BTG

Description

BTG is a global specialist healthcare company which operates through three divisions – interventional medicine, specialty pharmaceuticals and licensing – and has an attractive product portfolio. Formerly known as British Technology Group, the company was formed from the National Research Development Corporation, which was privatised in 1992. Three years later, the company listed on the London Stock Exchange.

In November 2018, BTG agreed to be acquired by Boston Scientific in an all-cash bid at 840p per share.

Investment case summary

Our history with BTG is long and initially revolved primarily around the development of Varisolve, now known as Varithena. This product provides a great case study on the length of time it can take to develop a medical therapy and the problems that can be encountered along the way. Clinical trials were halted in 2003, amid safety concerns that bubbles of gas could form in the bloodstream of some patients. This caused delays as BTG worked to satisfy these regulatory concerns. Trials recommenced two years later and the product has subsequently cleared all regulatory hurdles and was approved in 2013. It is now an on-market therapy with growing revenues.

In the intervening years, the company has transformed itself through a number of acquisitions, such as Protherics in 2008, Biocompatibles in 2010 and Ekos in 2013 which have broadened its portfolio of commercial and development assets.

Given its on-market products and an attractive pipeline of future opportunities, we have consistently viewed BTG as a compelling long-term growth story.

Ask a question about our investment in BTG

Fund exposure
Equity Income Fund 1.84%

As at 31 October 2018

Segmentation
Geography United Kingdom
Industry Health Care
Themes Healthcare innovation

Source: Woodford

Share Price

Market Quotes by TradingView

Commentary

Bid approach

BTG has this morning announced that it is to be acquired by Boston Scientific in an agreed deal which values the company at £3.3bn. At 840p per share in cash, the offer represents a premium of 37% above yesterday’s closing share price, and a premium of 51% over the 90-day volume weighted average share price.

This deal effectively brings to an end a long relationship with BTG, during which it has transformed itself from a clinical-stage biotechnology company, into a specialty pharmaceuticals business with a diversified pipeline of on-market products and a global presence. Throughout this transformation, the business has possessed an attractive development pipeline, the future value of which has been consistently under-appreciated by the market, in our view. The bid premium adequately reflects the future value that this pipeline may deliver.

Stephen Lamacraft
20 November 2018

Great interim results

A great set of financial results from BTG today which have been received well by the market. Revenues increased by 12% in the first half of the current financial year, driven by better product sales in its Interventional Medicine division, and strong growth in licensing revenues. Meanwhile, adjusted operating profit increased by 35% year-on-year, demonstrating that the operational gearing within the business is now beginning to come through.

The second half has started well with good momentum across the business, allowing BTG to reiterate full year guidance for Interventional Medicine and slightly upgrade expectations for its Pharmaceuticals division. Overall, the long-term investment thesis remains very much in place, from our perspective.

Stephen Lamacraft
13 November 2018

Solid trading update

This morning’s trading update from BTG confirms positive momentum across all areas of the business and a slight upward revision to full year revenue guidance. More detail on the key moving parts follows below but, in summary, this represents a solid update from BTG. Over the next twelve to eighteen months, the attractions of the stock should become more apparent.

Within the Interventional Medicine division, the company has seen a strong performance from Therasphere (a targeted radiation therapy, delivered by glass microspheres) its cryoablation solutions (which use extreme cold to destroy diseased cells) and from Ekos (a treatment for pulmonary embolism).

Meanwhile, BTG has confirmed that sales of its varicose vein treatment, Varithena, continue to progress well. Sales of this treatment will be included in the Vascular product sales line from now on, rather than reported separately, but BTG confirmed that it expects Varithena to reach profitability by 2020 and to have peak sales potential in the high tens of millions of dollars.

Within its pharmaceuticals division, BTG continues to see a strong performance from Digifab (an antidote for overdose of digoxin), Crofab (snake bite antivenom) and Voraxaze (a treatment for impaired renal function). The company continues to review its options for its PneumRx coils, which include partnering with or sale to a third party.

Stephen Lamacraft
4 October 2018

Strong results

A good set of results from BTG this morning, which reiterated much of what we heard from the company in April’s trading update. Overall revenue growth came in at 10% (in constant exchange rates) last year, slightly ahead of consensus, with even an even bigger beat on an earnings per share basis (+42% year-on-year growth) thanks in part to a lower-than-expected tax rate.

Looking ahead, the current financial year represents something of a transition for BTG, with Zytiga (prostate cancer) and CroFab (snake antivenom) both facing potential competition in their respective markets. This may weigh on growth this year but on a longer-term basis, BTG still looks capable of delivering double-digit annualised revenue growth. Meanwhile, the company enjoys a very strong balance sheet which should allow it to continue to invest and expand its development pipeline positively.

The April trading update was greeted by a short-lived period of share price weakness. This morning’s share price reaction looks similar but, from a long-term perspective, we see nothing in these results to suggest it will persist.

Stephen Lamacraft
15 May 2018

Trading Statement

Broadly, an encouraging update from BTG, with more positives than negatives to take away. In its speciality pharmaceuticals segment CroFab (a snake antivenom) and Voraxaze (for impaired renal function) have seen the greatest sales growth. In its licensing segment royalties from Zytiga (a treatment for a specific type of prostate cancer) have been growing most significantly, following new data that supported its earlier use in patients with advanced prostate cancer.

Sales in its earlier stage medicines, on the other hand, were broadly flat. There is renewed physician interest in Varithena; however, this growth was offset by lower sales in its PneumRx Coil. BTG no longer expects material revenues from the product over the next two years and, as a result, it will book an impairment charge of approximately £150m. It will also incur a one-off restructuring charge of up to £10m.

BTG’s share price was weak in response to the statement, but from a fundamental perspective, we do not believe this is fully justified. It feels as though the market is focusing too much on the PneumRX impairment charge, but this represents only ~3% of the value of the business, and there will also be associated cost savings related to the asset write-down.

Stephen Lamacraft
5 April 2018

Woodford Investment Management Ltd is authorised and regulated by the Financial Conduct Authority (firm reference number 745433). Incorporated in England and Wales, company number 10118169. Registered address 9400 Garsington Road, Oxford OX4 2HN.

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number 09405653. Registered as an investment company under section 833 of the Companies Act 2006. Registered address Beaufort House, 51 New North Road, Exeter, EX4 4EP.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. The Fund’s Swiss paying agent is Neue Helvetische Bank AG. All fund documentation including, Prospectus, Key Investor Information Documents, Instrument of Incorporation and financial reports may be obtained free of charge from the Swiss Representative in Lausanne. The place of performance and jurisdiction for all shares distributed in or from Switzerland is at the registered office of the Swiss Representative. Fund prices can be found at www.fundinfo.com.

© 2018 Woodford Investment Management Ltd.
All rights reserved.

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