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BB Medtech AG (SWF:MED) Corporate news announcement processed and transmitted by Hugin AS. The issuer is solely responsible for the content of this announcement. ---------------------------------------------------------------------- --------------
The third quarter of 2008 was, as in the preceding months, marked by severe turbulence on international financial markets. The Swiss Market Index (SMI) retreated -4.4% in the third quarter, the German Stock Index (DAX) suffered an even greater loss of -9.2%. BB MEDTECH shares also closed the quarter with a negative performance, declining by -5.0%. However, the Net Asset Value of BB MEDTECH was stable (+0.4%) and thus held up better than the total market over the quarter. During the first nine months of the year the Net Asset Value per share receded by -22.6% (adjusted for dividends) to CHF 59.67. BB MEDTECH's share price fell by -29.1% (adjusted for dividends) to CHF 52.00 during the same period while the SMI retreated by -21.6% and the DAX -27.7%. Financial market turmoil caused the discount between the share price and NAV to widen from 5% to 13%. We will continue to buy back shares to limit this discount. Shareholders' equity (excluding treasury shares) amounted to CHF 703 mn as at September 30, 2008. The Deutsche Börse informed us that our stock is no longer included in the TecDax Index as at September 22 due to low local trading volumes. It appears to have become generally more difficult for foreign stocks to be listed there.
Within the scope of the constant refinement of BB MEDTECH's investment strategy, the Board of Directors has redefined the company's strategic cornerstones. It is our intention to be an active, long-term investor in one to three companies and to work together with their top management to achieve a significant increase in value. We were quite successful doing so in the past, as the example of Nobel Biocare shows, and are convinced that we can repeat this success story going forward. The relevant medtech expertise of BB MEDTECH's Board of Directors and management team as well as our extensive network in the industry are key aspects of our investment strategy. At the present time we are evaluating several investment candidates in this area. This segment of the portfolio comprising participations in which BB MEDTECH plays an active role will account for up to but not more than half of shareholders' equity. An additional 10 to 15 participations in mid-sized companies positioned in highly attractive segments of the medical technology market will be taken to optimize the port-folio structure. The geographic focus will remain on Europe and North America and may be augmented with individual participations in Asia. Thorough fundamental company analyses and close contact with the management of our portfolio companies on a regular basis remains the core element of our long-term investment strategy. With this approach we expect to significantly outperform the broader market. Temporary share price fluctuations must be expected as a consequence of high return expectations and the concentrated portfolio structure.
We continued to realign and further diversify the BB MEDTECH portfolio during the third quarter in accordance with this strategy. Major changes were the reduction in our Sonova participation and the re-investment of these proceeds in new participations, which included Mindray (5% of shareholders' equity), our first investment in a Chinese company, and Illumina (5%), an American company that enhances our portfolio focus on molecular diagnostics. The weighting in Sonova was significantly reduced to 4% of shareholders' equity (13% as at June 30, 2008). Detailed analysis of the global hearing instrument market and the major players in this market compelled us to take a cautious stance regarding the short and mid-term outlook and we accordingly reduced our exposure. Our core holding Qiagen performed well in the third quarter (+8.2% in EUR), prompting us to realize some of the gains. Our position in Fresenius (14%), another core holding, was increased somewhat while Tecan (11%) was slightly reduced. We took advantage of volatility in Nobel Biocare and reduced our position to 6% of shareholders' equity during periods of strength. The participation in Galenica was reduced to 2% after its good performance in the wake of the half-year results and also because of the possibility that a com-petitor's product would obtain regulatory approval. Masimo's very pleasing performance prompted us to take some profits, reducing this participation to 1% of shareholders' equity.
The new participations Mindray and Illumina are fast-growing companies with a convincing product portfolio, a good market position and strong management. Mindray, domiciled in China and listed on the New York Stock Exchange, develops and markets medical technology devices in the market segments of patient monitoring and life support products, medical imaging systems and in-vitro diagnostic products. In its domestic market Mindray is one of the market leaders and growing rapidly, driven by government spending on China's healthcare system as well as the company's short innovation cycles and constant efforts to expand its product portfolio. Mindray's increasing internationalization, supported by the recent acquisition of the patient monitoring business of Datascope in the US, creates additional growth potential. California-based Illumina is the market leader in biological chip systems for gene expression analysis and genotyping. Furthermore, the acquisition of Solexa last year established Illumina as market leader in next-generation DNA sequencing systems. In ad-dition to the applications based on these innovative technologies in the research market, Illumina is also positioned in the highly promising market of molecular diagnostics. Thanks to its outstanding technological position, Illumina serves as an ideal partner for rapidly developing biomarker companies and thus stands to also benefit from this segment's fast growth.
As at September 30, 78% of BB MEDTECH's assets were invested. The high cash allocation is attributable to the ongoing portfolio realignment as well as the uncertainty and volatility of today's market environment. As already mentioned in our previous letter to shareholders, we are confident that the current weakness on stock markets also offers opportunities to selectively expand our portfolio in the coming months in accordance with our investment strategy and thereby generate substantial value added for our shareholders. Despite the negative year-to-date performance BB MEDTECH's share price has still increased by +163% from the beginning of 2000 to the end of September 2008 (incl. dividend payouts).
The composition of BB MEDTECH's portfolio as at September 30, 2008 is the following (in % of equity):
SWAP agreement on treasury shares 0.1% Put option Nobel Biocare (short) (0.4%) Put option Nobel Biocare (short) (0.3%) Call option Nobel Biocare (short) (0.0%) Call option Nobel Biocare (short) (0.0%)
Total securities CHF 548.2 mn 78.0%
Liquid funds (net) CHF 226.5 mn 32.2% Other assets CHF 11.5 mn 1.6% Other payables CHF (83.3) mn (11.9%)
Total shareholder's equity CHF 702.9 mn 100.0% Own shares (in % of company) 19.1%
1) unlisted company
The Quarterly Report is available on www.bbmedtech.com
For further information please contact: Bellevue Asset Management AG, Seestrasse 16, CH-8700 Kusnacht/Zurich Alexandra Avila, phone +41 44 267 67 09
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BB Medtech AG Vordergasse 3 Schaffhausen Switzerland
WKN: 898194 ; ISIN: CH0000428661; Index: TECH All Share, TecDAX, Prime All Share; Listed: Prime Standard in Frankfurter Wertpapierbörse, Geregelter Markt in Frankfurter Wertpapierbörse;
