International Biotechnology Trust (LSE:IBT) — Annual Results to 31st August 2023

0:01 Good afternoon, ladies and gentlemen, and welcome to the INTERNATIONAL BIOTECHNOLOGY TRUST PLC investor presentation.. On the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so, and these will be available via your investor meet company dashboard.

0:34 Before we begin, I would like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the team from INTERNATIONAL BIOTECHNOLOGY TRUST PLC, Marek, Elsa, Lucy. Good afternoon. Good afternoon, Jake, and good afternoon, everyone. First of all, thank you very much for taking the time to hear us go through our annual results presentation. So our financial year ends at the end of August each year, and this presentation runs through our numbers. It talks about the sector and why we think it's a good time to invest and ends up with some slides on the exciting news that we're moving to Schroders at the end of this month. So kicking off, please cast your eyes over the disclaimer.

1:23 And this slide talks about the team that currently invest currently manage the trust. Merrick and I look after the quoted part of the portfolio and Kate Bingham, SP Health Investors looks after the venture part of the portfolio, which makes up just under 10% of the trust. And just so that you know, that will continue. She will continue with the rest of her team to be managing the venture funds when we move to Schroders. And Mark and I will continue to manage the credit part of the portfolio. A bit of background, so I'll just do a quick intro into me. So I have scientific training and then joined Wealth Management in the early noughties. I've covered biotech investing since I left university, so over twenty years now.

2:13 Marek has actually been in industry. Marek, maybe you could Yes. So I've I've worked fifteen years in the industry, meaning pharmaceutical development and business development, and moved to IBT in 2014. Yeah. And a little bit on Kate. You may have heard of her. She stepped aside to help with the vaccine task force and had... It's proud to say that she rolled out the fastest vaccine program in the world, which I'm sure you've heard about. She's now back at the helm at SV and continuing with her day job. Okay. So moving on. This is a quick summary of what we do in the sector. We're invested in the innovative part of the healthcare industry, I. E. The biotech companies. They're mostly US based.

2:59 Our performance over one, five and ten years has been positive versus our benchmark. And volatility wise, we've managed to keep the volatility to less than our benchmark, which is the NASDAQ Biotech Index. We also have a dividend. So we pay 4% of NAV each year, two installments, 22%. We're backed by an expert team. And also we have key opinion leaders access to key opinion leaders that we can pick their brains on various different drugs and companies. And then finally, we'll be moving over to Schroders as I mentioned, and we have a few slides talking about the process and the reason why Schroders was picked later in the presentation. So as a summary, to the end the twelve months to the end of August twenty three, the fund returned just shy of 3% NAV, and that compares to the benchmark that we're compared to of negative 1.4%.

3:58 We paid a dividend of 28.2p per share and we bought back some shares as we were trading at a discount about just over 1,500,000 shares bought back during the period, which is equivalent to GBP 10,000,000 and just shy of 4% of NAV. The discount is broadly flat, opening at 6.6 percent and then dropped slightly to 6.3% at the close of the period and there was a performance fee paid. Other news, we'll be moving to Schroders and this is the first year that our new Chairman, Kate Cornish Bowden has been Chair of the Trust. Performance wise, on the left, you can see one, five year performance, the top line showing the net asset value per share performance and the share price in the middle and then NASDAQ BIOTECH index, NBI at the bottom. So you can see here, we've outperformed over one and five years. We were hit over the three year period due to not investing in the vaccine companies, which had an astronomical performance during the pandemic.

4:58 On the right hand side, it shows discrete performance. So each year going back five years and these data we put on our fact sheet each month and you're welcome to have a look at the fact sheets on our website.

5:11 As I mentioned, we managed to keep the volatility below our benchmark, but our returns are higher and this chart shows that. And again, we announce this every month on our fact sheet, so you can keep track of that. We've been lucky to receive external recognition, both nominations and winning various different awards in 2022 and more recently in 2023. So we're very proud of that. Right. So this presentation is fit into two. The first section of the presentation talks about the biotech market and industry, its drivers and why we think it's a good time to invest. And the second part of the presentation, we'll be talking about the fund and the portfolio analysis. And then finally, there are a couple of slides on the transition to Schroders.

5:58 So Marek, my co lead fund manager, is going to talk about the sector. Thank you, Asaf. So let's start with this slide, which is fundamental for the industry at the moment and been so for a while. We have a demography, which is a tailwind for the for the sector. As you can see, the global population is stabilizing, but it's growing. But the part of the world that is growing is the population above the age of 65, but also those above the age of 80. But coming back to that, when when we turn around 50, the ailments start to kick in at us, and we get heart disease, cancer, Alzheimer's, you name it. And the the reason why we live longer now is due to the pharmaceutical development and the new drugs that are coming through the market and and is to distinguish... Is is taken away diseases previously and took us out earlier. So now we live longer, and this is a tailwind for the sex. So the population above the age of 65 is growing between three percent to five percent a year contrast to the global population, which has a growth of around 1%.

7:06 So if you turn the slide, you can see on the left hand side, number of ongoing clinical trials. So you can see that the industry has responded in kind to the demands from the markets and the industry or the population. Number of clinical trials have more or less doubled during the last decade. And on the right hand side, you can also see number of drugs approved by the FDA, which is the US Drug Administration. You can see that this year, we might potentially have an all time high number of drugs approved. The the light green slide shows you the the number of drugs approved to date, which is on the October 24. So we we might see a record. In either way, the long term trend is very positive for the sector. We see new drugs and innovation is not diminishing. It's accelerating, I would say.

8:02 If you take the next slide, you can also see the resilience of the industry when it comes to sales of pharmaceutical. This slide shows the global total prescription drug sales, meaning pharmaceuticals that you can get on prescription. As you can see, the total growth is about 5% on annual base irrespective of the economical backdrop, COVID pandemic, no COVID pandemic, wars, etcetera. You can see that the growth is relatively stable. We at IBT, we focus on the more... The area where... Which addresses more high unmet medical need, means higher innovation. The dark green in... On this slide focus on rare diseases, which is an area which usually is, by definition, rare, but also often very debilitating.

8:54 Once you come up with a with a solution to one of these diseases, you really address a high unmet medical need. And that area of of the industry grows the twice the pace of the rest of the industry. And within within this slide, you can also see that you you can't see the patent expiries that also affects the industry. Drug is approved and usually on the market between ten and fifteen years. Then when the patents expire, the generics come in and the sales of the drug disappears. So seeing 5% growth in in essence means the new drugs prescribed increases much budget... Much more than the 5% you can see on the slide. If you turn the slide, you can also see that this is a busy slide. I understand that.

9:41 But this shows you the innovation that has happened during the last ten, fifteen years in the industry. What we see here is that on the right... Left hand side, you can see that cell based therapies, a new branch in in pharmaceutical developments, you might call it, have have established themselves as a way of treating patients. Cell based therapy, basically, what you do, you take cells from a sick patient, modify their cells, expand them, put them back, and these cells are equipped in a such way that they can actually attack your your own... The the cancer you have in in the body. This is what the the first generation of these drugs was for. We see that area branching out and addressing other diseases. Gene therapies, needless to say, what you do, you take out or insert a functioning gene that previously didn't work when when you... Usually when you're a newborn and affected over lifespan. Now we have much better tools to insert the gene in the right place and be functional for a longer time. That has been the scourge of of that part of the industry. You have had a hard time to insert the gene in the right place and have duration of of efficacy for a longer time. It's getting better at every iteration.

11:02 RNA therapies is an is, of course, the area where Moderna developed and BIOTECHNOLOGY PLC their RNA vaccines, but there are other drugs that that use these techniques in diseases that previously were considered undruggable. So not only do we have new modalities, but they also address areas where small molecules and and previous proteins couldn't address. And the latest addition is gene editing,

11:29 which is in in the latter stages of getting the first drug approved through their technology. So the first three buckets, cell based gene gene therapies, RNA therapies have drugs on the market. Gene editing is on the cusp of getting a drug approved. And we would probably see new modalities coming through and iterations, modulations of these technologies. This is how the industry works. You create a good innovation and then new iterations create better and better incrementally better drugs. Change the slide. Coming back to... Previously, was talking about the soundness of the industry, the innovation cycle, etcetera, how how it's everything expanding, accelerating. This slide shows the financial markets and their view of the biotech sector.

12:20 We wrote a blog approximately a year ago addressing this area because we have had two, almost three years now where biotech has been out of focus, out of investor focus. One of the reasons is because it's considered relatively risky business in terms of interest rate sensitivity and inflation sensitivity. What you can see on this slide is different stages that the industry goes through from financial and equity perspective. I can start at the top where we have despair, which I would say happened one year ago when biotech was totally out of of... Nobody liked biotech. Nobody wanted to touch it. Then we started to see a stabilization.

13:06 And what often happens is the big pharma that are lurking in in the woods and and checking out small biotech pharma because this is where the major ideas come from, and they start to buy up these small companies. And this is where the time when we see recovery in the industry valuations come up. Suddenly, we start to see IPOs, meaning new public... Publicly traded companies coming to the market. And then as always, as very often happens, you have an ephoria stage when valuations get get out of sync with reality. And once that happen, farm... Big pharma steps out of the room. They don't wanna overpay, and then we have a correction and funding issues, and around and around we go. We have... Me and us have been working in this industry for twenty years. We have seen several of these cycles of... Often repeats itself, not always circle, like, go back and forth. But over time, this is what we have seen. During the COVID pandemic, it was one of the fastest I've ever seen. We we started with a despair immediately, then recovery equilibrium in ephoria within six months.

14:15 And since mid twenty twenty one, we have been in a in a bear market territory and been hovering around stage two and stage three. I would say last couple of months, we have taken a big step back to to more stage two early recovery due to political events, but also interest rate hikes, etcetera. So BIOTECH is very sensitive to macro and political happenings in the world. To take the next slide. This is a relatively busy slide, but I would like to... You to focus on... This is a slide of number of publicly traded companies in the world. And and what is very interesting to watch is that you have it... It's not linear in in that sense because as I previously said that you have a period when equilibrium is there and then m and a happens, the pharma comes in and buy companies, the the atmosphere becomes better. And then a new bunch of companies do IPOs come to the public markets, and we have an uptick of number of companies.

15:24 And the cycle stabilizes, and you can see it's it's kind of a step shaped form that biotech grows rather than being a linear one. And we are, as you can see in the... On the right hand side of the slide, we have had a correction during the last two years. And we believe this is sound in one way because we... As you can see, the the number of companies almost doubled during the last three, four years before correcting correcting back a while. But over long term, as I previously said, the tailwind for the sector is there, and we believe over time, it will stabilize and we will see another jump upwards. But but this is how the industry works. The next slide. And this is also...

16:11 This slide shows the the equity markets moves, and I will explain a bit further what what these graphs mean. S... SPX is S and P 500, which is kind of what what The US economy is is based on the 500 companies. The dark green is the NASDAQ Biotech Index, which is the market weighted index in our reference. The light green is XBI, which is more tilted towards small cap biotech, which we historically call the biotechs the world. As you look at this graph, you can see the vicious moves we had. When the pandemic hit. We had a 30% immediate correction of the markets. And when interest rates came down and and we had loose monetary policy, it tends to focus on risk on risk taking. And you can see the light green went from 80 to to around 210, which means 150% increase in valuations in BIOTECHNOLOGY within 1.5, which historically is not sustainable. We were out relatively early in 2021 when we took over and wrote that the valuations are not sustainable at these levels, and we saw a relatively quick correction of 30%, 40%.

17:30 Then the index or the small cap stabilized. But since around end of twenty twenty one, we have seen the inflation spike and interest rates coming up, which is... Has been a drag on the BIOTECH index due to the cost of capital that these companies have. But also recently, we have seen a stabilization since, I would say, late... Latter twenty twenty two, and and that's should... For us, looks like a good solid basis to to start over again. And I can say, anecdotally, around 25% of US companies listed in the US stock exchange are traded below cash, meaning that they have more cash in the bank than the valuation of the company, which also is a sign that historically has been a sign that we are reaching some kind of bottom.

18:24 Thank you, Marek. So moving on to the portfolio. This slide talks about the current themes that we're thinking about as portfolio managers at the moment. Marek's mentioned a couple of times now about the macro backdrop, which has been hit, we think unfairly, the biotech companies within our space. As interest rates rise, the cost of capital is increasing and future cash flows are obviously far out for these companies as they're often developing drugs now and expecting cash flows in the future. So interest

18:56 rates rising hits the capital markets very much so and has this is the third year now of negative returns for the biotech sector. We, on this side of the table, feel optimistic about that. It gives us an opportunity to invest in high quality names at a much cheaper valuation, which is what we're doing right now. I should mention, we've got a slide on this coming up, but big pharma, the buyer, has a huge patent expiry cliff coming up at the end of this decade, and they've got to replenish those revenues that they're going to lose. So we're seeing a major pickup in M and A at the moment. We have a gearing facility because we're a closed ended fund, and you can follow our position, which we actively manage. So it changes depending on our outlook on our fact sheets each month.

19:44 There have been a couple of M and A deals that have investigated by the FTC, something we're keeping an eye on. One of those major transactions was the Amgen Horizon deal, and they've now settled and that's now closed. In terms of what we're doing, just high level on the portfolio because we're seeing a lot more value in the earlier names, the earlier younger companies. We're dipping our toes back into those names after being most exposed to the larger companies within biotech. We obviously do a bottom up stock picking process and we're redeploying the two large inflows of cash from the two major M and A deals that we've had in the fund. So these charts you'll see on our monthly fact sheet. On the right hand side, top right, you can see that almost 50% of the trust are in companies that are profit making.

20:36 About 25% are in profitable, unprofitable early stage companies, and about 30% in what we call revenue growth names. And revenue growth names are names where a company has successfully got through the clinic, successfully received an approval from the FDA and they're making top line sales, but not yet turned a profit.

20:56 On the right hand side, you can see the breakdown of the market caps. And this shows us as an investor in IBT, you get exposure all the way from ideas out of university and the venture funds, all the way up to large cap profitable names. Bottom left, Marek mentioned about how the rare disease market is the faster growing within healthcare sales. So we have a large proportion of the fund in these names. We also like oncology and central nervous system names, that's sort of mental health names because we think that's where the high unmet medical needs are. Bottom right, you can see that most of our investments are listed in The US. Here's a snapshot of our top 10. It's a broad spectrum of company sizes. So you've got Gilead and Amgen in there, mega cap companies, all the way down to one company like such as Vera, the 800,000,000 market cap.

21:52 Turning to the next slide. And here is a slide just depicting the major sales outflows that big pharma are gonna be suffering in the next few years. So all the big names that you would have heard of Merck, J and J, AstraZeneca, Novartis, Bristol, These guys are all at the table looking at biotech companies to acquire, to replace the sales that they're going to lose when their drugs come off patent. And this slide shows all the names within the funds that have been acquired since May 2020. And I'll just point out on the y axis, it shows the premium that these companies were acquired at by the big pharma names. And on the x axis is the date. Above the x axis are all the names that have been acquired out of the quoted portfolio.

22:38 And below the x axis are names that have been acquired out of the venture funds.

22:44 So some case studies of how we manage our positions in the portfolio. Here's Horizon. So we initiated a position approximately five years ago. And as we got to know the company, we built the position. And you can see with the green dotted line, it shows our position as we've traded in and out of the company. So you can see here, we felt that the valuation was looking a bit stretched and we took some profits in 2021. The whole sector, if you remember, was overheated, we felt, and a lot of valuations were looking toppy. So we took some profits. The share price then retracted in 2022 and we increased our position. And at the end of twenty twenty two, Horizon was our largest position in the fund and Amgen announced its intention to acquire.

23:29 We then sold out of that position. And then as the FTC announced an investigation, you can just see the share price fell sort of kind of late spring twenty three. We invested back a little bit into it to take advantage because we felt that they would come to a a solution which they did. Another case study example for you is Cogen. So this company, again, we built a position and it was an ADC oncology company, pretty established company with revenues. They were in discussions to be acquired by Merck. Those deals fell through... That deal fell through. Sorry. And then the CEO resigned after that due to personal problems.

24:16 We added to our position. It became our largest position in the fund and Pfizer announced its intention to acquire. We exited the position and went on the announcement and we're using those funds from a rising decision to reinvest back into biotech names. Third case study is Miraati, an oncology company, slightly earlier stage than the previous two. They've launched their drug for a subsector of lung cancer. So they're in revenue growth name and they were recently picked up by Bristol Myers for $58 per share.

24:54 So I mentioned we pay a dividend each year out of capital. It's 4% of NAV. So if the NAV falls, the dividend payment will fall. And if the NAV rises, the dividend payment will rise. This financial year, we paid out a dividend of 28.2 p.

25:12 So as a little bit on our process, Mark and I attend investor conferences over in The US to meet new new companies and generate new ideas. We have access to key opinion leaders who specialize in particular disease areas that we can pick their brains and take a view on a company. We also have this risk mitigation approach, something I haven't touched on yet, which is that we will reduce exposure in in the fund to a company when they're approaching a clinical readout. We don't think we can second guess a clinical readout. If fund managers could, then we wouldn't need clinical trials. We're very valuation sensitive. We're not afraid to take money off the table if we feel like a company is fully valued. On the macro side, we will have one eye on what's going on in the business cycle.

25:58 Interest rates rising isn't good for long dated assets. So we've been using that as a contrarian indicator to move into small mid cap companies now that we've seen this significant correction. And we have a gearing facility that we use tactically.

26:17 So on the left hand side, this is what we look for. What are the characteristics we look for in a biotech company? We certainly... As I've mentioned a few of these already, but we we do look for financial robustness. Can... Will this company be able to survive for the next two or so years and finish the clinical trials they're doing? So that's something that we will ask management teams when we meet them. We ideally have a com... Invest in a company that owns an asset outright. This makes it a cleaner m and a deal. A monopoly position would be ideal, but obviously not necessary. Pricing power is key. Strong management, absolutely key. Valuation, we we are valuation sensitive as I've mentioned. And liquidity. So because we trade in and out of our companies depending on news flow, we wanna be able to do that. So we need companies that are liquid.

27:06 And then on a top down basis, I've mentioned, we are... We do have one eye on where we are in that cycle that Marek talked about. Is biotech in favor or out of favor? Right now, safe to say biotech is very much out of favor. So we're trying to be contrarian and we're dipping our toes into this mid cap market as we speak.

27:27 Okay. So a bit about the venture funds. There are two dominant funds within the venture part of the portfolio. And this makes up 5% to 15% of the trust at the moment is just shy of 10%. SV Fund VI is a slightly older fund, so that's exiting right now, and BCOF is the newer fund. There's been exceptionally early and good take out for Nimbus of Takeda, which has helped boost the IRR on BCOF fund. And as I mentioned, these funds will continue to remain at SV and our investments will be continued to be managed by SV. So the transition to Schroders. Our Board of Directors is an incredibly strong team. They've been great and worked really hard the last ten or so months with the transition to Schroders.

28:16 Kate Cornish Bowden stepped up to be the chair at the end of last year. So we're coming up to full year, her first full year as the chairman.

28:27 So what's happened? Back in February this year, SV announced they wanted to focus purely on venture, and we were the only public fund within SV. And so they served notice on that fund. The board then spoke to the top shareholders of the fund and asked for their feedback and what they would like to see or keep the same. And then the mandate was put out of tender. 24 different investment houses applied for the mandate, and that was whittled down to a short list of three, and then Schroders eventually won that deal. Why Schroders? Continuity, the feedback from shareholders was to keep the mandate the same, keep the dividend, keep the team and Schroders agreed to all of those aspects. Schroders also has a healthcare product, but not a biotech product. So it was a nice neat fit into them and they clearly have been establishing established marketing presence with a view to growing the fund.

29:27 So that is the end of our presentation. Thank you very much for taking the time to listen. We've got some questions coming in already, so that's great. So we'll just have a read of these and work through them. Perfect. Marek, Elsa, Lucy, if I may just jump back in there. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab that's situated on the right hand corner of your screen. But just while the team take a few moments there, I would just like to encourage those just to submit their questions now. Mark, Elsa, Lucy, as you can see, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. If I may just ask you just to read those out and give your responses where it's appropriate to do so, and then I'll pick up from you at the end, that would be great. Thank you.

30:17 So thank you for the questions. The first question is, can the trends of increasing number of trials and drug approvals continue in a tougher funding environment for biotech companies? To begin with, I think we have historically have had... I mean, the last couple of years, we have had excess amount of money coming into the biotech sector through the COVID pandemic and etcetera. So a lot of trials that have been funded maybe shouldn't have been funded. So what has happened is the probability of success have come down the last couple of years. So with with a tighter budget, I think, historically has been the case. I was around in 2007, the great financial crisis. What happened is that companies tend to call the less productive projects or the early stage ones. So the number of approvals, I think, will not be affected materially, but we will probably see fewer early stage trials.

31:20 That is what I think will happen. Yes. Thank you, Marek. So next question. Yeah. So so you talked about the fact that the sector is recovering. How does that translate into the... IBT's performance? Yeah. You can you can show the slide if if we still have it in in how the how the Evaluations. Yeah. Yeah. The the equity. The XPI. XPI version. Can see That's right. Yeah. You can see this slide is is very much telling what's... What what has happened in the sector. The question is more like, yeah, we have stabilized. But as you can see at this slide, the NBI index had a relatively early early in the year.

32:05 It it was relatively much hit, whereas the rest of the Nasdaq, etcetera, went up mainly due to interest rate increases. And we we have had a turbulent year. No doubt about it. It's go... Been going out in a... Up and down. But if you look at this, the last one and a half year compared to the previous three years, you can see the moves that we have seen, 200% up and 70% down. We did... We have not seen them during the last year. Inherently, biotech is is very volatile. So from my perspective, this is a relative

32:41 relative calm period. And of last month or so, unintentionally, what what has happened in in in the Israel territory and and Palestine and also the political aspects in The US where where the increase of interest rate happened very, very rapidly have affected the the kind of risk on scenario. We we are in a risk off environment at the moment, and this is what what happened to XBI. We we saw up, I think, last week, a 12% move in in the XBI upwards when interest rates came down 50 basis points just shows you how quickly the the recovery can can happen. And we have invested in relatively smaller names the last couple of months because we we see this this is where you see the most value at the moment.

33:31 And I would also add to that. I think when we had this huge exuberance back in 2021, we had a lot of companies IPO ing that were just too early and shouldn't have IPO ed. There's a lot of money sloshing around funding projects that probably shouldn't have been funded. So it it... In a way, right now, we think the environment of investing feels a lot healthier than it did back in 2021, and there's a big cleanup operation going at the moment with projects being called that probably shouldn't be happening. And the next question is about UK biotech. Why do you not invest more in The UK biotech considering the low valuations in The UK? Yeah. If Kate were in the room, she would say that's exactly what they are doing. So on the venture side and very early stage company stage ideas coming out of university, The UK is really strong.

34:23 And we do have a lot of UK numbers within the venture names. But as the companies grow, their need for capital increases. And unfortunately, The US just gives greater access to money and capital. It's much more advantageous for companies to list on NASDAQ for that reason. So as companies mature, we see

34:41 the migration over to The US and the rest of the portfolio, as you know, is is invested in the more mature end of the biotech sector. There is a blog on our website that talks about that migration of companies from Europe to The US as they get bigger. And the next question is related to that. Our definition of small caps is sub $2,000,000,000. And does that then exclude smaller companies?

35:04 So what is our minimum market cap? We don't have a minimum market cap. The only thing we we care about is liquidity. So we don't want to invest in a company we can't then exit. We've seen, you know, people make that mistake in the past two decades, and we don't wanna be sort of forced to hold a position over a clinical trial readout. A couple of technical questions. One about the level of our capital reserves. We pay our dividend from capital reserves, and that number is GBP $250,000,000. So our trust market cap is GBP $2.75 ish at the moment. So it's nearly our entire trust is defined as capital reserves. So no shortage on capital reserves to cover our dividend. And then also about our gearing level, do you want to talk about Yes. So we currently pay 1.5% of our Bank of England base rate.

35:56 And we have the ability to gear up to percent of the trust. At the moment, we're low double digits. Mara, can I just? This is a personal manager view, wouldn't feel massively comfortable going very far north of 15. If we're at 15, we're very optimistic about the market. If you look at our fact sheets, you can see you can kind of interpret our view from looking at our gearing position. And if we're at zero, we're just, you know, sitting on the sidelines temporarily. So next question about the bid premium M and A situations. Do you think recent premium is sufficient given the lowly valuations?

36:34 Yes, it's a good question. We a deal in in one of our portfolio companies,, which we felt was very much on the low side. We we we can debate the reasons. One of them is that management didn't fulfill their... The the job, so to speak. They were actually ousted a couple of months ago and probably has a lot of other things going on. But in general, what tends... What needs to happen for premiums, etcetera, and these to happen is do you have a stable environment. As you can see on the slide, they've been relatively stable the

37:06 last six months. And when buyers and sellers needs to accept the new reality, so to speak, that they need to meet and have a proper discussion what the valuations are. And, I mean, we we can debate. Is it 60%, 50%? It's the buyer and seller, but the key is that they need to be calmness in the boardroom to to kind of agree on a price. That's what needs to happen. And the takeout prices tend to range from five to 10... A multiple of five to 10 times peak sales. So that's kind of a broad kind of thing in the air valuation to have the back of your minds. As Mary was mentioning, what we've seen is a big pullback in share prices, and we've had a consolidation. So hopefully, now management teams, boards, the buyer have accepted that maybe the 2021 valuations were too choppy.

38:00 The next question, how have you performed against your peer group and who in The UK would be our closest competitor? So there's two closed ended biotech investment trusts listed on the London Stock Exchange, IBT and BIOTECHNOLOGY TRUST. Those are the peer group, and you're welcome to look up performance, but we... It's not really appropriate for us to talk about our peer group performance. The next question actually came in before we showed the slide on the private portfolio, so it may have been answered. But what are the plans for the exposure in the midterm before the move to Schroders on the private side? Before the move? Given the move to Schroders. So no change there. So we've got two funds that we invest in the SV manage, and they will continue to manage that. And we... Those invest... The SV fund six is now maturing. BCOF is actually relatively new funds.

38:52 So no change. They're going to continue to manage, and we're going to continue to hold those holdings.

38:58 You talked about adding earlier stage names, small cap names to the portfolio. Are you able to talk through any of those and the rationale for the investment?

39:08 We aren't meant to talk about names lower than our top 10. The way... We talk a lot about our companies in the annual report, which has come out today. So you can have a look through there and see which names are smaller than 2,000,000,000 market cap. And what we're doing, we're not necessarily investing in new names, although we have, but also adding to the names that we like that are in our trust that's that you'll see in the annual report list. So you can have a look at those. Yes. One way of how we do it is that we invest in therapeutic baskets. For example, in the kidney space, we have several companies, but because we believe that's an area that is right for M and A or at least that there is a very high unmet medical need there, and we focus on that.

39:55 But we are not we are scared, but not that scared to pick the winner because then we only have to invest in one. We believe in the basket approach, then there are several different mechanism of action that can treat a certain disease. So say, we invest in five companies, but doing that, we don't want to expose ourselves too much. So we might invest a half a percent of the fund or or thereabouts. And once the companies have proven themselves, we might increase the holdings. And this is what what we have been doing in some of the companies. Have increased our holdings. And maybe in in some instance, we've added new holdings. But when you add a new holding, we sell them to more than a half a percent to begin with because you always have to kind of vet the companies you invest in. It takes a couple of years. And to help us show...

40:42 Showed earlier that, for example, the CH and Horizon, a company that was acquired last year or this year, we held positions for five years going in and out. So it's not like it happens overnight usually. But you need to be very early on with these companies and get to know them and see that do they deliver what they say. So I'll put it that way. We have increased number of companies we have invested in as well relatively recently. And we've got time for just one last question. Which of the four innovation areas, cell therapy, gene therapy, gene editing, and RNA therapies do you see the best outlook for growth in the next two to five years? In in... It's I've just read it before you read it out, but it's very difficult question because do you mean growth as in innovation and iterations?

41:30 And I can... I'm gonna answer it if if you mean that, or do you mean growth as in sales? So cell therapy, we've had cell therapy drugs on the market now for a while that when they were first being approved by the FDA, there were two companies, Kite and Juno. This is about five... Over five years ago. And Celgene and Gilead and Amgen swooped in and acquired up these cell therapy platform technologies of which they were in our fund. So they're relatively established that these are the first iteration of cell therapies. They're incredibly effective and cure effectively cure patients of some cancers. What we're seeing now is iterations and improvements upon that. I do you have to use the patient cells, can you use anyone cells and have something called off the shelf allergenic cell therapy. So that's the next iteration. So if you're talking about growth of innovation, that's what's happening in cell therapy. Gene therapies, we've only just sort of started seeing gene therapies getting launched on the market to a significant number. So whereas five years ago, was just one or two.

42:39 Now we're at sort of four or five. Those sales growth projections at the moment are looking pretty low. The whole system needs to get used to the fact that these are very high cost potentially curative treatments. How do you pay for that? So it's slightly sort of... We need... We're working that out. Gene editing is even earlier, so we haven't had a gene editing approval yet. We're on the cusp of the very first one from CRISPR and VERTECH. So it doesn't mean that it's gonna get approved. It's up to the up to the FDA. So that's the kind of an emerging technology. And, obviously, there aren't any sales in that yet. RNA therapies is much more established. This is even before cell therapies. We've had RNA treatments, and, of course, you all know about the vaccines as well out of RNAs. So that's a much more established area. Growth in... I would say that's the largest proportion of sales as well. So I'm not sure exactly what you mean by growth. Is it sales or innovation? But certainly innovation wise, they're going from strength to strength as new companies come in with better versions of those technologies.

43:39 I think that's that's That's all the questions now. All the questions you have. Elsa, Lucy, Merrick, absolutely. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this afternoon. And, of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review to then add any additional responses, of course, where it's appropriate to do so, and we'll publish all those responses out on the investor meet company platform. But, Elsa, perhaps before really just looking to redirect those on the call to provide you their feedback, which I know is particularly important to yourself and the company, if I could please just ask you for a few closing comments just to wrap up with, that would be great. Absolutely. So thank you, Jake, and thank you, everyone, who's taken the time to dial in. I think you hopefully picked up that we're pretty enthusiastic about where we are with BIOTECH at the moment after the third year down in valuations.

44:31 So thank you very much. That's great. Marek, Elsa, Lucy, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations? This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of INTERNATIONAL BIOTECHNOLOGY TRUST PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.