Pleasing progress in BB BIOTECH AG's portfolio

BB BIOTECH AG / Pleasing progress in BB BIOTECH AG's portfolio Processed and transmitted by Thomson Reuters. The issuer is solely responsible for the content of this announcement. Third-quarter report of BB BIOTECH AG as of September 30, 2010 The Net Asset Value of BB BIOTECH surged 13.4% (in USD) during the third quarter. Numerous acquisitions of small and mid-sized biotech companies by pharma companies led share prices higher during the quarter. Two of the companies in BB BIOTECH's portfolio, ZymoGenetics and Genzyme, were the targets of takeover bids. Takeover speculation also lifted our core investment Actelion after the third quarter ended. Biotech companies gave an impressive display of their operating strength and innovative skills during the past quarter despite healthcare reform in the USA and austerity drives in Europe. In the coming quarter biotech firms worldwide are expected to publish data on as many as 80 Phase III studies or regulatory events. More M&A activity can be expected since valuations are still inexpensive. BB BIOTECH has participated in several capital increases, providing promising companies with the necessary capital to expedite their drug development programs. This shows that BB BIOTECH is steadfastly moving forward with its plans to give small and mid-sized companies a greater weighting in the portfolio. After serving almost two decades as a director for BB BIOTECH, Prof. Dr. David Baltimore has announced that he is stepping down from the Board of Directors at the next annual general meeting of shareholders on March 21, 2011 for reasons of age. The Board of Directors thanks David Baltimore for his untiring services on behalf of the company. Biotech sector buoyed by takeovers The historically low valuations of biotech companies led to a flurry of takeover activity in the third quarter, which gave the entire sector a strong boost. This brightening environment helped the Nasdaq Biotechnology Index to climb 11.9% (in USD) as it recovered during the course of the third quarter. The Net Asset Value (NAV) of BB BIOTECH AG shares showed an even better gain of 13.4% (in USD) during the period. Due to the weakness of the dollar, NAV in Swiss francs rose by only 3.5%. BB BIOTECH shares have not yet fully benefited from these positive developments. Investors in Europe are still shying away from the healthcare sector, which is reflected in the correction of BB BIOTECH AG's share price, which was down 3.7% in CHF and 3.2% in EUR at the end of the third quarter. In our interim report as per mid-year we wrote that acquisition activity could be expected to pick up if the valuations of biotech companies stayed at historically low levels. The most recent wave of acquisitions was triggered by the long acknowledged structural problems within the pharma industry, which is confronted with expiring patent protection, pressure on prices and an innovation logjam. Because of this situation, particularly innovative biotech companies with promising products have become takeover candidates. In the third quarter takeover bids were announced for two of the companies in BB BIOTECH's portfolio. First Sanofi-Aventis offered USD 18.5 bn for Genzyme, which represented a takeover premium of about 40%. This was followed by Bristol-Myers Squibb's (BMS) bid for ZymoGenetics. BB BIOTECH was the third-largest shareholder of ZymoGenetics when the bid was announced and benefited accordingly from the proposed takeover, which was priced about 85% above ZymoGenetics' previous closing price. ZymoGenetics has a promising product candidate for the treatment of hepatitis C that it licensed in from BMS about two years ago. It has now been completely integrated into the company through this transaction. During the course of the third quarter BB BIOTECH AG continued its share buyback program and bought back 226'978 shares through a second line of trading, which represents about 60% of the number authorized under the share buyback program. Solid progress by core participations - greater portfolio diversification Diversification of the portfolio continued in the third quarter. The portfolio weighting of Actelion was reduced in view of the risks in its development pipeline while investments were made in several mid-cap companies. The sale of the ZymoGenetics shares and the reduction of the position held in Arena Pharmaceutical ultimately lowered the percentage of invested portfolio assets from 114.6% to 105.3%. BB BIOTECH participated in the share offering announced by Halozyme, the fifth such transaction it has participated in so far this year. Capital increases are an ideal means of building up a position in companies with a small market capitalization. Our investment allows these companies to press ahead with promising development projects on their own and to generate more value for all stakeholders. Besides the transaction in ZymoGenetics at the beginning of the year we participated in the capital increases conducted by Micromet, Optimer, Immunogen and, most recently, Halozyme. Actelion (-2.8%, in CHF) published negative news about Clazosentan, which was being tested as a treatment for severe complications following vasospasm and did not meet the primary endpoint. As a result, there are still no drug treatments available for this medical need. The setback with Clazosentan increases the pressure on Actelion to develop new products and bring them to the market before Tracleer loses patent protection in 2015/16. BB BIOTECH reduced its exposure to Actelion during the course of the quarter in anticipation of the deterioration in the risk profile associated with this clinical study. Celgene's (+13.4%, in USD) quarterly results clearly confirmed the growth momentum of the company's hematology franchise. Revlimid, Celgene's product for treating multiple myeloma, will generate further significant sales growth in the coming years thanks to a broader label and its launch in the Japanese market. Despite all the good Phase III data on Telaprevir in the treatment of hepatitis C, Vertex shares rose by only 5.1% (in USD). Lingering questions concerning the drug's competitive situation should be addressed at this year's AASLD conference when further details of clinical studies will be presented. Vertex plans to initiate the filing process for Telaprevir in the fourth quarter, which means regulatory approval could be granted in the second half of 2011. Novo Nordisk (+9.8%, in DKK) continues to rise on the wings of the solid market uptake of its diabetes drug Victoza, whose launch in both the USA and Europe has so far gone well. What's more, Roche, a major potential competitor for its GLP project, suffered a setback in its diabetes study due to side effects. The estimated market potential of this class of drugs has been revised up in recent months by market participants, which has brightened Novo Nordisk's growth outlook. Gilead Sciences shares rose 3.9% (in USD) over the course of the past three months. It published another disappointing set of results in the second quarter because the market had underestimated the pressure on HIV drug funding in the USA as well as the effects of exchange-rate movements. The company published more positive clinical data on its HIV drug pipeline. Nevertheless, there is still some skepticism regarding the company's long-term growth prospects considering the current valuation (P/E ratio of 10 times estimated 2010 EPS). Gilead also initiated a major USD 5 bn share buyback program in the third quarter. M&A activity buoys small and mid-cap participations The entire position in ZymoGenetics was sold at the end of September due to the announcement of a takeover bid by BMS triggered by the company's progress in developing its drug candidates. The position in Arena was reduced significantly. An FDA advisory committee voted 9 to 5 against approval of its obesity drug, which now has very slim chances of receiving market approval. Some of the Genzyme shares were sold at a profit. The stock's next movements will depend on the success of the takeover and the final price Sanofi-Aventis is willing to pay. The position in Halozyme was increased significantly through participation in the company's capital increase. Halozyme is developing a promising technology platform that enables protein-based drugs to be administered subcutaneously instead of intravenously. The remaining position in Biogen Idec was completely divested after we concluded that the company's core business would come under pressure from the growing number of competitive multiple sclerosis drugs in the coming years. Positive signs going into Q4 2010 Looking ahead, we will devote particular attention to small and mid-cap stocks as a complementary investment to our core holdings. Several of these companies might have the resources and the potential to eventually become a core investment. The current burst of takeover activity driven by the major drug companies will continue in our opinion, especially since these drug makers are coming under increasing pressure to strengthen their pipelines or else risk becoming a victim of the consolidation process themselves. Important news in the fourth quarter is expected from the following companies: * Vertex will give an update on Telaprevir's profile at this year's AASLD conference (American Association for the Study of Liver Diseases). * The ASH conference (American Society of Hematology) will be an important medical conference for Celgene, which is scheduled to present further clinical results on Revlimid. * Incyte will publish initial data on the registration program for its Jak- 1/2 inhibitor for the treatment of myelofibrosis. * Amgen will publish clinical results on Denosumab for the prevention of bone metastasis by the end of the year. Predictions that US healthcare reform would knock -0.5% to -2.0% off top-line revenues are likely to be confirmed in the upcoming publications of quarterly and annual results. At the same time investors will have greater clarity regarding the effects of government efforts in Europe to rein in spending, which could diminish sector revenues by a similar amount. We are confident that the improving investor sentiment in the USA on the biotechnology sector will eventually spread to Europe. The latest acquisitions are an initial sign pointing in this direction. Prof. Dr. David Baltimore stepping down after 17 years on the Board of Directors Prof. Dr. David Baltimore is resigning from the Board of Directors on the date of the next general meeting, scheduled for March 21, 2011, citing reasons of age. He has held a seat on the board of BB BIOTECH ever since the company was founded in 1993 and he currently serves as Vice Chairman. The Board of Directors thanks David Baltimore for his great dedication and extraordinary services on behalf of the company over the past 17 years. He has made an invaluable contribution to the successful development of BB BIOTECH. The Board of Directors has initiated the evaluation process to select David Baltimore's successor and will present a qualified candidate for election at the next general meeting of shareholders on March 21, 2011. The complete quarterly report as of September 30, 2010 and a video with Dr. Daniel Koller can be viewed at Biodays 2010 - Zurich, Frankfurt, Stuttgart, Munich, Hamburg and Milan. Sign up at For further information: Bellevue Asset Management AG, Seestrasse 16, 8700 Küsnacht, Switzerland Thomas Egger, Tel. +41 44 267 67 09, Company profile BB BIOTECH invests in companies in the fast growing market of biotechnology and is one of the world's largest investors in this sector with CHF 1.2 bn in assets under management. BB BIOTECH is listed in Switzerland, Germany and Italy. Its investments are focused on listed companies that are developing and commercializing novel medical treatments and cures. BB BIOTECH's investment selection process is guided by the fundamental research and analysis of physicians and molecular biologists. Its Board of Directors has many years of experience in industry and science. Composition of BB BIOTECH's portfolio as of September 30, 2010 (in % of securities, rounded values)   CORE HOLDINGS   Celgene       19.8%   Actelion       17.6%   Gilead       15.8%   Vertex Pharmaceuticals       13.7%   SMALL PARTICIPATIONS   Novo Nordisk       6.6%   Incyte       3.8%   Micromet       3.0%   Amgen       2.2%   Immunogen       1.9%   Intercell       1.8%   Biomarin Pharmaceutical       1.7%   Genzyme       1.7%   Alexion Pharmaceuticals       1.7%   Roche Holding GS       1.6%   Halozyme Therapeutics       1.6%   Optimer Pharmaceuticals       1.5%   Basilea Pharmaceutica       1.0%   Bavarian Nordic       0.8%   Affymetrix       0.7%   Elan       0.7%   Arena Phamaceuticals       0.2%   Idenix Pharmaceuticals       0.2%   Cosmo Pharmaceuticals (1))       0.1%   Probiodrug (2))       0.5%   SWAP agreement on treasury shares       <0.1%   Cosmo Pharmaceuticals put option (long) (1))       <0.1%   Novo Nordisk call option (short)       <(0.1%)   Roche put option (short)       (0.1%)   Total securities       CHF 1 247.6 mn   Liquid funds (net)       CHF (70.1) mn   Other assets        CHF 8.9 mn   Other payables       CHF (1.6) mn   Total shareholder's equity       CHF 1 184.9 mn   Treasury shares (in % of company) (3))       14.9% 1) Exchange from shares BioXell due to the acceptance of the public tender offer of Cosmo Pharmaceuticals 2) Unlisted company 3) Correspond to the total of all own shares held in Switzerland, Germany and Italy including the second trading line [HUG#1456202] --- End of Message --- BB BIOTECH AG Vordergasse 3 Schaffhausen Switzerland WKN: AONFN3;ISIN: CH0038389992; Press Release BB Biotech Q3 2010 (PDF): This announcement is distributed by Thomson Reuters on behalf of Thomson Reuters clients. 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