International Biotechnology Trust (ISE:IBT) portfolio manager Ailsa Craig spoke to Proactive this week about renewed momentum in biotech and a more supportive backdrop for M&A.
The trust has benefited from a sector rebound, with returns driven by tactical gearing during market weakness and a series of portfolio acquisitions.
Its actively managed, flexible investment approach – rotating across risk levels and clinical progress – has underpinned consistent outperformance versus peers, Craig said.
Proactive: I'm joined by Ailsa Craig, portfolio manager for the International Biotechnology Trust. Ailsa, it’s very good to meet you. You delivered a standout year beating the biotech index. What's driving that momentum?
Ailsa Craig: Yes, it feels a bit long overdue. We've had a long, protracted bear market in biotech. Performance was great last year, so it seems to be coming back in vogue. It was driven by two things. We're a closed-ended fund and we can gear up, so when stocks were hit on Liberation Day, we geared up to one of the highest levels we've had since the financial crisis, and that helped returns. Secondly, we had nine acquisitions out of the fund, making performance really strong.
Proactive: For those new to the trust, how do you invest across the biotech space?
Ailsa Craig: We don't do a buy-and-hold strategy. We take a basket approach across companies in areas we like. As they move through the clinic, we sell the losers and increase weightings in the most interesting stocks with best-in-class potential. We also combine top-down and bottom-up approaches. If the sector is oversold, we move into higher-risk names, and if overbought, into lower-risk names. That’s helped us outperform over the long term.
Proactive: We're seeing a wave of takeovers. How important is M&A to returns right now?
Ailsa Craig: It's part of the evolution of biotech companies. Often they are acquired by large pharma. We're seeing a pickup in M&A because big pharma companies are facing massive patent expiry. We expect momentum to pick up and a number of our companies to be acquired this year.
Proactive: Despite the rally, valuations are still attractive. Where are you seeing opportunities?
Ailsa Craig: We're positioned in late-stage biotech companies that are launching or about to launch products. These companies typically trade at five to eight times sales, but currently they're at three to four times, so there’s still significant upside.
Proactive: IPO activity is picking up. Does that signal biotech is back in favour?
Ailsa Craig: Yes, it does. At the JP Morgan Healthcare Conference, bankers said there are 20–30 IPOs in the pipeline this year. That’s a sign the sector is returning to normal and gives optimism for 2026.
Proactive: For investors on the sidelines, why is now a good time to look at biotech?
Ailsa Craig: M&A is key. There’s strong demand from cash-rich pharma companies facing patent expiries. The need for new revenue streams is very high.
Proactive: Why choose International Biotechnology Trust?
Ailsa Craig: We have a lot of tools—we’re closed-ended, can gear up, and pay a dividend. We return cash from M&A to shareholders at 4% of NAV per year. We’ve delivered the best performance in our peer group over five years, and we’re very proud of that track record.
Proactive: Ailsa, thank you very much.