The £2.5bn BB Biotech trust has increased its dividend by 25 per cent as it saw significant growth in the biotech sector.
The dividend of CHR14.5 (£10.20) per share will be proposed at the AGM on March 17, which represents a 5 per cent yield to the volume-weighted average price of the trust.
The trust outperformed the Nasdaq Biotech Index last year, returning 27.1 per cent in US Dollar terms, compared to 11.8 per cent for the index.
“Major performance drivers were new product launches, regulatory approvals, positive clinical data and M&A activity,” the trust says in its annual report.
Recent market volatility has led to more attractive valuations for some biotechnology stocks, leading to a buying opportunity, the trust says.
The trust’s cash position moved during the past year, from zero at the start of the year to 5 per cent during summer, as valuations creeped higher. The cash level has since reduced and the trust is invested 104 per cent.
The portfolio now has 34 positions, with six core holdings of more than 5 per cent each. They are Celgene, Incyte, Ionis Pharmaceuticals, Actelion, Gilead and Radius Health.
The trust also established two new positions in Q4, in Sage Therapeutics and Cidara Therapeutics.
“In its outlook for 2016, BB Biotech expects more announcements of regulatory approvals as well as strong pipeline newsflow from its portfolio companies. Merger and acquisition activity was an important performance driver in 2015 and BB Biotech’s investment management team expects more large deals to come,” states the annual report.
“As for the macroeconomic environment, management expects volatility to climb higher over the next few quarters, triggered by diverging central bank monetary policy and election news in the US.”