Shareholder letter

Dear Shareholders

Despite a turbulent start to the year, BB Biotech delivered a resilient second quarter: share price and NAV outpaced the Nasdaq Biotech Index (NBI), and several portfolio companies achieved major milestones. This performance came as the macro economic backdrop stabilized but remained complex. The US Federal Reserve, held policy rates at 4.25% to 4.50%, and cooling inflation spurred expectations for a Q3 rate cut. Risk assets rallied – technology rebounded most – while healthcare lagged under gathering policy clouds.

Drug-pricing uncertainty re-intensified in Washington. Debate over a Most-Favored-Nation (MFN) framework – capping Medicare prices at overseas levels – collided with draft guidance for the second round of Inflation Reduction Act (IRA) negotiations, set to expand the list from ten to roughly fifteen drugs. Proposed pharmaceutical tariffs after April’s Liberation Day address and a softer US dollar in Q2 (USD vs. CHF -10.2%) compounded investor caution. Meanwhile, leadership churn at the FDA further obscured the near‑term regulatory timetable.

Amid these uncertainties, strategic acquirers continue to bid for innovation. In June, Sanofi agreed to buy our new holding Blueprint Medicines for up to USD 9.5 bn, followed in July by Merck’s USD 10 bn offer for Verona Pharma, and back in Q1 by Johnson & Johnson’s USD 14.6 bn purchase of our long‑standing holding Intra‑Cellular Therapies. These deals show that innovative science commands premiums even when sentiment is fragile. Thanks to our investment company structure, we can lean into such valuation dislocations and unlock long-term value through time-arbitrage.

The M&A deals in the first half of the year show that innovative science commands premiums even when sentiment is fragile.

Navigating Q2 2025 performance: from draw-down to catch-up

After a bruising first quarter, Q2 split into two distinct acts: April and May extended the Q1 slide as macro economic angst – plus a weakening US dollar – drove our Net Asset Value (NAV) to year-to-date lows in Swiss francs. June then staged an equally sharp snapback, powered by strong clinical read-outs and Sanofi’s bid for Blueprint Medicines. Sentiment flipped from restraint to cautious optimism, as bad news stopped accelerating, and fundamentals finally had some room to breathe.

• NAV currency impact: An ≈10% slide in the US dollar versus the Swiss franc masked the underlying NAV progress. NAV rose 5.8% in USD – beating the NBI by 5.9 points – but translated into -5.1% in CHF / -2.8% in EUR. Consequently, Q2 reported a net loss of CHF 100 mn, vs. Q2 2024’s CHF ‑87 mn.
• Share price resilience: BB Biotech outperformed the Nasdaq Biotechnology Index (NBI) in Q2 in every currency.
• Discount narrows: Improving sentiment tightened our share-price discount to NAV from 14.1% at end-Q1 to 10.5% at end-Q2.

Solid clinical and regulatory wins across our mid-caps – and the Blueprint Medicines take-out – powered June’s rebound. In contrast, several NBI heavyweights (Regeneron, Amgen, Gilead, AstraZeneca, Sarepta) remained under pressure, explaining much of the benchmark’s drag. With conviction positions intact and ample exposure to US-centric innovation, we believe the portfolio is well positioned for the second half.

With conviction positions intact and ample exposure to US-centric innovation, we believe the portfolio is well positioned for the second half.

Portfolio highlights: innovation driving progress in Q2

Q2 2025 brought a number of important milestones across our portfolio, underscoring our conviction that scientific innovation is the most enduring driver of long-term value creation. Our holdings made meaningful progress on regulatory, commercial, and clinical fronts. Some highlights include:

Regulatory and commercial execution

• Argenx: FDA approval for Vyvgart Hytrulo subcutaneous pre-filled syringe; improves convenience, driving adoption in myasthenia gravis and chronic inflammatory demyelinating polyneuropathy (CIDP).
• Alnylam Pharmaceuticals: European approval of Amvuttra for transthyretin amyloid cardiomyopathy (ATTR‑CM), materially enlarging its addressable market beyond the rarer polyneuropathy form (ATTR‑PN).
• Moderna: FDA cleared next-generation COVID-19 vaccine (mNEXSPIKE) and expanded respiratory syncytial virus (RSV) vaccine (mRESVIA) label, positioning them both for the 2025-26 respiratory-virus season. Separately, Moderna’s influenza vaccine showed ~30% relative efficacy versus a licensed comparator; enables launches of stand‑alone influenza vaccine and influenza/COVID-19 combination in 2026.

Clinical breakthroughs and translational momentum

• Ionis Pharmaceuticals: Donidalorsen reduced the attack rate in hereditary angioedema by 96% over three years, significantly de-risking FDA decision. Olezarsen showed robust triglyceride reduction in Phase II; pivotal Phase III results in severe hypertriglyceridemia expected Q3.
• Vertex Pharmaceuticals: VX-880 stem-cell-derived islet therapy demonstrated durable insulin independence in 10 of 12 patients, underscoring curative potential for type 1 diabetes.
• Revolution Medicines: Zoldonrasib (KRAS-G12D) showed 61% response rate in early clinical data for NSCLC; daraxonrasib (KRAS-Multi) received breakthrough therapy designation for pancreatic cancer, supported by USD 2 bn financing.
• Incyte: Early mutant-CALR antibody data in essential thrombocythaemia showed disease-modifying potential for broader myeloproliferative neoplasms.
• Scholar Rock: Apitegromab preserved lean mass alongside GLP-1 therapy in obesity, confirming muscle-sparing potential with strong safety.
• Rivus Pharmaceuticals: Phase II M-ACCEL met its primary endpoint for reduction of liver fat in metabolically associated steatohepatitis (MASH) and drove fat-selective weight loss via mitochondrial uncoupling while sparing lean mass.
• Edgewise Therapeutics: EDG-7500 improved cardiac biomarkers in hypertrophic cardiomyopathy without competitor safety concerns, though unexpected atrial fibrillation signals require further clarification. The FDA declined Edgewise’s request for accelerated approval in Becker muscular dystrophy for EDG-5506, refocusing investor attention on EDG‑7500’s cardiac program.
• Relay Therapeutics: RLY-2608 (PI3K-α) showed ~11-month median PFS in second-line HR⁺/HER2⁻ breast cancer, enabling the imminent pivotal Phase III start.

Together, these achievements highlight share‑price‑relevant progress across our portfolio and illustrate how our mid‑cap focus converts science into shareholder value.

Sharpening the portfolio: active rotation and strategic focus

Disciplined capital allocation and rotation remains a core component of our strategy, ensuring that we focus the portfolio on companies with the strongest science, clearest value creation pathways, and most attractive risk/reward profiles.

During Q2 2025, two notable portfolio actions illustrated this approach and kept our total number of holdings stable at 23:

• Exit: Esperion Therapeutics. We fully exited our position in Esperion Therapeutics following a reassessment of its outlook. While the company has demonstrated commercial traction in LDL-cholesterol lowering, increasing reimbursement pressures and high capital requirements weakened the overall investment thesis. We redeployed the proceeds from this sale into higher-conviction ideas that better fit our criteria, including stronger balance sheets and more robust long-term upside potential.
• New Investment: Blueprint Medicines. In early Q2, we initiated a position in Blueprint Medicines based on our conviction in its lead asset Ayvakit (for advanced systemic mastocytosis) and its next-generation wild-type KIT inhibitor BLU-808 (targeting conditions like mast cell activation syndrome). Just weeks later, Sanofi announced a USD 9.5 bn bid for Blueprint Medicines – roughly 33% premium to the pre-announcement share price. We will also receive one non-tradeable contingent value right (CVR) entitling us to milestone payments of up to USD 6 per CVR tied to future development and regulatory approval of BLU-808. The speed and scale of this outcome validated our thesis and underscored how differentiated science and strategic relevance can unlock value.
• Deploying cash reserves: We increased positions in Immunocore, Akero Therapeutics, Scholar Rock, and Edgewise Therapeutics, where risk-reward profiles and balance sheets are most compelling, and modestly added to other select positions.

Disciplined capital allocation and rotation remains a core component of our strategy, ensuring that we focus the portfolio on companies with the strongest science, clearest value creation pathways, and most attractive risk/reward profiles.

Portfolio breakdown of BB Biotech as of June 30, 2025

Advancing our strategy: executing with discipline, evolving with insight, deepening shareholder alignment

The second quarter reinforced our belief that sustainable long-term value in biotech comes from a combination of patient conviction, rigorous discipline, and continuous adaptation. BB Biotech’s strategic framework remains grounded in four core principles:

• High-conviction concentration: We maintain a focused portfolio of currently 23 companies that we are looking to build out to the upper end of our 20-35 position range over time, backing the most compelling innovation platforms with meaningful capital. Our investment company structure lets us convert volatility into opportunity: by committing capital on multi-year horizons, we invest with a longer clock than the market – a form of time-arbitrage. Q2’s outperformance – driven by mid-cap names such as Ionis Pharmaceuticals, Akero Therapeutics, Alnylam Pharmaceuticals and Blueprint Medicines – highlights the payoff from holding companies that combine breakthrough science with visible clinical or commercial inflection points.
• Dynamic capital allocation: Our S-curve investment model emphasizes rebalancing toward companies that are transitioning from R&D into commercialization, where valuation upside is often greatest. This quarter we trimmed exposure to certain large caps with more limited upside and exited names where the risk/reward profile deteriorated (as demonstrated by the Esperion Therapeutics exit). Such discipline protects the integrity of the portfolio while keeping us agile in responding to new developments and opportunities.
• Process evolution and agentic AI integration: For years now our in-house data-science team has been quietly laying the digital rails for a new generation of adaptive, agentic-AI tools. Early pilots already absorb millions of scientific, clinical, regulatory and market data points, flagging weak signals and stress-testing investment theses in real time. By automating the heavy analytic lift, these systems increasingly free our investment analysts to focus on judgment and portfolio construction. Initial results are encouraging; the next step is a measured, platform-wide scale-up enabling to sharpen decisions today and surface tomorrow’s opportunities sooner – ultimately compounding value for shareholders over the long term.
• Shareholder focus: In addition to these investment principles, we maintain a clear focus on shareholder alignment. Our dividend policy continues to provide shareholders with predictable income. Just as importantly, we engage directly with investors across all channels to explain our portfolio positioning, our process, and our purpose. To further strengthen this commitment, we are pleased to announce that Rachael Burri will be joining as Head Investor Relations as of August 1. Rachael brings extensive experience in investor relations and corporate communications from the financial services industry, having held senior roles at institutions such as Helvetia and SwissRe. Her appointment reflects our commitment to clear, consistent, and professional shareholder engagement, helping ensure that BB Biotech is well-understood and appropriately valued.

BB Biotech's S-curve model

Outlook: innovation as the catalyst, stability as the foundation

As we look ahead to the second half of 2025, we maintain a posture of constructive realism. The macroeconomic backdrop has stabilized yet remains uneven in its support. Policy rates sit near 4.25% to 4.50%; inflation is moderating, and expectations for easing interest rates – potentially before year‑end – are building.

Capital, however, is still costly, and healthcare policy uncertainty weighs on sentiment. The threat of pharmaceutical tariffs, evolving Most‑Favored‑Nation pricing benchmarks, and the long‑term roll‑out of Medicare negotiations under the Inflation Reduction Act all introduce risks. In parallel, leadership changes at the FDA and other health agencies have blurred regulatory timelines and approval consistency, further testing investor confidence in the sector.

Even in this unsettled landscape, scientific innovation is gaining speed. Our portfolio companies are on pace to deliver nearly a dozen commercial launches this year.

Four key launches remain in the pipeline for the second half:

• Apitegromab (Scholar Rock) – spinal muscular atrophy
• Donidalorsen (Ionis Pharmaceuticals) – hereditary angioedema
• Mitapivat (Agios Pharmaceuticals) – α/β-thalassemia
• Troriluzole (Biohaven) – spinocerebellar ataxia

We also anticipate the following pivotal readouts that could be material inflection points:

• Olezarsen (Ionis Pharmaceuticals) – Phase III data in severe hypertriglyceridemia
• Mitapivat (Agios Pharmaceuticals) – Phase III results in sickle cell disease
• mRNA-1647 (Moderna) – Phase III cytomegalovirus (CMV) vaccine efficacy data

Key clinical proof-of-concept catalysts on deck for H2 2025 include:

• WVE-006 (Wave Life Sciences)– Phase I/II data RNA editing in alpha-1-antitrypsin-deficiency (AATD)
• NBI-’770 (Neurocrine Biosciences) – Phase II results in major depressive disorder
• INCB160058 (Incyte) – Phase I/II data for JAK2 V617F in myeloproliferative neoplasms
• RLY-2608 (Relay Therapeutics) – Phase I/II PI3Kα triplet data in first-line breast cancer

Collectively, these commercial, pivotal, and early-stage milestones illustrate why we stay focused on well-capitalized mid-cap innovators with clear paths to first- or best-in-class market positions. Our concentrated mid-cap portfolio uniquely positions us to capitalize on both valuation dislocations and accelerating innovation cycles.

We remain optimistic; patience is beginning to pay off, and the ability to invest several years out remains scarce capital. After a period of drawdowns and policy turbulence, the opportunity set is clarifying; innovation is accelerating, valuations are compelling, and capital discipline is starting to matter again. Many small- and mid-cap innovators now trade at – or even below – their net cash, a dislocation last seen after the dotcom bust. At the same time, we are integrating a once-in-a-generation transformation into our process: agentic AI augmenting judgment, sharpening insight, and deepening analytical rigor. Building on our data-science foundation, we will steadily expand our capabilities and computational reach in the months and years ahead, bringing these systems fully online and scaling their impact across the platform. This evolving human-machine partnership is already refining decisions and helping us navigate increasingly complex landscapes.

As this transformation deepens, we believe the convergence of breakthrough science, intelligent infrastructure and disciplined time-arbitrage equip BB Biotech with a renewed edge in pursuing long-term value creation. We move forward with confidence – guided by conviction, powered by patience, enhanced by technology, and rooted in purpose.

Thank you for your continued trust and partnership.

The Board of Directors of BB Biotech AG