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Selected explanatory notes to the consolidated interim 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, 2020. 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. No new standards, interpretations and amendments to published standards, which are applicable to the Group and valid since January 1, 2021, have been applied in these condensed consolidated interim financial statements.

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, 2022) – Classification of Liabilities as Current or Non-current
  • 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 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

 

30.09.2021

 

31.12.2020

USD

 

0.93170

 

0.88520

ANG

 

0.52343

 

0.49730

EUR

 

1.07845

 

1.08134

GBP

 

1.25530

 

1.21000

Fair values

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

30.09.2021

 

Level 1

 

Level 2

 

Level 3

 

Total

Assets

 

 

 

 

 

 

 

 

Securities

 

 

 

 

 

 

 

 

– Shares

 

4 090 835

 

 

 

4 090 835

– Derivative instruments

 

 

 

2 268

 

2 268

Total assets

 

4 090 835

 

 

2 268

 

4 093 103

 

 

 

 

 

 

 

 

 

31.12.2020

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Securities

 

 

 

 

 

 

 

 

– Shares

 

3 952 504

 

 

 

3 952 504

– Derivative instruments

 

 

 

2 155

 

2 155

Total assets

 

3 952 504

 

 

2 155

 

3 954 659

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

 

 

01.01.–30.09.2021

 

01.01.–30.09.2020

Opening balance

 

2 155

 

2 355

Purchases/Sales/Reclassification

 

 

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

 

113

 

(113)

Closing balance

 

2 268

 

2 242

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

 

113

 

(113)

The level 3 instrument was allocated as part of a corporate action in 2019. 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 31.12.2020

 

Change

 

Number 30.09.2021

 

Market price in original currency 30.09.2021

 

Valuation CHF mn 30.09.2021

 

Valuation CHF mn 31.12.2020

Moderna

 

2 854 963

 

(1 176 614)

 

1 678 349

 

USD

 

384.86

 

601.8

 

264.0

Ionis Pharmaceuticals

 

8 220 000

 

892 973

 

9 112 973

 

USD

 

33.54

 

284.8

 

411.4

Argenx SE

 

921 332

 

34 206

 

955 538

 

USD

 

302.00

 

268.9

 

239.8

Neurocrine Biosciences

 

3 035 000

 

(119 600)

 

2 915 400

 

USD

 

95.91

 

260.5

 

257.5

Alnylam Pharmaceuticals

 

1 155 000

 

(45 000)

 

1 110 000

 

USD

 

188.81

 

195.3

 

132.9

Incyte

 

2 900 000

 

(3 000)

 

2 897 000

 

USD

 

68.78

 

185.6

 

223.3

Agios Pharmaceuticals

 

4 158 902

 

146 090

 

4 304 992

 

USD

 

46.15

 

185.1

 

159.5

Vertex Pharmaceuticals

 

900 000

 

150 000

 

1 050 000

 

USD

 

181.39

 

177.5

 

188.3

Fate Therapeutics

 

2 030 000

 

1 156 336

 

3 186 336

 

USD

 

59.27

 

176.0

 

163.4

Arvinas

 

2 176 903

 

 

2 176 903

 

USD

 

82.18

 

166.7

 

163.7

Macrogenics

 

4 815 564

 

2 260 000

 

7 075 564

 

USD

 

20.94

 

138.0

 

97.4

Biogen

 

537 000

 

(37 000)

 

500 000

 

USD

 

282.99

 

131.8

 

116.4

Sage Therapeutics

 

1 540 104

 

1 630 000

 

3 170 104

 

USD

 

44.31

 

130.9

 

117.9

Intra-Cellular Therapies

 

3 538 419

 

125 000

 

3 663 419

 

USD

 

37.28

 

127.2

 

99.6

Myovant Sciences

 

4 757 039

 

965 000

 

5 722 039

 

USD

 

22.44

 

119.6

 

116.3

Relay Therapeutics

 

1 409 357

 

2 326 605

 

3 735 962

 

USD

 

31.53

 

109.7

 

51.8

Crispr Therapeutics

 

900 884

 

48 700

 

949 584

 

USD

 

111.93

 

99.0

 

122.1

Radius Health

 

7 455 714

 

250 000

 

7 705 714

 

USD

 

12.41

 

89.1

 

117.9

Revolution Medicines

 

 

3 410 105

 

3 410 105

 

USD

 

27.51

 

87.4

 

Scholar Rock Holding

 

2 255 651

 

19 474

 

2 275 125

 

USD

 

33.02

 

70.0

 

96.9

Molecular Templates

 

6 380 331

 

4 411 672

 

10 792 003

 

USD

 

6.71

 

67.5

 

53.0

Generation Bio Co.

 

2 333 180

 

120 000

 

2 453 180

 

USD

 

25.07

 

57.3

 

58.6

Exelixis

 

2 835 000

 

 

2 835 000

 

USD

 

21.14

 

55.8

 

50.4

Esperion Therapeutics

 

3 947 964

 

530 000

 

4 477 964

 

USD

 

12.05

 

50.3

 

90.9

Beam Therapeutics

 

396 821

 

210 000

 

606 821

 

USD

 

87.01

 

49.2

 

28.7

Nektar Therapeutics

 

2 620 676

 

 

2 620 676

 

USD

 

17.96

 

43.9

 

39.4

Essa Pharma

 

 

5 015 814

 

5 015 814

 

USD

 

8.00

 

37.4

 

Kezar Life Sciences

 

4 533 148

 

 

4 533 148

 

USD

 

8.64

 

36.5

 

20.9

Mersana Therapeutics

 

1 885 000

 

2 250 000

 

4 135 000

 

USD

 

9.43

 

36.3

 

44.4

Black Diamond Therapeutics

 

1 390 000

 

2 050 000

 

3 440 000

 

USD

 

8.46

 

27.1

 

39.4

Homology Medicines

 

1 737 122

 

 

1 737 122

 

USD

 

7.87

 

12.7

 

17.4

Wave Life Sciences

 

2 602 858

 

 

2 602 858

 

USD

 

4.90

 

11.9

 

18.1

Alexion Pharmaceuticals

 

1 294 428

 

(1 294 428)

 

 

USD

 

n.a

 

 

179.0

Halozyme Therapeutics

 

3 970 000

 

(3 970 000)

 

 

USD

 

n.a

 

 

150.1

Voyager Therapeutics

 

2 680 283

 

(2 680 283)

 

 

USD

 

n.a

 

 

17.0

Cidara Therapeutics

 

2 822 495

 

(2 822 495)

 

 

USD

 

n.a

 

 

5.0

Total shares

 

 

 

 

 

 

 

 

 

 

 

4 090.8

 

3 952.5

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Alder Biopharmaceuticals – Contingent Value Right

 

2 766 008

 

 

2 766 008

 

USD

 

0.88

 

2.3

 

2.2

Bristol-Myers Squibb – Contingent Value Right

 

800 000

 

(800 000)

 

 

USD

 

n.a

 

 

Total derivative instruments

 

 

 

 

 

 

 

 

 

 

 

2.3

 

2.2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total securities

 

 

 

 

 

 

 

 

 

 

 

4 093.1

 

3 954.7

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 01.01.2020 at fair values

 

3 518 985

 

 

4 685

 

3 523 670

Purchases

 

699 570

 

 

 

699 570

Sales

 

(1 010 092)

 

 

 

(1 010 092)

Net gains/(losses) from securities

 

744 042

 

 

(2 531)

 

741 511

Realized gains

 

364 618

 

 

 

364 618

Realized losses

 

(83 963)

 

 

 

(83 963)

Unrealized gains

 

882 536

 

 

 

882 536

Unrealized losses

 

(419 149)

 

 

(2 531)

 

(421 680)

Closing balance as at 31.12.2020 at fair values

 

3 952 504

 

 

2 155

 

3 954 659

 

 

 

 

 

 

 

 

 

Opening balance as at 01.01.2021 at fair values

 

3 952 504

 

 

2 155

 

3 954 659

Purchases

 

796 287

 

 

 

796 287

Sales

 

(845 013)

 

 

 

(845 013)

Net gains/(losses) from securities

 

187 057

 

 

113

 

187 170

Realized gains

 

271 885

 

 

 

271 885

Realized losses

 

(1 530)

 

 

(2 330)

 

(3 860)

Unrealized gains

 

649 723

 

 

113

 

649 836

Unrealized losses

 

(733 022)

 

 

2 330

 

(730 692)

Closing balance as at 30.09.2021 at fair values

 

4 090 835

 

 

2 268

 

4 093 103

5. Short-term borrowings from banks

5. Short-term borrowings from banks

At September 30, 2021, a CHF 248 mn short-term loan is outstanding with interest payable at 0.40% p.a. (December 31, 2020: CHF 63 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, 2020: 55.4 mn) with a par value of CHF 0.20 each (December 31, 2020: 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, 2021, to September 30, 2021, the Company has purchased 63 360 treasury shares at an average price of CHF 88.73 to the amount of TCHF 5 622 and 117 572 treasury shares at an average price of CHF 82.10 to the amount of TCHF 9 653 were sold (01.01.–30.09.2020: no transactions). As at September 30, 2021, the Company holds 60 450 treasury shares (December 31, 2020: 114 662 shares). The treasury shares as at September 30, 2021, were treated as a deduction from the consolidated shareholders’ equity using cost values of TCHF 5 368 (December 31, 2020: TCHF 8 240).

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. The share buy-back program will run from April 12, 2019, until April 11, 2022, at the latest. Until September 30, 2021, no shares had been repurchased under this share buy-back program. A repurchase would take place via second trading line for the purpose of a subsequent capital reduction.

7. Administrative expenses

7. Administrative expenses

(in CHF 1 000)

Administrative expenses comprise the following:

 

 

01.01.–30.09.2021

 

01.01.–30.09.2020

Asset manager

 

 

 

 

– Management fees (incl. VAT)

 

38 537

 

29 523

Personnel

 

 

 

 

– Board of Directors remuneration

 

998

 

870

– Wages and salaries

 

192

 

210

– Social insurance contributions and duties

 

79

 

87

 

 

39 806

 

30 690

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

(in CHF 1 000)

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

 

01.01.–30.09.2021

 

01.01.–30.09.2020

USA

 

265 839

 

(29 134)

Netherlands

 

22 543

 

83 109

Singapore

 

(6 250)

 

179

Great Britain

 

(15 243)

 

(8 578)

Switzerland

 

(26 513)

 

12 620

Curaçao

 

(41 621)

 

(31 656)

Canada

 

(57 601)

 

 

 

141 154

 

26 540

9. Assets pledged

9. Assets pledged

At September 30, 2021, securities in the amount of CHF 4 093.1 mn (December 31, 2020: CHF 3 954.7 mn) are collateral for a credit line of CHF 700 mn (December 31, 2020: CHF 700 mn). At September 30, 2021, CHF 248 mn short-term loan is outstanding (December 31, 2020: CHF 63 mn).

10. Related party transactions

10. 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 September 30, 2021 and December 31, 2020.

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 September 30, 2021, no proceedings existed which could have any material effect on the financial position of the Group (December 31, 2020: 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 September 30, 2021 and December 31, 2020.

13. Subsequent events

13. Subsequent events

There have been no events subsequent to September 30, 2021, which would affect the condensed consolidated interim financial statements.

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