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Financial Report Selected explanatory notes to the consolidated interim financial statements

Notes to the consolidated financial statements

1. The Company and its principal activity

1. The Company and its principal activity

BB Biotech AG (the Company) is listed on the SIX Swiss Exchange, in the «Prime Standard Segment» of the German Exchange as well as in the «Star Segment» of the Italian Exchange and has its registered office in Schaffhausen, Schwertstrasse 6. Its principal activity is to invest in companies active in the biotechnology industry for the purpose of capital appreciation. The investments are held through its wholly owned subsidiaries.

Company

 

Capital in CHF 1 000

 

Capital and voting interest in %

Biotech Focus N.V., Curaçao

 

11

 

100

Biotech Growth N.V., Curaçao

 

11

 

100

Biotech Invest N.V., Curaçao

 

11

 

100

Biotech Target N.V., Curaçao

 

11

 

100

2. Accounting policies

2. Accounting policies

The condensed consolidated interim financial statements of the Company and its subsidiary companies (the Group) have been prepared in accordance with International Accounting Standards (IAS) 34 «Interim Financial Reporting,» as well as the provisions of the rules of the SIX Swiss Exchange for Investment Companies and should be read in conjunction with the consolidated annual financial statements for the year ended December 31, 2021. The preparation of the condensed consolidated interim financial statements requires management to make assumptions and estimates that have an impact on the balance sheet values and items of the statement of comprehensive income in the current financial period. In certain circumstances, the actual values may diverge from these estimates.

The condensed consolidated interim financial statements have been prepared in accordance with the accounting policies set out in the consolidated annual financial statements.

The following amended standards, valid since January 1, 2022, have been applied in these condensed consolidated interim financial statements:

  • IFRS 3 (amended, effective January 1, 2022) – Reference to the Conceptual Framework
  • IAS 37 (amended, effective January 1, 2022) – Onerous Contracts – Cost of fulfilling a Contract
  • Annual Improvements to IFRS Standards 2018-2020 (effective January 1, 2022) – IFRS 9, IFRS 16

The Group assessed the impact of the above-mentioned amended standards. Based on the analysis, the Group concluded that these amended standards have no material impact on the Group’s accounting policies and overall results and financial position.

The following amended standards were approved, but will only be applicable for the Group prospectively and were not early adopted in these condensed consolidated interim financial statements:

  • IAS 1 (amended, effective January 1, 2023) – Classification of Liabilities as Current or Non-current
  • IAS 1 (amended, effective January 1, 2023) – Disclosure of Accounting Policies
  • IAS 12 (amended, effective January 1, 2023) – Deferred Tax related to Assets and Liabilities arising from a Single Transaction

The Group assessed the potential impact of the above-mentioned amended standards. Based on the analysis, the Group concludes that these amended standards have no material impact on the Group’s accounting policies and overall results and financial position.

3. Financial risk management

3. Financial risk management

Currency risk

The Group holds assets denominated in currencies other than the Swiss franc, the functional currency. It is therefore exposed to currency risk, as the value of the securities denominated in other currencies will fluctuate due to changes in exchange rates. Depending on the market situation the Group could use foreign currency options and/or forward contracts to reduce the currency risk.

The following exchange rates have been used for the preparation of these condensed consolidated interim financial statements:

Currency

 

31.03.2022

 

31.12.2021

USD

 

0.92250

 

0.91290

ANG

 

0.51826

 

0.51287

EUR

 

1.02112

 

1.03740

GBP

 

1.21260

 

1.23390

Fair Values

The following table presents the Group’s assets that are measured at fair value (in CHF 1 000):

31.03.2022

 

Level 1

 

Level 2

 

Level 3

 

Total

Assets

 

 

 

 

 

 

 

 

Securities

 

 

 

 

 

 

 

 

– Shares

 

3 118 719

 

 

 

3 118 719

– Derivative instruments

 

 

 

 

Total assets

 

3 118 719

 

 

 

3 118 719

 

 

 

 

 

 

 

 

 

31.12.2021

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Securities

 

 

 

 

 

 

 

 

– Shares

 

3 638 890

 

 

 

3 638 890

– Derivative instruments

 

 

 

2 222

 

2 222

Total assets

 

3 638 890

 

 

2 222

 

3 641 112

The table below summarizes the transactions in level 3 instruments (in CHF 1 000):

 

 

01.01.–31.03.2022

 

01.01.–31.03.2021

Opening balance

 

2 222

 

2 155

Purchases/(Sales)/Reclassification

 

(5 071)

 

Gains/(losses) included in net gain/loss from securities

 

2 849

 

142

Closing balance

 

 

2 297

Gains/(losses) on level 3 instruments included in net gain/loss from securities

 

2 849

 

142

The level 3 instrument was allocated as part of a corporate action in 2019 and sold in March 2022. There were no transfers between level 1, 2 and 3 during the reporting period.

For assets and liabilities carried at amortised cost, their carrying values are a reasonable approximation of fair value.

4. Financial assets

4. Financial assets

Securities

Securities comprise the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Company

 

Number 31.12.2021

 

Change

 

Number 31.03.2022

 

Market price in original currency 31.03.2022

 

Valuation CHF mn 31.03.2022

 

Valuation CHF mn 31.12.2021

Ionis Pharmaceuticals

 

10 232 973

 

(500 000)

 

9 732 973

 

USD

 

37.04

 

332.6

 

284.3

Argenx SE

 

970 538

 

(50 000)

 

920 538

 

USD

 

315.31

 

267.8

 

310.3

Moderna

 

1 663 349

 

(80 000)

 

1 583 349

 

USD

 

172.26

 

251.6

 

385.7

Neurocrine Biosciences

 

3 015 400

 

(150 000)

 

2 865 400

 

USD

 

93.75

 

247.8

 

234.5

Vertex Pharmaceuticals

 

1 030 000

 

(50 000)

 

980 000

 

USD

 

260.97

 

235.9

 

206.5

Incyte

 

2 897 000

 

(141 000)

 

2 756 000

 

USD

 

79.42

 

201.9

 

194.1

Intra-Cellular Therapies

 

3 538 419

 

(180 000)

 

3 358 419

 

USD

 

61.19

 

189.6

 

169.1

Alnylam Pharmaceuticals

 

1 110 000

 

(60 000)

 

1 050 000

 

USD

 

163.29

 

158.2

 

171.8

Arvinas

 

2 176 903

 

(70 000)

 

2 106 903

 

USD

 

67.30

 

130.8

 

163.2

Fate Therapeutics

 

3 701 336

 

(190 000)

 

3 511 336

 

USD

 

38.77

 

125.6

 

197.7

Agios Pharmaceuticals

 

4 312 292

 

(220 000)

 

4 092 292

 

USD

 

29.11

 

109.9

 

129.4

Relay Therapeutics

 

4 085 962

 

(200 000)

 

3 885 962

 

USD

 

29.93

 

107.3

 

114.6

Sage Therapeutics

 

3 170 104

 

(160 000)

 

3 010 104

 

USD

 

33.10

 

91.9

 

123.1

Revolution Medicines

 

3 421 462

 

(170 000)

 

3 251 462

 

USD

 

25.51

 

76.5

 

78.6

Kezar Life Sciences

 

4 918 148

 

(250 000)

 

4 668 148

 

USD

 

16.62

 

71.6

 

75.1

Myovant Sciences

 

6 122 039

 

(310 000)

 

5 812 039

 

USD

 

13.32

 

71.4

 

87.0

Radius Health

 

7 705 714

 

550 000

 

8 255 714

 

USD

 

8.83

 

67.2

 

48.7

Macrogenics

 

7 275 564

 

 

7 275 564

 

USD

 

8.81

 

59.1

 

106.6

Exelixis

 

2 835 000

 

(140 000)

 

2 695 000

 

USD

 

22.67

 

56.4

 

47.3

Crispr Therapeutics

 

949 584

 

(47 479)

 

902 105

 

USD

 

62.77

 

52.2

 

65.7

Molecular Templates

 

10 792 003

 

200 000

 

10 992 003

 

USD

 

3.45

 

35.0

 

38.6

Beam Therapeutics

 

606 821

 

(30 000)

 

576 821

 

USD

 

57.30

 

30.5

 

44.1

Essa Pharma

 

5 015 814

 

 

5 015 814

 

USD

 

6.18

 

28.6

 

65.0

Scholar Rock Holding

 

2 275 125

 

(110 000)

 

2 165 125

 

USD

 

12.89

 

25.7

 

51.6

Generation Bio Co.

 

3 853 180

 

(190 000)

 

3 663 180

 

USD

 

7.34

 

24.8

 

24.9

Esperion Therapeutics

 

4 477 964

 

(220 000)

 

4 257 964

 

USD

 

4.64

 

18.2

 

20.4

Nektar Therapeutics

 

2 620 676

 

340 000

 

2 960 676

 

USD

 

5.39

 

14.7

 

32.3

Mersana Therapeutics

 

4 135 000

 

(210 000)

 

3 925 000

 

USD

 

3.99

 

14.4

 

23.5

Wave Life Sciences

 

4 602 858

 

(40 000)

 

4 562 858

 

USD

 

2.00

 

8.4

 

13.2

Black Diamond Therapeutics

 

3 440 000

 

(170 000)

 

3 270 000

 

USD

 

2.77

 

8.4

 

16.7

Homology Medicines

 

1 737 122

 

(90 000)

 

1 647 122

 

USD

 

3.04

 

4.6

 

5.8

Biogen

 

500 000

 

(500 000)

 

 

USD

 

n.a.

 

 

109.5

Total shares

 

 

 

 

 

 

 

 

 

 

 

3 118.7

 

3 638.9

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alder Biopharmaceuticals – Contingent Value Right

 

2 766 008

 

(2 766 008)

 

 

USD

 

n.a.

 

 

2.2

Total derivative instruments

 

 

 

 

 

 

 

 

 

 

 

 

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total securities

 

 

 

 

 

 

 

 

 

 

 

3 118.7

 

3 641.1

The changes in value of securities at fair value through profit or loss by investment category are as follows (in CHF 1 000):

 

 

Listed shares

 

Unlisted shares

 

Derivative instruments

 

Total

Opening balance as at 01.01.2021 at fair values

 

3 952 504

 

 

2 155

 

3 954 659

Purchases

 

955 515

 

 

 

955 515

Sales

 

(925 467)

 

 

 

(925 467)

Net gains/(losses) from securities

 

(343 662)

 

 

67

 

(343 595)

Realized gains

 

312 779

 

 

 

312 779

Realized losses

 

(1 831)

 

 

(2 330)

 

(4 161)

Unrealized gains

 

437 584

 

 

67

 

437 651

Unrealized losses

 

(1 092 194)

 

 

2 330

 

(1 089 864)

Closing balance as at 31.12.2021 at fair values

 

3 638 890

 

 

2 222

 

3 641 112

 

 

 

 

 

 

 

 

 

Opening balance as at 01.01.2022 at fair values

 

3 638 890

 

 

2 222

 

3 641 112

Purchases

 

12 916

 

 

 

12 916

Sales

 

(241 832)

 

 

(5 071)

 

(246 903)

Net gains/(losses) from securities

 

(291 256)

 

 

2 849

 

(288 406)

Realized gains

 

1 265

 

 

2 849

 

4 115

Realized losses

 

(32 811)

 

 

 

(32 811)

Unrealized gains

 

203 053

 

 

 

203 053

Unrealized losses

 

(462 763)

 

 

 

(462 763)

Closing balance as at 31.03.2022 at fair values

 

3 118 719

 

 

 

3 118 719

5. Short-term borrowings from banks

5. Short-term borrowings from banks

At March 31, 2022, a CHF 355 mn short-term loan is outstanding with interest payable at 0.40% p.a. (December 31, 2021: CHF 355 mn at 0.40% p.a.).

6. Shareholders’ equity

6. Shareholders’ equity

The share capital of the Company consists of 55.4 mn fully paid registered shares (December 31, 2021: 55.4 mn) with a par value of CHF 0.20 each (December 31, 2021: CHF 0.20).

Treasury shares

The Company can buy and sell treasury shares in accordance with the Company’s articles of association and Swiss company law and in compliance with the listing rules of the SIX Swiss Exchange. During the period from January 1, 2022, to March 31, 2022, the Company has purchased 164 834 treasury shares at an average price of CHF 63.77 to the amount of TCHF 10 511 and the Company has not sold any treasury shares (01.01.–31.03.2021: no purchases; Sales of 114 662 treasury shares to the amount of TCHF 9 398). As at March 31, 2022, the Company holds 272 260 treasury shares (December 31, 2021: 107 426 shares). The treasury shares as at March 31, 2022, were treated as a deduction from the consolidated shareholders’ equity using cost values of TCHF 19 716 (December 31, 2021: TCHF 9 205).

Share buyback 2nd line (bought for cancellation)

The Board of Directors has approved the repurchase of a maximum of 5 540 000 own registered shares with a nominal value of CHF 0.20 each. Until the end of the program, at April 11, 2022, no shares had been repurchased under this share buy-back program.

The Board of Directors has approved the repurchase of a maximum of 5 540 000 own registered shares with a nominal value of CHF 0.20 each. The share buy-back program will run from April 13, 2022 until April 11, 2025 at the latest. The repurchase will take place via second trading line for the purpose of a subsequent capital reduction.

7. Administrative expenses

7. Administrative expenses

Administrative expenses comprise the following:

in CHF 1 000

 

01.01.–31.03.2022

 

01.01.–31.03.2021

Investment manager

 

 

 

 

– Management fees (incl. VAT)

 

10 093

 

12 658

Personnel

 

 

 

 

– Board of Directors remuneration

 

290

 

353

– Wages and salaries

 

61

 

47

– Social insurance contributions and duties

 

41

 

20

 

 

10 485

 

13 078

The remuneration model of BB Biotech AG is determined by the Board of Directors.

Since 2014 the remuneration paid to the investment manager is based upon a 1.1% p.a. all-in fee on the average market capitalization without any additional fixed or performance-based elements of compensation. The compensation of the Board of Directors consists since 2014 of a fixed compensation.

8. Segment reporting

8. Segment reporting

The sole operating segment of the Group reflects the internal management structure and is evaluated on an overall basis. Revenue is derived by investing in a portfolio of companies active in the biotechnology industry for the purpose of capital appreciation. The following results correspond to the sole operating segment of investing in companies active in the biotechnology industry.

The geographical analysis of the profit/(loss) before tax is as follows – all income from financial assets are attributed to a country based on the domiciliation of the issuer of the instrument.

Profit/(loss) before tax in CHF 1 000

 

01.01.–31.03.2022

 

01.01.–31.03.2021

Singapore

 

(4 818)

 

(4 354)

Curaçao

 

(10 773)

 

(13 374)

Switzerland

 

(11 245)

 

(13 628)

Great Britain

 

(11 825)

 

(24 311)

Netherlands

 

(29 947)

 

1 456

Canada

 

(36 425)

 

8 942

USA

 

(194 809)

 

266 236

 

 

(299 842)

 

220 967

9. Assets pledged

9. Assets pledged

At March 31, 2022, securities in the amount of CHF 3 118.7 mn (December 31, 2021: CHF 3 641.1 mn) are collateral for a credit line of CHF 700 mn (December 31, 2021: CHF 700 mn). At March 31, 2022, a CHF 355 mn short-term loan is outstanding (December 31, 2021: CHF 355 mn).

10. Transactions with the Investment Manager and related party transactions

10. Transactions with the Investment Manager and related party transactions

Detailed information regarding the remuneration model for the Board of Directors and the investment manager are mentioned under note «7. Administrative expenses».

11. Commitments, contingencies and other off-balance sheet transactions

11. Commitments, contingencies and other off-balance sheet transactions

The Group had no commitments or other off-balance sheet transactions open at March 31, 2022 and December 31, 2021.

The operations of the Group are affected by legislative, fiscal and regulatory developments for which provisions are made where deemed necessary. The Board of Directors concludes that as at March 31, 2022, no proceedings existed which could have any material effect on the financial position of the Group (December 31, 2021: none).

12. Significant shareholders

12. Significant shareholders

The Board of Directors is not aware of any major shareholder with a holding exceeding 3% of all votes as at March 31, 2022 and December 31, 2021.

13. Subsequent events

13. Subsequent events

There have been no events subsequent to March 31, 2022, which would affect the condensed consolidated interim financial statements.

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