, maybe three times. A lot of time is spent looking at the management quality. We often find good science and technology but the business model is bad.
"When I visit a company, even if I think 'I have seen this all before', I always come out knowing something new."
Approximately 90% of the investible biotech firms in the world are based in the US. The fund has 80% US holdings with the rest coming from Europe.
The Pictet GSF Biotech fund has performed particularly well over the last six and 12 months. This success comes from the fact that losers were avoided, but also from the great performance of a few star stocks.
In the second half of last year it was Avigen, while in the second quarter of this year there were two stocks - Cephalon and Vertex Pharmaceuticals - both of which were still high in the portfolio at the beginning of July.
Cephalon has a daytime sleeping drug called Provigil, which could have applications to areas, such as attention deficiency disorder and hyperactivity. Vertex, meanwhile, has a strong and innovative product development system and has recently signed a deal with Novartis.
At the moment, Sjöström prefers mid caps with a strong line-up of drugs in their final stages of development. He estimates that 50% of the valuation of a company is essentially determined from the product it has on the market. The other half is from earlier stage products.
The transparency of the drug development programme is such that there are few upside surprises.
The continuing success of the human genome project is a real long-term plus for the sector. It will open up the number of possible drugs and treatments as various illnesses and problems become genetically identified. However, companies currently heavily involved in genomics have suffered a great deal.
Sjöström was fortunate - or foresightful - enough to pull out of this area before it collapsed. He tends to avoid companies that are involved in the production of technical platforms used for DNA analysis. Instead, he favours companies that already have a strong series of drugs in the final stages of testing.
The Pictet fund is registered in Luxembourg, Switzerland, Sweden, France, Spain, Germany and Austria. Daily subscriptions take place at a single price based upon the NAV.
In limited circumstances, the NAV will be adjusted to include a dilution levy that reflects dealing and fiscal charges normally borne by the fund.
The scientific advisory board is composed of Professor Michel Aguet, director of the Swiss Institute for Experimental Cancer Research; Professor Stefan Catsicas, vice-president of research for the Swiss Institute of Technology; Professor Kenneth Randall Chien, professor of medicine and member of the Centre for Molecular Genetics in the University of California; Dr Silvano Fumero, head of research and development for the Ares Serono Group; and Professor Pascal Nicod, chairman of the Department of Medicine for CHUV.
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