Biotech Trusts Trade at Discount

Biotech investment trusts are trading at a discount relative to other markets and their history, despite a positive outlook for the sector

Karen Kwok 26 May, 2017 | 9:48AM
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It seems a rising tide does not lift all boats; the S&P 500 has risen 11% following President Donald Trump’s victory last November, but the NASDAQ Biotechnology index is up just 2%.

Mega-cap global biotech companies are trading at a significant discount to the major US pharmaceutical stocks and the S&P 500, according to a report by Stifel. This is reflected in the closed-end funds in the sector too; the Silver Rated Biotech Growth (BIOG) is trading at 7.6% discount, the lowest level of valuation since 2011, while International Biotech (IBT) is trading at 6.4% discount.

Megacap global biotech companies are trading at price to earnings multiples of 13 times, US pharma stocks are trading at 17 times and the S&P 500 is at 25 times. “It is rare for a sector with higher forecast growth rates to trade at a discount to the wider US market,” added Anthony Stern with Stifel.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Biotech Growth Ord1,168.00 GBX0.00Rating
International Biotechnology Ord716.00 GBX-1.51Rating

About Author

Karen Kwok

Karen Kwok  is a Reporter for