Monthly Comment 04-09
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Quaker Biotech Pharma-Healthcare Fund September 2004 Mutual Fund Assets: USD15,698,094 Mutual Fund Exposures: Long: 58.4% Short: -21.4% Options:-0.4% Cash: 63.4% Top 5 Long/Short Positions: Long Positions % Assets Short Positions % Assets Gilead 7.3% IBB -4.8% Celgene 6.6% Nasdaq 100 Index Tracking Stock -4.5% Medimmune 3.8% Genzyme Corp -3.9% Ilex Oncology 3.6% Genentech -3.9% Vertex 3.3% Forest Labs -2.1% Commentary: The Nasdaq Biotech Index (NBI) was up on the month (+3.3%) while the Philadelphia Drug Index (RXS) was down –4.0%. The monthly performance of the Nasdaq Composite was +3.2% while the S&P was +0.9%. On the year the NBI is down –1.3%, outperforming and the Nasdaq Composite (-5.3%) and the RXS (-6.9%) and underperforming the S&P (+0.2%). There was significant news during the quarter. Most significantly, Merck announced that they will be pulling Vioxx off the shelves voluntarily (2003 sales of USD2.5bn) because they found an increased risk of cardiovascular events in one of their trials. In other pharmaceutical news, an FDA panel did not recommend AstraZeneca’s anti-clotting drug Exanta for approval due to toxicity. In regulatory news, Biogen-Idec announced that they have filed Antegren for Crohn’s disease with the European regulatory authorities. Also, Amylin announced positive regulatory developments for its two diabetes drugs. In clinical development news, Atherogenics announced positive interim results for their ...
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Quaker Biotech Pharma-Healthcare Fund September 2004Mutual Fund Assets:USD15,698,094Mutual Fund Exposures:Short: -21.4%Long: 58.4%63.4%Options:-0.4% Cash: Top 5 Long/Short Positions: Long Positions% AssetsShort Positions% Assets Gilead 7.3%IBB -4.8% Celgene 6.6%Nasdaq 100 Index Tracking Stock-4.5% Medimmune 3.8%Genzyme Corp-3.9% Ilex Oncology3.6% Genentech-3.9% Vertex 3.3%Forest Labs-2.1% Commentary: The Nasdaq Biotech Index (NBI) was up on the month (+3.3%) while the Philadelphia Drug Index (RXS) was down –4.0%. The monthly performance of the Nasdaq Composite was +3.2% while the S&P was +0.9%. On the year the NBI is down –1.3%, outperforming and the Nasdaq Composite (-5.3%) and the RXS (-6.9%) and underperforming the S&P (+0.2%). There was significant news during the quarter. Most significantly, Merck announced that they will be pulling Vioxx off the shelves voluntarily (2003 sales of USD2.5bn) because they found an increased risk of cardiovascular events in one of their trials. In other pharmaceutical news, an FDA panel did not recommend AstraZenecas anti-clotting drug Exanta for approval due to toxicity. In regulatory news, Biogen-Idec announced that they have filed Antegren for Crohns disease with the European regulatory authorities. Also, Amylin announced positive regulatory developments for its two diabetes drugs. In clinical development news, Atherogenics announced positive interim results for their cardiovascular drug AGIX-1067 sending the stock up 64% in one day. In other clinical development news, NABI announced positive preliminary results for NicVax (their smoking addiction vaccine), OSI Pharmaceuticals announced that Tarceva demonstrated a modest survival benefit in pancreatic cancer, and a number of smaller cancer companies announced incremental developments at a European cancer conference. In alliance news, Medarex and Pfizer struck an agreement for their respective rheumatoid arthritis projects and for the discovery and development of 50 novel antibodies.. The A shares of the fund were up +2.2 % on the month and up +7.2% on the year, outperforming the NBI. On the long side, Celgene, Vertex and Gilead (among others) recorded positive contributions. The short portfolio had a negative contribution to performance although some stock specific shorts counterbalanced negative contributions from index/exposure shorts. After this summers correction, biotech equity valuations are now clearly back to attractive levels. Large caps are trading at approximately 25X 2005E EPS, an unchallenging level given the expected 3 year EPS growth rate of 25% p.a.. Mid- caps are even more attractive, trading on par with their large cap counterparts on a Price / Sales basis but with an expected sales growth rate of 50% vs 25%. Based on industry fundamentals alone, we would expect biotech equities to perform solidly in the next 6-24 months, driven by sales and earnings growth, drug approvals and clinical results. In the pharmaceutical space, we continue to be quite selective opting to focus on companies with novel products in later development, low patent expiration exposure and clear milestones. We also look for opportunities in the generic and specialty pharmaceutical areas. The short term outlook is somewhat uncertain given the continuously challenging environment for equities in general and high beta stocks in particular.
Monthly Comment – September 2004 Sectoral Asset Management
The Sub-Advisor: Sectoral Asset Management (S.A.M.) has one of the worlds longest track record (10 years) in managing Biotech mutual funds and is one of the largest investors in that sector with over USD2.5bn under management. For more info on S.A.M., you can visit the following web site:www.sectoral.com or www.quakerfunds.com. Fund Mandatefund has a very focused mandate and will invest in 15-25 long positions and 0-10 short: The positions in the Biotech and Pharmaceutical industries.The fund also has the flexibility to go 100% cash if deemed necessary. Tickers: A-QBPAXB-QBPBXC-CBPCX
The Fund’s holdings and characteristics are as of9/30/2004 and are subject to change. As of the quarter ended 9/30/2004, the Class A Share returns for 1 year and since inception (10/14/2002) were9.97% and 18.23%respectively. Performance shown does not reflect sales charges or any fee waivers and expense limitations in effect. In their absence performance would be reduced. Current performance may be lower or higher than the performance shown. For the Fund's most recent month-end standardized performance, visit our website, www.quakerfunds.com or call us at 1-800-220-8888.
The Fund Prospectus includes a complete discussion of investment objectives, risks, charges and expenses, and is available for download at www.quakerfunds.com/request or by calling 1-800-220-8888. The Prospectus contains this and other information about the Fund and should be read carefully before investing.Investment returns and the principal value of an investment will fluctuate, so that an investor's shares, when redeemed, may be worth more or less than their original cost.The Quaker Funds are distributed by Citco Mutual Fund Distributors, Inc. (Member NASD).
Monthly Comment – September 2004 Sectoral Asset Management
