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What is a biotechnology company?
Biotechnology has been used for thousands of years as people harnessed microorganisms to make beer and bread. Even today, the term biotechnology can include food additive development and technology for changing the taste and texture of food.

When biotechnology was “rediscovered” in modern times, there was considerable excitement as specific individual proteins were manufactured, utilising cultured cells as mini-factories. Replacement proteins were a huge advance as diabetes could be treated with recombinant human insulin and anemia with epogen. In addition, monoclonal antibodies, which could be targeted to receptors on specific cells, have delivered great hope for more targeted medicines.

As scientists and companies began to use molecular biology to study disease and drug development, biotechnology brought a host of different approaches to developing medicines. These included not only proteins, but small molecules that specifically interfered with a disease process, cell screening systems to identify molecules that might make good drugs and many techniques for improving and controlling drug delivery.

Our investment universe focuses on companies that use advances in the life sciences to directly improve human health. Thus, our companies discover, develop and market therapeutics to treat and diagnose cancer, heart disease, diabetes, genetic disease, pain and infection.

Why biotech ?
The biotechnology sector is by most standards a new and highly dynamic industry. In less than 30 years biotech has developed from a collection of scientific ideas into a key investment sector. It is remarkably innovative and fast moving field. It is also commercially successful; its new drugs treat disease in better and more focused ways.

In focusing on severe and unmet medical problems, the biotechnology sector benefits from a rare combination of inelastic demand for its products, huge potential markets and broad patent protection. Put simply, people get old and they get sick: Society is willing to pay to slow the first process and treat the second. Most of these innovative treatments can be priced aggressively, as they offer a significant new value.

This is in contrast to many newer pharmaceutical products, which are often third, fourth or even the fifth version of existing drugs. In fact, the general consensus is that growth in the pharmaceutical sector will slow significantly in the next years. Competition, generic pressures and reimbursement legislation will severely affect this industry. Similarly, medical services and distribution business are open to regulatory pressures. However, because most biotechnology products address life threatening, unmet medical needs in an innovative fashion, they possess considerable pricing power.

In this industry, valuation most often follows top-line growth acceleration of innovative therapeutics. To achieve this, product development, in all its complexity, must be successfully executed. With success, an individual company can multiply its product’ s sales in the double digits for years. However, this is also a sector of dramatic success and failure, where key events can significantly change a stocks valuation in minutes. This huge variance in returns makes this an expert stock pickers universe.

Why biotech today ?
It’s too late! It’s too early!Just give me one good reason to reinvest in biotech! These are questions investors commonly ask. Well, here are a few reasons why this sector should be in all investors portfolios :

Biotech’s product pipeline is full (download the survey). Given that the sectors future value will inevitably be driven by what’s in the pipeline today, with almost 324 drugs in clinical development (download « The Drug Discovery, Development and Approval Process ») biotech is rich, especially in comparison to pharmaceuticals.
~USD 30 billion in cash (IT Asset estimates). Such a resource ensures many companies have the ability to both fully develop and eventually exploit their rich pipelines of new drug candidates. Cash also allows those companies wishing to partner their drugs with big pharmaceutical companies to derive better economic terms for their wares.
Product approvals are flowing (download « New Drug Approvals in 2003 »). Recent FDA approvals ( www.fda.com ) for a diverse range of illness's underlines the fact that the biotech sectors revenue base is broader & deeper than at any time in its history.
FDA’s recent efforts to improve the current drug approval process. A number of new initiatives will clearly benefit biotech, significantly decreasing the cost and time of bringing many new drugs to market, particularly amendments to the Accelerated Drug Approval process.
Almost across the board, double digits growth of both top and bottom lines for the larger capitalised companies reinforces the sectors solid fundamentals.
M&A and alliance activity has been strong. Companies are either bought for their lead products or companies with lagging growth rates merge with others in an effort to keep up with the leading companies.

Why the IT Funds Biopharma ?
As a Manager of funds with a sector-specific focus, we are able to exploit a data-driven approach to maximize the value of our specialist expertise. The firm is knowledge driven and relies heavily on both its manager’s technical and investment knowledge as well as an extensive network of clinicians and industry experts.

Due to its emphasis on analyzable data, most portfolio companies are in the later stages product development. The Manager's core philosophy is to only make investment decisions when there is sufficient data to be reasonably predictive about the clinical and commercial success of a company's lead product.

Using our specialist knowledge, we assemble a portfolio of companies that represent excellent growth opportunities and a balanced risk/return profile. We expect that our portfolio companies will outperform as the companies transition through their milestones and advance their therapies .