HBM Healthcare Investments achieves a balanced result in the 2023/2024 financial year

• Slight loss of CHF 1 million
• Net asset value per share (NAV) 0.3% higher after share buy-backs
• Mixed portfolio performance
• Unfavourable currency developments reduce annual result by around 2.5%
• Portfolio selectively supplemented with investments in two private companies
• Board of Directors proposes unchanged par value repayment of CHF 7.50 per share

HBM Healthcare Investments almost broke even in the 2023/2024 financial year with a slight loss of CHF 1 million. The net asset value per share (NAV) rose by 0.3 percent as the number of shares outstanding was reduced by share buy-backs. The share price fell by 6.0 percent.

The performance of the portfolio was mixed. The following investments contributed the most to the NAV development:

Winner

NAV

Loser

NAV

Y-mAbs Therapeutics

1.9%

Cathay Biotech

–5.6%

Biohaven

1.2%

Farmalatam (private)

–1.5%

Longboard Pharmaceuticals

1.1%

ConnectRN (private)

–1.4%

ImmunoGen

1.1%

Travere

–0.5%

Cytokinetics

0.8%

Mineralys Therapeutics

–0.5%

Mixed market environment

The market environment for HBM Healthcare's portfolio companies was challenging and uneven during the year under review. The biotech sector recovered in the United States and to some extent in Europe, and M&A activity increased in the second half of 2023. Most of HBM Healthcare’s public investments in the US benefited from the overall positive market sentiment. In Asia, the markets in China continued to decline, while the Indian healthcare market was in strong shape.

Volatile investment currencies

HBM Healthcare’s investment currencies were subject to strong exchange rate fluctuations. Swiss National Bank’s unexpectedly early interest rate cut towards the end of the first quarter of 2024 corrected the strong appreciation of the Swiss franc somewhat. Nevertheless, all investment currencies lost ground against the Swiss franc in the reporting year (US dollar –1.5 percent, Chinese yuan –6.3 percent, euro –2.0 percent and Indian rupee –3.0 percent). Overall, the currency effects weighed on our performance by around 2.5 percent.

Developments in the portfolio of public companies

With a total increase in value of CHF 69 million or 3.9 percent, the portfolio of public companies made the largest positive contribution to earnings. This was despite negative currency effects totalling CHF -32 million.

The public companies originating from the private portfolio depressed the result by a total of CHF –44 million despite the positive contributions from Y-mAbs Therapeutics (CHF 33 million), Longboard Pharmaceuticals (CHF 19 million) and Ambrx Pharmaceuticals (CHF 10 million), the latter due to the acquisition by Johnson & Johnson for USD 2 billion.

In contrast, Cathay Biotech's share price fell by 28 percent, resulting in a book loss of CHF
–98 million. However, the company's key operating metrics, which had declined in 2023, showed a significant improvement again in the first quarter of 2024. As a leader in the field of synthetic biology, Cathay’s positioning for the future remains excellent.

The investments in the portfolio of other public companies, which were built up directly on the market, contributed a total of CHF 113 million to the annual result. Four acquisitions – ImmunoGen, CymaBay, Chinook Therapeutics and Prometheus Biosciences – took centre stage, contributing CHF 39 million to the result. Biohaven (CHF 21 million), Cytokinetics (CHF 15 million), Merus (CHF 14 million) and various Indian companies (totalling CHF 24 million) also developed positively.

Developments in the portfolio of private companies

Private companies recorded a net value reduction of CHF –60 million. CHF –10 million of this is attributable to unfavourable currency developments. This corresponds to a negative contribution to earnings of 3.4 percent.

Upstream Bio (CHF 12 million) and Swixx BioPharma (CHF 11 million) were revalued upwards; larger value impairments were necessary at Farmalatam (CHF –26 million) and ConnectRN (CHF –24 million). Value adjustments totalling CHF –33 million were made to thirteen other private companies due to financing rounds or disappointing operating performance.

The portfolio was selectively supplemented with two new investments in US companies. An investment commitment of USD 5 million (of which USD 2.5 million was paid in) was made to Alumis for the development of oral therapies for the treatment of immune disorders. ADARx Pharmaceuticals received USD 4 million. ADARx is developing a promising siRNA platform. A further CHF 29 million was invested in existing private companies as part of follow-up financing.

Funds and other assets

The funds’ portfolio reported an impairment loss of CHF –10 million (of which CHF –2 million due to currency movements).

Other assets and liabilities made a positive contribution to earnings totalling CHF 24 million.

Asset allocation

The portfolio remains well balanced, with public companies accounting for 42 percent of consolidated total assets (of which 22 percent were previously private companies), private companies 35 percent, funds 10 percent, cash and cash equivalents 11 percent and other assets 2 percent.

Par value repayment and share buy-backs

HBM Healthcare Investments endeavours to maintain a balance between new investments and returns to shareholders in the form of cash distributions and share buy-backs.

The Board of Directors is therefore proposing to the Annual General Meeting a repayment of par value of CHF 7.50 per share, unchanged from the previous year. This corresponds to a yield of 3.9 percent on the share price at the end of March 2024.

As part of the current share buy-back programme approved by the Annual General Meeting in June 2022, around 89 000 treasury shares totalling CHF 15.6 million were acquired via the 2nd trading line in the reporting year. This corresponds to 1.3 percent of outstanding shares.

Outlook

The macroeconomic and geopolitical environment is likely to remain challenging. With a carefully constructed portfolio of private and public companies and liquidity of 11 percent of total assets, HBM Healthcare Investments is well positioned to take advantage of any opportunities that arise. In view of the fundamentally favourable performance of the industry and many portfolio companies, HBM Healthcare Investments looks to the future with confidence.

The full 2023/2024 Annual Report is available on the Company’s website at www.hbmhealthcare.com/en/investors/financial-reports.