LONDON - International Biotechnology Trust plc (IBT), of London, reported a profit of £5.4 million for the six months ending February 1998. But it said lack of confidence in the U.K. market and setbacks at Biocompatibles International plc and Core Group plc - two of three U.K. companies in which IBT has investments - were having a direct effect on the fund.

“Whilst this is unwelcome, it is not unexpected in the biotechnology industry, and illustrates why a portfolio approach provides investors with an opportunity to spread the risk,“ IBT said. In contrast to the U.K., the U.S. sector has shown “steady performance.“ The U.S. sector accounts for 65 percent of the equity portfolio value of IBT.

The ordinary shares, quoted on the London Stock Exchange, are trading at a 25 percent discount to the net asset value per share as of the end of March.

“Clearly, this situation will change when confidence returns to the sector in the U.K. in general,“ the company said, “and in particular when this is combined with an appreciation of the progress within the IBT portfolio.“

IBT made investments of £19 million (US$31.6 million) during the six months, the most active period since the fund was set up in 1994. It has now invested £87.5 million in 21 companies - three in the U.K., one in Canada, one in Germany and the remainder in the U.S. New investments were made in Vanguard Biomedica plc, of the U.K., where IBT invested £5.2 million in a £25.7 million fund raising; Angiotech Pharmaceuticals Inc., of Vancouver, British Columbia, where IBT invested £3 million as lead investor in a £9.4 million initial public offering; and Onyx Pharmaceuticals Inc., of Richmond, Calif., in which IBT invested £5 million in a £6.1 million private placement.

The trust also made follow-on investments totaling £5.5 million in Cytel Corp., of San Diego; Ribozyme Pharmaceuticals Inc., of Boulder, Colo.; Biocompatibles International plc, of Farnham, Surrey, U.K.; and Core Group plc, of Kilmarnock, Scotland.

The £5.4 million profit came from the sale of IBT's interest in PathoGenesis Corp., of Seattle, following the FDA's December 1997 approval of its lead product, TOBI, for the treatment of chronic lung infections in people with cystic fibrosis. IBT invested £7 million in this company in June 1996 and raised £12.4 million from the sale.

Despite the overall slowdown, IBT reports continued growth in the number of investment proposals it has received. The fund remains committed to making long-term investments and helping to manage the companies in which it invests. *