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TWST: Can we begin with a brief historical sketch and overview of BB BIOTECH (Xetra: 888509.DE)?

Mr. Müller: We are actually an investment company and not a fund as many people think. BB BIOTECH was founded in 1993 and invests in promising companies in the interesting growth sector of the biotech industry. We hold stake in companies that have an excellent management, a solid science and technology base and a healthy financial structure. We are traded on the Swiss Stock Exchange, the Prime Standard in Germany and the Nuovo Mercato in Italy and are the biggest biotech investor in Europe. The great majority of our companies are already listed -- just around 4% of the money is allocated in private equity. Our strategy is to focus on 4 to 6 core holdings that make up around 75% of the portfolio and 15 to 25 smaller positions. And so, we prefer to make bets on a few companies and not like mutual fund that are invested in more than 70 different companies.

TWST: What are the benefits of that investment strategy, i.e. focusing on a narrow selection of biotechs?

Mr. Müller: First, all the specialists working at BB Biotech have a scientific background. They have either medical doctorates or Ph.D’s in biochemistry, molecular biology and so on, or they have some experience already in pharmaceutical or biotech companies and therefore know how to analyze all those pre-stage products. Let’s say, if you already have phase two or three data on a product, while it is still difficult, it is easier to analyze those studies and foresee the potential. However, if we invest in very early stage companies its too difficult to see if that product is going to make it in ten years or not. So we prefer to bring more shareholder value by investing in companies that are more mature and have either a product launched in the market or a product in phase two or three of clinical development.

TWST: Can you give us a quick snapshot of your core positions in the portfolio?

Mr. Müller: Yes, the core positions are Amgen, IDEC Pharmaceuticals and MedImmune that make up around 50% of the whole portfolio. Mainly last year when the biotech sector came under, we started to focus more in companies that are profitable and already have products on the market. Investors start to be more selective in those days and profitable companies have a higher visibility on turnover and EPS. That’s why Amgen, for example, and other profitable biotech companies benefited more from the rebound we saw in the Q3 and Q4 last year.

TWST: How have these issues in the biotech space affected BB Biotech’s performance? If one were to benchmark against other biotech funds or indexes, how do you shape up?

Mr. Müller: Of course we were also affected, the same way as we were affected in the boom years. But when we started in 1993 we didn’t actually have a benchmark since there was almost no other biotech fund. The majority of the pure biotech funds were incepted during the boom years so a comparison is only practical since 1998. We can say that we are proud of our performance, as we are always among the best three – out of thirty- in all time horizons. There are also two indexes we can take as comparison; the AMEX Biotech index and the NASDAQ Biotech index. We outperformed both since the inception of BB Biotech in 1993, the AMEX biotech by 50% and the NASDAQ Biotech by 75%.

TWST: What are the summary points you would like to leave investors with?

Mr. Müller: Biotech is still an excellent sector to invest in. Even if the last two years didn’t reflect this promising outlook, we are confident that the biotech sector has reached a healthy valuation and can start growing again. Compared with other tech sectors, biotech is launching new products and has plenty of innovative products ready to be approved. BB Biotech offers an excellent way to participate in this growth. Due to weak market conditions the shares of BB Biotech are being traded at a discount of around 20%, which means that you profit twice; from the discount that should close as soon as the markets start to turn and from the positive development of the biotech sector.