The Biotech sector has in a short time gone through a significant correction. It started unexpectedly around two weeks ago when sector ETFs had outflows, said to be explained by profit taking and investors closing the books for the year. One week ago, however, Celgene announced a failed trial, which we interpret reinforced the sell off in the market, which has been further been reinforced by Celgene's lowered guidance in theQ3 report. See further comments. During those two weeks we have also seen a tweet from Trump commenting on drug pricing.
What was started more as profit taking has developed into a negative spiral with further outflows. This is impacting AALS negatively, both in terms of absolute return and relative performance. Our positive view of the portfolio companies and the market for innovative drugs are unchanged. The valuation of the companies is low. Several of the portfolio companies are presenting important data in the near future and we see those names holding up, however not sufficient to compensate for the "carnage" the last week. The flows in the market is impossible to predict. In light of this situation, our current strategy is to stick to our belief. The sector will recover, but this volatility might stick here for some time. The weakness can be used for further investments in attractive names.
Arctic Aurora LifeScience is an equity fund investing in global biotechnology and pharmaceutical companies. The fund is run by former portfolio manager in the Swedish AP Fonder, Ulrica Bjerke, and Dr. Torbjørn Bjerke, both with 20 years of experience from the industry. Daniel Bolanowski fills the role as anlyst on the team with a MSc in both Biotech and Economics. Arctic Aurora LifeScience was launched in May 2016 with both hedged and unhedged share classes.
Past performance in Arctic Aurora LifeScience s no guarantee for future returns. Future returns depend on the market, fund manager skill, fund risk level, costs, among others. Performance in the fund may at times be negative and may for this fund vary considerably within periods.