ANNUAL REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The Biotech Growth Trust PLC Annual Report for the year ended 31 March 2024
Disability Act
Copies of this Annual Report and other documents issued by the Company are available from the
Company Secretary. If needed, copies can be made available in a variety of formats, including
Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Group, which has installed telephones to allow speech and hearing impaired people who have
their own telephone to contact them directly, without the need for an intermediate operator, for this
service please call 0800 731 1888. Specially trained operators are available during normal business
hours to answer queries via this service. Alternatively, if you prefer to go through a ‘typetalk’
operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
This report is printed on Revive 100% White Silk a totally recycled paper
produced using 100% recycled waste at a mill that has been awarded the
ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
A member of the Association of Investment Companies
CBP008251
THE BIOTECH GROWTH TRUST PLC
25 SOUTHAMPTON BUILDINGS
LONDON WC2A 1AL
WWW.BIOTECHGT.COM
In order to achieve its investment objective, the Company invests in a
diversified portfolio of shares and related securities in biotechnology
companies on a worldwide basis.
Further details of the Company’s investment policy are set out on pages 28
and 29.
ORBIMED CAPITAL LLC – PORTFOLIO MANAGER
OrbiMed’s investment business was founded in 1989 with a vision to invest
across the spectrum of healthcare companies: from venture capital start-ups
to large multinational companies.
Beginning with its first public equity fund in 1989, OrbiMed expanded to include
long/short equity and private equity investments in 1993. On 19 May 2005
OrbiMed was appointed as the Company’s Portfolio Manager. In 2007 OrbiMed
expanded to Asia, opening offices in Mumbai and Shanghai, and launching
a fund focused on private equity healthcare opportunities in China and India.
In 2010 OrbiMed expanded to the Middle East, opening an office in Israel to
seek innovative life sciences venture capital opportunities across the region. In
May 2023, OrbiMed opened an office in London to provide local support for its
network of European portfolio companies and to seek private and public equity
investments.
Today, OrbiMed has a singular focus on seeking successful investments on a
worldwide basis across the entire spectrum of private and publicly-traded life
sciences companies. With approximately U.S. $17 billion under management,
OrbiMed ranks as one of the world’s largest healthcare-dedicated investment
firms.
OrbiMed’s investment professionals possess a combination of extensive
scientific, medical and financial expertise.
HOW TO INVEST
The Company’s shares are traded on the London Stock Exchange and can be
purchased through a stock broker or other financial intermediary. The shares
are available through savings plans (including investment dealing accounts,
ISAs, Junior ISAs and SIPPs) which facilitate both regular monthly investments
and lump sum investments in the Company’s shares. There are a number of
investment platforms that offer these facilities. Further details can be found on
page 104.
STRATEGIC REPORT
Financial Highlights
1
Chair’s Statement
2
Company Performance
5
Investment Portfolio
7
Portfolio Manager’s Review
9
OrbiMed’s Approach to ESG
26
Business Review
28
GOVERNANCE
Board of Directors
40
Corporate Governance
42
Report of the Directors
51
Statement of Directors’ Responsibilities
57
Audit Committee Report
58
Directors’ Remuneration Report
63
Directors’ Remuneration Policy
67
Independent Auditor’s Report
68
FINANCIAL STATEMENTS
Income Statement
76
Statement of Financial Position
77
Statement of Changes in Equity
78
Statement of Cash Flows
79
Notes to the Financial Statements
80
FURTHER INFORMATION
Shareholder Information
99
Glossary of Terms and Alternative
Performance Measures
100
How to Invest
104
Notice of the Annual General Meeting
105
Explanatory Notes to the Resolutions
108
Company Information
110
For more information about The Biotech
Growth Trust PLC visit the website at
www.biotechgt.com
Follow us on X @biotechgt
THE BIOTECH GROWTH TRUST PLC
The Biotech Growth Trust PLC seeks
capital appreciation through investment
in the worldwide biotechnology industry.
Designed and
printed by:
perivan.com
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
1
* Source: Morningstar
^ Alternative Performance Measure (see glossary beginning on page 100)
† Nasdaq Biotechnology Index (sterling adjusted)
** IFRS Measure
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Source: Morningstar
26.5% 5.0%
Net asset value per share
(total return)*^
2023: -11.0%
Benchmark*
†
2023: 5.4%
27.1%
Share price
(total return)*^
2023: -12.8%
1,078.9p
Net asset value per share**
2023: 852.6p
995.0p
Share price
2023: 783.0p
£361.3m
Shareholders’ funds**
2023: £330.3m
7.8%
1.2%
Ongoing Charges^
2023: 1.1%
Active Share*^
2023: 76.6%
Discount of share price to net asset
value per share*^
2023: 8.2%
66.6%
for the year to 31 March 2024
TOTAL RETURN PERFORMANCE
as at 31 March 2024
FINANCIAL HIGHLIGHTS
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
2
INTRODUCTION AND RESULTS
I am pleased to present to shareholders this annual report
for the year ended 31 March 2024.
After a challenging two years, the Company performed
well in both absolute and relative terms in the year under
review; the net asset value (NAV) per share total return was
26.5% (2023: -11.0%), and the share price total return was
27.1% (2023:-12.8%), both outperforming the Company’s
benchmark, the Nasdaq Biotechnology Index (sterling
adjusted), which over the year rose 5.0% (2023: 5.4%). The
small disparity between the performance of the Company’s
NAV per share and its share price reflected a slight
narrowing of the share price discount to the NAV per share
from 8.2% at the start of the Company’s financial year to
7.8% at the year end.
The average exchange rate over the year was $1.258, some
4.5% higher than the previous year’s average of $1.204.
The Company’s gearing, which increased to 9.1% at the
year end from 7.8% at the beginning of the year, contributed
1.2% to the Company’s NAV total return during the year.
While performance this year has been encouraging and
we are relieved to be seeing signs of recovery in the
sector, the Board is aware that there is still some way
to go before the Company fully recovers its relative and
absolute losses from the past two years. Nevertheless,
our Portfolio Manager’s investment strategy has started
once again to yield results. They intend to maintain the
Company’s overweighting to small and mid-capitalisation
(cap) companies, which they believe will deliver
increasingly positive results to shareholders. In addition
they anticipate that we can expect to see a continuation
of the consolidation in the biotechnology industry, as
larger companies seek to acquire smaller companies with
promising pipelines of drugs and therapies to address
impending patent expirations which threaten their
futureearnings.
Our portfolio contains a diverse range of biotech companies
with exposure to the most exciting and promising new
technologies. The areas in which our Portfolio Manager
is finding the most promising investment opportunities
include obesity, oligonucleotide therapeutics and oncology.
I encourage you to read the Portfolio Manager’s Review,
beginning on page 9, to find out more about these themes
and the companies making breakthroughs in these areas.
The fact that the emerging technologies in these areas have
been developed into approved new treatments reaffirms
our view that the biotechnology industry is maturing and
demonstrates its ability to convert laboratory research into
effective medicines.
The Company has maintained a small exposure to
Chinese biotechnology companies which overall made a
negligible contribution to performance over the year. The
difficult macroeconomic, geopolitical and local regulatory
environment has meant that the valuations of Chinese
biotech companies remain depressed although there
have been some success stories such as AstraZeneca’s
acquisition of Gracell Biotechnologies (which was held
in our portfolio) for $1.2 billion. Chinese investments
represented 7.7% (2023: 9.0%) of the portfolio at the year
end and while our Portfolio Manager continues to believe
the long-term outlook for Chinese biotech is promising, this
level of exposure is unlikely to be increased unless or until
the environment in China becomes more supportive.
The Company has not invested in any new private
companies during the year and at the year end, the two
remaining, directly held, private investments (both of which
are Chinese companies) comprised 3.2% of the Company’s
NAV. As announced earlier in the year and explained further
in the Portfolio Manager’s Review, we wrote down the
holding in Stemirna Therapeutics and this contributed
to the negative return from the private investments over
theyear.
CAPITAL STRUCTURE
Shareholders will be aware that the Company pursues an
active discount management policy, buying back shares when
the discount of the Company’s share price to its NAV per share
is higher than 6% (under normal market conditions).
ROGER YATES
CHAIR’S STATEMENT
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
3
The Company’s shares traded at a discount throughout the
year, leading to the repurchase of 5,250,221 shares, at an
average discount of 7.3% to the Company’s cum income
NAV per share at the time, at a total cost of £43.6 million.
This is a substantial return of capital, representing 13.6% of
the issued share capital of the Company at the start of the
year. Buying back these shares at a discount generated an
uplift of 0.9% to the NAV over the year.
At the year end there were 33,487,198 shares in issue and
the share price traded at an 7.8% discount to the cum
income NAV per share. As we have previously commented,
the shares can trade at a discount wider than 6% for a
period of days or indeed longer, particularly in volatile or
muted markets. However, the Company remains committed
to protecting a 6% share price discount over the longer
term. Since the year end, a further 290,000 shares have
been bought back for cancellation and at the time of writing
the share price discount stands at 8.2%.
REVENUE RETURN
The revenue return per share was 0.3p (2023: -1.6p).
This reflects the relatively low yield generated from the
biotechnology sector and, in particular, the small and
mid-cap companies in this sector that comprise much of
the portfolio.
As the Company has brought forward revenue losses, no
dividend is recommended in respect of the year ended
31March 2024 (2023: nil).
BOARD CHANGES
In October we were delighted to announce the appointment
of Hamish Baillie as a non-executive director, effective
1November 2023. Hamish will succeed Steve Bates as
Chair of the Management Engagement Committee and
Senior Independent Director following Steve’s retirement
at the conclusion of the forthcoming annual general
meeting(AGM).
In anticipation of his retirement, I would like to extend
our sincere gratitude to Steve for his dedicated service.
Throughout his tenure, his expertise, wealth of knowledge
and insightful guidance have been invaluable to the Board.
We wish him all the best for the future.
Other directors are coming to the end of their tenure and
Board recruitment processes are underway in line with our
succession plan.
PERFORMANCE FEE
There is currently no provision within the Company’s NAV for
any performance fee payable at a future calculation date.
The arrangements for performance fees are described
in detail on pages 51 and 52 of this Annual Report but
I would highlight that it is dependent on the long-term
outperformance of the Company: any outperformance
has to be maintained for 12 months after the relevant
calculation date and only becomes payable to the extent
that the outperformance gives rise to a total fee greater
than the total of all performance fees paid to date. This
ensures that a performance fee is not payable for any
outperformance that contributes to recovery of prior
performance.
CHANGE OF BENCHMARK INDEX
As noted above, the Company’s performance is currently
measured against the Nasdaq Biotechnology Index (sterling
adjusted) and this is the index used to determine the
entitlement (if any) of OrbiMed to a performance fee.
The index measures capital return, and as the
biotechnology sector is largely made up of growth
companies that tend not to pay dividends, historically there
was very little difference between the capital and total
return versions of the index.
In recent years, however, the biotechnology industry as a
whole and the constituents of the index have changed as
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
4
the industry has matured. The number of index constituents
that pay a dividend has increased, although the number
is still modest and the Company itself is not receiving
sufficient income to be required to pay a dividend under
current investment trust taxation rules. The Board believes
this trend, in which dividend income contributes to the total
return from the index, is likely to increase.
Therefore, following consultation with our advisers, the
Board is proposing to shareholders that the index used
to measure the Company’s performance and so the
entitlement of OrbiMed to a performance fee, which is
based on outperformance of the index, should be changed
to the Nasdaq Biotechnology Index Total Return (sterling
adjusted and net of withholding tax).
Under the Listing Rules, the proposed change is a related
party transaction and must therefore by approved
by shareholders. The proposed change will be put to
shareholders at a general meeting which will be held
immediately after the conclusion of the forthcoming AGM
on 18 July 2024.
The proposed change is explained in more detail in a
circular that will be sent to shareholders with this Annual
Report and which will be made available on the Company’s
website: www.biotechgt.com.
ANNUAL GENERAL MEETING
The Company’s AGM will be held at the Barber-Surgeons’
Hall, Monkwell Square, Wood St, Barbican, London
EC2Y5BL on Thursday, 18 July 2024 at 12 noon. As well
as the formal proceedings, there will be an opportunity for
shareholders to meet the Board and the Portfolio Manager,
and to receive an update on the Company’s strategy and its
key investments.
I very much look forward to seeing as many shareholders
as possible this year. For those investors who are not
able to attend the meeting in person, a video recording of
the Portfolio Manager’s presentation will be uploaded to
the website after the meeting. Shareholders can submit
questions in advance by writing to the Company Secretary
at info@frostrow.com.
I encourage all shareholders to exercise their right to vote at
the AGM. The Board strongly encourages shareholders to
register their votes online in advance. Registering your vote
in advance will not restrict you from attending and voting
at the meeting in person should you wish to do so, but as
the past few years have shown, unforeseen extraordinary
events can make attendance difficult or impossible. The
votes on the resolutions to be proposed at the AGM will be
conducted on a poll. The results of the proxy votes will be
published following the conclusion of the AGM by way of
a stock exchange announcement and on the Company’s
website: www.biotechgt.com.
OUTLOOK
It has been a volatile few years for the biotechnology
sector and the Company. 2020 and 2021 saw a surge in
investment in healthcare and biotechnology driven by low
interest rates, merger and acquisition (M&A) activity and
of course, the COVID pandemic. In 2022, as interest rates
and inflation rose, the pandemic waned and the valuations
of smaller biotech companies fell to all-time lows. This
generated a performance headwind for the Company.
In the past year, I am glad to report that there have been
signs of recovery which are reflected in the Company’s
good performance over the past year, with an increase
in regulatory approvals and a potential revival in the IPO
market. The challenges facing the sector are still present:
regulatory hurdles, uncertainty around funding and
more broadly, a difficult macroeconomic environment
characterised by persistent inflation and high costs of
capital. However, the global biotech industry is expected
to continue its growth trajectory, with groundbreaking
innovations and new technologies improving and saving
lives, creating value for shareholders and, ultimately, driving
performance. The Company is exposed to a wide variety of
the most promising technologies.
Our Portfolio Manager and the Board are excited about
the innovation taking place in the sector and the portfolio
companies we hold. As a consequence, our overall
investment strategy remains unchanged and, assuming
relatively benign markets, we look forward with confidence
to good long-term returns for the Company.
Roger Yates
Chair
4 June 2024
CHAIR’S STATEMENT CONTINUED
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
5
COMPANY PERFORMANCE
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PERFORMANCE SINCE THE DATE OF APPOINTMENT OF ORBIMED CAPITAL LLC AS PORTFOLIO MANAGER
to 31 March 2024
SHARE PRICE DISCOUNT TO THE NAV PER SHARE
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
6
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HISTORIC PERFORMANCE FOR THE YEARS ENDED 31 MARCH
2019 2020 2021 2022 2023 2024
Net asset value per share total return*^ 5.3% 18.5% 55.1% (33.8%) (11.0%) 26.5%
Share price total return*^ 4.6% 10.9% 75.2% (37.0%) (12.8%) 27.1%
Benchmark return* 13.0% 1.2% 25.1% (7.4%) 5.4% 5.0%
Net asset value per share 786.8p 932.4p 1,446.4p 957.8p 852.6p 1,078.9p
Share price 734.0p 814.0p 1,426.0p 898.0p 783.0p 995.0p
Discount of share price to net asset value
per share^ 6.7% 12.7% 1.4% 6.2% 8.2% 7.8%
Ongoing charges (excluding performance
fees)^
1.1% 1.1% 1.1% 1.1% 1.1% 1.2%
Gearing^ 5.5% 9.0%
6.8% 8.4% 7.8% 9.1%
* Source: Morningstar
^ Alternative Performance Measure (see glossary beginning on page 100).
to 31 March 2024
FIVE YEAR PERFORMANCE
COMPANY PERFORMANCE CONTINUED
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
7
INVESTMENT PORTFOLIO
INVESTMENTS HELD AS AT 31 MARCH 2024
Security Country/Region #
Fair value
£’000
% of
investments
Biogen USA 23,375 5.9
Janux Therapeutics USA 18,291 4.6
Regeneron Pharmaceuticals USA 17,365 4.4
Sarepta Therapeutics USA 16,610 4.2
Amgen USA 14,265 3.6
Avidity Biosciences USA 13,735 3.5
Argenx** Netherlands 13,580 3.5
Scholar Rock Holding USA 12,757 3.2
Apellis Pharmaceuticals USA 12,467 3.2
Vaxcyte USA 12,383 3.1
Ten largest investments 154,828 39.2
Geron USA 11,634 3.0
XtalPi* China 11,460 2.9
Heron Therapeutics USA 11,044 2.8
Syndax Pharmaceuticals USA 11,000 2.8
Ionis Pharmaceuticals USA 10,865 2.8
Rhythm Pharmaceuticals USA 10,024 2.5
BioMarin Pharmaceutical USA 9,472 2.4
Neurocrine Biosciences USA 9,066 2.3
Mineralys Therapeutics USA 8,664 2.2
Aerovate Therapeutics USA 8,196 2.1
Twenty largest investments 256,253 65.0
Vera Therapeutics USA 7,900 2.0
ALX Oncology Holdings USA 7,863 2.0
Esperion Therapeutics USA 7,038 1.8
Praxis Precision Medicines USA 6,664 1.7
Morphic Holding USA 6,629 1.7
Innovent Biologics China 6,089 1.6
Compass Therapeutics USA 5,570 1.4
Immatics Germany 5,435 1.4
Vertex Pharmaceuticals USA 5,392 1.4
Amicus Therapeutics USA 5,305 1.3
Thirty largest investments 320,138 81.3
Krystal Biotech USA 5,233 1.3
Arrowhead Pharmaceuticals USA 5,146 1.3
Vir Biotechnology USA 5,127 1.3
Tyra Biosciences USA 4,974 1.3
Neumora Therapeutics USA 4,955 1.3
Xenon Pharmaceuticals Canada 4,951 1.3
Dyne Therapeutics USA 4,495 1.1
Nkarta, Inc. USA 4,398 1.1
BeiGene China 4,098 1.0
Edgewise Therapeutics USA 3,829 1.0
Forty largest investments 367,344 93.3
Lexicon Pharmaceuticals, Inc.^* USA 3,747 1.0
CytomX Therapeutics USA 2,900 0.7
Cytokinetics, Inc. USA 2,551 0.6
Ventyx Biosciences USA 2,201 0.6
Fate Therapeutics USA 2,099 0.5
Exact Sciences USA 2,061 0.5
10X Genomics USA 1,781 0.5
Kezar Life Sciences USA 1,375 0.3
Milestone Pharmaceuticals Canada 1,350 0.3
Prelude Therapeutics USA 1,300 0.3
Fifty largest investments 388,709 98.6
# Primary listing
† Partnership interest
* Unquoted investment
** Includes Argenx ADR (see glossary) amounting to £10,139,000
^* Including the unquoted element amounting to £1,948,000 (Lexicon Series A Convertible Preferred stock)
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
8
INVESTMENT PORTFOLIO CONTINUED
Security Country/Region #
Fair value
£’000
% of
investments
OrbiMed Asia Partners*† Asia 1,122 0.3
Dynavax Technologies USA 1,115 0.3
New Horizon Health*** China 860 0.2
YS Biopharma China 850 0.2
Enliven Therapeutics USA 653 0.2
Suzhou Basecare Medical China 448 0.1
Gracell Biotechnologies CVR* China 389 0.1
Stemirna Therapeutics* China 219 0.1
Repare Therapeutics Canada 181 0.0
Lyell Immunopharma, Inc. USA 166 0.0
Sixty largest investments 394,712 100.1
Imara USA – –
Total investments 394,712 100.1
OTC equity swaps - financed
Swaps China 5,890 1.5
Less: Gross exposure on financed swaps (6,308) (1.6)
Total OTC swaps (418) (0.1)
Total investments including OTC swaps 394,294 100.0
All of the above investments are equities unless otherwise stated. Please refer to the glossary for a definition of financed swaps.
# Primary listing
† Partnership interest
* Unquoted
*** Shares suspended on 28 March 2024 due to a delay in the issuance of the company’s annual report for 2023.
PORTFOLIO BREAKDOWN
Investments
Fair value
£’000
% of
investments
Quoted
Equities
379,574 96.3
379,574 96.3
Unquoted
Equities 14,016 3.5
Partnership interest 1,122 0.3
15,138 3.8
Derivatives
OTC equity swaps (418) (0.1)
Total investments 394,294 100.0
PERFORMANCE ATTRIBUTION FOR THE YEAR ENDED 31 MARCH 2024
Contribution to total returns % %
Benchmark return 5.0
Portfolio Manager’s contribution 20.6
Portfolio total return 25.6
Gearing 1.2
Management fee and other expenses (1.2)
Share buyback 0.9
Total 0.9
Return on net assets 26.5%
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
9
PERFORMANCE REVIEW
We are pleased to report that the Company delivered strong
performance for the fiscal year ended 31March 2024. The
Company’s NAV per share total return was 26.5% during the
fiscal year, compared with a 5.0% increase for the Company’s
benchmark, the Nasdaq Biotechnology Index, measured on a
sterling adjusted basis (the Benchmark).
Macroeconomic factors continued to dominate portfolio
performance during most of the fiscal year. The fiscal year
began with an auspicious start in April and May, with a
number of biotech M&A transactions helping to improve
sentiment in the small and mid-cap biotech space. However,
from June through October, a string of positive economic
news suggested that the U.S. Federal Reserve (the Fed)
could leave interest rates “higher for longer” without tipping
the economy into recession. This led to a gradual rise in
10-year U.S. government yields, which peaked at around 5%
in October. The rise in interest rates pressured unprofitable,
small cap technology stocks generally, including emerging
biotech. In November and December, the Fed began
telegraphing that it had finished raising interest rates and
guided investors to rate cuts in 2024. This catalysed a sharp
recovery in small and mid cap biotech stocks, coinciding
with a drop in 10-year yields from 5% to 3.8% over the span
of a couple of months. With the Fed signaling that it was
done raising rates, investor sentiment towards small and
mid cap biotech noticeably improved, leading to significant
performance in that segment from November through
February. Having said that, we recognise that the interest rate
outlook remains variable, and the Fed will remain data-driven
in its approach. In 2024, there were three successive monthly
inflation readings that were a bit higher than expectations, so
investor expectations for the timing and number of interest
rate cuts became more muted towards the end of the fiscal
year. We continue to believe that it is a question of “when,
not if” those interest rate cuts will materialise, and we do
not believe further interest rate hikes are likely. As macro
dynamics stabilise, we believe this will create a conducive
environment for stock selection, and fundamental research
will be rewarded.
As we have noted over the past two years, our overweight
positioning in smaller cap emerging biotech has been
premised on three main investment points:
1) Emerging biotech valuations were driven to
unprecedented lows in the performance drawdown
beginning in early 2021, primarily due to rising interest
rates. That drawdown occurred on both an absolute and
relative basis versus the broader market and large cap
biotech. We expected interest rate pressure ultimately to
abate as inflation declined in the U.S., allowing stocks to
recover to historical valuation levels.
2) We expected an increase in M&A activity due to: a) the
compelling valuations of smaller biotech targets; and b)
the urgent need on the part of “Big Pharma” to acquire
biotech assets to address revenue gaps due to expected
generic and biosimilar competition for their major
blockbuster drugs in the second half of the decade.
3) Emerging biotech, rather than large cap biotech,
is still contributing about two-thirds of the total
biopharmaceutical industry pipeline. That segment of the
biotech universe remains the primary driver of innovation
for the sector, and importantly, the valuation correction
that we have witnessed since early 2021 has not properly
reflected the strong fundamental innovation delivered by
these companies.
We were pleased to see that the long overdue recovery
in smaller biotech began manifesting itself towards the
end of the fiscal year. The portfolio’s heavier weighting in
smaller cap stocks relative to the Benchmark, aided by some
particularly strong individual stocks, led to the Company’s
significant outperformance versus the Benchmark during the
review period.
As shown in Figure 1, if one looks at the market cap
distribution of the Company’s portfolio at the beginning
of the fiscal year, the portfolio was 41% overweight small
caps and 33% underweight large caps relative to the
Benchmark. If one plots the average stock price performance
of the Benchmark constituents in each of those market
GEOFF HSU
JOSH GOLOMB
PORTFOLIO MANAGER’S
REVIEW
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
10
PORTFOLIO MANAGER’S REVIEW CONTINUED
capitalisation categories, one observes that small cap
biotech significantly outperformed large cap biotech by
about 35% during the review period. Figure 2 shows the
extent of small cap underperformance over a longer period,
since 31 March 2021. Despite the strong performance of
small caps since October 2023, we believe that there is
still quite a bit of outperformance left to be generated by
this segment. If interest rates begin declining over the next
several months, we expect the performance gap between
small cap and large cap stocks since 31 March 2021 to fully
“close up” in the months ahead.
Our China holdings made an inconsequential contribution
to performance during the fiscal year. Valuations in Chinese
11
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
Mar 2023
Apr 2023
May 2023
Jun 2023
Jul 2023
Aug 2023
Sep 2023
Oct 2023
Nov 2023
Dec 2023
Jan 2024
Feb 2024
Mar 2024
SMALL AND MID CAP BIOTECH BEGINNING TO OUTPERFORM (2023-2024)
Market Cap Breakdown
(classifications of 31 March 2024)
Company Benchmark Difference
Large Cap (>$10bn) 32% 64% -32%
Mid Cap ($2-10bn) 33% 24% 9%
Small Cap (<$2bn) 42% 12% 30%
%NAV Exposure of the Company's portfolio vs. the Benchmark, excluding private securities.
Market Cap Breakdown
(classifications of 31 March 2023)
Company Benchmark Difference
Large Cap (>$10bn) 37% 70% -33%
Mid Cap ($2-10bn) 14% 18% -4%
Small Cap (<$2bn) 53% 12% 41%
%NAV Exposure of the Company's portfolio vs. the Benchmark, excluding private securities.
Benchmark Small Cap Performance
+28.1%
Benchmark Mid Cap Performance
+20.1%
Benchmark Large Cap Performance
-6.9%
Figure 1
Note: Chart shows equal-weighted performance of Benchmark stocks in their respective market cap buckets, using market cap classifications as of 31 March
2023. Updated as of 31 March 2024, performance calculated in US dollars.
Source: Bloomberg
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
11
healthcare remain at depressed levels given the difficult
economic environment in China and the persistence of
geopolitical tensions between the U.S. and China. The Hang
Seng Healthcare Index, which tracks Chinese healthcare
companies on the Hong Kong exchange, trades at record
lows. Having said that, we continue to like the fundamental
outlook for Chinese biotech. Chinese central government
support for biotech innovation in the country remains
robust. Recent comments from the CEOs of Big Pharma
companies like Pfizer and AstraZeneca have indicated
their desire to increase their access to Chinese innovation.
In fact, in December 2023, AstraZeneca announced its
intention to acquire a Chinese cell therapy company called
Gracell Biotechnologies, which was held in the portfolio, for
$1.2 billion. Other examples of Western biopharmaceutical
interest in Chinese innovation include Novartis’ recent
acquisition of SanReno Therapeutics, a private Chinese
company with two late-stage assets for immunoglobulin
A nephropathy, and Bristol Myers Squibb’s licensure of
a bispecific antibody-drug conjugate for cancer from
Chinese company Sichuan Biokin Pharmaceuticals for an
$800 million upfront payment. We continue to allocate a
portion of the portfolio to investments in Chinese biotech
(approximately 7.7% of the portfolio as of 31 March 2024).
Just as U.S. small cap biotech has begun recovering from
record lows, we believe a similar recovery can occur for
Chinese biotech. We are comfortable with the current level
of exposure and do not anticipate meaningfully increasing
our China exposure until there is more stability on the
macrofront.
22
-65%
-55%
-45%
-35%
-25%
-15%
-5%
5%
15%
25%
35%
Mar 2021
Apr 2021
May 2021
Jun 2021
Jul 2021
Aug 2021
Sep 2021
Oct 2021
Nov 2021
Dec 2021
Jan 2022
Feb 2022
Mar 2022
Apr 2022
May 2022
Jun 2022
Jul 2022
Aug 2022
Sep 2022
Oct 2022
Nov 2022
Dec 2022
Jan 2023
Feb 2023
Mar 2023
Apr 2023
May 2023
Jun 2023
Jul 2023
Aug 2023
Sep 2023
Oct 2023
Nov 2023
Dec 2023
Jan 2024
Feb 2024
Mar 2024
SMALL AND MID CAP BIOTECH BEGINNING TO RECOVER (2021-2024)
Figure 2
Note: Chart shows equal-weighted performance of Benchmark stocks in their respective market cap buckets, using market cap classifications as of 31 March
2021. Updated as of 31 March 2024, performance calculated in US dollars.
Source: Bloomberg
Benchmark Large Cap Performance
-5.9%
Benchmark Small Cap Performance
-24.8%
Benchmark Mid Cap Performance
-29.5%
Market Cap Breakdown
(classifications as of 31 March 2021)
Company Benchmark Difference
Large Cap (>$10bn) 26% 58% -32%
Mid Cap ($2-10bn) 22% 29% -7%
Small Cap (<$2bn) 51% 13% 38%
%NAV Exposure of the Company's portfolio vs. the Benchmark, excluding private securities.
Market Cap Breakdown
(classifications as of 31 March 2024)
Company Benchmark Difference
Large Cap (>$10bn) 32% 64% -32%
Mid Cap ($2-10bn) 33% 24% 9%
Small Cap (<$2bn) 42% 12% 30%
%NAV Exposure of the Company's portfolio vs. the Benchmark, excluding private securities.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
12
EMERGING BIOTECH VALUATIONS
RECOVERING FROM UNPRECEDENTED LOWS
We have been encouraged to see the early stages of a
recovery in small cap biotech from unprecedented absolute
and relative valuations.
One proxy commonly used to track the performance of
small and mid cap biotech is the XBI, an exchange traded
fund created in 2006 that tracks an equal-weighted index of
biotech companies. About 50% of this index consists of small
cap names. If one plots the relative performance of the XBI
versus the S&P 500 (shown below), one can see that since
inception, the XBI has outperformed the S&P 500, indicating
that emerging biotech has historically been a sector offering
better returns than the broader market. Over the past 18
years, however, there have been short periods when the XBI
has underperformed the S&P 500, shown by the red circles.
Typically, these drawdown periods result in underperformance
versus the S&P 500 of 30-45%. The most recent relative
drawdown was 77%, making it the longest and largest
drawdown of the XBI on both an absolute and relative basis.
Prior drawdowns have been followed by periods of significant
outperformance of the XBI versus the S&P 500, denoted by the
green arrows on the graph, which usually results in the biotech
index reclaiming prior outperformance highs. We believe the
relative performance drawdown of the XBI versus the S&P
500 has likely run its course, as shown by some indications of
stabilisation in Figure 3 below over the past few months. We
continue to expect small cap biotech to outperform the S&P
500 from current levels, just as it has rebounded historically.
Despite the nascent recovery in small cap biotech, absolute
valuations remain at historically depressed levels. A
significant number of biotech companies are still trading
at negative enterprise values (i.e. market caps below the
net cash on their balance sheets). As shown in Figures 4
and 5, we estimate close to 15% of the biotech universe,
representing approximately 60 companies, is now trading
at a negative enterprise value as of 31 March 2024. While
there has certainly been an improvement on this metric
coincident with the recent recovery in emerging biotech,
we expect further valuation increases will restore levels to
historical norms.
PORTFOLIO MANAGER’S REVIEW CONTINUED
50
100
200
400
800
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Drug Pricing
(Increased Political
Pressure)
-31.2% Drawdown
+109% Recovery
-43.8% Drawdown
+68.0% Recovery
-30.0% Drawdown
+83.3% Recovery
Logarithmic Scale
Current
Drawdown
(Size Rotation, Tech
Sell-off, Rate Hikes)
-77.0%
Peak Drawdown
(8 February 2021 –
7 February 2024)
Most Recent Drawdown: (1) Longest, (2) Largest Absolute, (3) Largest Relative
Drug Pricing
(Concerns Over Hepatitis
C Drug Pricing)
Fed Quantitative
Tightening
XBI VS. S&P 500 (SPX) SPREAD SINCE XBI INCEPTION
Recent drawdown appears to have stabilised, setting up a potentially strong recovery
Figure 3
Note: Drawdowns are calculated using daily closing prices, while chart is shown using monthly periodicity for smoothing purposes. Updated as of 31 March 2024.
Source: JPM (Drawdowns and Recoveries) | OrbiMed (XBI - SPX Spread Chart since XBI Inception).
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
13
BIOTECH VALUATIONS RECOVERING FROM UNPRECEDENTED LOWS
0. 0%
5. 0%
10.0%
15.0%
20.0%
25.0%
30.0%
20 00
20 01
20 02
20 03
20 04
20 05
20 06
20 07
20 08
20 09
20 10
20 11
20 12
20 13
20 14
20 15
20 16
20 17
20 18
20 19
20 20
20 21
20 22
20 23
0
20
40
60
80
10 0
12 0
14 0
16 0
18 0
20 00
20 01
20 02
20 03
20 04
20 05
20 06
20 07
20 08
20 09
20 10
20 11
20 12
20 13
20 14
20 15
20 16
20 17
20 18
20 19
20 20
20 21
20 22
20 23
PERCENT OF BIOTECH COMPANIES TRADING NUMBER OF BIOTECH COMPANIES TRADING
BELOW NET CASH ON BALANCE SHEET BELOW NET CASH ON BALANCE SHEET
Figure 4 Figure 5
Note: Monthly chart of all Global Industry Classification Standard (GICS) defined biotechnology companies greater than $10 million, using historical cash and
debt sourced from Bloomberg, with annual GICS biotechnology universe refreshes. Updated through 31 March 2024.
Source: Bloomberg
Dot Com Bust
Great Financial
Crisis
Political Pressure on
Drug Pricing
US/China Trade War
& COVID-19
Current
Drawdown
1
2
3
4
5
6
7
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
RATIO OF MARKET CAP TO NET CASH ON BALANCE SHEET (MEDIAN)
Figure 6
Note: Monthly chart of all GICs defined biotechnology companies greater than $10 million, using historical cash and debt sourced from Bloomberg, with annual GICS
biotechnology universe refreshes. Updated through 31 March 2024.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
14
PORTFOLIO MANAGER’S REVIEW CONTINUED
We believe the first interest rate cut by the Fed could be the trigger that catalyses a more full-fledged valuation recovery from
currently depressed levels. At the current time, the Fed is still anticipating that rate cuts will begin in 2024. In the meantime,
continued M&A activity and positive clinical developments should help the sector re-rate.
TOP AND BOTTOM FIVE CONTRIBUTORS TO NET ASSET VALUE PERFORMANCE FOR THE YEAR TO 31 MARCH 2024
Top Five Contributors £’000
Contribution
per share
(pence)*
Vera Therapeutics
18,242 50.6
Scholar Rock Holding 14,957 41.5
Janux Therapeutics 11,182 31.0
Bellus Health
#
9,002 25.0
Chinook Therapeutics
#
6,942 19.3
60,325 167.4
Top Five Detractors
Travere Therapeutics
#
(9,905) (27.5)
uniQure
#
(6,891) (19.1)
Biogen
(6,601) (18.3)
Stemirna Therapeutics (4,985) (13.8)
Mersana Therapeutics
#
(3,818) (10.6)
(32,200) (89.3)
* Based on 36,041,496 shares being the weighted average number of shares in issue during the year ended 31 March 2024.
#
Not held at the year end.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
15
CONTRIBUTORS AND DETRACTORS
Vera Therapeutics, Scholar Rock Holding, Janux
Therapeutics, Bellus Health, and Chinook Therapeutics
were the leading positive contributors to performance in the
portfolio during the year.
• Vera Therapeutics is a clinical-stage biotechnology
company focused on developing and commercialising
treatments for patients with serious immunological
diseases. In July 2023, the company reported positive
Phase 2a data for its lead asset atacicept in patients
with IgA nephropathy (IgAN), an autoimmune disease
in which antibodies build up in kidney tissue. In January
2024, additional positive data was presented, showcasing
atacicept as a potential functional cure forIgAN.
• Scholar Rock Holding is a clinical-stage biotechnology
company developing medicines that target myostatin,
a protein that regulates muscle growth. The stock
outperformed after the company announced in October
that it will advance programs in obesity. This effort in
obesity is intended to help individuals retain muscle
mass in the context of GLP-1-targeted weight loss
therapies, which are associated with both muscle and
fat loss. In conjunction with the announcement of these
new programs, Scholar Rock also completed an upsized
public offering that extended its cash runway.
• Janux Therapeutics is a clinical-stage immuno-oncology
company developing T-cell engager medicines. In
February, shares rose following the release of positive
Phase 1 data in prostate cancer, which suggested that
the company may have a best-in-class asset. This
data also suggested that Janux’s technology could be
successfully applied to additional targets in tumor types
such as lung, kidney, and head and neck cancer.
• Bellus Health is a clinical stage company developing
camlipixant for the treatment of refractory chronic cough. In
mid-April, GlaxoSmithKline agreed to acquire the company
for $2 billion in cash, representing a 103% premium to Bellus'
share price prior to the announcement.
• Chinook Therapeutics is a clinical-stage
biopharmaceutical company focused on discovering,
developing, and commercialising precision medicines
for kidney diseases. In June, Novartis agreed to acquire
the company for up to $3.5 billion, a ~67% premium to
Chinook’s last closing price.
Travere Therapeutics, uniQure, Biogen, Stemirna
Therapeutics, and Mersana Therapeutics were the principal
detractors for the year.
• Travere Therapeutics is a commercial-stage
biotechnology company focused on rare diseases. In
late September, the company’s two-year Phase 3 trial
showed a numerical benefit for its drug Filspari versus
standard of care on kidney function, but missed statistical
significance by a narrow margin in patients with IgA
nephropathy. Filspari was subsequently approved under
Accelerated Approval, but the commercial launch has
been slower than expected.
• uniQure is a clinical-stage gene therapy company that
focuses on neurological disorders. In June, the company
showed interim data from its Phase 1/2 trial of its gene
therapy for Huntington’s disease, a genetic disorder that
causes breakdown of nerve cells in the brain, that fell
below investor expectations.
• Biogen is a large cap biotechnology company with a
pipeline of commercial and clinical stage treatments
for neurological and neurodegenerative diseases. The
company’s stock declined due to a slower-than-expected
launch of Leqembi, its first-in-class treatment for
Alzheimer’s disease.
• Stemirna Therapeutics is a private Chinese biotech
company developing mRNA-based vaccines and
therapeutics. The Company initially invested in Stemirna in
2021 because it was developing one of the leading domestic
mRNA-based COVID vaccines in China at a time when no
mRNA-based vaccines had yet been approved in China.
Given that the commercial opportunity for COVID vaccines
has diminished substantially, Stemirna decided to abandon
its COVID program and focus on its earlier-stage programs,
including a personalised cancer vaccine in PhaseI. As a
result, the company’s next financing round will likely be done
at a substantial discount to its last round. The Company’s
third-party valuation agent, Kroll, recommended an
appropriate write-down to reflect thisupdate.
• Mersana Therapeutics is a clinical stage company
developing antibody-drug conjugate therapeutics. At the end
of July, the company’s shares declined when the company
announced that its lead asset, UpRi, had failed to show a
significant benefit in late-stage ovarian cancer patients.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
16
PORTFOLIO MANAGER’S REVIEW CONTINUED
EXPECT SOME ELECTION YEAR NOISE ON DRUG PRICING BUT NOTHING MATERIAL IN THE NEARTERM
With the upcoming U.S. presidential election in November 2024, we expect both presidential candidates, Joe Biden and
Donald Trump, to discuss ways in which they might reduce drug prices if elected. We view this as campaign-related rhetoric
to attract votes and do not foresee any substantive legislative changes on this issue post-election. In 2022, the Biden
administration signed into law the Inflation Reduction Act (the IRA), which granted Medicare the authority to negotiate drug
prices. Given that this law already addresses the drug pricing issue, we think it would be unlikely that Congress would revisit
the topic again post-election. Additionally, any further adverse drug pricing legislation would likely require the Democrats to
control both chambers of Congress and the presidency, which is highly uncertain at the current time. Meanwhile, Big Pharma
has launched numerous legal challenges against the government to overturn the law and the drug industry continues to
engage in intense lobbying to soften some of the IRA’s requirements. From an M&A perspective, the IRA may actually assist
the biotech industry. The prospect of Medicare-related price cuts on key products for Big Pharma only increases the need of
those companies to acquire biotech companies to maintain earnings growth.
REGULATORY CLIMATE CONTINUES TO BE CONSTRUCTIVE
The U.S. Food and Drug Administration (FDA) regulatory environment for the approval of novel drugs remains constructive.
Since the first year of the Trump administration in 2017, we have witnessed an elevated level of new drug approvals at the
FDA. In fact, as shown in Figure 7, 2023 was a record year for FDA new drug approvals (including biologics approved at FDA’s
biologics division and drugs approved by the FDA’s traditional drug division). The increased number of approvals likely reflects
a combination of increased innovation in the sector and continued agency flexibility on approval requirements. The FDA has
generally been proactive about approving new drugs quickly if they address unmet medical needs, even if some of the clinical
trials have delivered mixed results. About 65% of drug approvals in 2023 used an expedited means of approval, whether it be
Fast Track, Breakthrough Designation, Priority Review, or Accelerated Approval. We do not foresee any change to this favourable
regulatory climate, regardless of who is elected president in the U.S. in November 2024.
22
46
59
48
53
51
37
55
7
1
5
7
8
12
22
53
59
49
58 58
45
67
0
10
20
30
40
50
60
70
2016 2017 2018 2019 2020 2021 2022 2023
CDER CBER
FDA NEW MOLECULAR ENTITY APPROVALS AT RECORD HIGHS
Figure 7
Source: FDA Centre for Drug Evaluation and Research (CDER) and Centre for Biologics Evaluation and Research (CBER) as of 31 December 2023.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
17
FINANCING ACTIVITY SURGING WITH
CONFIDENTIALLY MARKETED TRANSACTIONS
OFFERING OUTSIZED RETURNS
After a relatively quiet 2022 and the first half of 2023, initial
public offerings (IPOs) have begun increasing again as
valuations have recovered. The Company has selectively
participated in some IPOs thus far and will continue to do
so. We did not make any new private investments during
the fiscal year as the IPO market is still in the early stages
of opening up, and we want to make sure any private
investment we make has an opportunity to go public
within the next 12 months. We continue to monitor the
receptivity of the capital markets and will resume making
crossover investments once we feel the IPO window has
conclusivelyopened.
As of 31 March 2024, the Company had two private
company investments totaling approximately 3.2% of
the Company’s NAV. Both of the positions are Chinese
biotech companies: XtalPi, an artificial intelligence-based
drug discovery company, and Stemirna Therapeutics, a
Chinese mRNA vaccine company. During the fiscal year,
as explained above, Kroll recommended (and the Board
approved, following a recommendation from the Valuation
Committee) a significant write-down on Stemirna given the
company’s pivot away from its mRNA COVID vaccine due
to the lack of commercial demand. XtalPi still hopes to go
public in 2024.
The follow-on financing environment for quality emerging
biotech companies remained relatively strong throughout
the fiscal year, capped by a particularly strong quarter
ending 31 March 2024. In general, companies with strong
fundamentals have had no problems raising capital from
equity investors, while companies of lesser quality have
continued to find fundraising difficult.
Recently, there has been an increasing trend of companies
conducting confidentially marketed offerings to a select
number of potential investors. To attract further interest
from healthcare investors, companies are disclosing
confidential information about their programs as part of
the process, including clinical trial data and other material
information. The investors that participate are restricted
from trading in the stock while they conduct diligence on
the investment opportunity before the financing is disclosed
to the public. Given OrbiMed’s longstanding presence in the
healthcare investment space, the firm is regularly invited
to participate in many of these deals, averaging four to
five deals per week. We would note that in most cases
only a handful of investment firms are informed of these
confidential financings; they are not broadly offered to the
wider investment community. We have been extremely
selective in participating in these deals and only invest in a
small minority of them.
Some recent financings where we were able to take
advantage of this fundraising paradigm include:
1) In October 2023, we invested $8.5 million in an equity
offering for Scholar Rock Holdings. The company
shared confidentially the launch of a new obesity
program with its anti-myostatin antibody, which has
shown promising weight-reduction effects in mice
while preserving lean muscle mass. Our holding in
Scholar Rock contributed approximately 4.6% to NAV
performance for the fiscal year.
2) In July 2023, we invested $2.2 million in a confidentially
marketed financing for Janux Therapeutics. The
company shared some encouraging early data for
its T-cell engager in prostate cancer as part of our
investment due diligence. We added to our position after
the financing. A positive update on the prostate cancer
dataset was subsequently released in February 2024,
leading to a sharp rise in the stock. Our holding in Janux
Therapeutics contributed approximately 5.5% to NAV
performance for the fiscal year.
3) In August 2023, we invested $4.7 million in an offering
for Mirati Therapeutics. Prior to the deal, the company
shared confidentially updated data for its drug, Krazati,
in lung cancer, promising initial data for a PRMT5
inhibitor for cancer, and news of a CEO change.
All of this news was released to the marketplace
simultaneously with news of the completed financing.
The stock reacted positively to the news and two
months later, Bristol Myers Squibb announced that
it was acquiring Mirati for $5.8 billion. Our holding
in Mirati contributed approximately 1.2% to NAV
performance for the fiscal year.
We will continue to leverage the firm’s access to
confidentially marketed deal flow to make attractive
investments.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
18
PORTFOLIO MANAGER’S REVIEW CONTINUED
BIOTECH IPOs BY QUARTER
Count by Quarter (#)
Figure 9
Source: Dealogic as of 11 April 2024.
Includes all SEC registered biotech IPOs greater than $50 million.
Volume by Quarter ($)
Figure 8
1
Biotech IPOs by Quarter
____________________
Source: Dealogic as of 4/11/2024.
Includes all SEC registered biotech IPOs greater than $50mm.
Count by Quarter (#)
Volume by Quart
5
15
10 10
7 7
5
3 3
12
9
12
10
20
14
9
8
17
6
10
7
20
26
20
24
27
18
10
5
2
1
2 2
1
5
3
7
1
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
676m
2.0bn
1.4bn
834m
685m
499m
381m
385m
300m
1.1bn
1.1bn
1.6bn
1.1bn
2.4bn
1.6bn
1.7bn
1.1bn
2.0bn
1.2bn
1.2bn
1.3bn
6.4bn
5.1bn
3.6bn
5.0bn
5.1bn
3.4bn
2.0bn
748m
353m
185m
269m
406m
540m
1.1bn
666m
1.5bn
110m
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
1
Biotech IPOs by Quarter
____________________
Source: Dealogic as of 4/11/2024.
Includes all SEC registered biotech IPOs greater than $50mm.
Count by Quarter (#)
Volume by Quart
5
15
10 10
7 7
5
3 3
12
9
12
10
20
14
9
8
17
6
10
7
20
26
20
24
27
18
10
5
2
1
2 2
1
5
3
7
1
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
676m
2.0bn
1.4bn
834m
685m
499m
381m
385m
300m
1.1bn
1.1bn
1.6bn
1.1bn
2.4bn
1.6bn
1.7bn
1.1bn
2.0bn
1.2bn
1.2bn
1.3bn
6.4bn
5.1bn
3.6bn
5.0bn
5.1bn
3.4bn
2.0bn
748m
353m
185m
269m
406m
540m
1.1bn
666m
1.5bn
110m
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
19
BIOTECH FOLLOW-ONS BY QUARTER
Count by Quarter (#)
2
Biotech Follow-ons by Quarter
____________________
Source: Dealogic as of 4/11/2024.
Includes all SEC registered biotech follow-ons greater than $50mm. Note: includes registered directs.
Count by Quarter (#)
Volume by Quarter ($)
56
28
25
7
14
11
15
16
21
22
33
28
47
31
34
15
23
32
22
41
34
65
43 43
74
23
11
27
12
23
30
39
27
33
22
25
55
3
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
16.4bn
6.8bn
4.7bn
4.7bn
5.4bn
1.5bn
2.1bn
2.3bn
2.9bn
3.8bn
6.8bn
5.4bn
8.8bn
4.1bn
5.7bn
2.7bn
4.3bn
4.4bn
4.4bn
6.9bn
5.8bn
19.1bn
8.1bn
10.1bn
10.9bn
4.1bn
2.2bn
5.3bn
2.5bn
2.7bn
5.6bn
6.7bn
4.7bn
5.4bn
5.0bn
4.8bn
11.9bn
309m
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
Figure 11
Source: Dealogic as of 11 April 2024.
Includes all SEC registered biotech follow-ons greater than $50 million. A follow on offering is when a public company issues more shares after completing its IPO
and is publicly traded on an exchange. Note: includes registered direct offerings (a public offering of securities sold on a best efforts basis by a placement agent
engaged by an issuer to introduce the issuer to potential investors).
Volume by Quarter ($)
2
Biotech Follow-ons by Quarter
____________________
Source: Dealogic as of 4/11/2024.
Includes all SEC registered biotech follow-ons greater than $50mm. Note: includes registered directs.
Count by Quarter (#)
Volume by Quarter ($)
56
28
25
7
14
11
15
16
21
22
33
28
47
31
34
15
23
32
22
41
34
65
43 43
74
23
11
27
12
23
30
39
27
33
22
25
55
3
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
16.4bn
6.8bn
4.7bn
4.7bn
5.4bn
1.5bn
2.1bn
2.3bn
2.9bn
3.8bn
6.8bn
5.4bn
8.8bn
4.1bn
5.7bn
2.7bn
4.3bn
4.4bn
4.4bn
6.9bn
5.8bn
19.1bn
8.1bn
10.1bn
10.9bn
4.1bn
2.2bn
5.3bn
2.5bn
2.7bn
5.6bn
6.7bn
4.7bn
5.4bn
5.0bn
4.8bn
11.9bn
309m
Q1 '15 Q1 '16 Q1 '17 Q1 '18 Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24
Figure 10
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
20
PORTFOLIO MANAGER’S REVIEW CONTINUED
M&A ACTIVITY CONTINUES TO BE ROBUST
Biotech M&A activity continued to be robust during the fiscal year, driven by: 1) the low valuations of biotech targets; and
2) the urgent need of Big Pharma to acquire new products to replace lost revenues from expected patent expirations in the
second half of the decade.
BIOTECH M&A CONTINUING AT ELEVATED RATE
Publicly-Traded Biotech M&A Activity (2018-2024)
Figure 12
Represents announced transactions where the target was a publicly traded company.
Source: FactSet, data as of 31 March 2024.
2
3
1
5
4
2
5
8
4
3
8
12
4 4
7
4
2
6
9
6
9
11
5
9
7
Q1 '18 Q2 '18 Q3 '18 Q4 '18 Q1 '19 Q2 '19 Q3 '19 Q4 '19 Q1 '20 Q2 '20 Q3 '20 Q4 '20 Q1 '21 Q2 '21 Q3 '21 Q4 '21 Q1 '22 Q2 '22 Q3 '22 Q4'22 Q1'23 Q2'23 Q3'23 Q4'23 Q1'24
$19B
$10B
$0.1B
$6B
$104B
$95B
$5B
$18B
$5B
$2B
$31B
$58B
$12B $3B
$16B
$9B
$2B
$18B
$13B
$31B
$51B
$29B
$9B
$47B
$15B
The Company benefited directly from six M&A transactions
during the fiscal year because of holdings at the time of the
announcement in the target companies:
• GlaxoSmithKline’s acquisition of Bellus Health for
$2billion;
• Novartis’ acquisition of Chinook Therapeutics for
$3.5billion;
• Eli Lilly’s acquisition of DICE Therapeutics for
$2.4billion;
• Bristol Myers Squibb’s acquisition of Mirati
Therapeutics for $5.8 billion;
• AstraZeneca’s acquisition of Gracell Biotechnologies for
$1.2 billion; and
• Johnson & Johnson’s acquisition of Ambrx Biopharma
for $2 billion.
Though many transactions have occurred, many Big
Pharma companies still need to do more to shore up
their pipelines. Acquirors are typically looking for biotech
companies with drugs that have already demonstrated
proof of concept in a clinical trial and have commercial
potential in excess of $1 billion in sales. Strategic fit with
the acquirors’ existing therapeutic areas of focus and
strong intellectual property are additional considerations.
As shown in Figure 13, we estimate close to $270billion of
blockbuster drug sales are at risk of generic or biosimilar
competition by the end of the decade, including mega-
blockbusters like Merck’s Keytruda and Bristol Myers
Squibb’s Eliquis. We believe there are many holdings in the
portfolio that would make suitable M&A targets for larger
companies.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
21
© 2024 OrbiMed Advisors LLC. All Rights Reserved. CONFIDENTIAL.
88
Big Pharma Patent Cliff Drives Biotech M&A
Nearly $270 billion in branded sales are at risk (2024-2030)
Company
Drug
US Loss of
Exclusivity
(Projected)
’23 Global
Sales
($bn)
2028
$25.0
2026
$12.2
2029
$11.6
2025
$10.9
2029
$9.7
2028
$9.0
2027
$4.9
2027
$4.8
Branded Sales at Risk ($bn)
Source: Wolfe Research, OrbiMed, Visible Alpha (sales at risk represents consensus projected sales for year prior
to year of expected loss of exclusivity)
Source: S&P Global report, Company Reports
$0
$20
$40
$60
$80
$10 0
$12 0
202 4 202 5 202 6 202 7 202 8 202 9 203 0
BIG PHARMA PATENT CLIFF DRIVES BIOTECH M&A
Nearly $270 billion in branded sales are at risk (2024-2030)
Figure 13
Source: Wolfe Research, OrbiMed, Visible Alpha (sales at risk represents
consensus projected sales for year prior to year of expected loss of
exclusivity).
Source: S&P Global report, company reports
STRONG INNOVATION CONTINUES TO DRIVE
INDUSTRY VALUE
Innovation remains strong for the biotech industry. A
significant proportion of the 67 drug approvals by the FDA
in 2023 consisted of first-in-class drugs with mechanisms
of action different from those of existing therapies.
While biotech has generally been a high-risk sector,
these approvals of drugs based on previously unproven
modalities show that the sector is maturing. Below are
just some examples of first-in-class novel drug approvals
originated by biotech companies in 2024:
• Casgevy, the first gene-editing CRISPR-based
treatment ever approved, for sickle cell disease (Vertex
Pharmaceuticals/CRISPR Therapeutics);
• Roctavian, the first gene therapy approved for
hemophilia A (BioMarin Pharmaceuticals);
• Elevidys, the first gene therapy approved for Duchenne
muscular dystrophy (Sarepta Therapeutics);
• Vyjuvek, the first topical gene therapy ever approved, for
dystrophic epidermolysis bullosa (Krystal Biotech);
• Daybue, the first treatment for Rett syndrome (Acadia
Pharmaceuticals);
• Skyclarys, the first treatment for Friedrich’s ataxia
(Biogen); and
• Zurzuvae, the first oral medication for postpartum
depression (Sage Therapeutics/Biogen).
US Loss of '23 Global
Exclusivity Sales
Company Drug (Projected) ($bn)
Merck Keytruda 2028 $25.0
Bristol Myers Squibb
& Pfizer Eliquis 2026 $12.2
Sanofi Dupixent 2029 $11.6
Johnson & Johnson Stelara 2025 $10.9
Johnson & Johnson Darzalex 2029 $9.7
Bristol Myers Squibb Opdivo 2028 $9.0
Abbvie &
Johnson & Johnson Imbruvica 2027 $4.9
Pfizer Ibrance 2027 $4.8
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
22
PORTFOLIO MANAGER’S REVIEW CONTINUED
The number of next generation biotherapeutics entering development based on novel development technologies like cell
therapy and gene therapy continues to rise. The Company has exposure across a wide swath of these new technologies, as
shown below (note some positions are double counted because they use more than onetechnology):
Antibody-drug
conjugates
5.9% NAV
Gene therapy/
gene editing
18.3% NAV
Cell therapy
7.4% NAV
Multispecific
antibodies/
T-cell engagers
21.3% NAV
Oligonucleotide
therapeutics
36.4% NAV
Figure 14
Percentage of Company NAV as of 31 March 2024. Some positions are double counted because they use more than one technology.
Source: OrbiMed
Other seminal events in the biotech sector during the review
period include:
• Argenx announced positive Phase 3 data for Vyvgart,
an anti-FcRN antibody, in chronic inflammatory
demyelinating polyneuropathy (CIDP), an autoimmune
disease that causes muscle weakness. Vyvgart is
expected to become the first novel treatment for CIDP
approved in over 10 years.
• MoonLake Immunotherapeutics reported best-in-
class Phase 2 efficacy and safety data for its anti-IL17
nanobody sonelokimab in hidradenitis suppurativa,
a painful chronic skin condition that causes skin
abscesses and scarring of the skin.
• Crinetics Pharmaceuticals announced a positive
Phase 3 trial for paltusotine, the first once-daily
oral medication for the treatment of acromegaly, a
rare condition where the body produces too much
growthhormone.
• Cytokinetics reported best-in-class Phase 3 safety
and efficacy data for aficamten, a cardiac myosin
inhibitor, for the treatment of obstructive hypertrophic
cardiomyopathy, a disease that causes impaired
heart function. The results of the study showed that
aficamten improved exercise capacity and increased
peak oxygen uptake relative to a placebo.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
23
While innovation is taking place across all therapeutic
areas and drug development technologies, we are currently
finding particularly attractive investment opportunities in
the following areas:
Obesity
Eli Lilly and Novo Nordisk have generated significant sales
for their obesity drugs and sell-side analysts now expect
the therapeutic category to reach $100+ billion in sales in
2030. Because those two companies are considered to
be Big Pharma companies, we have not held them in our
biotech portfolio. Given the commanding lead that Eli Lilly
and Novo Nordisk have established and the fact that their
pipeline assets have already shown weight loss of 20-25%,
our view is that biotech companies will need to differentiate
based on mechanism of action, tolerability, or some other
significant aspect in order to take market share. Some
examples of biotech companies held in the portfolio as of
31 March 2024 that have obesity programs include:
• Scholar Rock Holding - Current GLP-1 agents cause
people to lose both fat mass and muscle mass. Scholar
Rock is developing an anti-myostatin antibody that
could be dosed in conjunction with GLP-1 agents in
order to preserve muscle mass. We like the fact that
this agent would not directly compete with the leading
assets from Eli Lilly and Novo Nordisk but would
instead be used as a companion therapeutic that could
ride on the coattails of thoseagents.
• Innovent - Innovent is a leading Chinese biotech
company that is developing mazdutide, a GLP-1/GPCR
dual agonist, for obesity in Phase 3 trials in China. We
believe Innovent will be first-to-market with a new
branded agent in obesity among domestic companies
in China and should therefore take a significant share in
that market.
• BrightGene Bio-Medical Technology - BrightGene is
a Chinese biotech developing a dual GLP-1/GIP agent
for obesity in Phase 2. We believe the drug could deliver
better efficacy than Eli Lilly’s Mounjaro/Zepbound.
• Lexicon Pharmaceuticals - Lexicon announced a weight
loss agent with a novel mechanism of action targeting
ACLS5 in April 2024 during its analyst day.
• Amgen - Amgen is a large cap biotech company
developing an obesity agent called MariTide that could
be dosed on a once-monthly basis rather than on a
weekly basis.
• Regeneron Pharmaceuticals - Regeneron is a large cap
biotech company that is developing antibodies against
myostatin and activin A to preserve lean muscle mass as
an adjunct treatment for GLP-1agents.
Oligonucleotide Therapeutics
Oligonucleotides are short strands of DNA or RNA that
can be administered to patients to allow them to express a
new protein or to block expression of a patients’ genes for
therapeutic effect. Some examples of biotech companies
held in the portfolio as of 31 March 2024 that have
oligonucleotide therapeutics include:
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
24
PORTFOLIO MANAGER’S REVIEW CONTINUED
• Sarepta Therapeutics - Sarepta Therapeutics is a
leader in precision genetic medicine for rare diseases. It
currently has three commercial RNA-based products for
Duchenne muscular dystrophy (DMD), and it has the first
FDA-approved gene therapy, Elevydis, for this devastating
disease. Elevidys is only approved for 4-5 year olds
currently, but we believe it is likely to secure a broader label
this year that will allow it to be marketed to all agegroups.
• Ionis Pharmaceuticals - Ionis Pharmaceuticals is a
leader in RNA-targeted therapeutics. The company has
made tremendous progress in the last 12 months -
pivoting from a clinical stage company to an independent
commercial organisation. The company’s marketed
products include Qalsody for SOD1-amyotrophic lateral
sclerosis, Spinraza for spinal muscular atrophy, and
Wainua for TTR polyneuropathy. The next wave of
late-stage products include donidalorsen for hereditary
angioedema and olezarsen for familial chylomicronemia
syndrome.
• Dyne Therapeutics - Dyne Therapeutics is a clinical-
stage muscle disease company with a proprietary
FORCE™ platform to deliver antisense oligonucleotides
conjugated to antigen-binding fragments to muscle
tissues. Its lead program in myotonic dystrophy Type
1 (DM1) has demonstrated best-in-class efficacy in
improving patient function.
• Avidity Biosciences - Avidity Biosciences is an emerging
biotech company developing first-in-class antibody
oligonucleotide conjugates which combine the tissue
selectivity of monoclonal antibodies with the precision
of oligonucleotide-based therapies. It is leading the field
with clinical development programs for three rare muscle
diseases: myotonic dystrophy type 1 (DM1), Duchenne
muscular dystrophy (DMD), and facioscapulohumeral
muscular dystrophy (FSHD).
Oncology
Oncology remains the largest therapeutic area of drug
development for the biopharmaceutical industry given the
significant unmet need that still exists. Some examples
of biotech companies held in the portfolio as of 31 March
2024 that have novel approaches to treating cancer include:
• Geron - Geron is a clinical stage oncology company
developing imetelstat, a telomerase inhibitor. In 2023,
Geron announced positive Phase 3 trial results in low-
risk myelodysplastic syndrome (MDS), an indication with
few effective options for patients. If approved, imetelstat
would become the first ever FDA-approved telomerase
inhibitor. We believe that the commercial launch of
imetelstat will be successful, driven by broad uptake
among academic and community physicians seeking to
treat a large fraction of low-risk MDS patients.
• Janux Therapeutics - Janux is developing a bispecific
T-cell engager that has shown compelling early data in
prostate cancer. The company’s masking technology
allows its bispecific to preferentially activate the immune
system at the site of the tumor, facilitating tumor-
specific killing and reducing toxicity to healthy tissue. The
platform has potential broad applicability to a range of
solidtumors.
• ALX Oncology - ALX Oncology is developing a CD47 immune
checkpoint inhibitor to turn off one of the mechanisms by
which cancer cells evade the immune system. The company
combines its therapy with anti-cancer antibodies as well as
antibody-drug conjugates to enhance its effectiveness. ALX
has recently shown that its drug combined with the standard
of care in later line gastric cancer significantly increased the
number of patients that had their tumors shrink relative to
patients on the standard of care alone.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
25
STRATEGY, OUTLOOK, AND ORBIMED UPDATE
We are encouraged that the recovery in small and mid cap
biotech that we have been predicting for the past couple of
years finally appears to be manifesting itself. Strategy-wise,
we intend to remain overweight small caps and underweight
large caps versus the Benchmark, as we believe we are
still in the early stages of an emerging biotech recovery
from depressed valuation levels. Having said that, we are
cognisant that the interest rate picture in the U.S. can change
rapidly, leading to short-term volatility in the portfolio. Our
aim is to identify quality companies with promising drugs
that can generate value regardless of market conditions.
From a risk management perspective, we diversify the
portfolio by stage of company, geography (U.S., Europe,
China), therapeutic area, and drug development technology.
We manage much of the idiosyncratic risk via prudent
position sizing. When we hold stocks into binary events like
a pivotal clinical trial result, we size the positions to minimise
downside risk in case the events turn out to be negative. The
biotech sector is a rapidly changing industry with stock-
moving catalysts occurring on a daily basis, whether it is a
clinical trial result, a regulatory decision, or an earnings result.
Frequently a clinical trial result for one company not only
affects the share price of that company but also the share
prices of any competitors in the field. Because the portfolio
is tilted towards more volatile smaller stocks, turnover in the
portfolio is relatively high in order to successfully navigate
these catalysts in a prudent way. The annual one standard
deviation move in a small cap biotech stock is roughly
78%. Most small cap biotech companies’ entire valuation
depends on the success or failure of a single lead asset.
As a result, we regularly trade around positions (trimming
high, adding low) to ensure position sizes appropriately
reflect risk/reward, especially in advance of binary events.
The turnover in the portfolio during the fiscal year was
102% and shareholders should expect that level of turnover
going forward. The portfolio had an average of 56 positions
during the fiscal year and we added 20 names and exited
17 names over the course of the year. In addition, we made
an intra-period entry and exit in nine stocks during the fiscal
year (i.e. we initiated a new position in a stock and sold the
stock completely during the fiscal year). The turnover reflects
valuation discipline and appropriate risk management.
Gearing will remain in the 5-10% range.
There were no significant changes to the OrbiMed research
team during the fiscal year. Despite the macro volatility,
we remain focused on the fundamentals of each company
that we invest in and remain committed to delivering the
best returns for the Company’s shareholders. We continue
to believe that the valuation disconnect we are currently
observing in the sector provides an excellent entry point for
long-term investors seeking to invest in the breakthrough
innovation in biotech.
OrbiMed Advisors LLC
Portfolio Manager
4 June 2024
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
26
ORBIMED'S APPROACH TO ESG
The Company’s Portfolio Manager, OrbiMed, is guided by its
Responsible Investing Policy in its approach to integrating
environmental, social and governance (ESG) issues into
its investment decision-making. The Portfolio Manager
seeks to invest in innovative healthcare companies that
are working towards addressing significant unmet medical
needs, across biopharmaceuticals, medical devices,
diagnostics, and healthcare services sectors, globally.
OrbiMed believes that there is a high congruence between
companies that seek to act responsibly and those that
succeed in building long-term shareholder value. The
Portfolio Manager seeks to integrate ESG into the overall
investment process, with the objective of maximising
investment returns. Investment decisions are based on
a variety of financial and non-financial company factors,
including ESG information. The Portfolio Manager has
appointed a Director - ESG to oversee the integration of ESG
analysis.
As a responsible investor, OrbiMed screens potential
investments and business sectors for factors that may
lead to negative impacts on public health or wellbeing. The
Portfolio Manager considers healthcare sector-specific
guidance from the Sustainability Accounting Standards
Board (SASB) to determine material ESG factors as
part of its investment research. Social factors such as
affordability, pricing, access, and safety dominate the
financially material ESG issues for the pharmaceutical,
biotechnology, and medical devices sub-sectors, followed
by governance factors. For companies which do not have
manufacturing and are focused on drug discovery and
development, environmental factors such as greenhouse
gas (GHG) emissions are not generally regarded as
material. Healthcare and life sciences sectors are highly
regulated, globally. Regulation is well-established across
developed markets and emerging markets for the sector.
To that end, OrbiMed considers compliance with local laws
and regulations as one of the factors in its investment
evaluation. Depending on the investment, all or a subset of
the ESG factors that are financially material and relevant are
considered in OrbiMed’sresearch.
MONITORING AND ENGAGEMENT
OrbiMed utilises ESG scores for public equity holdings from
third-party service providers. To supplement the information
from the third-party service providers, OrbiMed also
conducts proprietary analysis on ESG performance.
The Portfolio Manager also engages on a regular basis
with its portfolio companies through meetings with
management, proxy voting, and in some cases, through
board representation.
OrbiMed’s analysts regularly track ESG information on
safety of clinical trials, drug safety, ethical marketing,
call-backs and other materially relevant factors. As part of
these efforts, OrbiMed engages with companies directly or
through brokers, and facilitates dialogues and exchange of
leading practices among investors, companies, and other
relevant experts on ESG in the healthcare sector.
Between 1 April 2023 and 31 March 2024, a total of 401
proposals came to vote within the Company’s portfolio. Of
these, 400 were management proposals and one was a
shareholder proposal.
ORBIMED VOTING DURING THE YEAR ENDED
31 MARCH 2024
Proposed by
Total number
of proposals
Voted
for
Voted
against
Votes
abstained/
withheld
Management
400 347 50
3
Shareholder
1 0 1
0
There were no management or shareholder proposals on
any material ESG topics, as listed in the SASB guidance for
the biotechnology and pharmaceuticals sub-sector.
The Portfolio Manager provides an annual update on ESG to
the Board of the Company.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
27
CLIMATE CHANGE
As per the guidance from SASB, climate change is not
a material ESG consideration for biotechnology and
pharmaceutical, medical equipment and supplies, and
managed care sectors. However, energy management
is noted as a material ESG concern for the healthcare
delivery sector. To that end, OrbiMed includes the scores on
energy management for the relevant sectors in its overall
ESGmonitoring.
REGULATORY UPDATE ON ESG
During the year, regulators around the world remained
active on defining and classifying ESG investing and
curbing greenwashing. The UK Financial Conduct
Authority (FCA) released its final Policy Statement on
Sustainability Disclosure Requirements (SDR) and
investment labels on 28 November 2023. The UK SDR,
which applies to all FCA-regulated firms, introduces a
set of sustainability-related product labels, product and
entity-level disclosures, and anti-greenwashing rules
for sustainable investing in the UK. While the Portfolio
Manager considers ESG issues to be important when
selecting investments, the Company does not have explicit
sustainability objectives in its investment policy and the
Company will not seek to apply a sustainability label under
SDR.
OrbiMed Advisors LLC
Portfolio Manager
4 June 2024
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
28
BUSINESS REVIEW
The Strategic Report on pages 1 to 39
contains a review of the Company’s
business model and strategy, an
analysis of its performance during
the financial year and its future
developments, as well as details of the
principal risks and challenges it faces.
Its purpose is to inform shareholders and help them to
assess how the Directors have performed their duty to
promote the success of the Company. The Strategic
Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based
on the information available to them up to the date of this
report. Such statements should be treated with caution
due to the inherent uncertainties, including both economic
and business risk factors, underlying such forward-looking
information.
BUSINESS MODEL
The Biotech Growth Trust PLC is an externally managed
investment trust and its shares are listed on the premium
segment of the Official List and traded on the main market of
the London Stock Exchange.
The purpose of the Company is to achieve long-term growth
in its shareholders' wealth by providing a vehicle for investors
to gain exposure to a portfolio of worldwide biotechnology
companies, through a single investment.
The Company’s strategy is to create value for shareholders
by addressing its investment objective. As an externally
managed investment trust, all of the Company's day-to-day
management and administrative functions are outsourced to
service providers. As a result, the Company has no executive
directors, employees or internal operations.
The Company employs Frostrow Capital LLP (Frostrow) as
its Alternative Investment Fund Manager (AIFM), OrbiMed
Capital LLC (OrbiMed) as its Portfolio Manager, J.P. Morgan
Europe Limited as its Depositary and J.P. Morgan Securities
LLC as its Custodian and Prime Broker. Further details
about their appointments can be found in the Report of the
Directors on pages 51 and 52.
The Board is responsible for all aspects of the Company’s
affairs, including setting the parameters for and monitoring
the investment strategy as well as the review of investment
performance and policy.
The Company is an investment company within the meaning
of Section 833 of the Companies Act 2006 and has been
approved by HM Revenue & Customs as an investment
trust (for the purposes of Section 1158 of the Corporation
Tax Act 2010). As a result, the Company is not liable for
taxation on capital gains. The Directors believe that approval
will continue to be retained. The Company is not a close
company for taxation purposes.
INVESTMENT OBJECTIVE AND POLICY
The Company seeks capital appreciation through investment
in the worldwide biotechnology industry.
In order to achieve its investment objective, the Company
invests in a diversified portfolio of shares and related
securities in biotechnology companies on a worldwide basis.
In connection with the investment policy, the following
guidelines apply:
• The Company will not invest more than 10%, in
aggregate, of the value of its gross assets in other
closed ended investment companies (including
investment trusts) listed on the London Stock Exchange,
except where the investment companies themselves
have stated investment policies to invest no more
than 15% of their gross assets in other closed ended
investment companies (including investment trusts)
listed on the London Stock Exchange.
• The Company will not invest more than 15%, in
aggregate, of the value of its gross assets in other closed
ended investment companies (including investment
trusts) listed on the London Stock Exchange.
• The Company will not invest more than 15% of the value
of its gross assets in any one individual stock at the
time of acquisition.
• The Company will not invest more than 10% of the value
of its gross assets in unquoted investments at the time
of acquisition. This limit includes any investment in
private equity funds managed by the Portfolio Manager
or any affiliates of such entity.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
29
• The Company may invest or commit for investment
a maximum of U.S.$15 million, after the deduction of
proceeds of disposal and other returns of capital, in
private equity funds managed by the Portfolio Manager,
or any affiliates thereof.
• The Company’s borrowing policy is that borrowings
will not exceed 20% of the value of the Company’s
net assets. Any loan facility in place from time to time
may be drawn by the Portfolio Manager overseen by
theAIFM.
• The Company may be unable either to invest directly or
invest efficiently in certain countries or share classes. In
these circumstances, the Company may gain exposure
by investing indirectly through swaps or other derivative
instruments where it is more efficient to do so. Exposure
to underlying investments thus obtained will count
towards and be subject to the investment limits set out
above. Further, where the Company invests via swaps
or derivatives for such a purpose, exposure to these
financial instruments will count towards and be subject
to the limits on the use of derivatives and equity swaps
set out below.
• In line with the Investment Objective, derivatives are
employed, when appropriate, in an effort to enhance
returns and to improve the risk-return profile of the
Company’s portfolio. The Board has set the following
limits within which derivative exposures are managed:
• Derivative transactions (excluding equity swaps) can
be used to mitigate risk and/or enhance return and
will be restricted to an aggregate net exposure of 5
per cent. of the value of the gross assets measured
at the time of the relevant transaction;
• Equity swaps may be used for efficient portfolio
management purposes and aggregate net
counterparty exposure through a combination of
derivatives (as set out in the previous bullet point)
and equity swap transactions is restricted to 12
per cent. of the value of the gross assets of the
Company at the time of the transaction.
In accordance with the requirements of the Financial Conduct
Authority, any material change to the investment policy will
only be made with the approval of shareholders by ordinary
resolution.
INVESTMENT STRATEGY
The implementation of the Investment Objective has been
delegated to OrbiMed by Frostrow (as AIFM) under the Board’s
and Frostrow’s supervision and guidance.
Details of OrbiMed’s investment strategy and approach are set
out in the Portfolio Manager’s Review on pages 9 to 25. While
performance is measured against the Benchmark, the Board
encourages OrbiMed to manage the portfolio without regard to
the Benchmark and its make-up.
While the Board’s strategy is to allow flexibility in managing the
investments, in order to manage investment risk it has imposed
the various investment, gearing and derivative guidelines and
limits, within which Frostrow and OrbiMed are required to
manage the investments, as set out in the Investment Policy.
PERFORMANCE MEASUREMENT
The Board measures OrbiMed's performance against the
Nasdaq Biotechnology Index (sterling adjusted). The Board also
monitors the Company's performance against its peer group.
The Board is recommending to shareholders a change to
the Benchmark Index. Please refer to the Chair's Statement
beginning on page 2 for further information.
DIVIDEND POLICY
The Company invests with the objective of achieving capital
growth and it is expected that dividends, if any, are likely to
be small. The Board intends only to pay dividends on the
Company’s shares to the extent required in order to maintain
the Company’s investment trust status.
No dividends were paid or declared during the year (2023:
None).
CONTINUATION OF THE COMPANY
An opportunity to vote on the continuation of the Company
is given to shareholders every five years. The next such
continuation vote will be proposed at the Annual General
Meeting to be held in 2025.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
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30
COMPANY PROMOTION
The Company has appointed Frostrow to provide marketing
and investor relations services, in the belief that a well-
marketed investment company is more likely to grow over
time, have a more diverse, stable list of shareholders and its
shares will trade closer to the net asset value per share over
the long term. Frostrow actively promotes the Company in
the following ways:
Engaging regularly with institutional investors, discretionary
wealth managers and a range of execution-only platforms:
Frostrow regularly meets with institutional investors,
discretionary wealth managers and execution-only
platform providers to discuss the Company’s strategy and
to understand any issues and concerns, covering both
investment and corporate governance matters;
Making Company information more accessible: Frostrow
works to raise the profile of the Company by targeting key
groups within the investment community, holding periodic
investment seminars, commissioning and overseeing PR
output and managing the Company’s website and wider
digital offering, including Portfolio Manager videos and
social media;
Disseminating key Company information: Frostrow
performs the Investor Relations function on behalf of the
Company and manages the investor database. Frostrow
produces all key corporate documents, distributes monthly
fact sheets, annual and half yearly reports and updates from
OrbiMed on the portfolio and market developments; and
Monitoring market activity, acting as a link between the
Company, shareholders and other stakeholders: Frostrow
maintains regular contact with sector broker analysts and
other research and data providers, and conducts periodic
investor perception surveys, liaising with the Board to
provide up-to-date and accurate information on the latest
shareholder and market developments.
KEY PERFORMANCE INDICATORS (KPIs)
The Board assesses the Company’s performance in
meeting its objective against the following KPIs:
• net asset value total return;
• share price total return;
• share price discount to net asset value per share; and
• ongoing charges.
A full description of the Company’s performance is provided
in the Chair’s Statement and the Portfolio Manager’s Review
and a record of these measures is shown on pages 1, 5 and 6.
The KPIs have not changed from the prior year:
NET ASSET VALUE PER SHARE TOTAL RETURN^
The Directors regard the Company’s net asset value per
share total return as being the overall measure of value
generated by the Portfolio Manager over the long term. The
Board considers the principal comparator to be the Nasdaq
Biotechnology Index (sterling adjusted) (the Benchmark).
OrbiMed’s investment style is such that performance is
likely to deviate from that of the Benchmark.
During the year under review, the Company’s net asset
value per total share return was 26.5%, outperforming the
Benchmark by 21.5% (2023: -11.0%, underperforming the
Benchmark by 16.4%). Since OrbiMed’s date of appointment
(19 May 2005) to 31 March 2024, the Company’s net asset
value per share total return is 983.3% compared with
840.9% for the Benchmark.
SHARE PRICE TOTAL RETURN^
The Directors also regard the Company’s share price total
return to be a key indicator of performance. This reflects the
Company's share price growth which the Board recognises
is important to investors.
During the year under review the Company’s share price
total return was 27.1% (2023: -12.8%). Since OrbiMed’s
date of appointment (19 May 2005) to 31 March 2024, the
Company’s share price total return is 955.7% compared
with Benchmark performance of 840.9%.
SHARE PRICE (DISCOUNT)/PREMIUM TO NET ASSET
VALUE PER SHARE^
The Board regularly reviews the level of the discount/
premium of the Company’s share price to the net asset
value per share and considers ways in which share price
performance may be enhanced, including the effectiveness
of marketing, share issuance and buybacks, where
appropriate. The Board has a discount control mechanism
in place, the aim of which is to prevent the level of the share
price discount to the net asset value per share exceeding
6%. Shareholders should note, however, that it remains
possible for the discount to be greater than 6% on any one
day due to sector volatility and the fact that the share price
BUSINESS REVIEW CONTINUED
^ Alternative Performance Measure (See glossary beginning on page 100).
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
31
continues to be influenced by the overall supply of and
demand for the Company’s shares in the secondary market.
Any decision to repurchase shares is at the discretion of the
Board. 5,205,221 shares were repurchased by the Company
during the year (2023: 2,421,263).
When the Company's shares trade at a premium to the
net asset value per share, new shares can be issued at a
premium to the net asset value per share.
The Board believes that the benefits of issuing new shares
in such conditions are as follows:
• to fulfil excess demand in the market in order to help
manage the premium at which the Company’s shares
trade to net asset value per share;
• to provide a small enhancement to the net asset value
per share of existing shares through new share issuance
at a premium to the estimated net asset value per share;
• to grow the Company, thereby spreading operating
costs over a larger capital base, which should reduce
the ongoing charges ratio; and
• to improve liquidity in the market for the Company’s
shares.
As the Company's shares traded at a discount to the net
asset value per share throughout the year, no new shares
were issued during the year (2023:Nil).
The volatility of the net asset value per share in an asset
class such as biotechnology is a factor over which the
Board has no control. The making and timing of any share
buy-backs or share issuance is at the absolute discretion
of the Board. Please see pages 38 and 39 for information
regarding how the Board addressed this issue during
theyear.
ONGOING CHARGES^
Ongoing charges represent the costs that the Company can
reasonably expect to pay from one year to the next, under
normal conditions. The Board continues to be conscious
of expenses and seeks to maintain a sensible balance
between high quality service and costs. The Board therefore
considers the ongoing charges ratio to be a KPI and reviews
the figure on a regular basis.
As at 31 March 2024 the ongoing charges figure was 1.2%
(2023: 1.1%).
^ Alternative Performance Measure (see glossary beginning on page 100).
RISK MANAGEMENT
The Board is responsible for managing the risks faced by
the Company. Through delegation to the Audit Committee,
the Board has established procedures to manage risk,
to review the Company’s internal control framework and
to establish the level and nature of the principal risks the
Company is prepared to accept in order to achieve its long-
term strategic objective. The Audit Committee has carried
out a robust assessment of the principal and emerging
risks with the assistance of Frostrow (the AIFM). Arisk
management process has been established to identify
and assess risks, their likelihood and the possible severity
of impact. Further information is provided in the Audit
Committee Report beginning on page 58. These principal
risks and the ways they are managed or mitigated are set
out on the following pages.
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32
BUSINESS REVIEW CONTINUED
PRINCIPAL RISKS AND UNCERTAINTIES MANAGEMENT/MITIGATION
MARKET RISK
The Company’s portfolio is exposed to
fluctuations in market prices (changes in
broad market measures, individual security
prices and foreign exchange rates) in the
biotechnology sector and the regions in
which it invests, which may result in a
reduction in assets due to market falls and
higher volatility.
The biotechnology sector has historically
been more volatile than other equity
sectors, reflecting factors inherent in
biotech companies, including emerging
technologies, uncertainty of drug approval
outcomes, regulatory and pricing policy.
More generally, geopolitical and economic
uncertainties have affected markets
globally and are likely to continue to do so.
These include the continued impact of the
war in Ukraine and the effect of sanctions
against Russia, tensions between the US/
West and China, and the Israel/Palestine
conflict. New regulations designed to
combat climate change and uncertainties
associated with shifts in population and
resource availability/demand may also
have an impact on global markets. In
addition, climate change events could have
an impact on the business models of the
portfolio companies and their operations.
Broad economic risks include prolonged
inflation and elevated interest rates, slowing
global economic growth and the fear or
presence of recession.
To an extent, this risk is accepted as being inherent to the Company's activities.
However, the Board has set limits in the investment policy which ensure the portfolio
is diversified. Compliance with the limits and guidelines contained in the Company’s
investment policy is monitored daily by Frostrow and OrbiMed and reported monthly
to the Board.
OrbiMed report at each Board meeting on the Company’s performance including the
impact of wider market trends and events.
The Portfolio Manager spreads investment risk over a wide portfolio of investments.
At the year end the Company’s portfolio comprised investments in 62companies.
As part of its review of the going concern and long-term viability of the Company, the
Board considers the sensitivity of the portfolio to changes in market prices and foreign
exchange rates (see note 14 beginning on page 90) and the ability of the Company
to liquidate its portfolio if the need arose. Further details are included in the Going
Concern and Viability Statements beginning on page 36.
The Board monitors and challenges the Portfolio Manager's awareness of emerging
climate change risks and the resources they have devoted to assessing climate risks.
The Board is conscious that climate change poses a general risk to the investment
environment and, through discussions with the Portfolio Manager, has noted that
the biotechnology industry is not a major contributor to greenhouse gas emissions.
For this reason, the Portfolio Manager does not consider climate change to be a
material ESG consideration when engaging with investee companies. However
energy management is noted as a material concern in the wider healthcare and
pharmaceutical sectors, and this forms part of OrbiMed’s ESG monitoring.
Increased DecreasedNo change
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
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PRINCIPAL RISKS AND UNCERTAINTIES MANAGEMENT/MITIGATION
PORTFOLIO PERFORMANCE
Investment performance may not achieve
the Investment Objective and the value of
the investments held in the portfolio may
fall materially out of line with the sector.
The Portfolio Manager’s approach is
expected to lead to performance that
will deviate from comparators, including
both market indices and other investment
companies investing in the biotechnology
sector.
The Portfolio Manager has responsibility for selecting investments in accordance with
the Investment Objective and Policy and seeks to ensure that investments in individual
stocks fall within acceptable risk levels.
To manage this risk, the Board:
• reviews and challenges, at each Board meeting, reports from OrbiMed which cover
portfolio composition, asset allocation, concentration and performance;
• reviews investment performance over the long term against the Benchmark and the
Company's peer group; and
• formally reviews OrbiMed's appointment, including their performance, service levels
and contractual arrangements, each year.
SHARE PRICE PERFORMANCE
The risk that the Company’s share price
is not representative of its underlying net
assets.
To manage this risk, the Board:
• regularly reviews the level of the share price discount/premium to the net asset value
per share and considers ways in which share price performance may be enhanced,
including the effectiveness of marketing and investor relations services, new share
issuance and share buybacks, as appropriate;
• has implemented a discount management policy, buying back the Company’s shares
when the level of the share price discount to the net asset value per share exceeds
6% (in normal market conditions). Further information on this policy is set out on
pages30 to 31;
• may issue shares at a premium to the net asset value per share to help prevent a
share price premium reaching too high a level;
• reviews an analysis of the shareholder register at each Board meeting and is kept
informed of shareholder sentiment; and
• regularly discusses the Company’s future development and strategy with the Portfolio
Manager and the AIFM.
CYBER RISK
Cyber crime may lead to the disruption
or failure of systems covering dealing,
trade processing, administrative services,
financial and other operational functions.
The Board relies on controls in place at OrbiMed, Frostrow, J.P. Morgan, Link and
other third-party service providers.
Audit Committee reviews the internal controls reports of the principal service
providers, as well as their data storage and information security arrangements.
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BUSINESS REVIEW CONTINUED
PRINCIPAL RISKS AND UNCERTAINTIES MANAGEMENT/MITIGATION
KEY PERSON RISK
The risk that the individuals responsible
for managing the Company’s portfolio
may leave their employment or may be
prevented from undertaking their duties.
The Board manages this risk by:
• appointing OrbiMed, who in turn have appointed Geoff Hsu and Josh Golomb to
manage the Company’s portfolio. Mr Hsu and Mr Golomb are supported by a team
of researchers and analysts dedicated to the biotechnology sector;
• receiving reports from OrbiMed at each Board meeting, which include any significant
changes in the make-up of the team supporting the Company;
• meeting the wider team at OrbiMed’s offices and encouraging the participation of
the wider OrbiMed team in investor updates; and
• delegating to the Management Engagement Committee the responsibility to
perform an annual review of the service received from OrbiMed, including, inter alia,
the team supporting the lead managers and their succession plans.
In light of the successful introduction of Mr Golomb as co-portfolio manager, the
Board considers that this risk has reduced during the year.
VALUATION RISK
Pursuant to the Investment Policy, the
Company may invest up to 10% of its
gross assets in unquoted investments
at the time of acquisition. The valuation
of unquoted assets involves a degree
of subjectivity and there is a risk that
proceeds received on the disposal of
unquoted holdings may prove to be
significantly lower than the value at which
the investment is held in the Company’s
portfolio.
Unquoted investments comprised 3.8% of the Company's portfolio at the year end.
The Company’s directly held unquoted investments are valued by an independent,
third-party valuation agent. The Board has established a Valuation Committee to
review the valuations of the unquoted investments and the methodologies used in
the valuations. The valuations are recommended to the Committee by Frostrow,
the Company's AIFM, following review by its own valuations committee. The
Valuation Committee makes recommendations to the Board, as appropriate. Further
information can be found in the Audit Committee Report beginning on page 58 and
note 1 to the financial statements beginning on page 80.
In light of the additional scrutiny provided by the Valuation Committee, and the
reduction in the number and proportion of unquoted investments in the Company's
portfolio during the year, the Board considers that the potential impact of this risk on
the Company has reduced during the year.
* See glossary beginning on page 100.
Increased DecreasedNo change
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
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PRINCIPAL RISKS AND UNCERTAINTIES MANAGEMENT/MITIGATION
COUNTERPARTY RISK
The Company is exposed to credit risk
arising from the use of counterparties. If
a counterparty were to fail, the Company
could be adversely affected through either
a delay in settlement or a loss of assets.
The most significant counterparty to which the Company is exposed is J.P. Morgan
Securities LLC (J.P. Morgan), the Custodian and Prime Broker, which is responsible
for the safekeeping of the Company’s assets and provides the loan facility to the
Company. As part of the arrangements with J.P. Morgan they may take assets as
collateral up to 140% of the value of the loan drawn down. The assets taken as
collateral by J.P. Morgan may be used, loaned, sold, rehypothecated or transferred.
The level of the Company's gearing is at the discretion of the AIFM and the Board and
the loan can be repaid at any time, at which point the assets taken as collateral will be
released back to the Company. Any of the Company’s assets taken as collateral are
not covered by the custody arrangements provided by J.P. Morgan.
J.P. Morgan is a registered broker-dealer and is accordingly subject to limits on
rehypothecation* imposed by the U.S. Securities and Exchange Commission (SEC).
In the event of J.P. Morgan’s insolvency, the Company may be unable to recover in
full assets held by it as Custodian or held as collateral.
The risk is managed through the selection of a financially stable counterparty,
limitations on the use of gearing and reliance on the SEC's robust regulatory regime.
In addition, the Board monitors the credit rating of J.P. Morgan.
J.P. Morgan is also subject to regular monitoring by J.P. Morgan Europe Limited, the
Depositary, and the Board receives regular reports from the Depositary.
During the year the Company entered into swap transactions with Goldman Sachs
International.
Further information can be found in note 14 to the financial statements beginning
on page 90.
OPERATIONAL DISRUPTION
As an externally managed investment
trust, the Company is reliant on the
systems of its service providers for
dealing, trade processing, administration,
financial and other functions. If such
systems were to fail or be disrupted
(including, for example, as a result of a
pandemic, war, network disruption or
simply poor performance/controls) this
could prevent accurate reporting of the
Company’s financial position or lead to
a failure to comply with applicable laws,
regulations and governance requirements
and/or to a financial loss.
To manage these risks, the Board (in some cases meeting as the Audit Committee):
• periodically meets representatives from the Company's key service providers to gain
a better understanding of their control environment, and the processes in place to
mitigate any disruptive events;
• receives a monthly report from Frostrow, which includes, inter alia, confirmation of
compliance with applicable laws and regulations;
• reviews the internal control reports and key policies (including disaster recovery
procedures and business continuity plans) of its service providers;
• maintains a risk matrix with details of risks to which the Company is exposed, the
approach to managing those risks, the key controls and the frequency of the controls
operation;
• receives updates on pending changes to the regulatory and legal environment and
progress towards the Company’s compliance with such changes; and
• has considered the increased risk of cyber-attacks and received reports and
assurance from its service providers regarding the information security controls in
place.
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STRATEGIC REPORT
36
BUSINESS REVIEW CONTINUED
EMERGING RISKS
The Company has carried out a robust assessment of
the Company’s emerging risks and the procedures in
place to identify emerging risks are described below. The
International Risk Governance Council definition of an
‘emerging’ risk is one that is new, or is a familiar risk in a
new or unfamiliar context or under new context conditions
(re-emerging).
The Audit Committee reviews a risk schedule at its half-
yearly meetings. Emerging risks are discussed in detail
as part of this process and also throughout the year to try
to ensure that emerging (as well as established) risks are
identified and, so far as practicable, mitigated.
During the year, the Audit Committee identified and
discussed emerging elements of market risk such as
threats to research funding and increased costs in the
biotechnology sector which may affect the Company's
investee companies and potentially damage the
breadth and pace of future development. The Audit
Committee also discussed demographic trends in China
and Europe including, notably, the potential impact of
ageing populations. It was noted that this could present
opportunities for the biotech and healthcare sectors but
may also have broader adverse effects including reduced
economic growth and a reduction in the availability of
risk capital needed to fund innovative companies and
technologies.
GOING CONCERN
The financial statements have been prepared on a
going concern basis. The Directors consider this is the
appropriate basis as the Company has adequate resources
to continue in operational existence for at least the next 12
months from the date of approval of this report on 4June
2024. The Company’s portfolio, trading activity, cash
balances, revenue and expense forecasts, and the trends
and factors likely to affect the Company’s performance are
reviewed and discussed at each Board meeting. The Board
has considered a detailed assessment of the Company’s
ability to meet its liabilities as they fall due, including
stress tests which modelled the effects of substantial
falls in portfolio valuations and liquidity constraints on
the Company’s financial position. Further information
is provided in the Audit Committee report beginning on
page58.
Based on the information available to the Directors at the
date of this report, including the results of these stress tests,
the conclusions drawn in the Viability Statement below, the
Company’s current cash balances, and the liquidity of the
Company’s investments, the Directors are satisfied that
the Company has adequate financial resources to continue
in operation for at least the next 12months from the date
of approval of this report on 4 June 2024. Accordingly, the
Directors are satisfied that it is appropriate to continue to
adopt the going concern basis in preparing the financial
statements.
VIABILITY STATEMENT
In accordance with the UK Corporate Governance Code and
the Listing Rules, the Directors have carefully assessed the
Company’s position and prospects as well as the principal
risks and have formed a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the next five financial years.
The Board has chosen a five-year horizon in view of the
long-term outlook adopted by the Portfolio Manager when
making investment decisions.
To make this assessment and in reaching this conclusion,
the Audit Committee has considered the Company’s financial
position, its ability to liquidate its portfolio and meet its
liabilities as they fall due and, in particular, notes the following:
• The portfolio is principally comprised of investments
traded on major international stock exchanges. Based
on recent market volumes 96.3% of the current portfolio
could be liquidated within 30 trading days and 94.5% in
seven days. There is no expectation that the nature of the
investments held within the portfolio will be materially
different in future.
• The Board has considered the viability of the Company
under various scenarios, including periods of acute stock
market and economic volatility, and concluded that it
would expect to be able to ensure the financial stability of
the Company through the benefits of having a diversified
portfolio of (mostly) listed and realisable assets. As
illustrated in note 14 to the financial statements, the
Board has considered other price risk (the sensitivity of
the value of shareholders' funds to changes in the fair
value of the Company's investments), foreign currency
sensitivity (the sensitivity to changes in key exchange
rates to which the portfolio is exposed) and interest rate
sensitivity (the sensitivity to changes in the interest rate
charged on the Company's loan facility).
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• With an ongoing charges ratio of 1.2%, the expenses of
the Company are predictable and modest in comparison
with the assets and there are no capital commitments
foreseen which would alter that position.
• The Company has a short-term bank facility which can
be used to meet its liabilities. Details of the Company’s
current liabilities are set out in note 11 to the financial
statements.
• The Company has no employees. Consequently it does
not have redundancy or other employment related
liabilities or responsibilities.
The Audit Committee, as well as considering the potential
impact of the Company’s principal risks and various severe
but plausible downside scenarios, has made the following
assumptions in considering the Company’s longer-term
viability:
• There will continue to be demand for investment trusts;
• The Portfolio Manager will continue to adopt a long-
term view when making investments;
• The Company invests principally in the securities
of listed companies traded on international stock
exchanges to which investors will wish to continue to
have exposure;
• Shareholders will vote for the continuation of the
Company at the Annual General Meeting to be held in
2025. The Company's shareholders are asked every
five years to vote for the continuation of the Company.
At the current time, the Directors believe they have a
reasonable expectation that the next vote will be passed;
• The closed-ended nature of the Company means that,
unlike open-ended funds, it does not need to realise
investments when shareholders wish to sell their shares;
• The Company will continue to be able to fund share
buybacks when required. The Company bought back
5,250,221 ordinary shares in the year under review at a
total cost of £43.6 million and experienced no problem
with liquidity in doing so. It had shareholders’ funds in
excess of £361 million at the year end; and
• The long-term performance of the Company will
continue to be satisfactory.
ENVIRONMENTAL, SOCIAL, COMMUNITY AND
HUMAN RIGHTS MATTERS
As an externally managed investment trust, the Company does
not have any employees or maintain any premises, nor does
it undertake any manufacturing or other physical operations
itself. All its operational functions are outsourced to third party
service providers. Therefore, the Company has no material,
direct impact on the environment or any particular community
and, as a result, the Company itself has no environmental,
human rights, social or community policies.
Under the Listing Rules, the Company is also exempt
from reporting against the Taskforce for Climate-Related
Financial Disclosures (TCFD) framework. However, the
Board recognises that climate change poses a general risk
to the investment environment and has discussed with the
Portfolio Manager the potential impact of climate change
risk on the Company's investments.
The Board believes that consideration of environmental,
social and governance (ESG) factors is important and has
the potential to protect and enhance investment returns.
The Portfolio Manager’s investment criteria ensure that ESG
factors are integrated into their investment process and best
practice in this area is encouraged by the Board. The Portfolio
Manager engages with the Company’s underlying investee
companies in relation to their corporate governance practices
and the development of their policies on social, community
and environmental matters. Further information on OrbiMed’s
responsible investing policy, including their approach to the
consideration of climate change in their investment process,
can be found on pages 26 and 27.
The Board is committed to carrying out the Company’s
business in an honest and fair manner with a zero-tolerance
approach to bribery, corruption, and tax evasion. As such,
policies and procedures are in place to prevent this. In
carrying out the Company’s activities, the Board aims to
conduct itself responsibly, ethically and fairly. The Board’s
expectations are that the Company’s principal service
providers have appropriate governance policies in place.
PERFORMANCE AND FUTURE DEVELOPMENTS
A review of the Company’s year, its performance and
the outlook for the Company can be found in the Chair’s
Statement beginning on page 2 and in the Portfolio
Manager’s Review beginning on page 9.
The Company’s overall strategy remains unchanged.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
38
BUSINESS REVIEW CONTINUED
STAKEHOLDER INTERESTS AND BOARD DECISION-MAKING (SECTION 172 OF THE COMPANIES
ACT2006)
The following disclosure, which is required by the Companies Act 2006 and the AIC Code of Corporate Governance, describes
how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.
STAKEHOLDER GROUP HOW THE BOARD HAS ENGAGED WITH THE COMPANY’S STAKEHOLDERS
Investors
The Board’s key mechanisms of engagement with investors include:
• The Annual and Half-yearly Reports
• The Annual General Meeting
• The Company’s website which hosts reports, articles and insights, monthly fact sheets and video
interviews with the Portfolio Manager
• The Company’s distribution list which is maintained by Frostrow and is used to communicate with
shareholders on a regular basis
• Online seminars with presentations from the Portfolio Manager
• One-to-one investor meetings
The AIFM and the Portfolio Manager, on behalf of the Board, completed a programme of investor relations
throughout the year, reporting to the Board on the feedback received. The Board aims for at least one
Director to attend the in person and online events at which the Portfolio Manager presents to investors. In
addition, the Chair has been and remains available to engage with the Company’s shareholders.
Portfolio
Manager
The Board met regularly with the Portfolio Manager throughout the year, both formally at quarterly
Board meetings and informally, as required. The Board engaged primarily with key members of the
portfolio management team, discussing the Company’s overall performance as well as developments at
individual portfolio companies and wider macroeconomic developments.
The Board also visited OrbiMed's office in New York where the Directors met with members of the
Portfolio Manager’s risk management, compliance and trading teams to better understand their internal
controls and processes.
The Management Engagement Committee reviewed the performance of the Portfolio Manager and the
terms and conditions on which they are engaged.
Other Service Providers
The Board met regularly with the AIFM, representatives of which attend every quarterly Board
meeting to provide updates on risk management, accounting, administration, corporate
governance and marketing matters.
The Management Engagement Committee reviewed the performance of all the Company’s service
providers, receiving feedback from Frostrow in their capacity as AIFM and Company Secretary. The
AIFM, which is responsible for the day-to-day operational management of the Company, meets
and interacts with the other service providers including the Depositary, Custodian and Registrar,
on behalf of the Board, on a daily basis. This can be through email, one-to-one meetings and/or
regular written reporting.
The Audit Committee reviewed the quality and effectiveness of the audit and recommended to the
Board that it be proposed to shareholders that BDO LLP (BDO) be re-appointed as Auditor. The
Audit Committee also met with BDO to review the audit plan and set their remuneration for the year.
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STRATEGIC REPORT
39
As an externally managed investment trust, the Company has no employees, customers, operations or premises. Therefore,
the Company’s key stakeholders (other than its shareholders) are considered to be its service providers. The need to foster
good business relationships with the service providers and maintain a reputation for high standards of business conduct are
central to the Directors’ decision-making as the Board of an externally managed investment trust.
KEY AREAS OF ENGAGEMENT MAIN DECISIONS AND ACTIONS TAKEN
• Ongoing dialogue with shareholders
concerning the strategy of the Company,
performance and the portfolio.
• Share price performance.
The Board and the Portfolio Manager provided updates via RNS, the Company’s
website, the distribution list and the usual financial reports and monthly fact sheets.
The Board continued to monitor share price movements closely. When the discount
of the share price to the net asset value per share exceeded 6%, the Company sought
to buy back shares in the market. As a result, 5,250,221 shares were bought back
during the year. No shares were issued at a premium to the net asset value per share
during the year. Please refer to pages 30 and 31for further information.
• Portfolio composition, performance, outlook
and business updates.
• The Portfolio Manager’s system of internal
controls and investment risk management
including their cyber security arrangements.
• The terms and conditions of the Portfolio
Management Agreement, including
performance measurement in particular.
The Directors were pleased to be able to visit OrbiMed's offices in New York during
the year, to meet with the OrbiMed team in person. While the Board considers the
visits to OrbiMed's offices to be valuable, in view of the environmental and cost
benefits associated with reduced long distance travel, the Board has agreed that the
frequency of such visits should be approximately 18 months.
The Board concluded that it was in the interests of shareholders for OrbiMed to
continue in their role as Portfolio Manager. Following discussion with OrbiMed,
the Board resolved to recommend to shareholders that the total return version
of the Nasdaq Biotechnology Index (net, sterling adjusted) should be used as the
benchmark against which to assess the Portfolio Manager’s performance, rather than
the capital return version. Please refer to page 52 and 53 for further details.
The Audit Committee concluded that the Portfolio Manager’s internal controls were
satisfactory. Please refer to the Audit Committee Report, beginning on page 58, for
further information.
• The promotion and marketing strategy of the
Company.
• Service providers’ internal controls, business
continuity plans and cyber security provisions.
• The effectiveness of the audit and the Auditor’s
reappointment.
• The terms and conditions under which the
Auditor is engaged.
The Board concluded that it was in the interests of shareholders for Frostrow to
continue in their role as AIFM. See pages 52 and 53 for further details.
The Board approved the Audit Committee’s recommendation that it would be in the
interests of shareholders for BDO to be re-appointed as the Company’s auditor for a
further year. Please refer to the Audit Committee Report beginning on page 58 and the
Notice of AGM beginning on page 105 for further information.
By order of the Board
Frostrow Capital LLP
Company Secretary
4 June 2024
GOVERNANCE
40
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
ROGER YATES
Independent Non-Executive
Chair
STEVE BATES
Senior Independent Non-
Executive Director
JULIA LE BLAN
Independent Non-Executive
Director
BOARD OF DIRECTORS
* Information as at 31 March 2024
GEOFF HSU
Non-Executive Director
Joined the Board in December 2021
Remuneration: £42,000 pa*
Committees
Roger is Chair of the Nominations
Committee. See page 42 for
further information.
Shareholding in the Company
15,000
Skills and Experience
Roger started his career in investment
management at GT Management
in 1981 and subsequently held
positions at Morgan Grenfell and
Invesco as Chief Investment Officer.
He was appointed Chief Executive
Officer of Henderson Group plc in
1999 and led the company for a
decade. More recently, Roger was
the Senior Independent Director and
Remuneration Committee Chair
at IG Group Holdings plc, Chair of
Electra Private Equity PLC and Chair
of Pioneer Global Asset Management
S.p.A. He was also a Non-Executive
Director of J.P. Morgan Elect PLC
from 2008 until 2018 and Senior
Independent Director and Chair of
the Remuneration Committee of St
James's Place until 2023.
Other Appointments
Roger is a non-executive director,
senior independent director and
remuneration committee chair at
Jupiter Fund Management plc. He
is also a non-executive director
and senior independent director at
Mitie Group plc. He is the non-
executive Chair of Pacific Horizon
Investment Trust plc.
Standing for re-election: Yes
Joined the Board in July 2015
Remuneration: £31,500 pa*
Committees
Steve is Chair of the Management
Engagement Committee. See
page 42 for further information.
Shareholding in the Company
10,000
Skills and Experience
Steve has extensive experience as
an Investment Manager and was
head of global emerging markets
at J.P. Morgan Asset Management
until 2002. Since then, he has been
an Executive Director of Guard Cap
Asset Management Limited (and its
predecessor company).
Other Appointments
Steve is a Director of GuardCap Asset
Management Ltd (where he is also a
non-executive Director of GuardCap
UCITS Funds PLC (an investment
company with variable capital,
incorporated in Ireland)).
Standing for re-election: No
Joined the Board in July 2016
Remuneration: £ 33,600 pa*
Committees
Julia is Chair of the Audit Committee
and the Valuation Committee.
Seepage 42 for further information.
Shareholding in the Company
7,000
Skills and Experience
A Chartered Accountant, Julia has
worked in the financial services
industry for over 30years. Julia was
formerly a non-executive Director of
Impax Environmental Markets plc,
JPMorgan US Smaller Companies
Investment Trust plc and Aberforth
Smaller Companies Trust PLC.
She was a tax partner at Deloitte
and sat for two terms on the AIC’s
technical committee.
Other Appointments
Julia is a non-executive
Director of British & American
Investment Trust PLC.
Standing for re-election: Yes
Joined the Board in May 2018
Remuneration: Nil
Committees
Geoff does not sit on any of the
Board’s Committees.
Shareholding in the Company
Nil
Skills and Experience
Geoff is a General Partner of
OrbiMed, having joined in 2002 as a
biotechnology analyst. Prior to joining
OrbiMed, he worked as an analyst in
the healthcare investment banking
group at Lehman Brothers. MrHsu
received his A.B. degree summa
cum laude from Harvard University
and holds an M.B.A. from Harvard
Business School. Prior to business
school, he spent two years studying
medicine at Harvard Medical School.
Other Appointments
Geoff is a General Partner of
OrbiMed and does not have any other
appointments.
Standing for re-election: Yes
GOVERNANCE
41
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
THE RT HON LORD WILLETTS
FRS
Independent Non-Executive
Director
DR NICKI SHEPHERD
Independent Non-Executive
Director
Joined the Board in November 2015
Remuneration: £28,875 pa*
Committees
See page 42 for further information.
Shareholding in the Company
Nil
Skills and Experience
A former Board member of the
Francis Crick Institute and of the
Biotech Industry Association,
Lord Willetts was the Member of
Parliament for Havant from 1992-
2015 and was Minister for Universities
and Science from 2010-2014. Before
that, he worked at HM Treasury and
the Number 10 Policy Unit. He also
served as Paymaster General in John
Major’s Government.
Other Appointments
Lord Willetts is a Board member
of Darktrace plc, Satixfy UK Ltd
and of Tekcapital. He is Co-chair of
Synbioven, a company which invests
in synthetic biology. He serves
on the board of UK Research and
Innovation. He is also an Honorary
Fellow of the Royal Society and of
Nuffield College, Oxford.
Standing for re-election: Yes
Joined the Board in January 2021
Remuneration: £28,875 pa*
Committees
See page 42 for further information.
Shareholding in the Company
2,000
Skills and Experience
Nicki is the Founder and Director
of Bellows Consulting focused on
supporting translational research
in the biomedical space. She was
previously at the Wellcome Trust
where she was responsible for
the establishment, management
and oversight of the Translation
Fund, a £30m a year investment
into new product development
covering therapeutics, vaccines,
diagnostics, medical devices and
regenerative medicine over a range
of clinical indications. Nicki has
also held positions at AstraZeneca
in Late-Stage Development and
Manufacturing.
Other Appointments
Nicki is a Member of the CARB-X
Advisory Board. She also sits
on or advises a number of
scientific panels.
Standing for re-election: Yes
Joined the Board in November 2023
Remuneration: £28,875 pa*
Committees
See page 42 for further information.
Shareholding in the Company
3,000
Skills and Experience
Hamish has extensive experience
and expertise both in managing an
investment trust and as a non-
executive director. His executive
career was spent at Ruffer LLP,
which he joined in 2002, becoming
a partner in 2006. Between 2011
and 2022 he was the Lead Manager
of Ruffer Investment Company
Ltd. He founded and managed
the Edinburgh office of Ruffer and
held firm-wide responsibilities in
relation to portfolio management
and investor communications. He
retired from Ruffer with effect from
3 October 2022.
Other Appointments
Hamish is a non-executive
director of Mid Wynd International
Investment Trust plc.
Standing for election: Yes
HAMISH BAILLIE
Independent Non-Executive
Director
GOVERNANCE
42
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
THE BOARD AND COMMITTEES
Responsibility for effective governance lies with the Board. The governance framework of the Company reflects the fact that
as an investment company it has no employees. Portfolio management is outsourced to OrbiMed and risk management,
company management, company secretarial, administrative and marketing services are outsourced to Frostrow. The Board
generates value for shareholders through its oversight of the service providers and management of costs associated with
running the Company.
THE BOARD
Chair – Roger Yates
Senior Independent Director – Steve Bates
Five additional non-executive Directors, four of whom are considered independent.
Key responsibilities:
• to provide leadership and set the strategy, values and standards of the Company within a framework of effective
controls which enable risk to be assessed and managed;
• to ensure that a robust corporate governance framework is implemented; and
• to challenge constructively and scrutinise the performance of all third-party service providers.
Audit Committee Nominations Committee
Management Engagement
Committee
Valuation Committee
Chair
Julia Le Blan
All Independent Directors
Key responsibilities:
• to review the Company’s
financial reports;
• to oversee the risk and
control environment and
financial reporting; and
• to have primary
responsibility for the
relationship with the
Company’s external
auditor, to review their
independence and
performance, and
to determine their
remuneration.
Chair
Roger Yates
All Independent Directors
Key responsibilities:
• to review regularly the
Board’s structure and
composition; and
• to make
recommendations for
any changes or new
appointments.
Chair
Steve Bates
All Independent Directors
Key responsibilities:
• to review regularly
the contracts, the
performance and
remuneration of the
Company’s principal
service providers.
Chair
Julia Le Blan
Steve Bates, Roger Yates,
Hamish Baillie
Key responsibilities:
• to consider the
valuations of the
Company’s unquoted
investments; and
• to consider the
appropriateness
of the Company’s
valuation policies and
methodologies.
Copies of the full terms of reference, which clearly define the responsibilities of each Committee, can be obtained from the
Company Secretary, will be available for inspection at the Annual General Meeting, and can be found on the Company’s
website at www.biotechgt.com
CORPORATE GOVERNANCE
GOVERNANCE
43
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
Board of Directors
Entirely non-executive, majority independent
Committees:
l Audit Committee
l
Management Engagement Committee
l
Nominations Committee
l
Valuation Committee
Frostrow
(AIFM, Company Secretary, Fund Administrator)
Reporting
l
Balance sheet
l
Liquidity and gearing
l
Income forecasts
l
Portfoliovaluation
l
Portfoliotransactions
l
Investmentlimitsandrestrictions
(monthly)
l
Compliancewithinvestmentpolicyand
guidelines (monthly)
l
Compliance report (semi-annually)
l
Effectivenessofcontrolenvironment
J.P. Morgan
(Depositary and Custodian)
Reporting
l
Depositary’s report (semi-annually)
l
Effectiveness of control environment (annually)
l
Presentations on subjects of interest e.g. cyber security (as required)
OrbiMed
(Portfolio Management)
Reporting
l
Portfolio performance update at each meeting
l
Compliance report (semi-annually)
l
Effectiveness of control environment (annually)
l
Presentations on subjects of interest
e.g. Risk Management, Investment Compliance (as required)
Winterflood
Securities
(Corporate Broker)
Link Group
(Registrar)
Reporting
l
Effectiveness of control environment (annually)
l
Presentations on subjects of interest e.g. cyber security (as required)
Charles Russell
Speechlys
(Legal Adviser)
BDO LLP
(Statutory Auditor)
Principal third-party
service providers
The Directors:
l
receive regular reporting
at meetings;
l
review the assurance
report produced by each
organisation;
l
receive additional
reporting on the control
environment from each
of the principal third –
party service providers;
and
l
formally evaluate their
performance on an
annual basis.
Secondary third-
party service
providers
The Directors:
l
receive regular reporting
on their activities at
meetings; and
l
formally evaluate their
performance on an
annual basis.
The Board has a responsibility for
establishing and assessing internal
controls to ensure the Company
operates effectively, efficiently and
within the risk appetites set by the
Board. As the Company relies on
third-party service providers for all
of its operations, it obtains regular
reports from these counterparties
on the nature and effectiveness of
controls within these organisations.
The Company’s principal service
providers are the Portfolio Manager,
OrbiMed, the AIFM, Company
Secretary and administrator,
Frostrow Capital, the custodian
and depositary, J.P. Morgan and
the registrar, Link Group. The
Board receives regular reporting
on compliance with the control
environment and assesses the
effectiveness of the internal controls
through review of the assurance
reports from each of these
organisations.
In addition, the Company retains a
number of secondary providers who
report regularly to the Board. These
include the Company’s legal adviser
and the corporate stockbroker.
The Management Engagement
Committee formally evaluates
the performance and service
delivery of all third-party service
providers at least annually and the
Audit Committee evaluates the
performance of the Company’s
external auditor annually, following
the completion of the annual audit
process.
INTERNAL CONTROLS STRUCTURE
GOVERNANCE
44
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
CORPORATE GOVERNANCE STATEMENT
The Board is committed to maintaining and demonstrating
high standards of corporate governance. The Board has
considered the principles and recommendations of the AIC
Code of Corporate Governance published in February2019
(the AIC Code). The AIC Code addresses all the principles
set out in the UK Corporate Governance Code (the UK Code)
published in 2018, as well as setting out additional provisions
on issues that are of specific relevance to the Company.
The Board considers that reporting against the principles
and provisions of the AIC Code (which has been endorsed
by the Financial Reporting Council) will provide better
information to shareholders. By reporting against the
AIC Code, the Company meets its obligations under the
UK Code (and associated disclosure requirements under
paragraph 9.8.6 of the Listing Rules) and as such does
not need to report further on issues contained in the UK
Code which are irrelevant to the Company as an externally
managed investment company, including the provisions
relating to the role of the chief executive, executive
directors’ remuneration and the internal audit function.
The AIC Code is available on the AIC’s website
www.theaic.co.uk and the UK Code can be viewed on the
Financial Reporting Council website www.frc.org.uk. The
AIC Code includes an explanation of how the AIC Code
adapts the principles and provisions set out in the UK Code
to make them relevant for investment companies.
In January 2024 the FRC published a revised UK Corporate
Governance Code which will apply to financial years
beginning on or after 1 January 2025. The 2018 UK Code
remains in place until this time. The Board will consider the
updated provisions of the new UK Code over the next year
and expects the publication of a revised AIC Code in due
course.
The Company has complied with the principles and
provisions of the AIC Code. The Corporate Governance
Report on pages 42 to 50, forms part of the Report of the
Directors on pages 51 to 56.
BOARD LEADERSHIP AND PURPOSE
PURPOSE AND STRATEGY
The purpose and strategy of the Company are described in
the Strategic Report.
BOARD CULTURE
The Board aims to consider and discuss fully differences
of opinion, unique vantage points and to exploit fully
areas of expertise. The Chair encourages open debate
to foster a supportive and cooperative approach for all
participants. Strategic decisions are discussed openly and
constructively. The Board aims to be open and transparent
with shareholders and other stakeholders and for the
Company to conduct itself responsibly, ethically and fairly
in its relationships with service providers.
The Board has gained assurance on whistleblowing
procedures at the Company’s principal service providers
to ensure employees at those companies are supported in
speaking up and raising concerns. No concerns relating to
the Company were raised during the year.
SHAREHOLDER RELATIONS
The Company has appointed Frostrow to provide marketing
and investor relations services in the belief that a well-
marketed investment company is more likely to grow over
time, have a more diverse, stable list of shareholders and
its shares will trade closer to the net asset value per share
over the long run. Frostrow actively promotes the Company
as set out on page 30.
Representatives of Frostrow met regularly with institutional
shareholders and private client asset managers to
discuss investment strategy, any issues or concerns and,
if applicable, corporate governance matters. Reports
on investor sentiment and the feedback from investor
meetings were discussed with the Directors at the
following Board meeting.
SHAREHOLDER COMMUNICATIONS
The Board, the AIFM and the Portfolio Manager consider
maintaining good communications with shareholders
to be a priority. They engage with larger shareholders
through meetings and presentations. Shareholders are
informed by the publication of annual and half-yearly
reports which include financial statements. These reports
are supplemented by the daily release of the net asset
value per share to the London Stock Exchange and the
publication of monthly fact sheets. All this information,
including interviews with the Portfolio Manager, is available
on the Company’s website at www.biotechgt.com.
The Board monitors changes to the share register of
the Company; it also reviews correspondence from
CORPORATE GOVERNANCE CONTINUED
GOVERNANCE
45
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
shareholders (if any) at each meeting and maintains regular
contact with major shareholders. Shareholders who wish to
raise matters with a Director may do so by writing to them
at the registered office of the Company.
The Board supports the principle that the AGM be used
to communicate with private investors in particular.
Shareholders are encouraged to attend the AGM, where they
are given the opportunity to question the Chair, the Board
and representatives of the Portfolio Manager. In addition, the
Portfolio Manager makes a presentation to shareholders
covering the investment performance and strategy of the
Company at the AGM. Details of the proxy votes received
in respect of each resolution are made available on the
Company’s website following the AGM.
SIGNIFICANT HOLDINGS AND VOTING RIGHTS
Details of the shareholders with substantial interests in the
Company’s shares, the Directors’ authorities to issue and
repurchase the Company’s shares, and the voting rights
of the shares are set out in the Report of the Directors on
pages 51 to 56.
CONFLICTS OF INTEREST
Company directors have a statutory obligation to avoid a
situation in which they (and connected persons) have, or
can have, a direct or indirect interest that conflicts, or may
possibly conflict, with the interests of the Company. In line
with the Companies Act 2006, the Board has the power
to authorise any potential conflicts of interest that may
arise and impose such limits or conditions as it thinks fit.
Aregister of interests and potential conflicts is maintained
and is reviewed at every Board meeting.
No new conflicts of interest arose during the year. As a
General Partner of OrbiMed, Geoff Hsu recused himself
from the Board’s considerations of the proposed change to
the benchmark index (please refer to the Chair's Statement
beginning on page 2 for further information).
DIVISION OF RESPONSIBILITIES
THE CHAIR AND THE SID
The Chair’s primary role is to provide leadership to the
Board, assuming responsibility for its overall effectiveness
in directing the Company.
The Senior Independent Director (SID) serves as a sounding
board for the Chair and acts as an intermediary for the
other Directors and the shareholders.
A full description of the responsibilities of the Chair and the
SID can be found on the Company’s website:
www.biotechgt.com
DIRECTOR INDEPENDENCE
The Board consists of seven non-executive Directors, six of
whom the Board considers to be independent of OrbiMed
and the Company's other service providers. Geoff Hsu is a
General Partner of OrbiMed and is therefore not independent.
Mr Hsu has been part of the team managing the Company's
portfolio since OrbiMed's appointment. His contributions to
the Board's discussions and his knowledge and experience of
the Company's history are valued by the Board. Mr Hsu does
not sit on any of the Board's committees; he is not involved
with the selection of new directors or the setting of their
remuneration, or the review and assessment of OrbiMed's
performance and the terms and conditions on which they are
engaged. In addition, he has waived his director's fee.
Aside from Mr Hsu, all of the Directors seeking election
or re-election at the forthcoming AGM continue to be
independent when assessed against the circumstances
set out in Provision 13 of the AIC Code. The Board carefully
considers these guidelines but believes that independence
is evidenced by an individual being independent of mind,
character and judgement.
Further details regarding the Directors can be found on
pages 40 to 41.
BOARD MEETINGS
The Board is responsible for the effective stewardship of
the Company’s affairs. Strategy issues and all material
operational matters are considered at its meetings.
The Board met formally four times during the year. The
primary focus at regular Board meetings was the review of
investment performance and associated matters, including
asset allocation, marketing/investor relations, peer group
information and industry issues.
The Board reviewed key investment and financial data,
revenue and expense projections, analyses of transactions,
performance metrics and performance comparisons, share
price and net asset value performance.
The Board is responsible for setting the Company’s
corporate strategy and reviewed the continued
appropriateness of the Company’s investment objective,
investment strategy and investment restrictions at
eachmeeting.
GOVERNANCE
46
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
MATTERS RESERVED FOR DECISION BY THE BOARD
The Board has adopted a schedule of matters reserved for its
decision. This includes:
– decisions relating to the strategic objectives and overall
management of the Company, including the appointment
or removal of the Portfolio Manager and other service
providers, establishing the investment objectives,
restrictions, strategy and performance comparators;
– approval of the annual and half yearly financial
statements, recommendation or declaration of any
dividends, determining the policy on share issuance and
buybacks;
– the Company’s internal controls, corporate governance
structure, policies and procedures; and
– matters relating to the Board and its committees,
including the appointment of directors.
Day-to-day portfolio management is delegated to OrbiMed
and operational management is delegated to Frostrow.
The Board takes responsibility for the content of
communications regarding major corporate issues, even if
OrbiMed or Frostrow acts as spokesman. The Board was
kept informed of relevant promotional material that was
issued by Frostrow during the year.
RELATIONSHIP WITH SERVICE PROVIDERS
Representatives of the Portfolio Manager and the AIFM were
in attendance at each Board meeting held during the year.
The Management Engagement Committee evaluated the
performance of all the Company’s service providers as well
as the terms and conditions on which they are engaged. The
Committee concluded that all the service providers were
performing well and recommended to the Board that they
should be retained on the existing terms and conditions, save
that it be proposed to shareholders that the Company should
use the total return version of the Nasdaq Biotechnology
Index (sterling adjusted) as the benchmark index. Please
refer to page 52 for further information on the Committee’s
assessment of the AIFM and the Portfolio Manager.
EXERCISE OF VOTING POWERS
The Board and the AIFM have delegated authority to
the Portfolio Manager to vote the shares owned by the
Company. The Portfolio Manager has been instructed to
submit votes in respect of such shares wherever possible.
The Portfolio Manager may refer to the Board or the AIFM
on any matters of a contentious nature. The Board has
reviewed OrbiMed’s Voting Guidelines and is satisfied with
their approach.
CORPORATE GOVERNANCE CONTINUED
*See glossary beginning on page 100 for further information.
MEETING ATTENDANCE
The table below sets out the number of scheduled Board and committee meetings held during the year ended 31 March 2024
and the number of meetings attended by each Director.
Board
Management
Engagement
Committee
Audit
Committee
Nominations
Committee
Valuation
Committee
Number of meetings held in 2023/24: 4 1 2 2 4
Hamish Baillie
1
2 1 1 1 1
Steve Bates 4 1 2 2 4
Geoff Hsu
2
4 N/A N/A N/A N/A
Julia Le Blan 4 1 2 2 2
Dr Nicki Shepherd 4 1 2 2 N/A
The Rt Hon Lord Willetts 3 1 2 1 N/A
Roger Yates 4 1 2 2 4
All of the serving Directors attended the Annual General Meeting held on 27 July 2023.
1 Hamish Baillie was appointed to the Board with effect from 1 November 2023.
2 Geoff Hsu is not a member of any Board committees.
GOVERNANCE
47
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
departure from the Board may be the date of the Annual
General Meeting following this anniversary. However, the
Board has agreed that the tenure of the Chair may be
extended for a limited time provided such an extension is
conducive to the Board’s overall orderly succession. The
Board believes that this more flexible approach to the tenure
of the Chair is appropriate in the context of the regulatory
rules that apply to investment companies, which ensure that
the chair remains independent after appointment, while being
consistent with the need for regular refreshment and diversity.
Notwithstanding this expectation, the Board considers that
a Director’s tenure does not necessarily reduce his or her
ability to act independently and will continue to assess
each Director’s independence annually, through a formal
performance evaluation.
APPOINTMENTS TO THE BOARD
The rules governing the appointment and replacement of
Directors are set out in the Company’s articles of association
and the aforementioned succession planning policy.
Where the Board appoints a new Director during the year,
that Director will stand for election by shareholders at the
next AGM. Subject to there being no conflict of interest, all
Directors are entitled to vote on candidates for appointment
to the Board and on the recommendation for shareholders’
approval for the Directors seeking re-election at the AGM.
When considering new appointments, the Board endeavours
to ensure that it has the capabilities required to be effective
and oversee the Company’s strategic priorities. This will
include an appropriate range, balance and diversity of skills,
experience and knowledge. The Company is committed to
ensuring that any vacancies arising are filled by the most
qualified candidates.
The Nominations Committee considers annually the skills
possessed by the Board and identifies any skill shortages
to be filled by new Directors. During the year, the Board
appointed Hamish Baillie as a non-executive Director,
ahead of the planned retirement of Steve Bates at the
forthcoming AGM. The Board engaged the services of a
specialist recruitment agency, Nurole, to assist with the
search process. Nurole sourced and prepared a diverse
long list of potential candidates for consideration by the
Nominations Committee. The Nominations Committee
then selected a short list of candidates to interview.
Following the interviews, a recommendation was made to
the Board that Mr Baillie be appointed as a Director. Nurole
has no other connection with the Company.
The Company does not retain voting rights on any shares
that are subject to rehypothecation in connection with the
loan facility provided by J.P. Morgan Securities LLC.
STEWARDSHIP AND ORBIMED’S RESPONSIBLE
INVESTING POLICY
The Board recognises that ESG issues can impact the
performance of investments. The Board has delegated
authority to OrbiMed to evaluate investee companies’
performance and engage with their management teams on
material ESG issues. The Board receives reports from OrbiMed
on their approach to handling ESG-related issues at portfolio
companies.
INDEPENDENT PROFESSIONAL ADVICE
The Directors have access to the advice and services of
a specialist investment trust company secretary, who
is responsible for advising the Board on all governance
matters. The Company Secretary ensures governance
procedures are followed and that the Company complies
with applicable statutory and regulatory requirements.
The Board has formalised arrangements under which
the Directors, in the furtherance of their duties, may
seek independent professional advice at the Company’s
expense. No such advice was sought during the year.
BOARD COMPOSITION, SUCCESSION AND
EVALUATION
SUCCESSION PLANNING
During the year, the Nominations Committee considered
the structure of the Board, recognising the need for
progressive refreshment. Plans for recruiting a director to
succeed Steve Bates following his anticipated retirement at
the forthcoming AGM were agreed.
The Board has an approved succession planning policy to
ensure that (i) there is a formal, rigorous and transparent
procedure for the appointment of new directors; and (ii) the
Board is comprised of members who collectively display
the necessary balance of professional skills, experience,
length of service and industry knowledge.
POLICY ON THE TENURE OF THE CHAIR AND
OTHER NON-EXECUTIVE DIRECTORS
The tenure of each independent, non-executive director,
including the Chair, is not ordinarily expected to exceed
nine years. It should be noted that, in practice, the date for
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
CORPORATE GOVERNANCE CONTINUED
INDUCTION AND TRAINING
New appointees to the Board are provided with a full
induction programme. The programme covers the
Company’s investment strategy, policies and practices.
The Directors are also given key information on the
Company’s regulatory and statutory requirements as they
arise including information on the role of the Board, matters
reserved for its decision, the terms of reference of the
Board committees, the Company’s corporate governance
practices and procedures and the latest financial
information. It is the Chair’s responsibility to ensure that
the Directors have sufficient knowledge to fulfil their role
and Directors are encouraged to participate in training
courses where appropriate.
DIVERSITY POLICY
The Board supports the principle of Boardroom diversity,
of which gender and ethnicity are two important aspects.
The Company’s policy is that the Board and its committees
should be comprised of directors with a diverse range of
skills, knowledge and experience and that appointments
should be made on merit against objective criteria,
including diversity in its broadest sense.
The objective of the policy is to have a broad range of
approaches, backgrounds, skills, knowledge and experience
represented on the Board. To this end, achieving a diversity
of perspectives and backgrounds on the Board will be
a key consideration in any director search process. The
Board encourages any recruitment agencies it engages to
find a diverse range of candidates that meet the criteria
agreed for each appointment and, from the shortlist, aims
to ensure that a diverse range of candidates is brought
forward for interview.
The Board will give due regard to the diversity targets in
the Listing Rules (set out below), but will not discriminate
unfairly on the grounds of gender, ethnicity, age, sexual
orientation, disability or socio-economic background when
considering the appointment of new directors. Candidates’
educational and professional backgrounds, their cognitive
and personal strengths, are considered against the
specification prepared for each appointment.
The Board has noted the FCA's new Listing Rules which
require companies to report against the following diversity
targets:
(a) At least 40% of individuals on the board are women;
(b) At least one of the senior board positions (Chair, CEO,
CFO or SID) is held by a woman; and
(c) At least one individual on the board is from a minority
ethnic background.
As an externally managed investment company, the
Company does not have the positions of CEO or CFO and
therefore, as permitted by the Listing Rules, it has not
reported against the second target as it is not applicable.
As shown in the tables below, the Company has met the
third target but has not yet met the first target. The Board
notes that the statistics will change when Steve Bates retires
from the Board at the conclusion of the forthcoming AGM
and will have due regard to these targets in future director
recruitment processes.
In accordance with the Listing Rules, the Board has provided the following information in relation to its diversity as at the year end.
Number of
Board
Members
Percentage
of the Board
Number of
Senior
Positions on
the Board
Men 5 71%
Not applicable*Women 2 29%
Not specified/prefer not to say – –
Directors were also given the opportunity to indicate if there was an ‘other category’ they wished to specify.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
Number of
Board
Members
Percentage
of the Board
Number of
Senior
Positions on
the Board
White British or other White (including minority–white groups) 6 86%
Not applicable*
Mixed/Multiple Ethnic Groups – –
Asian/Asian British 1 14%
Black/African/Caribbean/Black British – –
Other ethnic group, including Arab – –
Not specified/ prefer not to say – –
*This column is inapplicable as the Company is externally managed and does not have executive management functions, specifically it does not have a CEO
or CFO. The Chair of the Board and the SID are both men. However, the Company considers that the chairs of the permanent sub-committees of the Board are
senior roles in an investment company context. Of the four permanent sub-committees of the Board, two are chaired by a woman: the Audit Committee and the
Valuation Committee.
The information above was obtained by asking the Directors to complete a multiple choice form with the options in the tables
set out above. The form asked the Directors to indicate how they should be categorised for the purposes of these disclosures.
BOARD EVALUATION
During the year an externally facilitated review of the Board,
its committees and individual Directors (including each
Director’s independence) was carried out by Lintstock
Limited, in the form of electronic performance evaluation
questionnaires.
The review concluded that the Board worked in a collegiate,
efficient and effective manner, and there were no material
weaknesses or concerns identified. The Board is satisfied
that the structure, mix of skills and operation of the Board, its
committees, and individual Directors continue to be effective.
The Board pays close attention to the capacity of individual
Directors to carry out their work on behalf of the Company.
In recommending individual Directors to shareholders for
re-election, it considered their other Board positions and
their time commitments. The Board is satisfied that each
Director has the capacity to be fully engaged with the
Company’s business.
The Board has considered the position of all of the
Directors as part of the evaluation process, and believes
that it would be in the Company’s best interests to propose
them for election or re-election at the forthcoming AGM for
the following reasons:
Roger Yates was appointed to the Board on 1 December
2021. He was appointed as the Chair at the 2022 AGM.
He has extensive knowledge of the investment sector,
having held CIO positions at Morgan Grenfell and Invesco,
and having led Henderson Group as CEO for 10 years.
More recently, he has chaired and served on the boards of
numerous investment and asset management companies.
Julia Le Blan joined the Board in July 2016. A Chartered
Accountant and a former tax partner at Deloitte, she has
considerable knowledge of the financial services industry
and the investment company sector. Julia became the
Chair of the Audit Committee in July 2017.
Geoff Hsu, who has been a Director since May 2018, is
a General Partner of OrbiMed, the Portfolio Manager. He
has been a part of the team that manages the Company’s
portfolio since OrbiMed’s appointment in 2005.
The Rt Hon Lord Willetts joined the Board in November 2015.
A former government minister, he has relevant experience
and a strong interest in the biotechnology sector.
Dr Nicki Shepherd joined the Board in January 2021.
DrShepherd has been working in the biomedical sector
for 25 years across academia, large pharma and global
biomedical charities. She brings breadth of experience
across technology and therapeutic areas and the full
product development pipeline from 'bench to bedside'.
Hamish Baillie joined the Board in November 2023. He
is an experienced investment manager (having managed
Ruffer Investment Company Ltd for more than 10 years)
and non-executive director. He has been appointed
to succeed Steve Bates as Chair of the Management
Engagement Committee following Mr Bates' retirement at
the forthcoming AGM.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
The Chair is pleased to report that following the externally-
facilitated performance evaluation, the Directors’
performance continues to be effective and they continue
to demonstrate commitment to the role. Accordingly, the
Board recommends that shareholders vote in favour of the
Directors' election or re-election at the forthcoming AGM.
AUDIT, RISK AND INTERNAL CONTROL
The Statement of Directors’ Responsibilities on page 57
describes the Directors’ responsibility for preparing this
report.
The Audit Committee Report, beginning on page 58,
explains the work undertaken to allow the Directors to
make this statement and to apply the going concern
basis of accounting. It also sets out the main roles and
responsibilities and the work of the Audit Committee
throughout the year, and describes the Directors’ review
of the Company’s risk management and internal control
systems.
A description of the principal risks facing the Company and
an explanation of how they are being managed is provided
in the Strategic Report on pages 31 to 36.
The Board’s assessment of the Company’s longer-term
viability is set out in the Strategic Report on pages36 to 37.
REMUNERATION
The Directors’ Remuneration Report, beginning on page 63,
sets out the levels of remuneration for each Director and
explains how Directors’ remuneration is determined.
By order of the Board
Frostrow Capital LLP
Company Secretary
4 June 2024
CORPORATE GOVERNANCE CONTINUED
GOVERNANCE
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
REPORT OF THE DIRECTORS
The Directors present this Annual Report on the affairs
of the Company together with the audited financial
statements and the Independent Auditor’s Report for
the year ended 31 March 2024. Disclosures relating to
performance, future developments and risk management
can be found in the Strategic Report on pages 1 to 39.
COMPANY MANAGEMENT
ALTERNATIVE INVESTMENT FUND MANAGER
Frostrow, under the terms of its AIFM agreement with the
Company (the AIFM Agreement) provides, inter alia, the
following services:
• delegation (subject to the oversight of Frostrow and
the Board) of the portfolio management function to
OrbiMed;
• investment portfolio administration and valuation;
• risk management services;
• marketing and shareholder services;
• share price discount and premium management
services;
• administrative and secretarial services;
• advice and guidance in respect of corporate
governance requirements;
• maintenance of the Company’s accounting records;
• preparation and dispatch of annual and half yearly
reports and monthly fact sheets;
• ensuring compliance with applicable legal and
regulatory requirements; and
• maintenance of the Company’s website.
Under the terms of the AIFM Agreement, Frostrow is
entitled to receive a periodic fee equal to 0.30% per annum
on the Company’s market capitalisation up to £500m,
0.20% on market capitalisation above £500m to £1bn and
0.10% on market capitalisation over £1bn.
Either party may terminate the AIFM Agreement on not less
than 12 months’ notice.
PORTFOLIO MANAGER
OrbiMed, under the terms of its portfolio management
agreement with the AIFM and the Company (the Portfolio
Management Agreement) provides, inter alia, the following
services:
• the seeking out and evaluating of investment
opportunities;
• recommending the manner by which monies should be
invested, disinvested, retained or realised;
• advising on how rights conferred by the investments
should be exercised;
• analysing the performance of investments made; and
• advising the Company in relation to trends, market
movements and other matters which may affect the
investment objective and policy of the Company.
OrbiMed receives a periodic fee equal to 0.65% per annum
of the Company’s net asset value. The proportion of the
Company’s assets committed for investment in OrbiMed
Asia Partners L.P., alimited partnership managed by
OrbiMed Asia G.P., L.P., an affiliate of the Portfolio Manager,
is excluded from the fee calculation.
The Portfolio Management Agreement may be terminated
by the Company, Frostrow or the Portfolio Manager giving
notice of not less than 12 months.
PERFORMANCE FEE
The Portfolio Manager is entitled to the payment of
a performance fee which is dependent on the long-
term performance of the Company. The performance
fee is calculated by reference to the amount by which
the Company’s NAV has outperformed the Nasdaq
Biotechnology Index (sterling adjusted), the Company’s
benchmark index.
The fee is calculated quarterly by comparing the cumulative
performance of the Company’s NAV with the cumulative
performance of the Benchmark since the commencement
of the performance fee arrangement on 30 June 2005. The
performance fee amounts to 15% of any outperformance
over the Benchmark. Provision is also made within the daily
NAV per share calculation as required and in accordance
with generally accepted accounting standards.
In order to ensure that only sustained outperformance
is rewarded, at each quarterly calculation date any
performance fee is based on the lower of:
(i) the cumulative outperformance of the NAV over the
Benchmark as at the quarter end date; and
(ii) the cumulative outperformance of the NAV over the
Benchmark as at the corresponding quarter end date in
the previous year.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
In addition, a performance fee only becomes payable to the
extent that the cumulative outperformance gives rise to a
total fee greater than the total of all performance fees paid
to date. No performance fees were paid during the year and
as at the date of this report, there is no provision for future
payments (see note 3 on page 85 for further details).
The proportion of the Company’s assets invested in
OrbiMed Asia Partners L.P. is excluded from the
performance fee calculation.
DEPOSITARY, CUSTODIAN AND PRIME BROKER
The Company has appointed J.P. Morgan Europe Limited
(theDepositary) as its depositary. Under the terms of
the Depositary Agreement, the Company has agreed to
pay theDepositary a fee calculated at 1.75 bps on net
assets up to £150 million, 1.50 bps on net assets between
£150million and £300 million, 1.00 bps on net assets
between £300million and £500 million and 0.50 bps on
netassets above £500 million.
The Depositary has delegated the custody and safekeeping
of the Company’s assets to J.P. Morgan Securities LLC
which acts as the Company’s Custodian and Prime Broker.
Under the terms of a Delegation Agreement, liability
for the loss of the Company’s financial instruments
held in custody by J.P. Morgan Securities LLC has been
transferred from the Depositary to J.P. Morgan Securities
LLC in accordance with the AIFMD. While the Depositary
Agreement prohibits the re-use of the Company’s assets
by the Depositary or the Custodian and Prime Broker
without the prior consent of the Company or Frostrow,
the Company has consented to the transfer and re-use
of its assets by the Custodian and Prime Broker (known
as rehypothecation) in accordance with the terms of an
institutional account agreement between the Company,
J.P. Morgan Securities LLC and certain other J.P. Morgan
entities (as defined therein). This activity is undertaken
in order to take advantage of lower financing costs on
the Company’s loan borrowings as well as lower custody
charges.
J.P. Morgan Securities LLC is a registered broker-dealer
and is accordingly subject to limits on rehypothecation, in
accordance with SEC rules. In the event of J.P. Morgan’s
insolvency, the Company may be unable to recover in full
all assets held by J.P. Morgan as collateral for the loan
or as Custodian (see note 14 beginning on page90 for
furtherdetails).
REPORT OF THE DIRECTORS CONTINUED
AIFM AND PORTFOLIO MANAGER
EVALUATION AND RE-APPOINTMENT
The performance of the AIFM and the Portfolio Manager
is reviewed by the Board with a formal evaluation being
undertaken by the Management Engagement Committee
(the MEC) each year. As part of this process, the Board
monitors the services provided by the AIFM and the
Portfolio Manager and receives regular reports and views
from them. The Board also receives comprehensive
performance measurement reports to enable it to
determine whether or not the performance objectives
set by the Board have been met. The MEC reviewed the
appointment of the AIFM and the Portfolio Manager in
February 2024 with a recommendation being made to
theBoard. Geoff Hsu is a general partner of the Portfolio
Manager and so recused himself from the Board’s
considerations of OrbiMed's re-appointment.
The Board believes the continuing appointment of the
AIFM and the Portfolio Manager is in the interests of
shareholders as a whole. In coming to this decision, the
Board took into consideration the following reasons:
– the quality and depth of experience allocated by the
Portfolio Manager to the management of the portfolio
and the level of performance of the portfolio in absolute
terms and also by reference to the Benchmark;
– the quality and depth of experience of the company
management, company secretarial, administrative
and marketing team that the AIFM allocates to the
management of the Company; and
– the terms of the AIFM and Portfolio Management
Agreements, in particular the level and method of
remuneration and the notice period, and the comparable
arrangements of a group of the Company's peers.
On the recommendation of the MEC, the Board resolved
that both the AIFM and the Portfolio Manager should
continue to be appointed on the same terms and
conditions set out above, save that it was resolved to
recommend to shareholders that the total return version
of the Nasdaq Biotechnology Index should be used as
the benchmark against which to assess the Portfolio
Manager’s performance, rather than the capital return
version. On the advice of the Board’s advisors, this change
will be proposed to shareholders at a general meeting to
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
be held immediately after the forthcoming AGM. Further
information about the proposed change can be found in the
Chair’s Statement on pages 3 and 4.
LOAN FACILITY
The Company’s borrowing requirements are met through
the utilisation of a loan facility, repayable on demand,
provided by J.P. Morgan Securities LLC. The potential draw
down of the Company’s loan facility with J.P. Morgan is
limited to 50% of the Company’s Marginable Securities*;
however under the Company's investment policy, the
maximum amount of gearing permitted is 20% of net
assets (further details can be found in note 1 beginning on
page80 and note 14 beginning on page 90).
*See glossary beginning on page 100.
SHARE CAPITAL
At 31 March 2024, there were 33,487,198 ordinary shares
of 25p each (shares) in issue (2023: 38,737,419). All
shares rank equally for dividends and distributions. Each
shareholder is entitled to one vote on a show of hands and,
on a poll, to one vote for every share held.
At the start of the year under review, the Directors had
shareholder authority to issue up to 4,092,172 shares on
a non-pre-emptive basis and to buy back up to 3,949,857
shares in the market. At the Company’s annual general
meeting held on 27 July 2023, these authorities expired
and new authorities to allot up to 3,724,702 shares
(representing 10% of the Company’s issued share capital at
the time) on a non-pre-emptive basis and to buy back up to
5,583,329 shares (representing 14.99% of the Company’s
issued share capital at the time) were granted.
No new shares were issued during the year. 5,250,221
shares were repurchased during the year and cancelled;
there are no shares held in Treasury. Further information on
the Company’s share issuance and buyback policies can be
found on pages 30 and 31.
The giving of powers to issue or buy back the Company’s
shares requires the relevant resolution to be passed by
shareholders. Proposals for the renewal of the Board’s
authorities to issue and buy back shares are detailed in the
Notice of AGM beginning on page 105.
There are no restrictions concerning the transfer of
securities in the Company; no special rights with regard
to control attached to the securities; no restrictions on
voting rights; no agreements between holders of securities
regarding their transfer known to the Company; and no
agreements which the Company is party to that might
affect its control following a successful takeover bid.
ANNUAL GENERAL MEETING
THE FOLLOWING INFORMATION TO BE CONSIDERED
AT THE FORTHCOMING ANNUAL GENERAL MEETING IS
IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
If you are in any doubt about the action you should take, you
should seek advice from your stockbroker, bank manager,
solicitor, accountant or other financial adviser authorised
under the Financial Services and Markets Act2000 (as
amended). If you have sold or transferred all of your ordinary
shares in the Company, you should pass this document,
together with any other accompanying documents, including
the form of proxy, at once to the purchaser or transferee, or
to the Stock broker, bank or other agent through whom the
sale or transfer was effected, for onward transmission to the
purchaser or transferee.
The Company’s Annual General Meeting will be held at
the Barber-Surgeons' Hall, Monkwell Square, Wood St,
Barbican, London EC2Y 5BL on Thursday, 18 July 2024 at
12noon.
In particular, resolutions relating to the following items
of business will be proposed at the forthcoming Annual
General Meeting.
Resolution 10 Authority to allot shares
Resolution 11 Authority to disapply pre-emption rights
Resolution 12 Authority to buy back shares
Resolution 13 Authority to hold General Meetings (other
than the AGM) on at least 14 clear days’ notice
The full text of the resolutions can be found in the Notice of
Annual General Meeting on pages 105 to 107. Explanatory
notes regarding the resolutions can be found on pages 108
to 109.
There will be a General Meeting immediately following
the conclusion of the AGM on 18 July 2024. A resolution
to approve a proposed change to the benchmark index
used to measure the Company's performance and
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
the entitlement, if any, of the Portfolio Manager to a
performance fee will be put to the meeting. Further
information is provided in the Chair's Statement beginning
on page 2 and in a circular that has been published
separately and sent to shareholders with this Annual
Report. The circular is also available on the Company's
website.
DIRECTORS
DIRECTORS’ FEES
A report on Directors’ Remuneration and the Directors’
Remuneration Policy are set out on pages 63 to 67.
DIRECTORS’ & OFFICERS’ LIABILITY INSURANCE
COVER
Directors’ & Officers’ liability insurance cover was
maintained by the Board during the year ended
31March2024. It will continue in effect for the year ending
31 March 2025 and subsequent years.
DIRECTORS’ INDEMNITIES
As at the date of this report, indemnities are in force
between the Company and each of its Directors under
which the Company has agreed to indemnify each Director,
to the extent permitted by law, in respect of certain liabilities
incurred as a result of carrying out his/her role as a Director
of the Company. The Directors are also indemnified against
the costs of defending any criminal or civil proceedings
or any claim by the Company or a regulator as they are
incurred provided that where the defence is unsuccessful
the Director must repay those defence costs to the
Company. The indemnities are qualifying third party
indemnity provisions for the purposes of the Companies
Act 2006.
A copy of each deed of indemnity is available for inspection
at the Company’s registered office during normal business
hours and will be available for inspection at the Annual
General Meeting.
SUBSTANTIAL INTERESTS IN SHARE CAPITAL
As at 31 March 2024, the Company had been notified of
the following substantial interests in the Company's voting
rights and there have not been any new holdings notified
between the year end and the date of this report.
Number of
shares held % held
Rathbones 2,061,139 5.0%
Border to Coast Pensions Partnership 1,985,000 5.0%
Brewin Dolphin 1,779,234 4.6%
This table reflects those shareholders who have notified the
Company of a substantial interest in its shares when they
have crossed certain thresholds and may not reflect their
current holding. The table does not reflect the full range
of investors in the Company. The shareholder register is
principally comprised of private wealth managers and retail
investors owning their shares through a variety of online
platforms. A profile of the Company’s ownership is shown
on page 99.
FINANCIAL INSTRUMENTS
The Company’s financial instruments comprise its portfolio,
including derivative instruments, cash balances, debtors
and creditors that arise directly from its operations, such as
sales and purchases awaiting settlement, accrued income
and the loan facility. The financial risk management and
policies arising from its financial instruments are disclosed
in note 14 to the financial statements beginning on page 90.
RESULTS AND DIVIDEND
The results attributable to shareholders for the year and
the transfer from reserves are shown on pages 76 and 78.
Nodividend is proposed in respect of the year ended
31March 2024 (2023: nil).
ALTERNATIVE PERFORMANCE MEASURES
The financial statements (on pages 76 to 98) set out the
required statutory reporting measures of the Company’s
financial performance. In addition, the Board assesses
the Company’s performance against a range of criteria
which are viewed as particularly relevant for investment
trusts, which are summarised on page 1 and explained in
greater detail in the Strategic Report, under the heading ‘Key
Performance Indicators’ on pages 30 and 31. The Directors
believe that these measures enhance the comparability of
information between reporting periods and aid investors in
understanding the Company's performance.
The measures used for the year under review are consistent
with the prior year.
REPORT OF THE DIRECTORS CONTINUED
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
Definitions of the terms used and the basis of their
calculation are set out in the glossary beginning on
page100.
AWARENESS AND DISCLOSURE OF RELEVANT
AUDIT INFORMATION
So far as each of the Directors is aware, there is no relevant
audit information (as defined in the Companies Act) of
which the Company’s auditors are unaware.
Each of the Directors has taken all the steps that he or she
ought to have taken as a Director in order to make himself or
herself aware of any relevant audit information (as defined)
and to establish that the Company’s auditors are aware of
that information.
The above confirmation is given and should be interpreted
in accordance with the provision of Section 418(2) of the
Companies Act 2006.
POLITICAL AND CHARITABLE DONATIONS
The Company has not made in the past and does
not intend in the future to make political or charitable
donations.
MODERN SLAVERY ACT 2015
The Company does not provide goods or services in the
normal course of business, and as a financial investment
vehicle, does not have customers. The Directors do not
therefore consider that the Company is required to make a
statement under the Modern Slavery Act 2015 in relation to
slavery or human trafficking. The Company’s suppliers are
typically professional advisers and the Company’s supply
chains are considered to be low risk in this regard.
ANTI-BRIBERY AND CORRUPTION POLICY
The Board has a zero-tolerance approach to instances of
bribery and corruption. Accordingly, it expressly prohibits
any Director or associated persons, when acting on behalf
of the Company, from accepting, soliciting, paying, offering
or promising to pay or authorise any payment, public or
private, in the United Kingdom or abroad to secure any
improper benefit for themselves or for the Company.
A copy of the Company’s anti-bribery and corruption policy
can be found on its website at www.biotechgt.com. The
policy is reviewed annually by the Audit Committee.
CRIMINAL FINANCES ACT 2017
The Board has a zero-tolerance approach to the criminal
facilitation of tax evasion. A copy of the Company’s policy
on preventing the facilitation of tax evasion can be found
on the Company’s website www.biotechgt.com. The policy
is reviewed annually by the Audit Committee.
GLOBAL GREENHOUSE GAS EMISSIONS
The Company is an investment trust, with neither
employees nor premises, nor has it any financial or
operational control of the assets it owns. It has no
greenhouse gas emissions to report from its operations,
nor does it have responsibility for any other emissions
producing sources under the Companies Act 2006
(Strategic Reports and Directors’ Reports) Regulations
2013 or the Companies (Directors’ Report) and Limited
Liability Partnerships (Energy and Carbon Report)
Regulations 2018, including those within the Company’s
underlying investment portfolio. The Company consumed
less than 40,000 kWh of energy during the year in respect
of which the Directors’ Report is prepared and therefore
is exempt from the disclosures required under the
Streamlined Energy and Carbon Reporting criteria.
COMMON REPORTING STANDARD (CRS)
CRS is a global standard for the automatic exchange
of information commissioned by the Organisation for
Economic Cooperation and Development and incorporated
into UK law by the International Tax Compliance
Regulations 2015. CRS requires the Company to provide
certain additional details to HMRC in relation to certain
shareholders. The Registrars, Link Group, have been
engaged to collate such information and file the reports
with HMRC on behalf of the Company.
CORPORATE GOVERNANCE
The Corporate Governance Report set out on pages 42
to50 forms part of the Report of the Directors.
NOMINEE SHARE CODE
Where shares are held in a nominee company name and
where the beneficial owner of the shares is unable to vote
in person, the Company nevertheless undertakes:
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
• to provide the nominee company with multiple copies of
shareholder communications, so long as an indication of
quantities has been provided in advance; and
• to allow investors holding shares through a nominee
company to attend general meetings, provided the
correct authority from the nominee company is
available.
Nominee companies are encouraged to provide the
necessary authority to underlying shareholders to attend
the Company’s general meetings.
BENEFICIAL OWNERS OF SHARES –
INFORMATION RIGHTS
Beneficial owners of shares who have been nominated by
the registered holder of those shares to receive information
rights under section 146 of the Companies Act 2006 are
required to direct all communications to the registered
holder of their shares rather than to the Company’s
registrar, Link Group, or to the Company directly.
SECURITIES FINANCIAL TRANSACTIONS
REGULATION (SFTR) DISCLOSURE
Securities financing transactions (SFTs) include repurchase
transactions, securities or commodities lending and
securities or commodities borrowing, buy-sell back
transactions or sell-buy back transactions and margin
lending transactions. Whilst the Company does not engage
in such SFTs it does engage in Total Return Swaps (TRS).
The Company’s exposure to TRS can be found on the
Company’s website www.biotechgt.com.
UK SANCTIONS
The Board has made due diligence enquiries of the service
providers that process the Company's shareholder data, to
ensure the Company's compliance with the UK sanctions
regime. The relevant service providers have confirmed
that they check the Company's shareholder data against
the UK sanctions list on a daily basis. At the date of this
report, no sanctioned individuals had been identified on
the Company's shareholder register. The Board notes that
stockbrokers and execution-only platforms also carry out
their own due diligence.
ARTICLES OF ASSOCIATION
Amendment of the Company’s Articles of Association
requires a special resolution to be passed by shareholders.
There are no changes proposed this year.
By order of the Board
Frostrow Capital LLP
Company Secretary
4 June 2024
REPORT OF THE DIRECTORS CONTINUED
GOVERNANCE
57
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law, the
Directors are required to prepare the financial statements
in accordance with UK-adopted international accounting
standards. Under company law, the Directors must not
approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of
the Company and of the profit or loss for the Company for
that period.
In preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are
reasonable and prudent;
• state whether they have been prepared in accordance
with UK-adopted international accounting standards,
subject to any material departures disclosed and
explained in the financial statements;
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business; and
• prepare a directors’ report, a strategic report and
directors’ remuneration report which comply with the
requirements of the Companies Act 2006.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Companies Act 2006.
They are also responsible for safeguarding the assets of
the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
The Directors are responsible for ensuring that the Annual
Report and financial statements, taken as a whole, are fair,
balanced, and understandable and provide the information
necessary for shareholders to assess the Company's
position, performance, business model and strategy.
WEBSITE PUBLICATION
The D irectors are responsible for ensuring the Annual Report
and the fi nancial s tatements are made available on a website.
Financial s tatements are published on the Company’s
website in accordance with legislation in the United
Kingdom governing the preparation and dissemination of
financial statements, which may vary from legislation in
other jurisdictions. The maintenance and integrity of the
Company’s website is the responsibility of the D irectors.
The D irectors’ responsibility also extends to the ongoing
integrity of the financial statements contained therein.
RESPONSIBILITY STATEMENT OF THE
DIRECTORS IN RESPECT OF THE ANNUAL
REPORT
We confirm that to the best of our knowledge:
• the financial statements have been prepared in
accordance with the applicable set of accounting
standards and give a true and fair view of the assets,
liabilities, financial position and the return of the
Company for the year ended 31March 2024; and
• the Annual Report includes a fair review of the
development and performance of the business and
the financial position of the Company, together with a
description of the principal risks and uncertainties that
they face.
The Directors consider the Annual Report, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy.
On behalf of the Board
Roger Yates
Chair
4 June 2024
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
AUDIT COMMITTEE REPORT
COMPOSITION AND MEETINGS
The Audit Committee (the Committee) comprises all of the
independent Directors whose biographies can be found
on pages 40 to 41, Julia Le Blan, who has recent and
relevant financial experience, was appointed Chair of the
Committee in July 2017. Inaddition, the Board recognises
the requirement for the Committee as a whole to have
competence relevant to the sector in which the Company
operates. The Committee members have a combination
of financial, investment and business experience which is
relevant to both the biotechnology and investment trust
sectors. The Committee believes it is appropriate for the
Chair of the Board to be a member of the Audit Committee
on account of his relevant financial and sector experience.
The Committee met twice during the year. Attendance by
each Director is shown in the table on page 46.
Role and Responsibilities of the Committee:
1. To review the Company’s half-yearly and annual
financial statements.
2. To advise the Board on whether the Annual Report,
taken as a whole, is fair, balanced and understandable.
3. To review the risk management and internal control
processes of the Company and its key service
providers.
4. To assess the effectiveness of the external audit
as well as the independence and objectivity of the
Auditor.
5. To be responsible for the selection/tender process for
the external Auditor, to agree the scope of the external
Auditor's work and set their remuneration.
6. To review and approve any non-audit work to be
carried out by the Auditor.
7. To consider the need for an internal audit function.
8. To assess the going concern and longer-term viability
of the Company.
9. To report its findings to the Board.
A comprehensive description of the Committee’s role, its
duties and responsibilities, can be found in its terms of
reference which are available for review on the Company’s
website at www.biotechgt.com.
SIGNIFICANT ISSUES CONSIDERED BY THE
COMMITTEE DURING THE YEAR
FINANCIAL STATEMENTS
The production of the Annual Report (including the external
audit) is a thorough process involving input from a number
of different organisations. In order to be able to confirm
that the Annual Report is fair, balanced and understandable,
the Board has requested that the Committee advise on
whether it considers these criteria have been satisfied. As
part of this process, the Committee has considered the
following:
• the procedures followed in the production of the Annual
Report, including the processes in place to ensure the
accuracy of the factual content;
• the extensive levels of review that were undertaken in
the production process by the AIFM and the Committee;
and
• the internal control environment as operated by the
Portfolio Manager, AIFM and other service providers.
As a result of the work undertaken by the Committee, it
has confirmed that the Annual Report for the year ended
31 March 2024, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the Company’s financial position,
performance, business model and strategy. The Committee
has confirmed this to the Board.
COMPANY’S INVESTMENTS – VALUATION AND
OWNERSHIP
The Committee approached and dealt with this area of risk by:
• seeking confirmation from the AIFM that all investment
holdings and cash/deposit balances had been agreed
to an independent confirmation from the Custodian and
Prime Broker. In addition, the Committee reviewed details
of the internal control procedures in place at the Portfolio
Manager, the AIFM and the Custodian and Prime Broker
and also received regular reports from the Depositary
(whose role it is to safeguard the Company’s assets and
to verify their valuation);
• reconfirming its understanding of the processes in
place to record investment transactions and income,
and to value the portfolio;
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
• reviewing and amending, where necessary, the
Company’s register of key risks in light of changes to
the portfolio and the investment environment; and
• gaining an overall understanding of the performance of
the portfolio both in capital and revenue terms through
comparison to the Benchmark.
VALUATION OF UNQUOTED INVESTMENTS
The Company has the ability to make unquoted
investments up to a limit of 10% of the portfolio at the time
of acquisition. This does not include any holdings that
are subject to an IPO lock-in (see glossary beginning on
page100). Both the Directors and the AIFM need to ensure
that an appropriate value is placed on such investments
within the Company’s published net asset value. The
Committee has worked with the Portfolio Manager and
the AIFM to establish clear guidelines for the valuation
of unquoted investments, including the use of valuations
produced by independent external valuers, where
appropriate.
The Board has established a Valuation Committee which
considers in detail the valuations and valuation methodologies
employed in respect of the unquoted assets. The Valuation
Committee also considers whether the third party valuer has
followed appropriate standards and established valuation
procedures, taking into account the views of the Company's
external auditor.
Valuations are adjusted both during regular valuation cycles
(currently a three month rolling cycle) and, if necessary, on
an ad hoc basis in response to material events such as a
significant change in fundamentals or a takeover approach.
This process ensures that the private companies in the
portfolio are valued in both a fair and timely manner. Any ad
hoc changes are reflected in the next day's published NAV,
which is announced to the stock exchange.
The Audit Committee reviewed the minutes of the Valuation
Committee meetings held after the year end and the half
year end and noted the recommendations it had made to
theBoard.
RECOGNITION OF REVENUE FROM INVESTMENTS
The Committee took steps to gain an understanding
of the processes in place to record investment income
and transactions. The Committee sought and received
confirmation from the AIFM that all dividends both received
and receivable had been accounted for correctly. The
Committee noted and took comfort from the segregation
of duties in place between the AIFM and the Custodian and
Prime Broker.
INVESTMENT TRUST STATUS
The Committee sought and received confirmation from
Frostrow that the Company continues to comply with
Section 1158 of the Corporation Tax Act 2010, so that its
status as an investment trust is maintained.
CALCULATION OF AIFM, PORTFOLIO
MANAGEMENT AND PERFORMANCE FEES
The AIFM, portfolio management and performance
fees are calculated in accordance with the AIFM and
Portfolio Management Agreements. Both the Committee
and the Auditor review and agree the calculation of
any performance fee that becomes payable, however
no performance fees became payable during the year
underreview.
OTHER REPORTING MATTERS
AUDIT REGULATION
The Committee has not had to consider any new audit
regulations in the past year. It has, however, taken note
of reporting guidance and thematic reviews published by
the FRC and determined how to apply any relevant best
practice to the Company’s reporting.
The Committee also reviews the outcomes of the FRC’s
annual Audit Quality Reviews and discusses the findings
with the Auditor.
The Committee has noted, in particular, the publication by
the FRC of the Minimum Standard for Audit Committees
and the revised UK Corporate Governance Code. The
Minimum Standard will apply to the Company on a comply
or explain basis as it is included by reference in the new UK
Corporate Governance Code. The Committee will seek to
comply with the Standard as far as it is appropriate for an
externally managed investment company to do so.
INVESTMENT PERFORMANCE
The Committee gained an overall understanding of the
performance of the investment portfolio, both in capital
and revenue terms, through ongoing discussions with the
Portfolio Manager and also with comparison to suitable key
performance indicators.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
ACCOUNTING POLICIES
During the year, the Committee ensured that the
accounting policies, as set out on pages 80 to 84, were
applied consistently throughout the year. In light of there
being no unusual transactions during the year or other
possible reasons, the Committee agreed that there was no
reason to change the policies.
GOING CONCERN
Having reviewed the Company’s financial position and
liabilities, the Committee is satisfied that it is appropriate
for the Board to prepare the financial statements on the
going concern basis. The Committee’s review of the
Company’s financial position included consideration of
the cash and cash equivalent position of the Company;
the diversification of the portfolio; and an analysis of
portfolio liquidity, which estimated a liquidation of c.94.5%
of the portfolio within seven trading days (based on current
market volumes). Stress testing was also conducted as
described below. Further information is provided in the
Strategic Report on page 36.
VIABILITY STATEMENT
The Committee considered the longer-term viability of
the Company in connection with the Board’s statement in
the Strategic Report on pages 36 and 37. The Committee
reviewed the Company’s financial position (including its
cash flows and liquidity position), the principal risks and
uncertainties and the results of stress tests. The tests
assumed falls in the Company's NAV and reductions in the
liquidity of the portfolio and then examined the effect this
would have on the Company's expenses and the Company's
ability to meet its liabilities as they fell due.
In even the most stressed scenario, the Company was
shown to have sufficient cash, or to be able to liquidate a
sufficient portion of its listed holdings, in order to be able to
meet its liabilities as they fall due. Based on the information
available to the Directors at the time, the Committee
concluded it was reasonable for the Board to expect that the
Company will be able to continue in operation and meet its
liabilities as they fall due over the next five financial years.
RISK MANAGEMENT AND INTERNAL CONTROLS
The Board has overall responsibility for the Company’s
risk management and internal control systems and for
reviewing their effectiveness. Operational responsibility
is delegated to the Audit Committee. The Company’s
AUDIT COMMITTEE REPORT CONTINUED
internal control structure is summarised on page 43. The
Company applies the guidance published by the Financial
Reporting Council on internal controls. Internal control
systems are designed to manage, rather than eliminate,
the risk of failure to achieve the business objective and
can provide only reasonable and not absolute assurance
against material misstatement or loss. These controls aim
to ensure that the assets of the Company are safeguarded,
that proper accounting records are maintained, and that the
Company’s financial information is reliable.
A description of the principal risks facing the Company
(including emerging risks) and an explanation of how
they are managed is provided in the Strategic Report on
pages 31 to 36. The Directors have established an ongoing
process for identifying, evaluating and managing the risks
faced by the Company, including emerging risks, which are
recorded in a risk register. The Committee reviewed the
risk register during the year to ensure the risks facing the
Company were correctly defined or articulated, and that
the risk scores were appropriate. The Audit Committee, on
behalf of the Board, assesses the likelihood of occurrence
and the possible impact of each risk. The Committee then
considers the Company’s ability to reduce or mitigate the
incidence and impact of these risks on its performance and
records the controls in place.
The Committee reviewed the effectiveness of the
Company’s risk management and internal controls
systems during the year. As an externally managed
investment trust, the Company is reliant on the operational
systems of its service providers. Therefore the Audit
Committee examined the internal control reports of the
Company’s principal service providers. The Committee also
reviewed the cyber security strategies adopted by each of
the principal service providers and spoke with members of
the Portfolio Manager’s risk management and investment
compliance teams to ensure their processes remain
robust. There were no changes to the Company’s risk
management processes during the year and no significant
failings or weaknesses were identified.
Following its review, the Committee concluded that there
were no significant control weaknesses or other issues that
were required to be brought to the attention of the Board.
The Committee is satisfied that appropriate systems have
been in place for the year under review and up to the date
of approval of this report.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
HALF YEAR REPORT AND FINANCIAL
STATEMENTS
The Committee reviewed the Half Year Report and
financial statements, which are not audited or reviewed
by the Auditor, to ensure that the accounting policies
were consistent with those used in the annual financial
statements and that they portrayed a fair, balanced and
understandable picture of the period in question.
INTERNAL AUDIT
The Committee considered whether there was a need for
the Company to have an internal audit function. As the
Company delegates its day-to-day operations to third
parties and has no employees, the Committee concluded
that there was no such need.
EXTERNAL AUDITOR
APPOINTMENT AND TENURE
BDO LLP (BDO) was the Auditor for the financial year and
this was their fifth audit of the Company.
Peter Smith was the audit partner for the financial year
under review and he has been the audit partner since BDO's
appointment. Accordingly, this was Mr Smith's final audit
as audit partner. A new audit partner will be appointed in
due course.
THE AUDIT
The Committee reviewed BDO's audit plan on 2 November
2023. The review considered, inter alia, the scope of the
audit, the level of materiality, the audit risks identified by
BDO, the Auditor's approach to testing the portfolio, and
pertinent regulatory developments. The Committee met
with BDO on 13 May 2024 to discuss the progress of the
audit and the draft Annual Report. The Committee then met
BDO on 23 May to review formally the outcome of the audit.
The Auditor was provided with an opportunity to meet with
the Committee without the AIFM or the Portfolio Manager
being present. No concerns were raised by the Auditor
or the Committee in relation to the service provided by
the AIFM, the Portfolio Manager, or any other third-party
service provider. There were no material or significant
adverse matters brought to the Committee's attention
in respect of the 2024 audit, which should be brought to
shareholders' attention.
INDEPENDENCE AND EFFECTIVENESS:
The Committee evaluated the independence of the Auditor
and the effectiveness of the external audit. In order to fulfil
this responsibility, the Committee reviewed:
– the senior audit personnel in the audit plan for the year,
in order to ensure that there were sufficient, suitably
experienced staff with knowledge of the investment
trust sector working on the audit;
– the steps the Auditor takes to ensure its independence
and objectivity including their arrangements concerning
any conflicts of interest;
– the extent of any non-audit services provided by the
Auditor during the year; and
– the statement by the Auditor that they remain
independent within the meaning of the regulations and
their professional standards.
In order to consider the effectiveness of the audit process,
the Committee reviewed:
– the Auditor’s fulfilment of the agreed audit plan,
including their ability to communicate with
management and to resolve any issues promptly and
satisfactorily;
– the presentation of the audit findings; and
– feedback from BDO and Frostrow as the AIFM and
Company Secretary.
The Committee is satisfied with the Auditor's independence
and the effectiveness of the audit process.
REMUNERATION
The Committee approved a fee of £50,500 for the audit for
the year ended 31 March 2024, excluding disbursements
(2023: £49,500). This represents an increase of 2.0%
compared with the previous year’s fee.
NON-AUDIT SERVICES
BDO did not undertake any non-audit services during the
year (2023: none).
Pursuant to the Company's non-audit services policy, the
provision of any non-audit services by the Auditor must be
approved by the Audit Committee. A copy of the Company's
non-audit services policy can be found on the Company's
website: www.biotechgt.com
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
AUDITOR’S REAPPOINTMENT
BDO have indicated their willingness to continue to act as
Auditor for the forthcoming year and a resolution for their
re-appointment will be proposed at the Annual General
Meeting.
As a public company listed on the London Stock Exchange,
the Company is subject to mandatory auditor rotation
requirements. Based on these requirements, another
tender process will be conducted no later than 2029. The
Committee will, however, continue to consider annually
the need to go to tender for audit quality, remuneration or
independence reasons.
PERFORMANCE EVALUATION
The Committee’s performance over the past year was
reviewed as part of the annual Board evaluation. The
externally-facilitated review considered the composition of
the Committee and the efficacy of Committee meetings.
I am pleased to confirm that the evaluation result was
positive and no matters of concern or requirements for
change were highlighted.
Julia Le Blan
Chair of the Audit Committee
4 June 2024
AUDIT COMMITTEE REPORT CONTINUED
GOVERNANCE
63
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
DIRECTORS’ REMUNERATION REPORT
The Directors’ Remuneration Report is subject to an annual advisory shareholder vote and therefore an ordinary resolution
for the approval of this report will be put to shareholders at the Company’s forthcoming AGM.
The law requires the Auditor to audit certain disclosures provided in this report. Where disclosures have been audited,
they are indicated as such and the Auditor’s opinion is included in their report to shareholders beginning on page 68. The
Remuneration Policy on page 67 forms part of this report.
As the Company has only non-executive directors, and therefore relatively simple remuneration arrangements, the Board has
not established a separate remuneration committee. Instead, the independent Directors on the Board consider the framework
for the Directors’ remuneration on an annual basis. The independent Directors review the ongoing appropriateness of the
Company’s remuneration policy and the remuneration of individual Directors by reference to the activities of the Company and
in comparison with other companies of a similar structure and size.
The simple fee structure reflects the non-executive nature of the Board, which itself reflects the Company’s business model
as an externally managed investment trust (please refer to the Business Review beginning on page 28 for more information).
Accordingly, statutory reporting requirements relating to executive directors’ and employees’ pay do not apply.
No communications have been received from shareholders regarding Directors’ remuneration.
During the year, having noted that there has been a period of high inflation and in order to bring the fees more in line with the
Company’s peers, it was agreed to apply a modest increase to each Director’s fees with effect from 1 April 2024.
The table below shows the level of fees paid to Directors and the percentage increase from the prior year:
Forecasted
Year Ending
31 March
2025
Fee Level
(per annum)
Year Ending
31 March
2024
Fee Level
(per annum)
Year Ending
31 March
2023
Fee Level
(per annum)
Year Ended
31 March
2022
Fee Level
(per annum)
Year Ended
31 March
2021
Fee Level
(per annum)
Chair of the Board £44,000 £42,000 £40,000 £40,000 £37,000
+4.8% +5.0% – +8.1% –
Audit Committee Chair £35,000 £33,600 £32,000 £30,000 £28,500
+4.2% +5.0% 6.7% +5.3% –
Management Engagement Committee Chair £33,000 £31,500 £30,000 £30,000 £28,500
+4.8% +5.0% – +5.3% –
Director £30,000 £28,875 £27,500 £27,500 £26,000
+3.9% +5.0% – +5.8% –
The Board believes these levels of remuneration reflect both the time commitment and the level of responsibility of each role.
GOVERNANCE
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
DIRECTORS’ REMUNERATION FOR THE YEAR (AUDITED)
The Directors who served in the year received the following remuneration:
Year ended 31 March 2024 Year ended 31 March 2023
Date of
Appointment
to the Board
Fees
£
Taxable
Benefits+
£
Total
£
Fees
£
Taxable
Benefits+
£
Total
£
Steve Bates 8 July 2015 31,500 – 31,500 30,000 – 30,000
Julia Le Blan 12 July 2016 33,600 – 33,600 32,000 – 32,000
Lord Willetts 11 November 2015 28,875 – 28,875 27,500 – 27,500
Dr Nicki Shepherd 18 January 2021 28,875 – 28,875 27,500 – 27,500
Roger Yates 1 December 2021 42,000 – 42,000 35,696 – 35,696
Andrew Joy^ 15 March 2012 – – – 12,000 – 12,000
Hamish Baillie 1 November 2023 12,031 629 12,660 – – –
176,881 629 177,510 164,696 – 164,696
The amounts shown in the table above exclude any employers’ national insurance contributions, if applicable.
+ Taxable benefits primarily comprise travel and associated expenses incurred by the Directors in attending Board and Committee meetings in London. Any
amounts shown would be subject to tax and National Insurance as a benefit in kind.
^ Andrew Joy retired from the Board on 19 July 2022.
Geoff Hsu joined the Board on 16 May 2018. Mr Hsu has waived his Director’s fee as he is a General Partner at OrbiMed, the
Portfolio Manager, which is party to the Portfolio Management Agreement and receives fees as described on page 51 of this
Annual Report.
The Directors are entitled to be reimbursed for reasonable expenses incurred by them in connection with the performance of
their duties and attendance at Board and General Meetings.
In certain circumstances, under HMRC rules, travel and other out of pocket expenses reimbursed to the Directors may be
considered as taxable benefits. Where expenses are classed as taxable under HMRC guidance they would be shown in the
Taxable Benefits column of the table above.
RELATIVE COST OF DIRECTORS’ REMUNERATION
To enable shareholders to assess the relative cost of Directors’ remuneration, the table below shows the amount spent on
Directors’ fees compared with AIFM and portfolio management fees and the Company’s other expenses, and the amount
spent on share buybacks during the year.
2024
£’000
2023
£’000
Difference
£’000
Fees payable to non-executive Directors 177 165 12
AIFM, portfolio management fees and other re-occurring expenses 3,836 4,223 (387)
Repurchase of Company’s own shares for cancellation 43,584 22,619 20,965
DIRECTORS’ REMUNERATION REPORT CONTINUED
GOVERNANCE
65
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
DIRECTORS’ REMUNERATION REPORT
At the Annual General Meeting held in July 2023, the results in respect of the non-binding resolution to approve the Directors’
Remuneration Report were as follows:
Percentage of
votes cast
For
Percentage of
votes cast
Against
Number of
votes
withheld
99.58% 0.42% 12,809
LOSS OF OFFICE
Directors do not have service contracts with the Company but are engaged under letters of appointment. These specifically
exclude any entitlement to compensation upon leaving office for whatever reason.
SHARE PRICE RETURN
The chart below compares the Company’s share price total return with the Nasdaq Biotechnology Index (sterling adjusted),
which the Board has adopted as the principal comparator for both the Company’s performance and that of the Portfolio
Manager.
SHAREHOLDER TOTAL RETURN FOR TEN YEARS TO 31 MARCH 2024
3FXIFV'NTYJHMSTQTL^.SIJ]XYJWQNSLFIOZXYJI9MJ'NTYJHM,WT\YM9WZXY8MFWJ5WNHJ
7JGFXJIYTFXFY2FWHM
8TZWHJ'QTTRGJWL
2FW 2FW2FW2FW2FW2FW2FW2FW2FW2FW2FW
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
DIRECTORS’ INTERESTS IN SHARES (AUDITED)
The table below shows the interests in the Company’s share capital of the Directors serving at the year end. There were no
changes in the Directors’ interests from the year end to the date of this report.
Number of shares held as at
31 March
2024
31 March
2023
Roger Yates (Chair) 15,000
10,000
Hamish Baillie 3,000
nil
Steve Bates 10,000
10,000
Julia Le Blan 7,000
7,000
Geoff Hsu nil
nil
Dr Nicki Shepherd
2,000 nil
The Rt Hon Lord Willetts nil
nil
None of the Directors were granted or exercised rights over shares during the year. None of the Directors is required to own
shares in the Company.
Roger Yates
Chair
4 June 2024
DIRECTORS’ REMUNERATION REPORT CONTINUED
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
DIRECTORS’ REMUNERATION POLICY
DIRECTORS’ REMUNERATION POLICY
The Board’s policy is that fees payable to the Directors should reflect the time spent by the Board on the Company’s affairs
and the responsibilities borne by the Directors. Remuneration should be sufficient to enable candidates of a high calibre to be
recruited. Directors are remunerated in the form of fees payable monthly in arrears, paid to the Director personally. There are
no long-term incentive schemes, bonuses, share option schemes or pension arrangements and the fees are not specifically
related to the Directors’ performance, either individually or collectively. The Company does not have any employees.
None of the Directors has a service contract. The terms of their appointment provide that Directors shall retire and be subject
to election at the first Annual General Meeting after their appointment and to re-election annually thereafter. The terms also
provide that a Director may be removed without notice and that compensation will not be due on leaving office.
The fees for the Directors are determined within the limits set out in the Company’s Articles of Association. The present
aggregate limit is £350,000 per annum.
The Directors’ Remuneration Policy is subject to a binding shareholder vote every three years. It was last approved at the
AGM held in 2023 and it is therefore expected that it will next be recommended to shareholders at the AGM in 2026. Of the
votes cast at the 2023 AGM, 99.54% were in favour and 0.46% were against.
This policy is reviewed annually and it is intended that it will continue for the year ending 31 March 2025 and for subsequent
financial years.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF
THE BIOTECH GROWTH TRUST PLC
OPINION ON THE FINANCIAL STATEMENTS
In our opinion the financial statements:
• give a true and fair view of the state of the Company’s
affairs as at 31 March 2024 and of its profit for the year
then ended;
• have been properly prepared in accordance with UK
adopted international accounting standards; and
• have been prepared in accordance with the
requirements of the Companies Act 2006.
We have audited the financial statements of The Biotech
Growth Trust PLC (the Company) for the year ended
31March 2024 which comprise the Income Statement, the
Statement of Financial Position, the Statement of Changes
in Equity, the Statement of Cash Flows and notes to the
financial statements, including a summary of material
accounting policies. The financial reporting framework that
has been applied in their preparation is applicable law and
UK adopted international accounting standards.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs(UK)) and applicable law.
Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion. Our audit
opinion is consistent with the additional report to the audit
committee.
Independence
Following the recommendation of the audit committee, we
were appointed by the Board of Directors on 20 February
2020 to audit the financial statements for the year ended
31March 2020 and subsequent financial periods. The
period of total uninterrupted engagement including
retenders and reappointments is five years, covering the
years ended 31 March 2020 to 31 March 2024. We remain
independent of the Company in accordance with the ethical
requirements that are relevant to our audit of the financial
statements in the UK, including the FRC’s Ethical Standard
as applied to listed public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements. The non-audit services prohibited by
that standard were not provided to the Company.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded
that the Directors’ use of the going concern basis of
accounting in the preparation of the financial statements
is appropriate. Our evaluation of the Directors’ assessment
of the Company’s ability to continue to adopt the going
concern basis of accounting included:
• Evaluating the appropriateness of the Directors’ method
of assessing the going concern in light of economic and
market conditions by reviewing the information used by
the Directors in completing their assessment;
• Recalculating the liquidity of the investment portfolio,
using our own independently obtained trading data,
to verify the liquidity assumptions which underpinned
the going concern assessment and comparing it to the
liabilities and expenditure;
• Calculating and considering financial ratios, namely
comparison of the investments balance to the current
liabilities and expenditure, to ascertain the financial
health of the Company; and
• Considering any other factors which could impact
on going concern such as non-compliance with laws
and regulation, legal matters and the presence of
contingencies and commitments.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Company’s ability to continue as a
going concern for a period of at least twelve months from
when the financial statements are authorised for issue.
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In relation to the Company’s reporting on how it has applied the UK Corporate Governance Code, we have nothing material
to add or draw attention to in relation to the Directors’ statement in the financial statements about whether the Directors
considered it appropriate to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant
sections of this report.
OVERVIEW
20220244 20220233
11
Key audit matters Valuation and ownership of quoted investments
Valuation of unquoted investments
3
3
3
3
Materiality Company financial statements as a whole
£3,610,000 (2023: £3,290,000) based on 1% (2023: 1%)
of Net assets
1 In the financial statements for the year-ended 31 March 2023 we reported one key audit matter which related to the valuation and existence of investments, in
the current year we have split the valuation of quoted and unquoted investments into two separate key audit matters as they have different risk profiles.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Our audit was scoped by obtaining an understanding of the Company and its environment, including the Company’s system
of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk
of management override of internal controls, including assessing whether there was evidence of bias by the Directors that
may have represented a risk of material misstatement.
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified, including those which had the greatest effect on: the overall audit strategy,
the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in
the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a
separate opinion on these matters.
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Key audit matter How the scope of our audit addressed the key audit matter
Valuation and ownership of quoted investments Note 1(B) and 8
We considered the valuation and ownership of quoted
investments to be a significant audit area as investments
represent the most significant balance in the financial
statements and underpin the principal activity of the
entity. Given the significance of the quoted investments
there is a risk that an error in their valuation could have a
material impact on the financial statements.
The quoted investment valuations are prepared by
J.P.Morgan and the Alternative Investment Fund
Manager (AIFM), Frostrow Capital LLP.
The investment valuations are reviewed and approved
by the Board. Notwithstanding this review, there is
a potential risk of misstatement in the investment
valuations. As quoted investments are Level 1 financial
instruments, we do not consider this to be a highly
subjective area.
As quoted investments make up the majority of the
balance sheet, it will be necessary to ensure that the
Company has appropriate confirmation of title over
investments.
Due to the significance of this balance we consider this to
be a key audit matter.
We have for 100% of the quoted portfolio:
• Compared the year-end bid price used to externally quoted
prices;
• Confirmed that the foreign exchange rates used in the
valuations were appropriate by corroborating these to
independent sources;
• Tested the computational accuracy by multiplying the number
of shares held per the statement obtained independently from
the custodian by the valuation per share; and
• Assessed if there were contra indicators, such as liquidity
considerations, to suggest bid price is not the most appropriate
indication of fair value by considering the realisation period for
individual holdings.
We have corroborated ownership by reference to confirmations
from the custodian, J.P. Morgan Securities LLC.
Key observations:
Based on our procedures performed we did not identify any
matters to suggest the valuation and ownership of quoted
investments was not appropriate.
Valuation of unquoted investments Note 1(A & B) and 8
There is a high level of estimation uncertainty involved in
determining the valuation of unquoted investments.
The unquoted investment valuations are prepared by Kroll,
an expert engaged by the Portfolio Manager, OrbiMed
Capital LLC, and are reviewed and approved by the
Board after review by, and on the recommendation of,
the Valuation Committee. Notwithstanding this review,
there is a potential risk of misstatement in the investment
valuations through the manipulation of judgemental inputs
and/or use of inappropriate valuation methodology.
Due to the materiality of the balance in relation to
the financial statements as a whole and judgement
involvement, we consider this to be a key audit matter.
For a sample of unquoted investment, we have:
• Considered whether the valuation methodology is the most
appropriate in the circumstances under the International Private
Equity and Venture Capital Valuation (IPEV) Guidelines;
• Verified and benchmarked key inputs and estimates to
independent information and our own research;
• Recalculated the computational accuracy of the value
attributable to the Company;
• Considered the competence, capabilities and expertise of the
management’s expert through consideration of the qualifications
held by the expert. We also considered the services provided by the
firm employing the expert. We considered the independence and
objectivity of the expert through reviewing the signed third-party
access letter that was issued by the expert. We considered the
appropriateness of the methodology and assumptions employed
by the expert through review of the accounting framework and
valuation guidelines followed; and
• Where appropriate, we have stress-tested certain assumptions
applied to assess the sensitivity of the valuation to these inputs
with reference to materiality.
We have corroborated ownership by reference to confirmations:
• from the custodian, J.P. Morgan Securities LLC, and
• from the investee companies.
Key observations:
Based on our procedures performed we did not identify any
matters to suggest the valuation of unquoted investments was
notappropriate.
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE BIOTECH GROWTH TRUST PLC CONTINUED
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements.
We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic
decisions of reasonable users that are taken on the basis of the financial statements.
In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower
materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these
levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and
the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole and performance
materiality as follows:
Company Financial statements
2024 2023
Materiality £3,610,000 £3,290,000
Basis for determining materiality 1% of Net assets 1% of Net assets
Rationale for the benchmark applied As an investment trust, the net
asset value is the key measure of
performance for users of the financial
statements.
As an investment trust, the net
asset value is the key measure of
performance for users of the financial
statements.
Performance materiality £2,707,000 £2,460,000
Basis for determining performance
materiality
75% of materiality 75% of materiality
Rationale for the percentage applied for
performance materiality
The level of performance materiality
applied was set after having considered
a number of factors including the
expected total value of known and
likely misstatements and the level of
transactions in the year.
The level of performance materiality
applied was set after having considered
a number of factors including the
expected total value of known and
likely misstatements and the level of
transactions in the year.
Reporting threshold
We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £180,500
(2023: £164,000). We also agreed to report differences below this threshold that, in our view, warranted reporting on
qualitative grounds.
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INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE BIOTECH GROWTH TRUST PLC CONTINUED
OTHER INFORMATION
The directors are responsible for the other information. The other information comprises the information included in the
Annual Report other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements
does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any
form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether
the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of
the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to report in this regard.
CORPORATE GOVERNANCE STATEMENT
The Listing Rules require us to review the Directors’ statement in relation to going concern, longer-term viability and that
part of the Corporate Governance Statement relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate
Governance Statement is materially consistent with the financial statements, or our knowledge obtained during the audit.
Going concern and longer-term viability
• The Directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any
material uncertainties identified; and
• The Directors’ explanation as to their assessment of the Company’s prospects, the period this assessment covers and
why the period is appropriate.
Other Code provisions
• Directors’ statement on fair, balanced and understandable;
• Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks;
• The section of the annual report that describes the review of effectiveness of risk management and internal control
systems; and
• The section describing the work of the Audit Committee.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
OTHER COMPANIES ACT 2006 REPORTING
Based on the responsibilities described below and our work performed during the course of the audit, we are required by the
Companies Act 2006 and ISAs (UK) to report on certain opinions and matters as described below.
Strategic report and Directors’ report
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Strategic report and the Directors’ report for the financial year for which the financial
statements are prepared is consistent with the financial statements; and
• the Strategic report and the Directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
we have not identified material misstatements in the strategic report or the Directors’ report.
Directors’ remuneration
In our opinion, the part of the Directors’ remuneration report to be audited has been properly prepared in accordance with
the Companies Act 2006.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to
report to you if, in our opinion:
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from
branches not visited by us; or
• the financial statements and the part of the Directors’ remuneration report to be audited are not in agreement with the
accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Statement of Directors’ responsibilities, the Directors are responsible for the preparation of the
financial statements and for being satisfied that they give a true and fair view, and for such internal control as the Directors
determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the
Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF THE BIOTECH GROWTH TRUST PLC CONTINUED
Extent to which the audit was capable of detecting
irregularities, including fraud
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design procedures
in line with our responsibilities, outlined above, to detect
material misstatements in respect of irregularities, including
fraud. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below:
Non-compliance with laws and regulations
Based on:
• Our understanding of the Company and the industry in
which it operates;
• Discussion with the AIFM and those charged with
governance; and
• Obtaining and understanding of the Company’s policies
and procedures regarding compliance with laws and
regulations,
we considered the significant laws and regulations to
be Companies Act 2006, the FCA listing and DTR rules,
the principles of the AIC Code of Corporate Governance,
industry practice represented by the AIC SORP, the
applicable accounting framework, and qualification as
an Investment Trust under UK tax legislation as any
non-compliance of this would lead to the Company losing
various deductions and exemptions from corporation tax.
Our procedures in respect of the above included:
• Agreement of the financial statement disclosures to
underlying supporting documentation;
• Enquiries of the AIFM and those charged with
governance relating to the existence of any non-
compliance with laws and regulations;
• Review of a sample of legal invoices to look for
potential non-compliance with laws and regulations or
undisclosed contingencies and commitments;
• Reviewing minutes of meetings of those charged with
governance throughout the period for instances of non-
compliance with laws and regulations; and
• Reviewing the calculation in relation to Investment Trust
compliance to check that the Company was meeting its
requirements to retain its Investment Trust Status.
Fraud
We assessed the susceptibility of the financial statement to
material misstatement including fraud.
Our risk assessment procedures included:
• Enquiry with the AIFM and those charged with
governance regarding any known or suspected
instances of fraud;
• Review of minutes of meeting of those charged with
governance for any known or suspected instances of
fraud;
• Discussion amongst the engagement team as to how
and where fraud might occur in the financial statements;
• Obtaining an understanding of the Company’s policies
and procedures relating to:
o Detecting and responding to the risks of fraud; and
o Internal controls established to mitigate risks related
to fraud; and
• Obtaining an understanding of the control environment
in monitoring compliance with laws and regulations.
Based on our risk assessment, we considered the areas
most susceptible to be management override of controls
and the valuation of unquoted investments.
Our procedures in respect of the above included:
• The procedures set out in the Key Audit Matter section
above relating to unquoted investments;
• In addressing the risk of management override of
control, we:
o Performed a review of estimates and judgements
applied by management in the financial statements
to assess their appropriateness and the existence of
any systematic bias;
o Considered the opportunity and incentive to
manipulate accounting entries and assessed the
reasonability of relevant adjustments made in the
period end financial reporting process;
o Reviewed for significant transactions outside the
normal course of business; and
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
o Performed a review of unadjusted audit differences, if
any, for indications of bias or deliberate misstatement.
We also communicated relevant identified laws and
regulations and potential fraud risks to all engagement
team members, who were deemed to have the appropriate
competence and capabilities and remained alert to any
indications of fraud or non-compliance with laws and
regulations throughout the audit.
Our audit procedures were designed to respond to risks
of material misstatement in the financial statements,
recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of
not detecting one resulting from error, as fraud may
involve deliberate concealment by, for example, forgery,
misrepresentations or through collusion. There are inherent
limitations in the audit procedures performed and the
further removed non-compliance with laws and regulations
is from the events and transactions reflected in the financial
statements, the less likely we are to become aware of it.
A further description of our responsibilities is available on
the Financial Reporting Council’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
USE OF OUR REPORT
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
Peter Smith (Senior Statutory Auditor)
For and on behalf of BDO LLP, Statutory Auditor
London, UK
4 June 2024
BDO LLP is a limited liability partnership registered in
England and Wales (with registered number OC305127).
FINANCIAL STATEMENTS
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2024
Notes
Revenue
£’000
2024
Capital
£’000
Total
£’000
Revenue
£’000
2023
Capital
£’000
Total
£’000
Income 2 1,203 – 1,203 310 – 310
Gains/(losses) on investments held at fair value
through profit or loss
8 – 79,143 79,143 – (32,727) (32,727)
Foreign exchange losses – (621) (621) – (3,759) (3,759)
AIFM, Portfolio management and performance
fees
3 (153) (2,917) (3,070) (176) (3,355) (3,531)
Other expenses 4 (742) (39) (781) (692) (51) (743)
Profit/(loss) before finance costs and taxation 308 75,566 75,874 (558) (39,892) (40,450)
Finance costs 5 (56) (1,059) (1,115) (40) (752) (792)
Profit/(loss) before taxation 252 74,507 74,759 (598) (40,644) (41,242)
Taxation 6 (159) – (159) (56) – (56)
Profit/(loss) for the year 93 74,507 74,600 (654) (40,644) (41,298)
Basic and diluted earnings/(loss) per share 7 0.3p 206.7p 207.0p (1.6)p (100.9)p (102.5)p
The Company does not have any income or expenses which are not included in the profit/(loss) for the year. Accordingly the “profit/(loss)
for the year” is also the “total comprehensive profit/(loss) for the year”, as defined in IAS 1 (revised) and no separate Statement of Other
Comprehensive Income has been presented.
The “Total” column of this statement represents the Company’s Income Statement, prepared in accordance with UK-adopted International
Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards
The “Revenue” and “Capital” columns are supplementary to this and are prepared under guidance published by the Association of
Investment Companies.
The accompanying notes from page 80 to page 98 are an integral part of this statement.
FINANCIAL STATEMENTS
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STATEMENT OF FINANCIAL POSITION
AS AT 31 MARCH 2024
Notes
2024
£’000
2023
£’000
Non current assets
Investments held at fair value through profit or loss 8 394,712 357,229
Derivative – OTC equity swaps 8, 9 42 –
394,754 357,229
Current assets
Other receivables 10 14,535 508
Cash and cash equivalents 2,131 2,772
16,666 3,280
Total assets 411,420 360,509
Current liabilities
Other payables 11 2,575 8,846
Loan 14 47,078 20,170
Derivative – OTC equity swaps 8, 9 460 1,202
50,113 30,218
Net assets 361,307 330,291
Equity attributable to equity holders
Ordinary share capital 12 8,371 9,684
Share premium account 79,951 79,951
Capital redemption reserve 15,059 13,746
Capital reserve 16 258,891 227,968
Revenue reserve (965) (1,058)
Total equity 361,307 330,291
Net asset value per share 13 1,078.9p 852.6p
The financial statements on pages 76 to 98 were approved by the Board on 4 June 2024 and were signed on its behalf by:
Roger Yates
Chair
The accompanying notes from page 80 to page 98 are an integral part of this statement.
The Biotech Growth Trust PLC – Company Registration Number 03376377 (Registered in England and Wales)
FINANCIAL STATEMENTS
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2024
Notes
Ordinary
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 1 April 2023
9,684 79,951 13,746 227,968 (1,058) 330,291
Net profit for the year
– – – 74,507 93 74,600
Repurchase of own shares for cancellation
(1,313) – 1,313
(43,584) –
(43,584)
At 31 March 2024 12, 13
8,371 79,951 15,059 258,891 (965) 361,307
FOR THE YEAR ENDED 31 MARCH 2023
Notes
Ordinary
Share
capital
£’000
Share
premium
account
£’000
Capital
redemption
reserve
£’000
Capital
reserve
£’000
Revenue
reserve
£’000
Total
£’000
At 1 April 2022
10,289 79,951 13,141 291,231 (404) 394,208
Net loss for the year
– – – (40,644) (654) (41,298)
Repurchase of own shares for cancellation
(605) – 605
(22,619) –
(22,619)
At 31 March 2023 12, 13
9,684 79,951 13,746 227,968 (1,058) 330,291
The accompanying notes from page 80 to page 98 are an integral part of this statement.
See note 16 on page 98 for details of the amounts of reserves available for distribution.
FINANCIAL STATEMENTS
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2024
Notes
2024
£’000
2023
£’000
Operating activities
Profit/(loss) before taxation* 74,759 (41,242)
Finance costs 1,115 792
(Gains)/losses on investments held at fair value through profit or loss 8 (80,669) 30,945
Foreign exchange losses 621 3,759
Decrease/(increase) in other receivables (6) 28
Increase/(decrease) in other payables 98 (116)
Taxation paid 6 (159) (56)
Net cash outflow from operating activities (4,241) (5,890)
Investing activities
Purchases of investments and derivatives (350,835) (459,606)
Sales of investments and derivatives 373,176 505,300
Net cash inflow from investing activities 22,341 45,694
Financing activities
Repurchase of own shares for cancellation (43,913) (20,910)
Finance costs – interest paid (1,115) (792)
Drawdown/(repayment) of the loan facility 26,287 (15,330)
Net cash outflow from financing activities (18,741) (37,032)
Net (decrease)/increase in cash and cash equivalents (641) 2,772
Cash and cash equivalents at start of year 2,772 –
Cash and cash equivalents at end of year† 2,131 2,772
* Includes dividends earned during the year of £1,080,000 (2023: £283,000) and deposit interest of £123,000 (2023: £11,000).
† Collateral cash held at Goldman Sachs £2,131,000 (2023: £2,772,000).
CHANGES IN NET DEBT ARISING FROM FINANCING ACTIVITIES
2024
£’000
2023
£’000
Balance as at 1 April 20,170 31,741
Drawdown/(repayment) of the loan facility 26,287 (15,330)
Foreign exchange losses 621 3,759
Loan balance at 31 March 47,078 20,170
The accompanying notes from page 80 to page 98 are an integral part of this statement.
FINANCIAL STATEMENTS
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THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
(A) BASIS OF PREPARATION
The financial statements of the Company have been prepared in accordance with UK-adopted International Accounting
Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards.
The principal accounting policies adopted are set out below.
The financial statements have been prepared under the historical cost convention, except for the measurement at fair value of
investments. Where presentational guidance is set out in the Statement of Recommended Practice (the SORP) for Investment
Trust Companies and Venture Capital Trusts produced by the Association of Investment Companies (AIC) issued in July 2022,
the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP.
The Company adopted Disclosure of Accounting Policies (Amendments to IAS 1 IFRS Practical Statement 2) from 1 January
2023. Although the amendments did not result in any changes to the accounting policies, they impacted the accounting policy
information disclosed in the financial statements. The amendments require the disclosure of “material”, rather than “significant”
accounting policies. Management received the accounting policies and made updates to the information disclosed in note 1.
Going concern
The Directors are required to make an assessment of the Company’s ability to continue as a going concern and have concluded
that the Company has adequate resources to continue in operational existence for at least 12 months from the date these
financial statements were approved.
In making this assessment, the Directors have considered a wide variety of emerging and current risks to the Company, as well
as the mitigation strategies that are in place. The Board has also reviewed stress-testing and scenario analyses prepared by
the AIFM. The stress tests and scenario analyses considered the effect of various downturns, based on historic bear markets,
on the asset value and expenses of the Company. The tests modelled the impact of decreases of up to 50% on the value of the
investment portfolio and decreases in current market liquidity of up to 50%.
These tests are carried out as an arithmetic exercise, which can apply equally to any set of circumstances in which asset value
and income are significantly impaired. It was concluded that even in an extreme downside scenario, the Company would be able to
continue to meet its liabilities as they fell due. Whilst the economic future is uncertain, the opinion of the Directors is that there is no
foreseeable downside scenario that would threaten the Company’s ability to continue to meet its liabilities as they falldue.
Based on the information available to the Directors at the time of this report, including the results of the stress tests and scenario
analyses, and having taken account of the liquidity of the investment portfolio, the Company’s cash flow and borrowing position, the
Directors are satisfied that the Company has adequate financial resources to continue in operation for at least 12 months from the
date of signing these financial statements and that, accordingly, it is appropriate to adopt the going concernbasis.
The Company’s financial statements are presented in sterling and all values are rounded to the nearest thousand pounds
(£’000) except when otherwise indicated.
Judgements and key sources of estimation and uncertainty
The preparation of the financial statements requires the Directors to make judgements, estimates and assumptions that
affect the amounts reported for assets and liabilities as at the Statement of Financial Position date and the amounts reported
for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ
from those estimates. In the process of applying the Company’s accounting policies, the Directors have made the following
estimate:
Fair value of the unquoted investments estimate
The Board has established a Valuation Committee to review the valuations and the valuation methodologies of the
Company’s unquoted investments. The Board has approved the valuations of the unquoted investments on the
recommendation of the Valuation Committee.
The unquoted investment in OrbiMed Asia Partners L.P. has been valued using the Net Asset Value presented in the
Statement of Partner’s Capital Activity as at 31 December 2023, as permitted under the IPEV guidelines. The Statement of
Partner’s Capital Activity as at 31 March 2024 was received in May 2024 and was not materially different from the valuation
at 31 December 2023. The Consolidated Financial Statements of the partnership for the year ended 31 December 2023 were
audited by KPMG LLP (New Jersey Headquarters) and were approved on 29 March 2024.
FINANCIAL STATEMENTS
81
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
1. ACCOUNTING POLICIES continued
The investments in Stemirna Therapeutics and XtalPi have been valued by Kroll, an independent valuer, using the
probability – weighted expected returns methodology (PWERM). The valuations have been approved by the Board on the
recommendation of the Valuation Committee. Under the PWERM, fair value is determined through consideration of the
values of the investment under a range of scenarios. These scenarios range from the “no recovery” to “full recovery” of the
amount invested, through to a number of IPO or similar exit scenarios. Each scenario is assigned a probability, with the value
of the investment reflecting the sum of each scenario’s valuation weighted by the probability of its occurrence. Examples of
the inputs into the valuation models are:
– The probability assigned to potential future outcomes;
– Likely exit scenarios; and
– The discount rate used to calculate the present value of future outcomes.
The investments in Gracell Biotechnologies Contingent Value Rights (CVR) and Lexicon series A convertible preference stock
(Lexicon) have also been valued by Kroll. Gracell’s CVRs have been valued using the PWERM and Lexicon using the price of
the recent funding, discounted for the lack of marketability.
(B) INVESTMENTS
Investments are recognised and de-recognised on the trade date.
As the entity’s business is investing in financial assets with a view to profiting from their total return in the form of dividends
or increases in fair value, investments are classified as fair value through profit or loss (FVTPL) and are initially recognised at
fair value. The entity manages and evaluates the performance of these investments on a fair value basis in accordance with
its investment strategy, and information about the investments is provided internally on this basis to the Board.
Investments classified at fair value through profit or loss, which are quoted investments, are measured at subsequent reporting
dates at fair value which is either the bid or the last trade price, depending on the convention of the exchange on which it is quoted.
In respect of unquoted investments, or where the market for a financial instrument is not active, fair value is established
by using valuation techniques which may include using weighted expected returns, reference to the current fair value of
another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there
is a valuation technique commonly used by market participants to price the instrument and that technique has been
demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised.
Transfers between levels of fair value hierarchy are deemed to have occurred at the date of the event or change in
circumstances that caused the transfer.
Gains and losses on disposal and fair value changes are also recognised in the Income Statement.
(C) PRESENTATION OF INCOME STATEMENT
In order to better reflect the activities of an investment trust company, and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income Statement between items of a revenue and capital nature has been
presented alongside the Income Statement. Net revenue is the measure the Directors believe appropriate in assessing the
Company’s compliance with certain requirements set out in section 1158 of the Corporation Tax Act 2010. The requirements
are to distribute net revenue but only so far as there are positive revenue reserves.
(D) INVESTMENT INCOME
Dividends receivable on equity shares are recognised on the ex-dividend date. Where no ex-dividend date is quoted,
dividends are recognised when the Company’s right to receive payment is established. Foreign dividends are grossed up at
the appropriate rate of withholding tax, with the withholding tax recognised in the taxation charge.
Dividends from investments in unquoted shares and securities are also recognised when the Company’s right to receive
payment is established.
Income from fixed interest securities is recognised on a time appointment basis so as to reflect the effective interest rate.
In deciding whether a dividend should be regarded as a capital or revenue receipt, the Company reviews all relevant information
as to the reasons for and sources of the dividend on a case by case basis depending upon the nature of the receipt.
FINANCIAL STATEMENTS
82
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
1. ACCOUNTING POLICIES continued
Special dividends of a revenue nature are recognised through the revenue column of the Income Statement. Special
dividends of a capital nature are recognised through the capital column of the Income Statement.
(E) EXPENSES AND FINANCE COSTS
All expenses are accounted for on an accruals basis. Expenses are charged through the Income Statement as follows:
• transaction costs on the acquisition or disposal of an investment are charged to the capital column of the Income Statement;
• expenses are charged to the capital column of the Income Statement where a connection with the maintenance or
enhancement of the value of the investment can be demonstrated, and accordingly:
• during the year, AIFM and Portfolio Management fees are charged 95% to the capital column of the Income Statement as the
Directors expect that in the long term virtually all of the Company’s returns will come from capital;
• during the year, loan interest is charged 95% to the capital column of the Income Statement as the Directors expect that in
the long term virtually all of the Company’s returns will come from capital.
• performance fees are charged 100% to the capital column of the Income Statement. Performance fees are recognised as
a liability of the Company when they crystallise and become due for payment. Details of the performance fee are set out on
pages 51 and 52; and
• all other expenses are charged to revenue column of the Income Statement.
(F) TAXATION
In line with the recommendations of the SORP, the allocation method used to calculate tax relief on expenses presented
against capital returns in the supplementary information in the Income Statement is the “marginal basis”. Under this basis,
if taxable income is capable of being offset entirely by expenses presented in the revenue column of the Income Statement,
then no tax relief is transferred to the capital column.
Investment trusts which have approval under Section 1158 Corporation Tax Act 2010 are not liable for taxation on capital
gains.
Current tax is provided at the amounts expected to be paid or recovered.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and
liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is
accounted for using the Balance Sheet liability method. Deferred tax liabilities are recognised for all taxable temporary
differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available
against which deductible temporary differences can be utilised.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is
realised. Deferred tax is charged or credited in the Income Statement, except when it relates to items charged or credited
directly to equity, or Other Comprehensive Income (OCI), in which case the deferred tax is also dealt with in equity or OCI
respectively.
(G) FUNCTIONAL AND PRESENTATION CURRENCY
The financial information is shown in sterling, being the Company’s presentation currency. In arriving at the functional
currency the Directors have considered the following:
(i) the primary economic environment of the Company;
(ii) the currency in which the original capital was raised;
(iii) the currency in which distributions would be made;
(iv) the currency in which performance is evaluated; and
(v) the currency in which the capital would be returned to shareholders on a break up basis.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
83
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
1. ACCOUNTING POLICIES continued
The Directors have also considered the currency to which the underlying investments are exposed and liquidity is managed.
The Directors are of the opinion that sterling best represents the functional currency.
(H) RESERVES
Ordinary share capital
• represents the nominal value of the issued share capital.
Share premium account
• represents the surplus of net proceeds received from the issue of new shares over the nominal value of such shares. The
Share premium account is non-distributable.
Capital redemption reserve
• a transfer will be made to this reserve on cancellation of the Company’s own shares purchased, equal to the nominal
value of the shares. This reserve is non-distributable.
Capital reserves
The following are credited or charged to the capital column of the Income Statement and then transferred to the Capital Reserve:
• gains or losses on disposal of investments;
• exchange differences of a capital nature;
• expenses allocated to this reserve in accordance with the above policies;
• increases and decreases in the valuation of investments held at year-end; and
• shares which have been bought back by the Company for cancellation.
Realised Capital Reserves are distributable by way of a dividend.
Revenue reserve
• reflects all income and expenditure recognised in the revenue column of the Income Statement. Amounts standing to the
credit of the Revenue Reserve are distributable by way of dividend.
(I) LOAN
The Company has a loan facility repayable on demand, provided by J.P. Morgan Securities LLC (J.P. Morgan). As part of the
arrangements with J.P. Morgan they may take assets as collateral, up to 140% of the value of the loan drawn down. Such
assets taken as collateral by J.P. Morgan may be used, loaned, sold, rehypothecated
†
or transferred. Any of the Company’s
assets taken as collateral are not covered by the custody arrangements provided by J.P. Morgan. Loans payable on demand
are carried at the undiscounted amount of the cash or other consideration expected to be paid. Interest on the facility
is charged at the U.S. overnight bank funding rate plus 45 basis points. Finance costs are apportioned 95% to capital in
accordance with the policy set out under note 1(e) expenses and finance costs beginning on page 82.
† See glossary beginning on page 100.
(J) OPERATING SEGMENTS
IFRS 8 requires entities to define operating segments and segment performance in the financial statements based on
information used by the Board of Directors. The Directors are of the opinion that the Company is engaged in a single
segment of business, being the investments business. The results published in this report therefore correspond to this sole
operating segment.
FINANCIAL STATEMENTS
84
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
1. ACCOUNTING POLICIES continued
(K) FINANCIAL INSTRUMENTS INCLUDING DERIVATIVE FINANCIAL INSTRUMENTS
Financial assets and financial liabilities are recognised on the Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument. Financial assets are derecognised when the Company’s contractual
right to the cash flows from the asset expires or substantially all the risks and rewards of ownership are transferred. Financial
liabilities are derecognised when the contractual obligation is discharged, with gains and losses recognised in the income
statement.
The Company uses derivative financial instruments, namely equity swaps. All derivative instruments are valued initially, and at
subsequent reporting dates, at fair value in the Statement of Financial Position.
The equity swaps are accounted for as non-current assets or current liabilities.
(L) ADOPTION OF NEW AND REVISED STANDARDS
Standards and amendments to existing standards effective 1 January 2023
The Company has applied the following standards and amendments for the first time for its annual reporting period
commencing 1 April 2023:
• Disclosure of Accounting Policies – Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice
Statement 2; and
• Definition of Accounting Estimates – Amendments to IAS 8.
These amendments did not have any impact on the amounts recognised in both current and prior years.
New standards, amendments and interpretations effective after 1 January 2024 which have not been
earlyadopted
The below new amendment and interpretations will become effective for annual periods beginning after 1 January 2024:
• Classification of Liabilities as Current or Non-Current – Amendments to IAS 1 Presentation of Financial Statements.
This amendment is not expected to have a material effect on the financial statements of the Company.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
85
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
2. INCOME
2024
£’000
2023
£’000
Investment income
Overseas dividend income
1,080
283
Other income
Derivatives – 16
Deposit interest 123 11
Total income 1,203 310
3. AIFM, PORTFOLIO MANAGEMENT AND PERFORMANCE FEES
Revenue
£’000
Capital
£’000
2024
Total
£’000
Revenue
£’000
Capital
£’000
2023
Total
£’000
AIFM fee – Frostrow Capital LLP
47 886 933
53 1,010 1,063
Portfolio management fee – OrbiMed Capital LLC
106 2,031 2,137
123 2,345 2,468
153 2,917 3,070
176 3,355 3,531
During the financial year ended 31 March 2024, in accordance with the performance fee arrangements in place, no
performance fee was earned (2023: nil).
As at 31 March 2024, no performance fees were accrued or payable (31 March 2023: £nil).
Further details of the AIFM, portfolio management fee and the performance fee basis can be found in the Report of the
Directors on page 51 and 52.
FINANCIAL STATEMENTS
86
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
4. OTHER EXPENSES
2024
Total
£’000
2023
Total
£’000
Directors’ emoluments
177
165
Fees payable to the Company’s auditor for the audit of the Company’s financial statements
52
50
Registrar fees
36
35
Depositary fees
48
58
Marketing and PR costs
71
68
Legal and professional fees^ 61
51
Broker fees 43
39
Listing fees
39
37
Printing costs
33
32
Other costs
182
157
Total expenses charged to Revenue
742
692
Professional fees charged to Capital*
39
51
Total expenses
781
743
^ Includes quarterly valuation fees in relation to the valuation of the unquoted investments.
* Professional fees in respect of acquisition of unquoted and pre-IPO investments.
Details of the amounts paid to Directors are included in the Directors’ Remuneration Report on pages 63 to 66.
5. FINANCE COSTS
Revenue
£’000
Capital
£’000
2024
Total
£’000
Revenue
£’000
Capital
£’000
2023
Total
£’000
Loan interest
56 1059 1,115
40 752 792
56 1,059 1,115
40 752 792
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
87
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
6. TAXATION
(A) FACTORS AFFECTING TOTAL TAX CHARGE FOR YEAR
Approved investment trusts are exempt from tax on capital gains made within the company.
The tax assessed for the year is higher than the standard rate of corporation tax in the UK of 25% (2023: 19%). The differences
are explained below:
Revenue
£’000
Capital
£’000
2024
Total
£’000
Revenue
£’000
Capital
£’000
2023
Total
£’000
Net profit/(loss) before taxation 252 74,507 74,759
(598) (40,644) (41,242)
Corporation tax at 25% (2023: 19%) 63 18,627 18,690
(114) (7,722) (7,836)
Effects of:
Non-taxable (gains)/losses on investments – (19,631) (19,631)
– 6,932 6,932
Non-taxable overseas dividends (270) – (270)
(54) – (54)
Overseas tax suffered 159 – 159
39 – 39
Expenses charged to capital available to be utilised (14) – (14) – – –
Excess expenses unused 221 1,004 1,225
168 790 958
Corporation tax charge – – –
17 – 17
Total taxation for the year
(see note 6(b))
159 – 159
56 – 56
(B) ANALYSIS OF CHARGE IN THE YEAR:
Revenue
£’000
Capital
£’000
2024
Total
£’000
Revenue
£’000
Capital
£’000
2023
Total
£’000
Overseas tax suffered
159 – 159
39 – 39
Corporation tax charge† – – –
17 – 17
Total taxation for the year
159 – 159
56 – 56
† Corporation tax was paid during the financial year ended 31 March 2023 due to the large performance fee reversed in 2022 which was captured by the
corporate loss restrictions rules.
(C) PROVISION FOR DEFERRED TAX
No provision for deferred taxation has been made in the current or prior year.
The Company has not provided for deferred tax on capital profit or losses arising on the revaluation or disposal of
investments, as it is exempt from tax on these items because of its status as an investment trust company.
At 31 March 2024, the Company had unutilised management expenses and other losses of £88,442,000 (2023: £83,627,000)
that are available to offset future taxable revenue.
A deferred tax asset of £22,111,000 (25% tax rate) (2023: £20,907,000 (25% tax rate)) arising as a result of these excess
management expenses and other losses has not been recognised because the Company is not expected to generate
sufficient taxable income in future periods in excess of the available deductible expenses. Given the composition of the
Company’s portfolio, it is not likely that this asset will be used in the foreseeable future and therefore no asset has been
recognised in the financial statements.
FINANCIAL STATEMENTS
88
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
7. BASIC AND DILUTED EARNINGS/(LOSS) PER SHARE
Revenue
pence
Capital
pence
2024
Total
pence
Revenue
pence
Capital
pence
2023
Total
pence
Earnings/(loss)/per share
0.3p
206.7p
207.0p
(1.6) (100.9)p (102.5)p
The total earnings per share of 207.0p (2023: loss of 102.5p) is based on the total earnings attributable to equity
shareholders of £74,600,000 (2023: loss £41,298,000).
The revenue profit per share 0.3p (2023: loss of 1.6p) is based on the revenue profit attributable to equity shareholders of
£93,000 (2023: loss of £654,000). The capital profit per share of 206.7p (2023: loss of 100.9p) is based on the capital profit
attributable to equity shareholders of £74,507,000 (2023: loss of £40,644,000).
The total profit per share is based on the weighted average number of shares in issue during the year of 36,041,496 (2023:
40,287,724).
There are no dilutive instruments issued by the Company (2023: none).
8. INVESTMENTS
As at 31 March 2024, all investments with the exception of the unquoted investments and derivatives have been classified
as level 1. The unquoted investments have been classified as either level 2 or level 3. See note 14 beginning on page 90 for
further details.
2024 2023
Quoted
Investments
£’000
Unquoted
£’000
Derivative
Financial
Instruments
– Net
£’000
Total
£’000
Quoted
Investments
£’000
Unquoted
£’000
Derivative
Financial
Instruments
– Net
£’000
Total
£’000
Opening book cost
392,482 14,341 – 406,823
512,894 22,943 – 535,837
Opening investment
holding (losses)/gains
(55,520) 5,926 (1,202) (50,796)
(119,725) 11,287 – (108,438)
Valuation at 1 April
336,962 20,267 (1,202) 356,027
393,169 34,230 – 427,399
Movement in the year
– – –
Purchases at cost 342,843 1,952 – 344,795
465,360 – – 465,360
Sales proceeds (388,521) (71) 1,395* (387,197)
(505,787) – – (505,787)
Transfer between levels
– – – –
9,887 (9,887) –
–
Net movement in
investment holding gains/
(losses)
88,290 (7,010) (611) 80,669
(25,667) (4,076) (1,202) (30,945)
Valuation at 31 March
379,574 15,138 (418) 394,294
336,962 20,267 (1,202) 356,027
Closing book cost at
31 March
354,597 16,268 – 370,865
392,482 14,341 – 406,823
Investment holding
gains/(losses) at 31 March
24,977 (1,130) (418) 23,429
(55,520) 5,926 (1,202) (50,796)
Valuation at 31 March
379,574 15,138 (418) 394,294
336,962 20,267 (1,202) 356,027
The sales proceeds of £387,197,000 (2023: £505,787,000) includes transaction costs of £814,000 (2023: £991,000). The
book cost of these investments when they were purchased was £380,753,000 (2023: £594,374,000).
These investments have been revalued over time and until they were sold any unrealised gains/loss were included in the fair
value of these investments.
* Sale of financed equity swap.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
89
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
8. INVESTMENTS continued
GAINS/(LOSSES) ON INVESTMENTS
2024
£’000
2023
£’000
Gains/(losses) on investments
80,669
(30,945)
Transaction costs
(1,526)
(1,782)
Gains/(losses) on investments held at fair value through profit or loss
79,143
(32,727)
The total transaction costs for the year were £1,526,000 (31 March 2023: £1,782,000) broken down as follows: purchase
transaction costs for the year to 31 March 2024 were £712,000 (31 March 2023 £791,000), sale transaction costs were
£814,000 (31 March 2023: £991,000). These costs consist mainly of commission. Transaction costs are recorded in the
capital column of the Income Statement.
9. DERIVATIVE FINANCIAL INSTRUMENTS
2024
£’000
2023
£’000
Fair value of OTC equity swaps (assets) 42 –
Fair value of OTC equity swaps (liabilities)
(460)
(1,202)
(418)
(1,202)
(See note 1(k) on page 84 for further details).
10. OTHER RECEIVABLES
2024
£’000
2023
£’000
Future settlements – sales
14,508
487
Prepayments and accrued income
27 21
14,535 508
11. OTHER PAYABLES
2024
£’000
2023
£’000
Future settlements – purchases
167
6,206
Amounts due to brokers in respect of shares repurchased by the Company for cancellation
1,379
1,695
Other creditors and accruals
1,029
945
2,575
8,846
FINANCIAL STATEMENTS
90
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
12. ORDINARY SHARE CAPITAL
2024
Number of
Shares
2023
Number of
Shares
Allotted, issued and fully paid at 1 April 2023
38,737,419
41,158,682
Shares bought back for cancellation during the year
(5,250,221) (2,421,263)
At 31 March 2024
33,487,198 38,737,419
2024
£’000
2023
£’000
Allotted, issued and fully paid shares of 25p
8,371
9,684
During the year no new ordinary shares were issued (2023: nil). 5,250,221 shares were bought back for cancellation for a
consideration of £43,584,000 (2023: 2,421,263 shares were bought back for a consideration of £22,619,000).
13. NET ASSET VALUE PER SHARE
2024 2023
Net asset value per share
1,078.9p
852.6p
The net asset value per share is based on the net assets attributable to equity shareholders of £361,307,000 (2023: £330,291,000)
and on 33,487,198 (2023: 38,737,419) shares in issue at 31 March 2024.
14. RISK MANAGEMENT POLICIES AND PROCEDURES
As an investment trust, the Company invests in equities and other investments for the long term in order to achieve its
investment objective as stated on pages 28 and 29.. In pursuing its investment objective, the Company is exposed to a
variety of risks that could result in either a reduction or increase in the Company’s net assets or profits.
The Company’s financial instruments comprise securities and other investments, cash balances, debtors and creditors and a
loan facility that arise directly from its operations (for example, in respect of sales and purchases awaiting settlement).
The main risks the Company faces from its financial instruments are (i) market price risk (comprising currency risk, interest
rate risk and other price risk (i.e. changes in market prices other than those arising from interest rate or currency risk)), (ii)
liquidity risk and (iii) credit risk. The Board also considers (iv) fair value measurement and (v) capital management.
The Board reviews and agrees policies regularly for managing and monitoring each of these risks.
OTC EQUITY SWAPS
The Company uses OTC equity swap positions to gain access to Chinese markets where the Company is not locally
registered to trade directly. During the year the Company entered into an OTC equity swap contracts related to Brightgene
Bio-Medical, Mabwell Shanghai Bioscience and Shanghai Runda Medical, with Goldman Sachs as the counterparty. See
glossary beginning on page 100 for further details.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
91
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
1. MARKET PRICE RISK:
The Company’s portfolio is exposed to fluctuations in market prices in the biotechnology sector and the regions in which it
invests. Market-wide uncertainties which have recently caused increased volatility in the markets include the war in Ukraine,
increasing political, military and commercial tensions between the US/West and China, and increased inflationary pressures.
The Company’s portfolio is exposed to market price fluctuations which are monitored by the AIFM and the Portfolio Manager
in pursuance of the investment objective. Further information on the composition of the portfolio is set out on page 7 and 8.
This market risk comprises three elements – foreign currency risk, interest rate risk and other price risk.
(a) Foreign currency risk:
The Company’s portfolio is denominated in currencies other than sterling (the Company’s functional currency, and in which it
reports its results). As a result, movements in exchange rates can significantly affect the sterling value of those items.
Management of the risk
The AIFM and the Portfolio Manager monitor the Company’s exposure to foreign currencies on a continuous basis and report
to the Board regularly. The Company does not hedge against foreign currency movements to manage market price risk.
The Company does not use financial instruments to mitigate the currency exposure in the period between the time that the
income is included in the financial statements and its receipt.
Foreign currency exposure
At the date of the Statement of Financial Position the Company held £379,359,000 (2023: £345,049,000) of investments
denominated in U.S. dollars and £14,935,000 (2023: £10,978,000) in other non-sterling currencies.
Foreign currency sensitivity
The fair value of the Company’s monetary items that have foreign currency exposure at 31 March 2024 is shown below.
Where the Company’s equity investments (which are not monetary items) are priced in a foreign currency they are shown
separately in the analysis as to show the overall level of exposure.
2024
£’000
2023
£’000
Sterling equivalent of U.S.$ and other non-sterling exposure
Current assets 16,640
3,257
Creditors (167)
(6,206)
Spot currency contracts (1,406)
(1,692)
Loan (non-sterling) (47,063)
(20,167)
Foreign currency exposure on net monetary items (31,996)
(24,808)
Investments held at fair value through profit or loss including derivative equity swap 394,294
356,027
Total net foreign currency exposure 362,298 331,219
The table on page 92 details the sensitivity of the Company’s profit or loss after taxation for the year (investment values) to
a 10% increase and decrease in the value of sterling compared with the U.S. dollar and other non-sterling currencies (2023:
10% increase and decrease).
The above percentages have been determined based on market volatility in exchange rates over the previous twelve months.
The analysis is based on the Company’s foreign currency financial instruments held at each Statement of Financial Position
date, after adjusting for an increase/decrease in the AIFM and portfolio management fees.
FINANCIAL STATEMENTS
92
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
If sterling had weakened against the U.S. dollar and other non-sterling currencies, as stated above, this would have had the
following effect:
2024
£’000
2023
£’000
Impact on revenue return – –
Impact on capital return
46,816
43,302
Total return after tax/effect on shareholders’ funds
46,816
43,302
If sterling had strengthened against the U.S. dollar and other non-sterling currencies, as stated above, this would have had
the following effect:
2024
£’000
2023
£’000
Impact on revenue return – –
Impact on capital return
(26,943)
(24,220)
Total return after tax/effect on shareholders’ funds
(26,943)
(24,220)
(b) Interest rate risk:
Interest rate risk is the risk that the fair value of a financial instrument will fluctuate because of changes in market interest
rates.
Interest rate exposure
The Company’s main exposure to interest rate risk is through its loan facility with J.P. Morgan Securities LLC which is
repayable on demand. Interest is charged at the US overnight bank funding rate plus 45 basis points.
At the year-end financial assets and liabilities subject to interest rate risk were as follows:
Fixed
rate
2024
£’000
Floating
rate
2024
£’000
Floating
rate
2023
£’000
Loan facility with J.P. Morgan Securities LLC
– 47,078
20,170
Gross exposure on OTC equity swaps
– 6,308
6,224
Total liabilities subject to interest rate risk
– 53,386
26,394
Less cash held at Goldman Sachs
– 2,131
2,772
Total net liabilities subject to interest rate risk
– 51,255
23,622
Management of the risk
The level of borrowings is approved and monitored by the Board and the AIFM on a regular basis.
Interest rate sensitivity
The majority of the Company’s financial assets are equity shares and other investments which neither pay interest nor have
a maturity date. The amount subject to interest risk as at 31March 2024 was £51,256,000 (2023: £23,622,000). If the rate
increased by 1%, the impact on the profit or loss and net assets would be expected to be £513,000 (2023: £236,000).
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
93
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
(c) Other price risk
Other price risk may affect the value of the quoted investments.
If market prices at the date of the Statement of Financial Position had been 20% higher or lower (2023: 20% higher or lower)
while all other variables had remained constant, the return and net assets attributable to shareholders for the year ended
31 March 2024 would have increased/decreased by £78,110,000 (2023: £71,762,000), after adjusting for an increase or
decrease in the AIFM and the Portfolio management fees. The calculations are based on the portfolio valuations as at the
respective Statement of Financial Position dates.
Other price risk exposure
2024 2023
Assets
£’000
Liabilities
£’000
Net
Fair Value
£’000
Assets
£’000
Liabilities
£’000
Net
Fair Value
£’000
Investments
394,712 – 394,712
357,229 – 357,229
OTC equity swaps
42 (460) (418)
– (1,202) (1,202)
394,754 (460) 394,294
357,229 (1,202) 356,027
The notional exposure of the OTC equity swaps calculated in accordance with AIFMD requirements, is £5,890,000
(2023:£5,022,000) see glossary beginning on page 100 for further details.
2. LIQUIDITY RISK:
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.
Management of the risk
Liquidity risk is not significant as the majority of the Company’s assets are investments in quoted equities that are readily
realisable within one week, in normal market conditions. Stress tests have been performed to understand how long the
portfolio would take to realise in such situations. The Board is comfortable that in such situations the Company would be
able to meet its liabilities as they fall due. Short-term funding flexibility can be achieved through the use of the bank loan
facility. The maximum amount of gearing permitted by the Board is 20% of net assets which equated to £72,261,000 at the
year end.
The Board gives guidance to the Portfolio Manager as to the maximum amount of the Company’s resources that should be
invested in any one company.
Liquidity exposure and maturity
Contractual maturities of the financial liabilities as at 31 March 2024, based on the earliest date on which payment can be
required, are as follows:
2024
3 months
or less
£’000
2024
3 to
12 months
£’000
2023
3 months
or less
£’000
2023
3 to
12 months
£’000
Loan facility (repayable on demand)
47,078
– 20,170 –
Future settlements
167
– 6,206 –
Derivative – OTC equity swaps
–
460 – 1,202
Other creditors and accruals
2,408 –
2,640 –
49,653
460
29,016 1,202
FINANCIAL STATEMENTS
94
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
3. CREDIT RISK:
Credit risk is the risk of failure of a counterparty to discharge its obligations resulting in the Company suffering a loss.
J.P. Morgan Securities LLC (J.P. Morgan) may take assets with a value of up to 140% of the loan as collateral. Such assets
held by J.P. Morgan are available for rehypothecation
†
.
As at 31 March 2024, the maximum value of assets available for rehypothecation was £65,909,000 being 140% of the loan
balance of £47,078,000 (31 March 2023: £28,238,000 being 140% of the loan balance of £20,170,000).
See page 35 for further details on the loan facility and the associated credit risk.
† See glossary beginning on page 100.
Management of the risk
The risk is not significant and is managed as follows:
J.P. Morgan
• by receiving and reviewing regular updates from the Custodian and Prime Broker and Depository.
• by reviewing their Internal Control reports and regularly monitor J.P. Morgan’s credit rating. J.P. Morgan has a credit rating
of Aa3 (Moody’s), A+ (S&P) and AA (Fitch).
• by reviewing on a monthly basis assets which are available for rehypothecation.
Other counterparties
• by only dealing with brokers which have been approved by OrbiMed Capital LLC and banks with high credit ratings such
as Goldman Sachs International who have a credit rating of A1 (Moody’s), A+ (S&P) and A+ (Fitch);
• by investing in markets that mainly operate DVP (delivery versus payment) settlement.
• all cash balances are held with approved counterparties. J.P. Morgan is the Custodian of the Company’s assets and all
assets are segregated from J.P. Morgan’s own assets.
At 31 March 2024 the Company’s exposure to credit risk amounted to £16,639,000 and was in respect of amounts due from
brokers in relation to future settlements and cash held as collateral (2023: £3,260,000).
4. FAIR VALUE MEASUREMENT
Hierarchy of investments
As required under IFRS 13 “Fair Value Measurement”, the Company has classified its financial assets designated at fair value
through profit or loss using a fair value hierarchy that reflects the significance of the inputs used in making the fair value
measurements. The hierarchy has the following levels:
• Level 1 – quoted prices (unadjusted) in active markets for identical assets or liabilities;
• Level 2 – inputs other than quoted prices included with Level 1 that are observable for the asset or liability, either directly
(i.e. as prices) or indirectly (i.e. derived from prices); and
• Level 3 – inputs for the asset or liability that are not based on observable market data (unobservable inputs).
As of 31 March 2024
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Assets
379,574 – 15,138 394,712
Derivatives: equity swap (assets) – 42 – 42
Derivatives: equity swap (liabilities) – (460) – (460)
Financial investments held at fair value through profit or loss 379,574 (418) 15,138 394,294
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
95
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
As at 31 March 2023
Level 1
£’000
Level 2
£’000
Level 3
£’000
Total
£’000
Assets
336,962 – 20,267 357,229
Financial investments held at fair value through profit or loss
– (1,202) – (1,202)
336,962 (1,202) 20,267 356,027
As at 31 March 2024, the investments in OrbiMed Asia Partners LP Fund has been classified as Level 3. The OrbiMed
Asia Partners Fund LP has been valued at the net asset value presented in its Statement of Partners Capital Activity as at
31December 2023, as permitted under the IPEV guidelines. The Statement of Partner’s Capital Activity as at 31 March 2024
was received in May 2024 and was not materially different from the valuation at 31 December 2023. If the value of the fund
were to increase or decrease by 10%, while all other variables remain constant, the return and net assets attributable to
shareholders for the year ended 31 March 2024 would have increased/decreased by £112,000 (2023: £216,000).
The following two investments have been valued by the Board, following recommendations received from the Valuation Committee
which has reviewed in detail both the valuation and the methodologies provided by Kroll, an independent valuer. Stemirna and
XtalPi have been valued using the probability-weighted expected returns methodology (PWERM) and are classified as Level 3.
These Level 3 investments include assumptions based on non-observable market data such as:
(i) the probability of certain scenarios;
(ii) the expected time to the date of sale or realisation opportunity; and
(iii) discount rates.
Stemirna
As at 31 March 2024, the PWERM was used. Under the PWERM, the fair value was mainly determined based on consideration
of the values for the company under different scenarios. As highlighted in the Portfolio Manager’s Review on page 15, this
investment was written down to reflect a change in the company’s outlook. As a result, the following scenarios were used to value
theCompany:
(i) No recovery – probability 10%
(ii) Restructuring scenario 1, where the proposed financing closes as expected, with no additional shares issued – probability 70%
(iii) Restructuring scenario 2, where the proposed financing closes as expected with a proportion of additional shares –
probability20%
If the probabilities of scenario were to change by 10%, while all other variables remain constant, the return to shareholders would
have increased/decreased by £22,000 (2023: £515,000).
XtalPi
As at 31 March 2024, the PWERM was also used. The scenarios used for this investment were as follows:
(i) Partial Recovery – probability 2.5%
(ii) Full Recovery Scenario – probability 2.5%
(iii) IPO Scenario 1 (30/6/2024) – probability-37.5%
(iv) IPO Scenario 2 (30/9/2024) – probability-37.5%
(v) IPO Scenario 3 (30/9/2024) – probability-20.0%
If the probabilities of scenario were to change by 10%, while all other variables remain constant, the return to shareholders would
have increased/decreased by £1,162,000 (2023: £1,271,000).
FINANCIAL STATEMENTS
96
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
The tables below set out the range of inputs applied in arriving at the fair value of the Level 3 investments valued by Kroll.
Probability of Scenario – (Stemirna and XtalPi)
The probability assigned to certain scenarios is determined by the independent valuer following consultation with the
Portfolio Manager. The probability assigned to any scenario reflects a number of factors including the operating performance
and prospects of the investee company and market receptivity for IPOs or other realisation routes.
2024 Probability of scenario 2.5%-70%
Weighted average probability of scenario 36.25%
2023 Probability of scenario 5%-35%
Weighted average probability of scenario 20%
Expected time to date of sale or realisation opportunity (XtalPi)
The expected time to a sale or realisation opportunity is determined by the independent valuer following consultation with
the Portfolio Manager and reflects a number of factors including the operating performance and prospects of the investee
company and the current and expected market receptivity for IPOs and other realisation routes.
2024 Expected time to sale or realisation opportunity 0.2 years - 0.8 years
Weighted average expected time to sale or realisation opportunity 0.5 years
2023 Expected time to sale or realisation opportunity 1-2.5 years
Weighted average expected time to sale or realisation opportunity 1.75 years
If the expected average time to date of sale or realisation was extended by three months, while all other variables remain
constant, the return to shareholders would have decreased by £544,000 (2023: £656,000).
Discount rate (XtalPi)
The discount rates assigned to certain scenarios are determined by the independent valuer using market surveys of discount
rates used in a range of private equity and unquoted investment transactions.
2024 Discount rate 23.5%
Discount rate weighted average 23.5%
2023 Discount rate 22.5%
Discount rate weighted average 22.5%
If the discount rate was to increase by 5%, while all other variables remain constant, the return to shareholders would have
decreased by £159,000 (2023: £382,000).
The valuations of Gracell Biotechnologies CVR and Lexicon Series A Convertible Preferred Stock (Lexicon) as at 31 March 2024,
which were produced by Kroll, have been approved by the Board on the recommendation of the Valuations Committee. The
Gracell CVR was valued using the PWERM and Lexicon was valued using the price of the most recent funding round, with a
discount applied to reflect their lack of marketability.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FINANCIAL STATEMENTS
97
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
14. RISK MANAGEMENT POLICIES AND PROCEDURES continued
Level 3 Reconciliation
Please see below a reconciliation disclosing the changes during the year for the financial assets and liabilities designated at
fair value through profit or loss classified as being Level 3. There has been no transfer between fair value hierarchy levels.
2024
£’000
2023
£’000
Assets
As at 1 April
20,267
33,927
Purchase of unquoted investments
1,952
–
Repayment of capital – unquoted investment (71)
–
Net movement in investment holding gains during the year (7,010)
(3,773)
Transfer from level 3 to level 1 –
(9,887)*
Assets as at 31 March 15,138
20,267
* Yisheng Biopharma and Summit Healthcare Acquisition Corp. entered into a definitive agreement for a business combination and upon closing of the
transaction in March 2023, the combined company was renamed as YS Biopharma Co. Ltd and became a publicly traded company on the Nasdaq.
FAIR VALUE OF FINANCIAL ASSETS AND FINANCIAL LIABILITIES:
Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value or at a
reasonable approximation of fair value.
5. CAPITAL MANAGEMENT
The Company’s capital management objectives are:
• to ensure that it will be able to continue as a going concern; and
• to maximise the total return to its equity shareholders.
The Board’s policy is to limit gearing to a maximum of 20% of the Company’s net assets.
As at 31 March 2024 the Company’s gearing ratio was 9.1% (2023: 7.8%).
The capital structure of the Company consists of the equity share capital, retained earnings and other reserves shown in the
Statement of Financial Position on page 77.
Shares may be repurchased by the Company as explained on pages 30 and 31.
The Company’s objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
As at 31 March 2024, the maximum value of assets available for rehypothecation was £65,909,000, being 140% of the loan
balance of £47,078,000 (31 March 2023: £28,238,000 being 140% of the loan balance of £20,170,000).
FINANCIAL STATEMENTS
98
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
15. TRANSACTIONS WITH RELATED PARTIES AND THE MANAGERS
Related Parties
The Directors of the Company are considered to be related parties.
Details of the remuneration of the Directors of the Company can be found on page 64. Geoff Hsu has waived his Directors’
fees. Details of the Directors’ interests in the capital of the Company can be found on page 66.
Transactions with the Managers
• Frostrow Capital LLP
• OrbiMed Capital LLC
Details of the relationship between the Company and Frostrow Capital LLP, the Company’s AIFM, and OrbiMed Capital LLC,
the Company’s Portfolio Manager, are disclosed on page 51. Geoff Hsu, who joined the Board on 16 May 2018, is a General
Partner at OrbiMed. Details of fees paid to OrbiMed by the Company can be found in note 3 on page 85. All material related
party transactions have been disclosed in notes 3 and 4 on page 85 and 86.
The Company holds an interest in OrbiMed Asia Partners Fund which equates to 0.3% of the investments held at 31 March
2024. Further details can be found on page 80.
Three current and two former partners at OrbiMed Capital LLC have a minority financial interest totalling 20% in Frostrow
Capital LLP, the Company’s AIFM. Details of the fees paid to Frostrow Capital LLP by the Company can be found in note 3 on
page 85.
16. CAPITAL RESERVE
2024
2023
Capital Reserves Capital Reserves
Other
£’000
Investment
holdings
gains/
(losses)
£’000
Total
£’000
Other
£’000
Investment
holdings
gains/
(losses)
£’000
Total
£’000
At 1 April
278,564 (50,596) 227,968
399,416 (108,185) 291,231
Net gains/(losses) on investments 5,014 74,129 79,143
(90,316) 57,589 (32,727)
Foreign exchange losses (621) – (621)
(3,759) – (3,759)
Expenses charged to capital (4,015) – (4,015)
(4,158) – (4,158)
Repurchase of own shares for cancellation (43,584) – (43,584)
(22,619) – (22,619)
At 31 March 235,358 23,533 258,891
278,564 (50,596) 227,968
Sums within the Total Capital Reserve less unrealised gains (those on investments not readily convertible to cash) are
available for distribution. Investment holding gains in the table above are unrealised.
17. CONTINGENT LIABILITIES AND CAPITAL COMMITMENTS
As at 31 March 2024 there were no contingent liabilities or capital commitments for the Company (2023: nil).
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FURTHER INFORMATION
99
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
FINANCIAL CALENDAR
31 March Financial Year End
June Final Results Announced
July Annual General Meeting
30 September Half Year End
November Half Year Results Announced
ANNUAL GENERAL MEETING
The Annual General Meeting of The Biotech Growth Trust PLC will be held at the Barber-Surgeons’ Hall, Monkwell Square,
Wood St, Barbican, London EC2Y 5BL on Thursday, 18July 2024 at 12 noon. Please refer to the Chair’s Statement beginning
on page 2 for details of this year’s arrangements.
SHARE PRICES
The Company’s Ordinary Shares are listed on the London Stock Exchange under ‘Investment Companies’. The price is given
daily in the Financial Times and other newspapers.
CHANGE OF ADDRESS
Communications with shareholders are mailed to the address held on the share register. In the event of a change of address or
other amendment this should be notified to the Company’s Registrars, Link Group, under the signature of the registered holder.
DAILY NET ASSET VALUE
The daily net asset value of the Company’s shares can be obtained on the Company’s website at www.biotechgt.com and is
published daily via the London Stock Exchange.
PROFILE OF THE COMPANY’S OWNERSHIP
% OF ORDINARY SHARES HELD AT 31 MARCH
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SHAREHOLDER INFORMATION
FURTHER INFORMATION
100
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
ACTIVE SHARE
Active Share is expressed as a percentage and shows the extent to which a fund’s holdings and their weightings differ from
those of the fund’s benchmark index. A fund that closely tracks its index might have a low Active Share of less than 20% and
be considered passive, while a fund with an Active Share of 60% or higher is generally considered to be actively managed.
ADR
An American depositary receipt (ADR) is a negotiable security that represents securities of a foreign company and allows that
company’s shares to trade in the U.S. financial markets. Shares of many non-U.S. companies trade on U.S. stock exchanges
through ADRs, which are denominated and pay dividends in U.S. dollars, and may be traded like regular shares of stock.
AIC
Association of Investment Companies.
ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)
Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the AIFMD
classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (AIFs) and requires
them to appoint an Alternative Investment Fund Manager (AIFM) and depositary to manage and oversee the operations of
the investment vehicle. The Board of the Company retains responsibility for strategy, operations and compliance and the
Directors retain a fiduciary duty to shareholders.
ALTERNATIVE PERFORMANCE MEASURE (APM)
An APM is a numerical measure of the Company’s current, historical or future financial performance, financial position or
cash flows, other than a financial measure defined or specified in the applicable financial framework. In selecting these
Alternative Performance Measures, the Directors considered the key objectives and expectations of typical investors in an
investment trust such as the Company.
DISCOUNT OR PREMIUM^
A description of the difference between the share price and the net asset value per share. The size of the discount or
premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a
percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a
premium. If the share price is lower than the net asset value per share, the shares are trading at a discount.
pages
As at 31
March 2024
(pence)
As at 31
March 2023
(pence)
Share price
1 & 6
995 .0 783.0
Net asset value per share (see note 13 on page 90 for further information)
1 & 6
1,078.9 852.6
Discount of share price to net asset value per share
1 & 6
7.8% 8.2%
GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE
MEASURES
^ Alternative Performance Measure
FURTHER INFORMATION
101
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
GEARING^
Gearing represents prior charges, adjusted for net current liabilities, expressed as a percentage of net assets (AIC
methodology). Prior charges includes all loans and overdrafts for investment purposes.
pages
31 March
2024
£’000
31 March
2023
£’000
Loan 77
47,078 20,170
Net current (assets)/liabilities (excluding loan and derivatives)* –
(14,091) 5,566
32,987 25,736
Net assets 74
361,307 330,291
Gearing
6
9.1% 7.8%
* Current liabilities less current assets
IPO
An Initial Public Offering (IPO) is the process by which the shares of a previously private company are listed on a stock
exchange for the first time. Through this process a company can raise new capital, offer an exit opportunity for private
investors and founders, and enable the trading of its shares.
IPO LOCK-IN
When a company offers shares in an IPO, investors sometimes enter into a lock-in agreement preventing them from selling
their shares for a specified period after the IPO.
LEVERAGE
The AIFMD leverage definition is slightly different from the Association of Investment Companies’ method of calculating
gearing and is defined as follows: any method by which the AIFM increases the exposure of an AIF it manages whether
through borrowing of cash or securities, or leverage embedded in derivative positions.
For the purposes of the AIFMD, leverage is any method which increases the Company’s exposure, including the borrowing
of cash and the use of derivatives. It is expressed as a ratio between the Company’s exposure and its net asset value and
can be calculated on a gross and a commitment method. Under the gross method, exposure represents the sum of the
Company’s positions after the deduction of sterling cash balances, without taking into account any hedging and netting
arrangements. Under the commitment method, exposure is calculated without the deduction of sterling cash balances and
after certain hedging and netting positions are offset against each other.
Gross
Method
Commitment
Method
Maximum limit
130.0% 130.0%
Actual as at 31 March 2024
110.5% 109.7%
MARGINABLE SECURITIES
Marginable securities are stocks, bonds, futures or other securities capable of being traded on a Margin Account and are
available for rehypothecation*.
NET ASSET VALUE (NAV)
The net asset value of the Company’s assets, principally investments made in other companies and cash held, less any
liabilities. The NAV is also described as “shareholders’ funds”. The NAV is often expressed in pence per share after being
divided by the number of shares which have been issued. The NAV per share is unlikely to be the same as the share price,
which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the
relationship between the demand and supply of the shares in the secondary market.
* See glossary definition on page 102.
^ Alternative Performance Measure
FURTHER INFORMATION
102
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
NET ASSET VALUE PER SHARE TOTAL RETURN^
The net asset value per share return for the year ended 31 March 2024 is calculated by taking the percentage movement
from the net asset value per share as at 31 March 2023 of 852.6p (2022: 957.8p) to the net asset value per share at 31March
2024 of 1,078.9p (2023: 852.6p). The Company has not paid any dividends to shareholders in respect of the above mentioned
years (see pages 1 and 6).
ONGOING CHARGES^
Ongoing charges are calculated by taking the Company’s annualised operating expenses expressed as a proportion of the
average daily net asset value of the Company over the year.
The costs of buying and selling investments are excluded, as are interest costs, taxation, performance fees, cost of buying
back or issuing ordinary shares and other non-recurring costs.
pages
31 March
2024
£’000
31 March
2023
£’000
AIFM & portfolio management fees (note 3)
85 3,070 3,531
Other re-occurring expenses (note 4)
86 742 692
Total ongoing charges
3,812 4,223
Average daily net assets for the year
323,811 394,525
Ongoing charges
1 & 6 1.2% 1.1%
OTC EQUITY SWAPS
Over-the-Counter (OTC) refers to the process of how securities are traded via a broker - dealer network, as opposed to on a
centralised exchange.
An equity swap is an agreement where one party (counterparty) transfers the total return of an underlying equity position to
the other party (swap holder) in exchange for a payment of the principal, and interest for financed swaps, at a set date. Total
return includes dividend income and gains or losses from market movements. The exposure of the holder is the market value
of the underlying equity position.
There are two main types of equity swaps:
• Funded – where payment is made on acquisition. They are equivalent to holding the underlying equity position with the
exception of additional counterparty risk and not possessing voting rights in the underlying security; and
• Financed – where payment is made on maturity. As there is no initial outlay, financed swaps increase exposure by the
value of the underlying equity position with no initial increase in the investments value – there is therefore embedded
leverage within a financed swap due to the deferral of payment to maturity.
REHYPOTHECATION
Rehypothecation is the practice by banks and brokers of using collateral posted as security for loans as regulated by the
U.S.Securities Exchange Commission.
GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES CONTINUED
FURTHER INFORMATION
103
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
SUSTAINABILITY ACCOUNTING STANDARDS BOARD (SASB)
The Sustainability Accounting Standards Board (SASB) is a non-profit organisation, founded in 2011 to develop sustainability
accounting standards. Its stated mission is “to establish industry-specific disclosure standards across ESG topics that
facilitate communication between companies and investors about financially material, decision-useful information. Such
information should be relevant, reliable and comparable across companies on a global basis.”
SHARE PRICE TOTAL RETURN^
The share price total return represents the theoretical return to a shareholder, on a closing market price basis. The share
price total return is calculated by taking the percentage movement from the share price as at 31 March 2023 of 783.0p
(2022: 898.0p) to the share price as at 31 March 2024 of 995.0p (2023: 783.0p). The Company has not paid dividends to
shareholders in respect of the above mentioned years.
See pages 1 and 6 for further information.
VARIABLE INTEREST ENTITY (VIE)
A corporate structure through which an investor can own the economic interests of shares in a company through a
contractual relationship. This structure is common in China, including in the biotechnology sector.
FURTHER INFORMATION
104
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
HOW TO INVEST
RETAIL INVESTORS ADVISED BY IFAS
The Company currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers (IFAs)
in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (FCA) rules in relationship to non-
mainstream investment procedures and intends to continue to do so. The shares are excluded from the FCA’s restrictions
which apply to non-mainstream investment products because they are shares in an investment trust.
INVESTMENT PLATFORMS
The Company’s shares are traded openly on the London Stock Exchange and can be purchased through a stock broker
or other financial intermediary. The shares are available through savings plans (including Investment Dealing Accounts,
ISAs, Junior ISAs and SIPPs) which facilitate both regular monthly investments and lump sum investments in the
Company’s shares. There are a number of investment platforms that offer these facilities. A list of some of them, that is not
comprehensive nor constitutes any form of recommendation, can be found below:
AJ Bell Youinvest http://www.youinvest.co.uk/
Barclays Smart Investor https://www.smartinvestor.barclays.co.uk/
Bestinvest http://www.bestinvest.co.uk/
Charles Stanley Direct https://www.charles-stanley-direct.co.uk/
Halifax Share Dealing https://www.halifaxsharedealing-online.co.uk/
Hargreaves Lansdown http://www.hl.co.uk/
HSBC https://www.hsbc.co.uk/investments/
iDealing http://www.idealing.com/
Interactive Investor http://www.iii.co.uk/
IWEB http://www.iweb-sharedealing.co.uk/share-dealing-home.asp
The Share Centre https://www.share.com/
FURTHER INFORMATION
105
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
Notice is hereby given that the Annual General Meeting of The Biotech Growth Trust PLC will be held at the Barber-Surgeons’
Hall, Monkwell Square, Wood St, Barbican, London EC2Y 5BL on Thursday, 18 July 2024 at 12 noon, for the following
purposes:
ORDINARY RESOLUTIONS
To consider and, if thought fit, pass the following as ordinary resolutions:
1. To receive the audited financial statements and the Report of the Directors for the year ended 31 March 2024.
2. To approve the Directors’ Remuneration Report for the year ended 31 March 2024.
3. To elect Hamish Baillie as a Director of the Company.
4. To re-elect Geoff Hsu as a Director of the Company.
5. To re-elect Julia Le Blan as a Director of the Company.
6. To re-elect Dr Nicki Shepherd as a Director of the Company.
7. To re-elect The Rt Hon Lord Willetts as a Director of the Company.
8. To re-elect Roger Yates as a Director of the Company.
9. To re-appoint BDO LLP as Auditor to the Company to hold office from the conclusion of the meeting to the conclusion
of the next Annual General Meeting at which accounts are laid, and to authorise the Audit Committee to determine their
remuneration.
AUTHORITY TO ALLOT SHARES
10. THAT in substitution for all existing authorities the Directors be and are hereby generally and unconditionally authorised in
accordance with Section 551 of the Companies Act 2006 (the Act) to exercise all powers of the Company to allot relevant
securities (within the meaning of Section 551 of the Act) up to a maximum aggregate nominal amount of £829,929.75
(being 10% of the issued share capital of the Company at the date of the notice convening the meeting at which this
resolution is proposed) and representing 3,319,719 shares of 25 pence each or, if changed, the number representing 10%
of the issued share capital of the Company at the date at which this resolution is passed, on such terms as the Board may
determine, provided that this authority shall expire at the conclusion of the Annual General Meeting of the Company to
be held in 2025 or 15months from the date of passing this resolution, whichever is the earlier, unless previously revoked,
varied or renewed, by the Company in general meeting and provided that the Company shall be entitled to make, prior to
the expiry of such authority, an offer or agreement which would or might require relevant securities to be allotted after such
expiry and the Directors may allot relevant securities pursuant to such offer or agreement as if the authority conferred by
this resolution had not expired.
SPECIAL RESOLUTIONS
To consider and, if thought fit, pass the following resolutions as special resolutions:
DISAPPLICATION OF PRE-EMPTION RIGHTS
11. THAT in substitution of all existing powers the Directors be and are hereby generally empowered pursuant to Sections
570 and 573 of the Companies Act 2006 (the Act) to allot equity securities (within the meaning of section 560 of the
Act) including if immediately before the allotment, such shares are held by the Company as treasury shares (as defined
in Section 724 of the Act) for cash pursuant to the authority conferred on them by resolution 10 set out in the notice
convening the Annual General Meeting at which this resolution is proposed or otherwise as if section 561(1) of the Act
did not apply to any such allotment and to sell relevant shares (within the meaning of section 560 of the Act) for cash
as if section 561(1) of the Act did not apply to any such sale, provided that this power shall be limited to the allotment of
equity securities pursuant to:
(a) an offer of equity securities open for acceptance for a period fixed by the Directors where the equity securities
respectively attributable to the interests of holders of shares of 25 pence each in the Company (Shares) are
proportionate (as nearly as may be) to the respective numbers of Shares held by them but subject to such
exclusions or other arrangements in connection with the issue as the Directors may consider necessary,
NOTICE OF THE ANNUAL GENERAL MEETING
FURTHER INFORMATION
106
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
appropriate, or expedient to deal with equity securities representing fractional entitlements or to deal with legal or
practical problems arising in any overseas territory, the requirements of any regulatory body or stock exchange, or
any other matter whatsoever; and
(b) (otherwise than pursuant to sub-paragraph (a) above) up to an aggregate nominal value of £829,929.75 (or, if
changed, the number representing 10% of the issued share capital of the Company at the date of the meeting at
which this resolution is passed),
and expires at the conclusion of the Annual General Meeting of the Company to be held in 2025 or 15months from the
date of passing this resolution, whichever is the earlier, unless previously revoked, varied or renewed by the Company in
general meeting and provided that the Company shall be entitled to make, prior to the expiry of such authority, an offer or
agreement which would or might require equity securities to be allotted after such expiry and the Directors may allot equity
securities pursuant to such offer or agreement as if the power conferred hereby had not expired.
AUTHORITY TO REPURCHASE ORDINARY SHARES
12. THAT the Company be and is hereby generally and unconditionally authorised in accordance with section 701 of the
Companies Act 2006 (the Act) to make one or more market purchases (within the meaning of section 693(4) of the Act)
of ordinary shares of 25 pence each in the capital of the Company (Shares) either for retention as treasury shares for
future reissue, resale, transfer or for cancellation provided that:
(a) the maximum aggregate number of Shares authorised to be purchased shall be that number of Shares which is
equal to 14.99% of the issued Share capital of the Company as at the date of the passing of this resolution;
(b) the minimum price (exclusive of expenses) which may be paid for a Share is 25 pence;
(c) the maximum price (exclusive of expenses) which may be paid for a Share is an amount equal to the greater
of (i) 105% of the average of the middle market quotations for a Share as derived from the Daily Official List of
the London Stock Exchange for the five business days immediately preceding the day on which that Share is
purchased and (ii) the higher of the price of the last independent trade in Shares and the highest then current
independent bid for Shares on the London Stock Exchange;
(d) the authority hereby conferred shall expire at the conclusion of the Annual General Meeting of the Company to be
held in 2025 or, if earlier, on the expiry of 15 months from the date of the passing of this resolution unless such
authority is renewed prior to such time; and
(e) the Company may make a contract to purchase Shares under this authority before the expiry of such authority
which will or may be executed wholly or partly after the expiration of such authority, and may make a purchase of
Shares in pursuance of any such contract.
GENERAL MEETINGS
13. THAT the Directors be authorised to call general meetings (other than Annual General Meetings) on not less than 14
clear days’ notice, such authority to expire at the conclusion of the next Annual General Meeting of the Company or, if
earlier, until expiry of 15 months from the date of the passing of this resolution.
By order of the Board Registered office:
One Wood Street
Frostrow Capital LLP London EC2V 7WS
Company Secretary
4 June 2024
NOTICE OF THE ANNUAL GENERAL MEETING CONTINUED
FURTHER INFORMATION
107
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
NOTES
1. Members are entitled to appoint a proxy to exercise all or any of their rights to attend and to speak and vote on their behalf at the meeting. A shareholder
may appoint more than one proxy in relation to the meeting provided that each proxy is appointed to exercise the rights attached to a different share or
shares held by that shareholder. A proxy need not be a shareholder of the Company.
2. A vote withheld is not a vote in law, which means that the vote will not be counted in the calculation of votes for or against the resolutions. If no voting
indication is given, a proxy may vote or abstain from voting at his/her discretion. A proxy may vote (or abstain from voting) as he or she thinks fit in relation
to any other matter which is put before the meeting.
3. Members can vote by: logging onto www.signalshares.com and following instructions; requesting a hard copy form of proxy directly from the registrars, Link
Group at shareholderenquiries@linkgroup.co.uk or, in the case of CREST members, utilising the CREST electronic proxy appointment service in accordance
with the procedures set out below, alternatively if you are an institutional shareholder you may also be able to appoint a proxy electronically via the Proximity
platform. To be valid any proxy form or other instrument appointing a proxy must be completed and signed and received by post or (during normal business
hours only) by hand at Link Group, PXS1, Central Square, 29 Wellington Street, Leeds LS1 4DL no later than 12 noon on 16 July 2024.
4. In the case of a member which is a company, the instrument appointing a proxy must be executed under its seal or signed on its behalf by a duly authorised
officer or attorney or other person authorised to sign. Any power of attorney or other authority under which the instrument is signed (or a certified copy of it)
must be included with the instrument.
5. The return of a completed proxy form, other such instrument or any CREST Proxy Instruction (as described below) will not prevent a shareholder attending
the meeting and voting in person if he/she wishes to do so.
6. Any person to whom this notice is sent who is a person nominated under section 146 of the Companies Act 2006 to enjoy information rights (a Nominated
Person) may, under an agreement between him/her and the shareholder by whom he/she was nominated, have a right to be appointed (or have someone
else appointed) as a proxy for the meeting. If a Nominated Person has no such proxy appointment right or does not wish to exercise it, he/she may, under
any such agreement, have a right to give instructions to the shareholder as to the exercise of voting rights.
7. The statement of the rights of shareholders in relation to the appointment of proxies in paragraphs 1 and 3 above does not apply to Nominated Persons.
The rights described in these paragraphs can only be exercised by shareholders of the Company.
8. Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001, only shareholders registered on the register of members of the Company (the
Register of Members) at the close of business on 16 July 2024 (or, in the event of any adjournment, on the date which is two days before the time of the
adjourned meeting) will be entitled to attend and vote or be represented at the meeting in respect of shares registered in their name at that time. Changes to
the Register of Members after that time will be disregarded in determining the rights of any person to attend and vote at the meeting.
9. As at 4 June 2024 (being the last business day prior to the publication of this notice) the Company’s issued share capital consists of 33,197,198 ordinary
shares, carrying one vote each (and no shares were held in Treasury). Therefore, the total voting rights in the Company as at 4 June 2024 are 33,197,198.
10. CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored members, and those CREST members who have appointed a service
provider(s), should refer to their CREST sponsor or voting service provider(s), who will be able to take the appropriate action on their behalf.
11. In order for a proxy appointment or instruction made using the CREST service to be valid, the appropriate CREST message (a CREST Proxy Instruction) must
be properly authenticated in accordance with the specifications of Euroclear UK and International Limited (CRESTCo), and must contain the information
required for such instruction, as described in the CREST Manual. The message, regardless of whether it constitutes the appointment of a proxy or is an
amendment to the instruction given to a previously appointed proxy must, in order to be valid, be transmitted so as to be received by the issuer’s agent
(ID RA10) no later than 48 hours before the time appointed for holding the meeting. For this purpose, the time of receipt will be taken to be the time (as
determined by the timestamp applied to the message by the CREST Application Host) from which the issuer’s agent is able to retrieve the message
by enquiry to CREST in the manner prescribed by CREST. After this time any change of instructions to proxies appointed through CREST should be
communicated to the appointee through other means.
12. CREST members and, where applicable, their CREST sponsors, or voting service providers should note that CRESTCo does not make available special
procedures in CREST for any particular message. Normal system timings and limitations will, therefore, apply in relation to the input of CREST Proxy
Instructions. It is the responsibility of the CREST member concerned to take (or, if the CREST member is a CREST personal member, or sponsored member,
or has appointed a voting service provider, to procure that his CREST sponsor or voting service provider(s) take(s)) such action as shall be necessary to
ensure that a message is transmitted by means of the CREST system by any particular time. In this connection, CREST members and, where applicable,
their CREST sponsors or voting system providers are referred, in particular, to those sections of the CREST Manual concerning practical limitations of the
CREST system and timings.
13. The Company may treat as invalid a CREST Proxy Instruction in the circumstances set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations
2001.
14. If you are an institutional investor you may also be able to appoint a proxy electronically via the Proxymity platform, a process which has been agreed by the
Company and approved by the Registrar. For further information regarding Proxymity, please go to www.proxymity.io. Your proxy must be lodged by 12 noon
on 16 July 2024 in order to be considered valid or, in the event of any adjournment, close of business on the date which is two working days before the time
of the adjourned meeting. Before you can appoint a proxy via this process you will need to have agreed to Proxymity’s associated terms and conditions. It
is important that you read these carefully as you will be bound by them and they will govern the electronic appointment of your proxy. An electronic proxy
appointment via the Proxymity platform may be revoked completely by sending an authenticated message via the platform instructing the removal of your
proxy vote.
15. In the case of joint holders, where more than one of the joint holders purports to appoint a proxy, only the appointment submitted by the most senior holder
will be accepted. Seniority is determined by the order in which the names of the joint holders appear in the Register of Members in respect of the joint
holding (the first named being the most senior).
16. Members who wish to change their proxy instructions should submit a new proxy appointment using the methods set out above. Note that the cut-off time
for receipt of proxy appointments (see above) also applies in relation to amended instructions; any amended proxy appointment received after the relevant
cut-off time will be disregarded.
17. Members who have appointed a proxy using the hard-copy proxy form and who wish to change the instructions using another hard-copy form, should
contact Link Group on 0371 664 0300 or +44 371 664 0300 if calling from outside the United Kingdom. Calls are charged at the standard geographic rate
and will vary by provider. Calls outside the United Kingdom are charged at the applicable international rate. Lines are open between 09.00-17.30, Monday to
Friday excluding public holidays in England and Wales.
18. If a member submits more than one valid proxy appointment, the appointment received last before the latest time for the receipt of proxies will take
precedence.
19. In order to revoke a proxy instruction, members will need to inform the Company. Members should send a signed hard copy notice clearly stating their
intention to revoke a proxy appointment to Link Group, PXS1, Central Square, 29 Wellington Street, Leeds LS1 4DL.
In the case of a member which is a company, the revocation notice must be executed under its common seal or signed on its behalf by an officer of the
company or an attorney for the company. Any power of attorney or any other authority under which the revocation notice is signed (or a duly certified copy
of such power of attorney) must be included with the revocation notice. If a member attempts to revoke their proxy appointment but the revocation is
received after the time for receipt of proxy appointments (see above) then, subject to paragraph 4, the proxy appointment will remain valid.
FURTHER INFORMATION
108
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
Resolution 1 – Audited Financial Statements and the Report of the Directors
The audited financial statements and the Report of the Directors for the year ended 31 March 2024 will be presented to the
Annual General Meeting. These accompanied this Notice of Meeting.
Resolution 2 – Remuneration Report
The Report on Directors’ Remuneration is set out in full on pages 63 to 66.
Resolutions 3 to 8 – Election and Re-election of Directors
Resolutions 3 to 8 deal with the election and re-election of the Directors. Biographies of each of the current Directors can be
found on pages 40 to 41.
The Board has confirmed, following a performance review, that the Directors standing for election or re-election continue to
performeffectively.
Resolution 9 – Re-appointment of Auditor
Resolution 9 relates to the re-appointment of BDO LLP as the Company’s independent auditor to hold office until the next
Annual General Meeting of the Company and also authorises the Audit Committee to set their remuneration.
Resolutions 10 and 11 – Issue of Shares
Ordinary Resolution 10 in the Notice of Annual General Meeting will renew the authority to allot the unissued share capital up
to an aggregate nominal amount of £829,929.75 (equivalent to 3,319,719 shares, or 10% of the Company’s existing issued
share capital on 4 June 2024 or, if changed, the number representing 10% of the issued share capital of the Company at the
date at which this resolution is passed). Such authority will expire on the date of the next Annual General Meeting or after
a period of 15months from the date of the passing of the resolution, whichever is earlier. This means that the authority will
have to be renewed at the next Annual General Meeting.
When shares are to be allotted for cash, Section 551 of the Companies Act 2006 (the Act) provides that existing shareholders
have pre-emption rights and that the new shares must be offered first to such shareholders in proportion to their existing
holding of shares. However, shareholders can, by special resolution, authorise the Directors to allot shares otherwise than by
a pro rata issue to existing shareholders. Special Resolution 11 will, if passed, give the Directors power to allot for cash equity
securities up to 10% of the Company’s existing share capital on 4 June 2024 or, if changed, the number representing 10% of
the issued share capital of the Company at the date at which this resolution is passed, as if Section 551 of the Act does not
apply. This is the same nominal amount of share capital which the Directors are seeking the authority to allot pursuant to
Resolution 10. This authority will also expire on the date of the next Annual General Meeting or after a period of 15 months,
whichever is earlier. This authority will not be used in connection with a rights issue by the Company.
The Directors intend to use the authority given by Resolutions 10 and 11 to allot shares and disapply pre-emption rights only
in circumstances where this will be clearly beneficial to shareholders as a whole. The issue proceeds would be available for
investment in line with the Company’s investment policy. No issue of shares will be made which would effectively alter the
control of the Company without the prior approval of shareholders in general meeting. New shares will be only issued at a
premium to the Company’s net asset value per share.
Resolution 12 – Share Repurchases
The Directors wish to renew the authority given by shareholders at the Annual General Meeting held in July 2023. The
principal aim of a share buy-back facility is to enhance shareholder value by acquiring shares at a discount to net asset
value, as and when the Directors consider this to be appropriate. The purchase of shares, when they are trading at a discount
to the net asset value per share, should result in an increase in the net asset value per share for the remaining shareholders.
This authority, if conferred, will only be exercised if to do so would result in an increase in the net asset value per share for the
remaining shareholders and if it is in the best interests of shareholders generally. Any purchase of shares will be made within
guidelines established from time to time by the Board. It is proposed to seek shareholder authority to renew this facility for
another year at the Annual General Meeting.
EXPLANATORY NOTES TO THE RESOLUTIONS
FURTHER INFORMATION
109
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
Under the current Listing Rules, the maximum price that may be paid on the exercise of this authority must not exceed the
higher of (i) 105% of the average of the middle market quotations for the shares over the five business days immediately
preceding the date of purchase and (ii) the higher of the last independent trade and the highest current independent bid on
the trading venue where the purchase is carried out. The minimum price which may be paid is 25p per share. Shares which
are purchased under this authority will either be cancelled or held as treasury shares.
Special Resolution 12 in the Notice of Annual General Meeting will renew the authority to purchase in the market a maximum
of 14.99% of shares in issue as at the date of the passing of the resolution (equivalent to 4,976,259 shares at the date of this
Notice). Such authority will expire on the date of the next Annual General Meeting or after a period of 15 months from the
date of passing the resolution, whichever is earlier. This means in effect that the authority will have to be renewed at the next
Annual General Meeting or earlier if the authority has been exhausted.
Resolution 13 – General Meetings
Special Resolution 13 seeks shareholder approval for the Company to hold General Meetings (other than the Annual General
Meeting) on not less than at 14 clear days’ notice.
Recommendation
The Board considers that the resolutions relating to the above items are in the best interests of shareholders as a whole.
Accordingly, the Board unanimously recommends to the shareholders that they vote in favour of the above resolutions to be
proposed at the forthcoming Annual General Meeting as the Directors intend to do in respect of their own beneficial holdings
totalling 37,000 shares.
FURTHER INFORMATION
110
THE BIOTECH GROWTH TRUST PLC Annual Report for the year ended 31 March 2024
DIRECTORS
Roger Yates
1
Hamish Baillie
Steve Bates
2
Julia Le Blan
3
Geoff Hsu
Dr Nicki Shepherd
The Rt Hon Lord Willetts FRS
1 Chair of the Board and the Nominations Committee
2 Chair of the Management Engagement Committee and Senior Independent
Director
3 Chair of the Audit Committee and the Valuation Committee
REGISTERED OFFICE
One Wood Street
London EC2V 7WS
WEBSITE
www.biotechgt.com
COMPANY REGISTRATION NUMBER
03376377 (Registered in England)
The Company is an investment company as defined under
Section 833 of the Companies Act 2006.
The Company was incorporated in England on 20 May 1997
as Reabourne Merlin Life Sciences Investment Trust PLC.
ALTERNATIVE INVESTMENT FUND MANAGER,
COMPANY SECRETARY AND ADMINISTRATOR
Frostrow Capital LLP
25 Southampton Buildings
London WC2A 1AL
Telephone: 0203 008 4910
E-Mail: info@frostrow.com
Website: www.frostrow.com
Authorised and regulated by the Financial Conduct Authority.
If you have an enquiry about the Company or if you would
like to receive a copy of the Company’s monthly fact sheet
by e-mail, please contact Frostrow Capital using the above
e-mail address.
PORTFOLIO MANAGER
OrbiMed Capital LLC
601 Lexington Avenue, 54th Floor
New York NY10022 USA
Telephone: +1 212 739 6400
Website: www.orbimed.com
Registered under the U.S. Securities and Exchange
Commission.
INDEPENDENT AUDITOR
BDO LLP
55 Baker Street
London W1U 7EU
DEPOSITARY
J.P. Morgan Europe Limited
25 Bank Street
London E14 5JP
CUSTODIAN AND PRIME BROKER
J.P. Morgan Securities LLC.
Suite 1, Metro Tech Roadway
Brooklyn, NY11201
USA
REGISTRAR
Link Group
Central Square
29 Wellington Street
Leeds LS1 4DL
E-mail: shareholderenquiries@linkgroup.co.uk
Telephone (in UK): 0371 664 0300†
Telephone (from overseas): + 44 371 664 0300†
Shareholder Portal: www.signalshares.com
Website: www.linkgroup.eu
Please contact the Registrars if you have a query about a
certificated holding in the Company’s shares.
STOCK BROKER
Winterflood Securities Limited
Riverbank House
2 Swan Lane
London EC4R 3GA
SOLICITORS
Charles Russell Speechlys
5 Fleet Place
London EC4M 7RD
IDENTIFICATION CODES
Shares: SEDOL: 0038551
ISIN: GB0000385517
BLOOMBERG: BIOG LN
EPIC: BIOG
GLOBAL INTERMEDIARY IDENTIFICATION NUMBER
(GIIN): U1MQ70.99999.SL.826
LEGAL ENTITY IDENTIFIER (LEI)
549300Z41EP32MI2DN29
COMPANY INFORMATION
In order to achieve its investment objective, the Company invests in a
diversified portfolio of shares and related securities in biotechnology
companies on a worldwide basis.
Further details of the Company’s investment policy are set out on pages 28
and 29.
ORBIMED CAPITAL LLC – PORTFOLIO MANAGER
OrbiMed’s investment business was founded in 1989 with a vision to invest
across the spectrum of healthcare companies: from venture capital start-ups
to large multinational companies.
Beginning with its first public equity fund in 1989, OrbiMed expanded to include
long/short equity and private equity investments in 1993. On 19 May 2005
OrbiMed was appointed as the Company’s Portfolio Manager. In 2007 OrbiMed
expanded to Asia, opening offices in Mumbai and Shanghai, and launching
a fund focused on private equity healthcare opportunities in China and India.
In 2010 OrbiMed expanded to the Middle East, opening an office in Israel to
seek innovative life sciences venture capital opportunities across the region. In
May 2023, OrbiMed opened an office in London to provide local support for its
network of European portfolio companies and to seek private and public equity
investments.
Today, OrbiMed has a singular focus on seeking successful investments on a
worldwide basis across the entire spectrum of private and publicly-traded life
sciences companies. With approximately U.S. $17 billion under management,
OrbiMed ranks as one of the world’s largest healthcare-dedicated investment
firms.
OrbiMed’s investment professionals possess a combination of extensive
scientific, medical and financial expertise.
HOW TO INVEST
The Company’s shares are traded on the London Stock Exchange and can be
purchased through a stock broker or other financial intermediary. The shares
are available through savings plans (including investment dealing accounts,
ISAs, Junior ISAs and SIPPs) which facilitate both regular monthly investments
and lump sum investments in the Company’s shares. There are a number of
investment platforms that offer these facilities. Further details can be found on
page 104.
STRATEGIC REPORT
Financial Highlights
1
Chair’s Statement
2
Company Performance
5
Investment Portfolio
7
Portfolio Manager’s Review
9
OrbiMed’s Approach to ESG
26
Business Review
28
GOVERNANCE
Board of Directors
40
Corporate Governance
42
Report of the Directors
51
Statement of Directors’ Responsibilities
57
Audit Committee Report
58
Directors’ Remuneration Report
63
Directors’ Remuneration Policy
67
Independent Auditor’s Report
68
FINANCIAL STATEMENTS
Income Statement
76
Statement of Financial Position
77
Statement of Changes in Equity
78
Statement of Cash Flows
79
Notes to the Financial Statements
80
FURTHER INFORMATION
Shareholder Information
99
Glossary of Terms and Alternative
Performance Measures
100
How to Invest
104
Notice of the Annual General Meeting
105
Explanatory Notes to the Resolutions
108
Company Information
110
For more information about The Biotech
Growth Trust PLC visit the website at
www.biotechgt.com
Follow us on X @biotechgt
THE BIOTECH GROWTH TRUST PLC
The Biotech Growth Trust PLC seeks
capital appreciation through investment
in the worldwide biotechnology industry.
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printed by:
perivan.com
ANNUAL REPORT
FOR THE YEAR ENDED 31 MARCH 2024
The Biotech Growth Trust PLC Annual Report for the year ended 31 March 2024
Disability Act
Copies of this Annual Report and other documents issued by the Company are available from the
Company Secretary. If needed, copies can be made available in a variety of formats, including
Braille, audio tape or larger type as appropriate. You can contact the Registrar to the Company,
Link Group, which has installed telephones to allow speech and hearing impaired people who have
their own telephone to contact them directly, without the need for an intermediate operator, for this
service please call 0800 731 1888. Specially trained operators are available during normal business
hours to answer queries via this service. Alternatively, if you prefer to go through a ‘typetalk’
operator (provided by the RNID) you should dial 18001 followed by the number you wish to dial.
This report is printed on Revive 100% White Silk a totally recycled paper
produced using 100% recycled waste at a mill that has been awarded the
ISO 14001 certificate for environmental management.
The pulp is bleached using a totally chlorine free (TCF) process.
This report has been produced using vegetable based inks.
A member of the Association of Investment Companies
CBP008251
THE BIOTECH GROWTH TRUST PLC
25 SOUTHAMPTON BUILDINGS
LONDON WC2A 1AL
WWW.BIOTECHGT.COM