Shareholder letter

Dear Shareholders

During the last quarter of 2023, global equity indices extended their 2023 gains. The US central bank held rates steady in the fall, lifting market sentiment in the last two months of 2023.

The US markets traded to all-time highs: The S&P 500 gained 26.3% in USD for the year, the Nasdaq 100 gained 55.1% in USD. European equities followed: The Euro Stoxx 50 was up 23.2% in EUR and the Dax was up 20.3% in EUR. Healthcare markets nevertheless underperformed in 2023, with total returns for the MSCI World Healthcare Index of +4.3% in USD and for the Nasdaq Biotech Index of +4.6% in USD – up slightly for the full year 2023.

The central bank action devalued the USD against most international currencies in 2023, particularly (and of central importance for BB Biotech’s reporting currency), the Swiss franc, which strengthened 9% versus the US Dollar.

BB Biotech’s fourth quarter share return was +3.4% in CHF and +7.1% in EUR. This was encouraging but not enough to reverse earlier 2023 losses. The total return for 2023, including the dividend payment of CHF 2.85 in March 2023, was –18.1% in CHF, –15.2% in EUR.

Fourth quarter net asset value performance started badly in October but saw a rally of almost 30% (in USD) from October lows to the end of year. Net asset value performance in the last quarter of 2023 was +14.2% in USD, respectively +5.0% in CHF. Fourth quarter gains of CHF 109 mn compare to the net loss of CHF 35 mn for the fourth quarter 2022. This may be signaling a strengthening biotech market.

Nevertheless, for full year 2023, NAV performance including the dividend was +1.8% in USD but –7.4% in CHF thanks to the USD devaluation. Consolidated full year 2023 data showed a net loss of CHF 207 mn for 2023 compared to a net loss of CHF 358 mn for 2022.

A proposed dividend of CHF 2.00 per share

Changes to the Board of Directors

Dr. Erich Hunziker has informed the Board of Directors that he will not stand for re-election at the upcoming Annual General Meeting and will step down after the AGM. The Board expresses its deepest gratitude for the remarkable leadership, strategic insights, and excellent governance which Dr. Hunziker has brought to BB Biotech. In the 10 years of his Chairmanship the Board increased its diversity, the Investment Management Team successfully entered neuroscience and the whole BB Biotech team was strengthened with data scientists to leverage the potential of artificial intelligence.

Dr. Thomas von Planta, a highly active member of the Board of Directors since 2019, will be proposed to the Annual General Meeting on March 21, 2024 as Dr. Hunziker’s successor as chairman. In addition to many contributions to BB Biotech, Dr. von Planta has profound experience in corporate finance and capital markets and is familiar with the healthcare industry. He is also the chairman of Baloise Holding AG.

Ms. Camilla Soenderby will be proposed as a new Member at the AGM. Ms. Soenderby has held executive roles at leading biopharmaceutical companies in the EU, the US and Asia and is also a board member of F2G (UK/US) and Affibody AB (Sweden), advisor to the private equity group EQT and a member of the Novo Advisory Group.

Portfolio adjustments in the fourth quarter 2023

During the fourth quarter, we exited the portfolio holding Mersana, and made two new investments in Immunocore, an immune oncology company, and Biohaven with activities in immunology and neuroscience. These two new positions plus further investments in Arvinas and Celldex were financed through select profit taking from the successful long-term investments in Vertex, Incyte, Ionis, Neurocrine and Argenx. BB Biotech’s investment levels were steady in 2023, closing the year at 113.4%.

We made two new investments: Immunocore, an immune oncology company, and Biohaven with activities in immunology and neuroscience.

2024: Exciting sector fundamentals and continued M&A activity leading to improved sector performance

During 2023, the US FDA approved 55 new medicines – up from 37 in 2022. This pace is expected to continue – driven by new platform technologies and continued investment in research and clinical development. Innovative biotechnology companies continue to invest substantially more into R&D than SGA, even though more and more biotech firms are commercializing their own products.

We believe that 2024 will include multiple catalysts for the sector and for BB Biotech’s portfolio companies, including product launches, important clinical trial results, licensing deals and M&A activity.

Many clinical trial read-outs are eagerly anticipated from portfolio companies in 2024. The focus will be on Vertex VTX-548 pain program, Alnylam’s vutrisiran for patients with transthyretin-mediated amyloidosis with cardiomyopathy, Ionis’ donidalorsen for hereditary angioedema and Intra-Cellular’s Caplyta data in major depression disease. Many proof of concept studies are also due, including for Revolution Medicines’ RMC-6236, for Relay’s RLY-2608 and Macrogenics’ B7H3 ADC vobramitamab duocarmazine. Argenx will report on proof of concept data for primary Sjogren’s syndrome for efgartigimod and Agios will report on transfusion dependent thalassemia patients for its PK activator mitapivat.

We expect multiple product approvals and label expansions to drive future revenue and profit opportunities:

• Incyte with axatilimab for chronic graft versus host disease
• Ionis with olezarsen for patients with familial chylomicronemia syndrome
• Moderna with its RSV vaccine mRNA-1345
• Argenx with efgartigimod for patients with chronic inflammatory demyelinating polyneuropathy
• Crispr and Vertex with Casgevy for beta thalassemia patients

Capital markets appear to have opened up in the last months of 2023, mainly geared towards the large-cap biopharma sector. In contrast to the broad investor base favoring large caps, many of them continue to bolster their pipeline and technology access by acquiring smaller to mid-cap companies. The recently accelerated take-over activity combined with an improved capital market allowing companies to raise working capital again, supports both the sector but as well our view that valuations are highly attractive and the innovation power to reside in the smaller and mid-cap segment.

We continue to seek attractive investments – applying ever more stringent methodologies including big, wide, and deep data and AI to support the diligence processes. We continue to hold a strong conviction that fundamental progress in biosciences and commercialization of superior new drugs from biotechnology will yield attractive investment returns.

We thank you for the trust you have placed in the Company.

The Board of Directors of BB Biotech AG