TIDMBPCR
RNS Number : 0954Z
BioPharma Credit PLC
16 September 2020
BIOPHARMA CREDIT PLC
(THE "COMPANY")
HALF-YEARLY REPORT FOR THE PERIODED 30 JUNE 2020
BioPharma Credit PLC (LSE: BPCR), a specialist life sciences
debt investment trust, is pleased to present the Half-Yearly Report
of the Company for the period ended 30 June 2020.
The full Half-Yearly Report and Financial Statements can be
accessed via the Company's website at www.bpcruk.com or by
contacting the Company Secretary by telephone on 01392 477500.
INVESTMENT HIGHLIGHTS
-- In the six month-period and post-period end, the Company's
portfolio continued to mature with further investments and a number
of positive realisations:
o The Company invested $236 million in the period, $71 million
of which comprised the funding of existing commitments prior to the
start of 2020
o This included the $165 million senior secured loan investment
with Collegium Pharmaceutical, Inc. (Nasdaq: COLL) announced on 7
February 2020
o Post-period end, on 7 August 2020 Global Blood Therapeutics
confirmed its intention to draw the second tranche of the Term Loan
which would increase the Company's investment from $41.3 million to
$82.5 million
o Post-period end, several pre-payments were announced including
the Company's senior secured loans of:
-- $150 million to Amicus on 30 July 2020, generating a 13.4%
IRR
-- $150 million to Novocure on 18 August 2020, generating a
10.2% IRR
-- $124.5 million to Lexicon on 8 September 2020 generating a
12.1% IRR
CORPORATE HIGHLIGHTS
-- During the half-year period the Company paid two quarterly
dividends totalling 1.75 cents per Ordinary Share against the
targeted total distribution of 7 cents for the full year
o In March 2020 the Company also paid a special dividend of 1.28
cents per Ordinary Share corresponding to the 2019 year. As a
result, 2019 dividend distributions were 8.28 cents per share,
significantly ahead of the Company's 7 cent target
-- The Company entered into a new three-year $200 million
Revolving Credit Facility on 26 May 2020 with JPMorgan Chase Bank
through its wholly owned subsidiary BCPR Limited Partnership, which
is expected to increase the Company's flexibility in relation to
funding new lending opportunities and provide liquidity for
outstanding obligations
-- The Company's Discount Control Mechanism was activated on 22
June 2020 and the Company announced the authority to buy-back
shares on 13 July 2020. On 16 July 2020, following the buy-back of
59,694 shares (0.004% of its issued share capital as of 22 June
2020), the Company announced that its shares traded at an average
discount of 1% or less on a 2-week rolling period, completing the
buy-back programme
-- As at 30 June 2020, the Company held $61 million in cash and
continues to see an attractive environment for its investment
strategy
ORDINARY SHARES ASSETS
as at 30 June 2020 as at 30 June 2020
Share price Shares in issue
$0.9760 1,373.9 million
(31 December 2019: $1.0200) (31 December 2019: 1,373.9 million)
Net income per Share Net assets
$0.0370 (1) $1,378.4 million
(30 June 2019: $0.0607) (31 December 2019: $1,403.7 million)
NAV per Share Target dividend
$1.0033 7 cents per annum
(31 December 2019: $1.0217)
Discount to NAV per Share Leverage
3.3% 0%
(31 December 2019: 0.2%) (31 December 2019: 0%)
1. Net income includes $12.0 million relating to the change
in fair value of its subsidiary, BPCR Limited Partnership.
This change in fair value of $12.0 million is equal to the
undistributed net income earned by BPCR Limited Partnership
in the period, reflecting changes in the fair value of and
income earned on the investment it holds. Details of these
investments are set out in note 7, investments at fair value
through profit and loss.
PORTFOLIO COMPOSITION
($ in millions) As at As at
31 December
30 June 2020 2019
------------------------------------------ ------------- ------------
Sarepta Therapeutics senior
secured loan 175 175
BMS purchased payments 162 150
Collegium senior secured
loan 155 -
Novocure senior
secured loan 150 150
Amicus senior secured
loan 150 150
Lexicon senior secured
loan 125 125
Sebela senior secured
loan 122 130
BioDelivery Sciences senior
secured loan 80 60
Optinose US senior secured notes and
warrants 62 46
Cash and cash equivalents 61 297
Global Blood Therapeutics senior secured
loan 41 41
Akebia senior secured
loan 40 40
Epizyme senior secured
loan 35 12
Other Assets of
BPCR Limited Partnership 33 -
BioDelivery Sciences
equity 12 17
Convertible bonds 4 20
Other net assets (29) (9)
Total net assets 1,378 1,404
------------------------------------------- ------------- ------------
Pedro Gonzalez de Cosio, CEO and co-founder of Pharmakon
Advisors L. P., the Investment Manager of BioPharma Credit PLC,
said:
"During the first six months of 2020, Covid-19 has brought
exceptional challenges to the global economy resulting in volatile
conditions for many sectors and a significant reduction in global
dividends. However, as a result of the Company's uncorrelated
revenue stream, dividend payments have continued uninterrupted
towards the ongoing annual target of 7 cents per share, just above
a 7% dividend yield to our investors on the 30 June share price. It
is the Company's objective to continue to offer a highly attractive
long-term source of income uncorrelated to other markets.
"The Company's investment activity in deploying specialised debt
investments such as senior secured loans backed by important life
science products has continued as normal with one significant new
investment in Collegium Pharmaceuticals during the period and
additional follow-on commitments in addition to some attractive
pre-payments post-period end.
"The environment continues to be attractive for the Company's
investment strategy given the considerable and growing capital
needs of the sector. This will be potentially enhanced by an
anticipated increase in sector M&A activity and a slowdown in
equity issuance that has tended historically to lead to a greater
appetite for fixed income as a source of capital for the life
sciences industry."
Results presentation
As announced on 18 August 2020, a management presentation for
analysts will be delivered via a conference call facility at 2:00pm
BST on the day of results. To request dial-in details please RSVP
biopharmacredit@buchanan.uk.com
Enquiries
Buchanan
David Rydell / Mark Court / Jamie Hooper / Henry Wilson
+44 (0) 20 7466 5000
biopharmacredit@buchanan.uk.com
Notes to Editors
BioPharma Credit PLC is London's only specialist debt investor
to the life sciences industry and joined the LSE in March 2017. The
Company seeks to provide long-term shareholder returns, principally
in the form of sustainable income distributions from exposure to
the life sciences industry. The Company seeks to achieve this
objective primarily through investments in debt assets secured by
royalties or other cash flows derived from the sales of approved
life sciences products.
CHAIRMAN'S STATEMENT
DURING THE FIRST HALF OF 2020, THE COMPANY INVESTED $236
MILLION.
Summary of Activities
During the first half of 2020, the Company invested $236
million, $71 million of which comprised the funding of commitments
entered into prior to the start of the period. The Company's
outstanding commitments of $248 million as of 30 June 2020 are
expected to be funded over the course of the second half of
2020.
During the period the Company entered in to a $200 million
revolving credit facility with JPMorgan Chase Bank through its
wholly-owned subsidiary, BPCR Limited Partnership. This facility is
expected to increase the Company's flexibility in relation to
funding new lending opportunities and provide liquidity for funding
outstanding obligations. At the end of the period the Company had
cash and short-term investments of $61 million.
Total income for the first half of 2020 was $59.4 million, which
includes $12.6 million relating to the change in fair value of its
subsidiary, BPCR Limited Partnership, down from the $90.2 million
reported during the first half of 2019 which included $45.8 million
in fees linked to the prepayment of the Tesaro loan.
On 25 June 2020 the Company held its third Annual General
Meeting at which all proposed resolutions were passed.
Shareholder Returns
On 30 June 2020, the Company's Ordinary Shares closed at
$0.9760, somewhat below the closing price on 31 December 2019 of
$1.0200. Net Asset Value ("NAV") per Ordinary Share decreased over
the same time frame by $0.0184 from $1.0217 to $1.0033. The Company
made two dividend payments over the period, one of $0.0303 per
share and the other of $0.0175 per share, for a total of $0.0478
per share.
As a result of the extremely volatile equity market conditions
experienced during the six months, the discount to NAV at which the
Company's shares traded narrowly exceeded 5% over a rolling 3 month
period, leading to a temporary triggering of the Company's discount
control mechanism. This resulted in the Company repurchasing a
total of 59,694 shares after the close of the first half period at
an average price of $0.9947 per share and a total cost of $59,502.
Subsequently, the share price recovered and the share repurchase
obligation lapsed.
During the period, the COVID-19 pandemic led to restrictions to
the movement of people and disruption to business operations. Thus
far the portfolio has proved resilient. Pharmakon Advisors, our
investment manager, conducted a review of the Company's assets and
believes that the COVID-19 virus has not had a material impact on
the credit quality of the loans. The Investment Manager continues
to monitor the situation and will inform shareholders of any
material changes to this assessment.
Outlook
As at 30 June 2020, the Company had total assets of $1,410
million, represented by $1,346 million of investments, $61 million
in cash and $3 million in other assets. The cash balance
subsequently increased as a result of the $443.4 million received
from the prepayment of the Amicus, Novocure and Lexicon loans.
Pharmakon Advisors is in continuing discussions with a number of
potential borrowers and, as you will see from their report which
follows, they aim to make further commitments over the remainder of
the year. In addition, our manager is continuing to develop a
longer term pipeline of further potential investments and, as a
consequence, we expect to be evaluating a number of alternatives to
fund our expected growth.
Board Changes
It was announced earlier in the year that I intended to step
down as Chairman in the course of the year, that I would be
succeeded in that position by our current Senior Independent
Director, Harry Hyman, and that further Board appointments were
expected to be made. I can now confirm that my resignation and Mr
Hyman's appointment as Chairman will both take effect from 16
September 2020 and that the Board is delighted to welcome Rolf
Soderstrom, former CFO of BTG plc, as an additional Director with
effect from the same date. Rolf has over 30 years' experience in
finance and extensive strategic, operational and international
experience including M&A, fundraisings and disposals and is
currently Senior Independent Director of Ergomed plc and Chair of
its Audit and Risk Committee and External Independent Director of
Sosei Group Corporation, which is listed on the Tokyo Stock
Exchange.
On behalf of the Board, I should like to express our thanks to
Pharmakon for their continued achievements on behalf of the Company
in 2020 and to our shareholders for their continued support.
Jeremy Sillem
Chairman
15 September 2020
INVESTMENT MANAGER'S REPORT
Pharmakon is pleased to present an update on the Company's
portfolio and investment outlook. The Company's existing portfolio
investments continue to perform well. Pharmakon's engagement during
the period with potential counterparties resulted in the execution
of new investments totalling $165 million which, together with $71
million from the funding of existing commitments entered into prior
to the start of the period, resulted in BioPharma Credit funding a
total of $236 million in the period. Subsequent to the end of the
period, the Company announced the repayment of three investments
representing $425 million of investments. Below is an update on the
Company's portfolio.
Collegium
On 7 February 2020, the Company and BioPharma-V, a private fund
also investing in life sciences debt managed by Pharmakon Advisors,
entered into a definitive senior secured term loan agreement for
$200 million with Collegium Pharmaceutical, Inc. (Nasdaq: COLL),a
biopharmaceutical company focused on developing and commercialising
new medicines for responsible pain management with a current market
capitalisation of approximately $636 million as at 9 September 2020
("Collegium").
The Company funded $165 million of the $200 million loan in
February 2020. The loan will mature in February 2024 and will bear
interest at three month LIBOR plus 7.50 per cent. per annum subject
to a 2.00 per cent. LIBOR floor with a one-time additional
consideration of 2.50 per cent. of the loan amount payable upon
funding. Collegium currently markets Xtampza(R) ER, an
abuse-deterrent, extended-release, oral formulation of oxycodone
and Nucynta(R) (tapentadol), a centrally acting synthetic
analgesic.
GBT
On 18 December 2019, the Company and BioPharma-V entered into a
definitive senior secured term loan agreement for up to $150
million with Global Blood Therapeutics (Nasdaq: GBT), a
biopharmaceutical company focused on life-changing treatments for
patients with serious blood-based disorders and a current market
capitalisation of approximately $3,544 million as at 9 September
2020 ("GBT"). GBT drew down $75 million at closing and has elected
to draw the remaining $75 million on 20 November 2020.
The Company funded $41 million of the $75 million first tranche
and will fund $41 million of the second tranche on 20 November
2020. The loan will mature in December 2025 and will bear interest
at three month LIBOR plus 7.00 per cent. per annum subject to a
2.00 per cent. floor along with a one-time additional consideration
of 1.50 per cent. of the total loan amount payable upon funding and
an additional 2.00 per cent. payable upon the repayment of the
loan. In 2019, GBT obtained US FDA approval for its first product,
Oxbryta TM (voxelotor) for the treatment of sickle cell disease in
adults and paediatric patients 12 years of age and older.
Sarepta
On 13 December 2019, the Company and BioPharma-V entered into a
definitive senior secured term loan agreement for up to $500
million with Sarepta Therapeutics (Nasdaq: SRPT), a fully
integrated biopharmaceutical company focused on precision genetic
medicine with a current market capitalisation of approximately
$10,244 million as 9 September 2020 ("Sarepta"). Under the terms of
the agreement, Sarepta drew down a first tranche of $250 million
and has until December 2020 to draw the remaining second tranche of
$250 million, at their option.
The Company funded $175 million of the $250 million first
tranche and will fund up to $175 million of the second tranche if
the full $250 million of the second tranche is drawn. The balance
of the first and second tranches will be funded by BioPharma-V. The
loan will mature in December 2023 and will bear interest at 8.5 per
cent. per annum along with a one-time additional consideration of
1.75 per cent. of the total loan amount payable upon funding and an
additional 2 per cent. payable upon the repayment of the loan.
Sarepta currently markets Exondys 51 (eteplirsen) in the US for
the treatment of Duchenne muscular dystrophy (DMD) in patients who
have a confirmed mutation of the DMD gene that is amenable to exon
51 skipping. On 12 December 2019, Sarepta announced the FDA
approval of Vyondys 53 (golodirsen), its second RNA exon-skipping
treatment for DMD approved in the U.S. and that commercial
distribution of Vyondys 53 in the US would commence
immediately.
On 23 December 2019, Sarepta announced a partnership with Roche
in territories outside the United States for its investigational
micro-dystrophin gene therapy for DMD. Sarepta received an up front
payment of $1.15 billion, comprising $750 million in cash and $400
million in equity and will receive future success-based milestones
and royalties.
Akebia
On 11 November 2019, the Company and BioPharma-V entered into a
definitive senior secured term loan agreement for up to $100
million with Akebia (Nasdaq: AKBA), a fully integrated
biopharmaceutical company focused on the development and
commercialisation of therapeutics for people living with kidney
disease with a current market capitalisation of approximately $380
million as at 9 September 2020 ("Akebia"). Under the terms of the
agreement, Akebia drew down $80 million at closing and has until
December 2020 to draw the remaining $20 million, at their
option.
The Company funded $40 million of the $80 million first tranche
and will fund $10 million of the second tranche if it is drawn. The
loan will mature in November 2024 and will bear interest at LIBOR
plus 7.50 per cent. per annum along with a one-time additional
consideration of 2.00 per cent. of the total loan amount. Akebia
currently markets Auryxia(R) (ferric citrate) which is approved in
the US for hyperphosphatemia (elevated phosphorus levels in blood
serum) in adult patients with chronic kidney disease (CKD) on
dialysis and iron deficiency anaemia in adult patients with CKD not
on dialysis. In May 2020, Akebia announced positive results from
its Global Ph III program of vadadustat for the treatment of anemia
due to chronic kidney disease in adult patients on dialysis. In
June 2020, Akebia announced that vadadustat was approved in Japan
for the treatment of anemia in adult chronic kidney disease
patients.
Epizyme
On 4 November 2019, the Company and BioPharma-V entered into a
definitive senior secured term loan agreement for up to $70 million
with Epizyme (Nasdaq: EPZM), a late-stage biopharmaceutical company
developing novel epigenetic therapies with a current market
capitalisation of approximately $1,289 million as at 9 September
2020 ("Epizyme"). Under the terms of the agreements, Epizyme drew
down $25 million at closing and the second and third tranche of $25
million and $20 million on 27 March 2020 and 30 June 2020
respectively.
The Company has funded all three tranches for a total position
of $35 million. The loan will mature in November 2024 and will bear
interest at LIBOR plus 7.75 per cent. per annum along with a
one-time additional consideration of 2.00 per cent. of the total
loan amount. Epizyme's lead product, tazemetostat, is a
first-in-class, oral EZH2 inhibitor in clinical development for
certain oncology indications. Since tazemetostat was not FDA
approved at the time the loan was funded, the loan was over
collateralised with cash. This requirement lapsed when tazemetostat
was approved for epitheliod sarcoma on 23 January 2020. On June 18,
2020 the US FDA also approved tazemetostat for follicular
lymphoma.
Optinose
On 12 September 2019, the Company and BioPharma-V entered into a
definitive senior secured note purchase agreement for the issuance
and sale of senior secured notes in an aggregate original principal
amount of up to US$150 million by OptiNose US, a wholly-owned
subsidiary of OptiNose (Nasdaq: OPTN), a commercial-stage specialty
pharmaceutical company with a current market capitalisation of
approximately $234 million as at 9 September 2020 ("OptiNose").
Under the terms of the agreement OptiNose purchased $80 million
from the Company and BioPharma V on 12 September 2019 and $30
million on 13 February 2020 and has until September 2021 to
purchase the remaining $20 million of notes at OptiNose's
option.
The Company funded $61 million of the $110 million first two
tranches and will issue $11 million of the remaining tranche if it
is drawn. The notes mature in September 2024 and bear interest at
10.75 per cent. per annum along with a one-time additional
consideration of 0.75 per cent. of the aggregate original principal
amount of senior secured notes which the Company and BioPharma-V
are committed to purchase under the facility and approximately
800,000 warrants exercisable into common stock of OptiNose.
OptiNose's leading product, XHANCE(R) (fluticasone propionate),
is a nasal spray approved by the U.S. Food and Drug Administration
(FDA) in September 2017 for the treatment of nasal polyps in
patients 18 years or older. XHANCE(R) utilises a novel and
proprietary exhalation delivery system to deliver the drug high and
deep into the sinuses, targeting areas traditional intranasal
sprays are not able to reach.
BioDelivery Sciences
On 23 May 2019, the Company entered into a senior secured loan
agreement for up to $80 million with BioDelivery Sciences
International (Nasdaq: BDSI), a commercial-stage specialty
pharmaceutical company ("BDSI") with a market capitalisation of
approximately $416 million as at 9 September 2020. BDSI utilizes
its novel and proprietary BioErodible MucoAdhesive (BEMA(R))
technology, to develop and commercialise new applications of proven
therapies aimed at addressing important unmet medical needs. BDSI's
leading products include BELBUCA(R) (buprenorphine buccal film) and
Symproic(R) (naldemedine).
In addition, the Company acquired 5,000,000 BDSI shares at $5.00
each for a total cost of $25 million in a public offering that took
place on 11 April 2019. The first tranche of the loan for $60
million was funded on 28 May 2019 and the additional tranche of $20
million was funded on 22 May 2020. The loan will mature in May 2025
and bears interest at LIBOR plus 7.50 per cent., along with 2.00
per cent. additional consideration.
As at 15 September 2020, the Company owns 2,695,189 BDSI
shares.
Amicus
On 20 September 2018, the Company entered into a definitive
senior secured loan agreement for $150 million with Amicus
Therapeutics, Inc (NASDAQ: FOLD), a commercial stage, rare
metabolic disease-focused biopharmaceutical company ("Amicus") with
a market capitalisation of approximately $3,610 million as at 9
September 2020.
The loan was repaid fully on 30 July 2020.
The $150 million loan had a five-year maturity and was interest
only for the first four years. The loan bore interest at LIBOR plus
7.50 per cent. (subject to certain caps) and included a 2.00 per
cent. additional consideration. Following the restructuring of this
loan with another third party, Amicus repaid the $150 million loan
on 30 July 2020. The Company received a payment of $156 million,
including the make-whole and prepayment premium totalling $5
million. The Company earned a 13.40 per cent. internal rate of
return on its Amicus investment.
Sebela
On 1 May 2018, the Company was lead arranger of a $316 million
senior secured term loan for Sebela BT Holdings Inc. ("Sebela"), a
subsidiary of Sebela Pharmaceuticals. The Company committed to a
$194 million investment, with the remaining $122 million balance
coming from co-investors.
The five-year senior secured loan began amortising in the third
quarter of 2018 and fully matures in December 2022. The loan bears
interest at LIBOR (uncapped) plus a single-digit spread and
includes additional consideration.
Sebela is a private specialty pharmaceutical company focused on
gastrointestinal medicines, dermatology, and women's health. As at
30 June 2020, the principal amount outstanding of the Company's
investment was $122 million.
Novocure
On 7 February 2018, the Company entered into a senior secured
loan agreement for $150 million with Novocure Limited (NASDAQ:
NVCR), a commercial stage oncology company with a current market
capitalisation of approximately $8,638 million as at 9 September
2020 ("Novocure").
The loan was repaid fully on 18 August 2020.
The $150 million loan was originally scheduled to mature in
February 2023 and bear interest at 9.00 per cent. per annum.
Novocure repaid the $150 million loan on 18 August 2020. The
Company received a payment of $155 million, including a prepayment
premium totalling $3 million. The Company earned a 10.20 per cent.
internal rate of return on its Novocure investment.
Novocure manufactures and sells the Optune system, a cancer
treatment centred on a proprietary therapy called TTFields, which
involves the use of electric fields tuned to specific frequencies
to disrupt solid tumour cancer cell division. Optune is currently
approved for the treatment of adults with glioblastoma.
On 27 February 2020, Novocure reported revenues of $351 million
for the year ended 31 December 2019 a 42.00 per cent. increase over
2018. Novocure invests meaningfully in research and development and
has late stage trials (Phase III pivotal studies) underway for
TTFields in brain metastases, non-small cell lung cancer and
pancreatic cancer.
On 23 May 2019, the FDA approved the NovoTTF-100L system in
combination with chemotherapy for the treatment of malignant
pleural mesothelioma. This is the first FDA approved mesothelioma
treatment in over 15 years.
Lexicon Pharmaceuticals, Inc.
On 4 December 2017, the Company and BioPharma IV entered into a
definitive term loan agreement for up to $200 million with Lexicon
Pharmaceuticals (NASDAQ: LXRX) ("Lexicon"), a fully integrated
biopharmaceutical company with a current market capitalisation of
approximately $171 million as at 9 September 2020.
The loan was repaid fully on 8 September 2020.
The Company funded $125 million of the $150 million first
tranche and Lexicon did not draw the second tranche. The loan paid
a fixed 9.00% coupon. Lexicon markets XERMELO(R) (teloristat ethyl)
for the treatment of carcinoid syndrome diarrhoea in the United
States and has licensed XERMELO(R) to Ipsen Pharma SA for
commercialisation in territories outside of the United States and
Japan. At the time of the loan Lexicon was developing Zynquista
(sotagliflozin) for the treatment of type 1 and type 2 diabetes in
partnership with Sanofi. The loan was secured by substantially all
of Lexicon's assets, including its rights to XERMELO(R) and
Zynquista.
Zynquista (sotagliflozin) received approval in Europe for Type 1
diabetes on 26 April 2019. On 22 March 2019, the FDA issued a
Complete Response Letter (CRL) which indicated that a New Drug
Application for the oral treatment of Type 1 diabetes would not be
approved in its present form for Zynquista. Lexicon appealed the
decision to the FDA and on 2 December 2019, the FDA affirmed its
initial decision. Lexicon has escalated its appeal to the FDA's
Center for Drug Evaluation and Research and is awaiting a decision.
The drug is still being evaluated for use in Type 2 patients with
potential to generate $110 million in development milestones by
early 2020 plus $150 million upon approval. The Type 2 diabetes
market is much larger than the Type 1 market.
On 26 July 2020, Lexicon announced a definitive agreement
pursuant to which Lexicon will sell Lexicon's XERMELO(R)
(telotristat ethyl) product and related assets for up to $224
million in upfront and milestone payments to TerSera Therapeutics
LLC. Lexicon will use the upfront proceeds from the XERMELO(R) sale
to substantially reduce its debt, including full repayment of its
$150 million secured term loan, of which the Company owns $124.5
million. The Lexicon loan has a prepayment premium of 2.00 per
cent. if prepaid before the fourth anniversary of the relevant
closing date plus, if the prepayment is made before the third
anniversary, a make-whole amount equal to the interest payable
between the prepayment date and the third anniversary of the
relevant closing date. The Lexicon loan closed on 4 December
2017.
Lexicon repaid the $124.5 million loan on 8 September 2020. The
Company received a payment of $132 million including the make-whole
and prepayment premium totalling $6 million. The Company earned a
12.10 per cent. internal rate of return on its Lexicon
investment.
Bristol-Myers Squibb, Inc.
On 8 December 2017, the Company's wholly-owned subsidiary
entered into a purchase, sale and assignment agreement with a
wholly-owned subsidiary of Royalty Pharma Investments ("RPI"), an
affiliate of the Investment Manager, for the purchase of a 50.00
per cent. interest in a stream of payments (the "Purchased
Payments") acquired by RPI's subsidiary from Bristol-Myers Squibb
(NYSE: BMY) through a purchase agreement dated 14 November
2017.
As a result of the arrangements, RPI's subsidiary and the
Company's subsidiary are each entitled to the benefit of 50 per
cent. of the Purchased Payments under identical economic terms. The
Purchased Payments are linked to tiered worldwide sales of Onglyza
and Farxiga, diabetes agents marketed by AstraZeneca, and related
products. The Company was expected to fund $140 million to $165
million during 2018 and 2019, determined by product sales over that
period, and will receive payments from 2020 through 2025. The
Purchased Payments are expected to generate attractive risk-
adjusted returns in the high single digits per annum. As of 30 June
2020, the Company funded all eight of the Purchased Payments based
on sales from 1 January 2018 to 31 December 2019 for a total of
$162 million out of the originally expected range of $140 million
to $165 million.
Investment Outlook
The life sciences industry is expected to continue to have
substantial capital needs during the coming years as the number of
products undergoing clinical trials continues to grow. All else
being equal, companies seeking to raise capital are generally more
receptive to straight debt financing alternatives at times when
equity markets are soft, increasing the number and size of
fixed-income investment opportunities for the Company, and will be
more inclined to issue equity or convertible bonds at times when
equity markets are strong. A good indicator of the life sciences
equity market is the New York Stock Exchange Biotechnology Index
("BTK Index"). While there was substantial volatility during the
period, the BTK index grew 13% during the period, a similar
performance to the first six months of 2019. Global equity issuance
by life sciences companies during the period was $63 billion, a 97
per cent. increase from the $32 billion issued during the first six
months of 2019. We anticipate a slowdown in equity issuance coupled
with greater appetite for fixed-income as a source of capital
during the remainder of 2020.
Acquisition financing is an important driver of capital needs in
the life sciences industry in general and a source of investment
opportunities. An active M&A market helps drive opportunities
for investors such as the Company, as acquiring companies need
capital to fund acquisitions. Global life sciences M&A volume
during the period was $18 billion, a 55 per cent. decrease from the
$39 billion witnessed during the first six months of 2019, driven
mainly by a decrease in M&A activity globally as a result of
the COVID-19 pandemic. We are encouraged by the number of M&A
opportunities that are starting to build up and should lead to a
more active market in the near term.
In conclusion, there continues to be a robust pipeline of
investment opportunities, but as usual, the precise timing of their
execution is not completely within our control. Pharmakon will
continue to evaluate potential capital sources to fund additional
investments in addition to the $248 million in commitments expected
to be funded during 2020. These commitments can be fully funded
with the proceeds from the recent loan prepayments. We remain
focused on our mission of creating the premier dedicated provider
of debt capital to the life sciences industry while generating
attractive returns and sustainable income to investors. Further,
Pharmakon remains confident of our ability to deliver attractive
returns that will enable the Company to continue to pay its target
dividend yield to its investors.
Pedro Gonzalez de Cosio
Co-founder and CEO, Pharmakon
15 September 2020
STATEMENT OF DIRECTORS' RESPONSIBILITIES
INTERIM MANAGEMENT REPORT
The important events that have occurred during the period under
review, the key factors influencing the financial statements and
the principal factors that could impact the remaining six months of
the financial year are set out in the Chairman's statement and the
Investment Manager's report above.
During the period the impact of COVID-19 led to restrictions to
the movement of people and disruption to business operations
impacting global portfolio company valuations and returns and
potentially impacting the operational resilience of the Company's
service providers. As the impact of COVID-19 continues, the
Directors and the Investment Manager continue to monitor the
situation closely.
The Directors and the Investment Manager have considered the
adverse impact of potential changes in law, regulation and taxation
and the matter of foreign exchange risk. They have determined that
although there are a number of potential risks associated with the
Brexit process, it has not had a material impact on the credit
quality of the loans.
The Directors have considered the principal risks facing the
Company and, other than the pandemic risk noted above, there have
not been any material changes to the principal risks and
uncertainties and approach to mitigating these risks since the
publication of the Annual Report and Financial Statements for the
year ended 31 December 2019, and expect that, for the remainder of
the year ending 31 December 2020, these will continue to be as set
out on pages 25 to 28 of that report.
Risks faced by the Company include, but are not limited to:
-- Failure to achieve target returns;
-- The success of the Company depends on the ability and
expertise of the Investment Manager;
-- The Company may from time to time commit to make future
investments that exceed the Company's current liquidity;
-- The Investment Manager's ability to source and advise
appropriately on investments;
-- There can be no assurance that the Board will be able to find
a replacement investment manager if the Investment Manager
resigns;
-- Concentration in the Company's portfolio may affect the
Company's ability to achieve its investment
objective;
-- Life sciences products are subject to intense competition and
various other risks;
-- Investments in debt obligations are subject to credit and
interest rate risks;
-- Counterparty risk;
-- Sales of life sciences products are subject to regulatory
actions that could harm the Company's ability to make distributions
to investors;
-- Net asset values published will be estimates only and may
differ materially from actual results; and
-- Changes in taxation legislation or practice may adversely
affect the Company and the tax treatment for shareholders investing
in the Company.
GOING CONCERN
The financial statements continue to be prepared on a going
concern basis. The Directors have reviewed areas of potential
financial risk and cash flow forecasts.
The Board is mindful of the uncertainty surrounding the COVID-19
pandemic's duration. Thus far, the portfolio has proved resilient
and the Board is satisfied that the Company has adequate resources
to continue in operational existence for the foreseeable future.
All of the Company's borrowers continue to pay as agreed and
Company projections will continue to be reviewed at Audit and Risk
Committee and Board Meetings. The Board believes that the Company
and its key third party service providers have in place appropriate
business continuity plans and will be able to maintain service
levels throughout the COVID-19 pandemic.
No material uncertainties have been detected which would
influence the Company's ability to continue as a going concern for
a period of not less than 12 months. Accordingly, the Board of
Directors continue to adopt the going concern basis in preparing
the financial statements. The important events that have occurred
during the period under review, the key factors influencing the
financial statements and the principal factors that could impact
the remaining six months of the financial year are set out in the
Chairman's statement and the Investment Manager's report above.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that to the best of their knowledge:
-- this set of condensed financial statements has been prepared
in accordance with International Accounting Standard ("IAS") 34,
'Interim Financial Reporting', as adopted by the European Union
("EU"); and gives a true and fair view of the assets, liabilities,
financial position and profit of the Company; and
-- this Half-Yearly Report includes a fair review of the
information required by:
(a) DTR 4.2.7R of the Disclosure Guidance and Transparency
Rules, being an indication of important events that have occurred
during the first six months of the financial year and their impact
on the condensed set of financial statements; and a description of
the principal risks and uncertainties for the remaining six months
of the year; and
(b) DTR 4.2.8R of the Disclosure Guidance and Transparency
Rules, being related party transactions that have taken place
during the first six months of the financial year and that have
materially affected the financial position or performance of the
Company during that period; and any changes in the related party
transactions that could do so.
This Half-Yearly Report was approved by the Board of Directors
on 15 September 2020 and the above responsibility statement was
signed on its behalf by Jeremy Sillem, Chairman.
On behalf of the Board
Jeremy Sillem
Chairman
15 September 2020
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 30 June 2020
(In $000s except per share amounts)
Period ended 30 June Period ended 30 June
2020 (Unaudited) 2019 (Unaudited)
---------------------------- ------------------------------
Note Revenue Capital Total Revenue Capital Total
---------------------- ----- -------- -------- -------- -------- ---------- --------
Income
Investment
income 3 45,793 - 45,793 84,005 - 84,005
Other income 3 1,033 - 1,033 6,186 - 6,186
Net gains/(losses)
on investments
at fair value 7 - 1,524 1,524 - (3,366) (3,366)
Net currency
exchange losses - (37) (37) - (6) (6)
---------------------- -----
Total income 46,826 1,487 48,313 90,191 (3,372) 86,819
Expenses
Management
fee 4 (6,872) - (6,872) (7,053) - (7,053)
Directors'
fees 4 (198) - (198) (191) - (191)
Other expenses 4 (877) - (877) 407 (48) 359
---------------------- -----
Total expenses (7,947) - (7,947) (6,837) (48) (6,885)
---------------------- ----- -------- -------- -------- -------- ---------- --------
Return on
ordinary activities
after finance
costs and
before taxation 38,879 1,487 40,366 83,354 (3,420) 79,934
Taxation on
ordinary activities 5 - - - - - -
---------------------- -----
Return on
ordinary activities
after finance
costs and
taxation 38,879 1,487 40,366 83,354 (3,420) 79,934
---------------------- ----- -------- -------- -------- -------- ---------- --------
Net revenue
and capital
return per
ordinary share
(basic and
diluted) 11 $0.0283 $0.0011 $0.0294 $0.0607 ($0.0025) $0.0582
The total column of this statement is the Company's Condensed
Statement of Comprehensive Income prepared in accordance with
International Financial Reporting Standards International Financial
Reporting Standards ("IFRS") as endorsed by the EU. The
supplementary revenue and capital columns are presented for
information purposes as recommended by the Statement of Recommended
Practice ("SORP") issued by the Association of Investment Companies
("AIC").
All items in the above Statement derive from continuing
operations.
There is no other comprehensive income, and therefore the return
on ordinary activities after finance costs and taxation is also the
total comprehensive income.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF CHANGES IN EQUITY
For the period ended 30 June 2020
(In $000s)
Total equity
attributable
Share Special to shareholders
Share premium distributable Capital Revenue of the
For the period ended 30
June 2020 Note capital account reserve* reserve reserve* Company
Net assets attributable
to shareholders at 1
January
2020 13,739 607,125 730,631 10,552 41,689 1,403,736
Return on ordinary
activities
after finance costs and
taxation - - - 1,487 38,879 40,366
Dividends paid to
Ordinary
Shareholders 6 - - - - (65,674) (65,674)
Net assets attributable
to shareholders at 30
June
2020 13,739 607,125 730,631 12,039 14,894 1,378,428
Share Special Total equity attributable
--------------------------
to shareholders
Share premium distributable Capital Revenue of the
For the period ended 30
June 2019 Note capital account reserve* reserve reserve* Company
-------------------------- -------- -------- -------------- -------- --------- --------------------------
Net assets attributable
to shareholders at 1
January
2019 13,739 607,125 734,309 2,045 22,804 1,380,022
-------------------------- -------- -------- -------------- -------- --------- --------------------------
Return on ordinary
activities
after finance costs and
taxation - - - (3,420) 83,354 79,934
Dividends paid to
Ordinary
Shareholders 6 - - (27,722) - (22,804) (50,526)
-------------------------- -----
Net assets attributable
to shareholders at 30
June
2019 13,739 607,125 706,587 (1,375) 83,354 1,409,430
-------------------------- ----- -------- -------- -------------- -------- --------- --------------------------
* The special distributable reserve and revenue reserves can be
distributed in the form of a dividend. The capital reserve is not
used for distributions.
The notes below form part of these financial statements.
CONDENSED STATEMENT OF FINANCIAL POSITION
As of 30 June 2020
(In $000s except per share amounts)
30 June 2020
(Unaudited) 31 December
Note 2019 (Audited)
--------------------------------------- ----- -------------- ----------------
Non-current assets
Investments at fair value through
profit or loss 7 1,346,084 1,116,127
--------------------------------------- -----
1,346,084 1,116,127
Current assets
Trade and other receivables 8 3,223 16,206
Cash and cash equivalents 9 61,058 296,638
--------------------------------------- -----
64,281 312,844
--------------------------------------- ----- --------------
Total assets 1,410,365 1,428,971
--------------------------------------- -----
Current liabilities
Trade and other payables 10 31,373 24,504
Total current liabilities 31,373 24,504
Total assets less current liabilities 1,378,992 1,404,467
--------------------------------------- ----- -------------- ----------------
Non-current liabilities
Deferred performance fee 10 564 731
--------------------------------------- ----- -------------- ----------------
Net assets 1,378,428 1,403,736
--------------------------------------- ----- -------------- ----------------
Represented by:
Share capital 13 13,739 13,739
Share premium account 607,125 607,125
Special distributable reserve 730,631 730,631
Capital reserve 12,039 10,552
Revenue reserve 14,894 41,689
--------------------------------------- -----
Total equity attributable to
shareholders of the Company 1,378,428 1,403,736
--------------------------------------- ----- -------------- ----------------
Net asset value per Ordinary
Share (basic and diluted) 12 $1.0033 $1.0217
--------------------------------------- ----- -------------- ----------------
The financial statements of BioPharma Credit PLC registered
number 10443190 were approved and authorised for issue by the Board
of Directors on 15 September 2020 and signed on its behalf by:
Jeremy Sillem
Chairman
15 September 2020
The notes below form part of these financial statements.
CONDENSED CASH FLOW STATEMENT
For the period ended 30 June 2020
(In $000s)
30 June 2020 30 June 2019
-----------------------------------------
Note (Unaudited) (Unaudited)
----------------------------------------- ----- ------------- -------------
Cash flows from operating activities
Investment income received 37,888 94,208
Other income received 1,458 6,614
Investment management fee paid (6,774) (6,737)
Performance fee paid (20,968) -
Finance costs paid - (3)
Net amounts received on behalf
of BPCR Limited Partnership* 26,241 -
Other expenses paid (1,039) (1,649)
Cash generated from operations 15 36,806 92,433
Net cash flow generated from
operating activities 36,806 92,433
----------------------------------------- ----- ------------- -------------
Cash flow from investing activities
Purchase of investments (225,736) (145,786)
Redemptions of investments 8,308 352,735
Sales of investments 10,753 -
----------------------------------------- ----- ------------- -------------
Net cash flow (used in)/ generated
from/ investing activities (206,675) 206,949
----------------------------------------- ----- ------------- -------------
Cash flow from financing activities
Ordinary Share issue costs - 466
Dividends paid to Ordinary Shareholders 6 (65,674) (50,526)
Net cash flow used in financing
activities (65,674) (50,060)
----------------------------------------- ----- ------------- -------------
(Decrease)/increase in cash
and cash equivalents for the
period (235,543) 249,322
----------------------------------------- ----- ------------- -------------
Cash and cash equivalents at
start of period 9 296,638 363,572
Revaluation of foreign currency
balances (37) (6)
----------------------------------------- ----- ------------- -------------
Cash and cash equivalents at
end of period 9 61,058 612,888
----------------------------------------- ----- ------------- -------------
*On 22 May 2020, the Company transferred the full carrying
amount of several investments to its newly formed wholly-owned
subsidiary BPCR Limited Partnership ("BPCR LP") in return for an
investment in BPCR LP. The amount reported of $26,241,000
represents the net proceeds from investments received and payments
of expenses made by the Company on behalf of BPCR LP.
The notes below form part of these financial statements.
NON-STATUTORY ACCOUNTS
The financial information set out below does not constitute the
Company's interim condensed financial statements or Half-Yearly
Report for the period ended 30 June 2020. The Half-Yearly Report,
including the interim condensed financial statements, for the
period ended 30 June 2020 was approved by the Board on 15 September
2020. The Auditor has reviewed those accounts; their report was (i)
unqualified, (ii) did not include a reference to any matters to
which the Auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
Section 498 (2) or (3) of the Companies Act 2006.
NOTES TO THE FINANCIAL STATEMENTS
For the period ended 30 June 2020
1. GENERAL INFORMATION
BioPharma Credit PLC is a closed-ended investment company
incorporated and domiciled in England and Wales on 24 October 2016
with registered number 10443190. The registered office of the
Company is Beaufort House, 51 New North Road, Exeter, EX4 4EP.
The Company carries on business as an investment trust company
within the meaning of Sections 1158/1159 of the Corporation Tax Act
2010.
The Company's Investment Manager is Pharmakon Advisors L.P.
("Pharmakon"). Pharmakon is a limited partnership established under
the laws of the State of Delaware. It is registered as an
investment adviser with the Securities and Exchange Commission
("SEC") under the United States Investment Advisers Act of 1940, as
amended.
Pharmakon is authorised as an Alternative Investment Fund
Manager ("AIFM") under the Alternative Investment Fund Managers
Directive ("AIFMD"). Pharmakon has, with the consent of the
Directors, delegated certain administrative functions to Link
Alternative Fund Administrators Limited ("Link").
2. ACCOUNTING POLICIES
A) Basis of preparation
The Company's condensed half-year financial statements covers
the period from 1 January 2020 to 30 June 2020 and have been
prepared in conformity with IAS 34 'Interim Financial Reporting'.
They do not include all financial information required for full
annual financial statements and have been prepared using the
accounting policies adopted in the audited financial statements for
the year ended 31 December 2019. The Company's annual financial
statements were prepared in conformity with IFRS as adopted by the
EU, which comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), and as applied
in accordance with the Disclosure Guidance Transparency Rules
sourcebook of the Financial Conduct Authority (FCA) and the AIC
SORP (issued in October 2019) for the financial statements of
investment trust companies and venture capital trusts, except to
any extent where it is not consistent with the requirements of
IFRS. The financial statements have adopted the following
accounting policies in their preparation, consistent with the
accounting policies adopted in the audited financial statements for
the year ended 31 December 2019, with the exception of the change
explained in note 2 (F).
The financial statements are presented in US dollars, being the
functional currency of the Company. The Board is mindful of the
uncertainty surrounding the COVID-19 pandemic's duration. Thus far,
the portfolio has proved resilient and the Board is satisfied that
the Company has adequate resources to continue in operational
existence for the foreseeable future. Company projections will
continue to be reviewed at Audit and Risk Committee and Board
Meetings. The Board believes that the Company and its key third
party service providers have in place appropriate business
continuity plans and will be able to maintain service levels
throughout the COVID-19 pandemic. The financial statements have
therefore been prepared on a going concern basis under historical
cost convention, except for the measurement at fair value of
investments measured at fair value through profit or loss.
The Company's condensed half-year information contained in this
Half-Yearly Report does not constitute full statutory accounts as
defined in Section 435 of the Companies Act 2006. The financial
information for the periods ended 30 June 2020 and 30 June 2019 is
not a financial year and has not been audited. The information for
the year ended 31 December 2019 has been extracted from the latest
published financial statements, which have been delivered to the
Registrar of Companies. The Auditor's Report on those financial
statements contained no qualification or statement under Section
498 of the Companies Act 2006.
ASSESSMENT AS AN INVESTMENT ENTITY
Entities that meet the definition of an investment entity within
IFRS 10 'Consolidated Financial Statements' are required to measure
their subsidiaries at fair value through profit or loss rather than
consolidate the entities. The criteria which define an investment
entity are as follows:
-- an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment
services;
-- an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
-- an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Directors have concluded that the Company meets the
characteristics of an investment entity, in that it has more than
one investor and its investors are not related parties; holds a
portfolio of investments, predominantly in the form of loans which
generates returns through interest income. All investments,
including its subsidiaries, BPCR Ongdapa Limited and BPCR Limited
Partnership, are reported at fair value.
B) PRESENTATION OF CONDENSED STATEMENT OF COMPREHENSIVE
INCOMES
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Condensed Statement of
Comprehensive Income between items of a revenue and capital nature
has been prepared alongside the Income Statement.
C) SEGMENTAL REPORTING
The Directors are of the opinion that the Company has one
operating and reportable segment being the investment in debt
assets secured by royalties or other cash flows derived from the
sales of approved life sciences products.
D) INVESTMENTS AT FAIR VALUE THROUGH PROFIT OR LOSS
The principal activity of the Company is to invest in
interest-bearing debt assets with a contractual right to future
cash flows derived from royalties or sales of approved life
sciences products. In accordance with IFRS, the financial assets
are measured at fair value through profit or loss. They are
accounted for on their trade date at fair value, which is
equivalent to the cost of the investment. The fair value of the
asset reflects any contractual amortising balance and accrued
interest.
For unlisted investments where the market for a financial
instrument is not active, fair value is established using valuation
techniques in accordance with the International Private Equity and
Venture Capital Valuation ("IPEV") Guidelines (issued in December
2018), which may include recent arm's length market transactions
between knowledgeable, willing parties, if available, reference to
the current fair value of another instrument that is substantially
the same, discounted cash flow analysis and option pricing models.
Where there is a valuation technique commonly used by market
participants to price the instrument and that technique has proved
reliable from estimates of prices obtained in actual market
transactions, that technique is utilised.
Unlisted investments often require the manager to make estimates
and judgements and apply assumptions or subjective judgement to
future events and other matters that may affect fair value. For
unlisted investments valued using a discounted cash flow analysis,
the key judgements are the size of the market, pricing, projected
sales of the product at trade date and future growth and other
factors that will support the repayment of a senior secured or
royalty debt instrument.
The fair value is either bid price or the last traded price on
the exchange where the investment is listed.
Changes in the fair value of investments held at fair value
through profit or loss and gains or losses on disposal are
recognised in the Condensed Statement of Comprehensive Income as
gains or losses from investments held at fair value through profit
or loss. Transaction costs incurred on the purchase and disposal of
investments are included within the cost or deducted from the
proceeds of the investments. All purchases and sales are accounted
for on trade date.
E) FOREIGN CURRENCY
Transactions denominated in currencies other than US Dollars are
recorded at the rates of exchange prevailing on the date of the
transaction. Items which are denominated in foreign currencies are
translated at the rates prevailing on the balance sheet date. Any
gain or loss arising from a change in exchange rate subsequent to
the date of the transaction is included as an exchange gain or loss
in the Condensed Statement of Comprehensive Income.
F) INCOME
There are four main sources of revenue for the Company: interest
income, royalty revenue, make-whole and prepayment income, and
dividends.
Interest income is recognised when it is probable that the
economic benefits will flow to the Company. Interest is accrued on
a time basis, by reference to the principal outstanding and the
effective interest rate that is applicable. Accrued interest is
included within trade and other receivables on the Condensed
Statement of Financial Position.
Any accrued income is reflected in the fair value of the
Company's limited partnership interest, and is allocated to capital
within the Condensed Statement of Comprehensive Income until the
Company's right to receive the income is established, when it is
transferred to revenue within the Condensed Statement of
Comprehensive Income and are amortized under the effective interest
rate method.
Royalty revenue is recognised on an accrual basis in accordance
with the substance of the relevant agreement (provided that it is
probable that the economic benefits will flow to the Company and
the amount of revenue can be measured reliably). Royalty
arrangements that are based on production, sales and other measures
are recognised by reference to the underlying arrangement.
Make-whole and prepayment income is recognised when payments are
received by the Company and is recorded to revenue with the
Statement of Comprehensive Income.
Dividends are receivable on equity shares and recognised on the
ex-dividend date. Where no ex-dividend date is quoted, dividends
are recognised when the Company's right to receive payment is
established. Dividends from investments in unquoted shares and
securities are recognised when they become receivable.
Some investments include additional consideration in the form of
structuring fees, which are paid on completion of the transaction.
From 1 January 2020, such fees are recognised over the life of the
investment. Prior to this date they were recognised at the funding
date. The impact of this change is immaterial. These fees are
allocated to revenue within the Condensed Statement of
Comprehensive Income.
Some investments include paydown fees, which are paid when the
investment is repaid, From 1 January 2020, such fees are recognised
over the life of the repayment period. The impact of this change is
immaterial. These fees are allocated to revenue within the
Condensed Statement of Comprehensive Income.
Bank interest and other interest receivable are accounted for on
an accruals basis.
G) DIVIDS PAID TO SHAREHOLDERS
Dividends to shareholders are recognised as a liability in the
year which they are paid or approved by the Board and are taken to
in the Condensed Statement of Changes in Equity. Dividends declared
and approved after the balance sheet date are not recognised as a
liability of the Company at the balance sheet date.
The Company may, if it so chooses, designate as an "interest
distribution' all or part of the amount it distributes to
shareholders as dividends, to the extent that it has 'qualifying
interest income' for the accounting period. Were the Company to
designate any dividend it pays in this manner, it should be able to
deduct such interest distributions from its income in calculating
its taxable profit for the relevant accounting period. The Company
intends to elect for the 'streaming' regime to apply to the
dividend payments it makes to the extent that it has such
'qualifying interest income'. Shareholders in receipt of such a
dividend will be treated, for UK tax purposes, as though they had
received a payment of interest, which results in a reduction of the
corporation tax payable by the Company.
H) EXPENSES
All expenses are accounted for on an accruals basis. Expenses,
including investment management fees, performance fees and finance
costs, are charged through the revenue account except as
follows:
-- expenses which are incidental to the acquisition or disposal
of an investment are treated as capital costs and separately
identified and disclosed in Note 4; and
-- expenses of a capital nature are accounted for through the
capital account.
The performance fee is considered to be an annual fee and is
only recognised at the end of each performance period. It is
calculated in accordance with the details in note 4(b) below. Any
performance fee triggered, whether payable or deferred, is
recognised in the Condensed Statement of Comprehensive Income.
Where a performance fee is payable it is treated as a current
liability in the Condensed Statement of Financial Position. Where a
performance fee is deferred, it is treated as a non-current
liability in the Condensed Statement of Financial Position. It
becomes payable to the Investment Manager at the end of the first
performance period in respect to which the compounding condition is
satisfied.
I) TRADE AND OTHER RECEIVABLES
Trade and other receivables do not accrue interest and are
measured at fair value through profit and loss and reduced by
appropriate allowances for estimated unrecoverable amounts, where
necessary. The Company assesses, on a forward-looking basis, the
expected credit losses associated with its trade and other
receivables. The Company applies the simplified approach permitted
by IFRS 9, which requires expected lifetime losses to be recognised
from initial recognition of the receivables. The identified
impairment loss is considered immaterial.
J) CASH AND CASH EQUIVALENTS
Cash and cash equivalents are defined as cash in hand, demand
deposits, and short-term, highly-liquid investments readily
convertible to known amounts of cash and subject to insignificant
risk of changes in value.
K) TRADE AND OTHER PAYABLES
Trade and other payables do not accrue interest and are measured
at fair value through profit and loss.
L) TAXATION
Tax on the profit or loss for the period comprises current and
deferred tax. Corporation tax is recognised in the Condensed
Statement of Comprehensive Income.
Current tax is the expected tax payable on the taxable income
for the period, using tax rates enacted or substantively enacted at
the balance sheet date and any adjustment to tax payable in respect
of previous periods. The tax effect of different items of
expenditure is allocated between revenue and capital on the same
basis as the particular item to which it relates, using the
Company's marginal method of tax, as applied to those items
allocated to revenue, for the accounting period.
Deferred tax is provided, using the liability method, on all
temporary differences at the balance sheet date between the tax
basis of assets and liabilities and their carrying amount for
financial reporting purposes. Deferred tax liabilities are measured
at the tax rates that are expected to apply to the period when the
liability is settled, based on tax rates (and tax laws) that have
been enacted or substantively enacted at the balance sheet
date.
M) SHARE CAPITAL AND RESERVES
The share capital represents the nominal value of the Company's
ordinary shares.
The share premium account represents the excess over nominal
value of the fair value of consideration received for the Company's
ordinary shares, net of expenses of the share issue.
The special distributable reserve was created on 30 June 2017 to
enable the Company to buy back its own shares and pay dividends out
of such distributable reserve, in each case when the Directors
consider it appropriate to do so, and for other corporate
purposes.
The capital reserve represents realised and unrealised capital
and exchange gains and losses on the disposal and revaluation of
investments and of foreign currency items. The realised capital
reserve can be used for the repurchase of shares.
The revenue reserve represents retained profits from the income
derived from holding investment assets less the costs and interest
on cash balances associated with running the Company. This reserve
can be distributed.
N) CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The preparation of these financial statements in conformity with
IFRS requires the Directors to make accounting estimates which will
not always equal the actual results. The Directors also need to
exercise judgement in applying the Company's accounting
policies.
This note provides an overview of the areas that involve a
higher degree of judgement or complexity and of items which are
more likely to be materially adjusted due to estimates and
judgements included in other notes, together with information about
the basis of calculation for each line in the financial
statements.
In particular, judgements and estimates are made in determining
the fair valuation of unquoted investments for which there is no
observable market and may cause material adjustments to the
carrying value of those investments. Determining fair value of
investments with unobservable market inputs is an area involving
management judgement, requiring assessment as to whether the value
of assets can be supported by the net present value of future cash
flows derived from such assets using cash flow projections which
have been discounted at an appropriate rate. In calculating the net
present value of the future cash flows, certain assumptions are
required to be made including management's expectations of short
and long term growth rates in product sales and the selection of
discount rates to reflect the risks involved. These are valued in
accordance with Note 2(D) above and using the valuation techniques
described in Note 7 below.
Also, judgements are made when determining any deferred
performance fee; this may be affected by future changes in the
Company's portfolio and other assets and liabilities. Any deferred
performance fee is calculated in accordance with note 4(B) below
and is recognised in accordance with note 2(H) above.
These judgements and estimates are reviewed on an ongoing basis.
Revisions to these judgements and estimates are reviewed on an
ongoing basis. Revisions are recognised prospectively.
O) NEW ACCOUNTING STANDARDS EFFECTIVE SINCE 1 JANUARY 2020
Amendment to IFRS 3 'Business Combinations'
The Directors have considered the implications of the amendments
to IFRS 3 and are of the opinion that the Company's subsidiaries
are already measured at fair value. Therefore, there has been no
impact on the current and comparative financial statements for this
accounting standard.
Definition of Material (Amendments to IAS 1 and IAS 8)
The Directors have considered the implications of the amendments
to IAS 1 and IAS 8 and are of the opinion that there is no impact
to the Company. Therefore, there has been no impact on the current
and comparative financial statements for this accounting
standard.
P) ACCOUNTING STANDARDS NOT YET EFFECTIVE
The IASB and International Financial Reporting Interpretations
Committee ("IFRIC") have issued and endorsed the following
standards and interpretations, applicable to the Company, which are
not yet effective for the period ended 30 June 2020 and have
therefore not been applied in preparing these financial
statements.
COVID-19-Related Rent Concessions (Amendment to IFRS 16) -
amending the standard to provide lessees with an exemption from
assessing whether a COVID-19-related rent concession is a lease
modification, effective for annual reporting periods beginning on
or after 1 June 2020.
The Directors do not expect that the adoption of the standards
and interpretations will have a material impact on the financial
statements.
Other future development includes the IASB undertaking a
comprehensive review of existing IFRSs. The Company will consider
the financial impact of these new standards as they are
finalised.
3. INCOME
Period ended Period ended
30 June 2020 30 June 2019
$000 $000
---------------------------------------- -------------------------- -------------
Income from investments
US unfranked investment income from
BioPharma III - 844
US unfranked investment income from
BPCR Ongdapa 3,440 4,133
US fixed interest investment income 19,633 12,397
US floating interest investment income 21,826 19,669
US make whole interest investment
income* - 36,102
Paydown fee** 427 -
Prepayment premium*** - 9,600
Additional consideration received**** 467 1,200
---------------------------------------- -------------------------- -------------
45,793 84,005
Other income
Interest income from liquidity/money
market funds 1,033 3,539
Interest income from US treasury bonds - 2,628
Other interest - 19
----------------------------------------
1,033 6,186
Total income 46,826 90,191
---------------------------------------- -------------------------- -------------
* In 2019 the Company's senior secured term loan to Tesaro
included make whole interest investment income of $36,102,000,
which was paid upon the loan repayment and recognised as income in
the year.
** In 2020 the Company's senior secured term loans to Sarepta
and GBT included paydown fees of $357,000 and $70,000.
*** In 2019 the Company's senior secured term loan to Tesaro
included a prepayment premium of $9,660,000, which was paid upon
the loan repayment and recognised as income in the year.
**** In 2020 the Company's senior secured term loan to Collegium
included additional consideration in the form of structuring fees
of $4,125,000 which was paid upon the completion of the transaction
and $467,000 of this amount recognised as income in the period. In
2019 the Company's senior secured term loan to Biodelivery Sciences
included additional consideration in the form of structuring fees
of $1,200,000 which was paid upon the completion of the transaction
and recognised as income in the period.
4. FEES AND EXPENSES
Expenses
Period ended 30 June Period ended 30 June
2020 2019
Revenue Capital Total Revenue Capital Total
------------------------
GBP000 $000 $000 GBP000 $000 $000
------------------------ -------- -------- ------ -------- -------- --------
Management fee
(note 4a) 6,872 - 6,872 7,053 - 7,053
------------------------ -------- -------- ------ -------- -------- --------
Directors' fees
(note 4c) 198 - 198 191 - 191
------------------------ -------- -------- ------ -------- -------- --------
Other expenses
Company Secretarial
fee 42 - 42 44 - 44
Administration
fee 56 - 56 62 - 62
Legal & professional
fees 263 - 263 (1,029) - (1,029)
Public relations
fees 105 - 105 96 - 96
Auditor's remuneration
- statutory audit 130 - 130 167 - 167
Auditor's remuneration
- other audit-related
services - interim
review 37 - 37 37 - 37
Auditor's remuneration
- other audit-related
services - Agreed
upon procedures 9 - 9
Other expenses 235 - 235 216 48 264
------------------------ -------- -------- ------ -------- -------- --------
877 - 877 (407) 48 (359)
------------------------ -------- -------- ------ -------- -------- --------
Total expenses 7,947 - 7,947 6,837 48 6,885
------------------------ -------- -------- ------ -------- -------- --------
The negative balance of legal fees in the prior period relates
to the reversal of an accrual for legal work carried out in
relation to a potential revolving credit facility. Following a
negotiation of the fee subsequent to the year end, the amount paid
in respect of the services was revised down from $1,658,000 to
$500,000.
A) INVESTMENT MANAGEMENT FEE
With effect from the Initial Admission, the Investment Manager
is entitled to a management fee ("Management Fee") calculated on
the following basis: 1/12 of 1 per cent. of the NAV on the last
business day of the month in respect of which the Management Fee is
to be paid (calculated before deducting any accrued Management Fee
in respect of such month) minus (1/12 of $100,000).
The Management Fee payable in respect of any quarter will be
reduced by an amount equal to the Company's pro rata share of any
transaction fees, topping fees, break-up fees, investment banking
fees, closing fees, consulting fees or other similar fees which the
Investment Manager (or an affiliate) receives in connection with
transactions involving investments of the Company ("Transaction
Fees"). The Company's pro rata share of any Transaction Fees will
be in proportion to the Company's economic interest in the
investment(s) to which such Transaction Fees relate.
B) PERFORMANCE FEE
Subject to: (i) the NAV attributable to the Ordinary Shares as
at the end of a performance period representing a minimum of 6 per
cent. annualised rate of return annualised on the Company's IPO
gross proceeds (adjusted for dividends, share issues and buybacks
as appropriate), (ii) the total return on the NAV attributable to
the Ordinary Shares (adjusted for dividends, share issues and
buybacks as appropriate) exceeding 6 per cent. over such
performance period, and (iii) a high watermark, the Investment
Manager will be entitled to receive a performance fee equal to the
lesser of: (a) 50 per cent. of the total return above 6 per cent.;
and (b) 10 per cent. of the total return over such performance
period provided always that the amount of any performance fee
payable to the Investment Manager will be reduced to the extent
necessary to ensure that after account is taken of such fee,
condition (iii) above remains satisfied.
Where the Investment Manager is not entitled to a performance
fee solely because condition (i) has not been satisfied, such fee
will be deferred and paid in a subsequent performance period in
which such condition is satisfied. Where condition (i) is satisfied
in a performance period but the payment of a performance fee (or
any deferred performance fee from previous performance periods) in
full would result in that condition failing, the Investment Manager
shall be entitled to such a portion of such fee that does not
result in the failure of the condition (i) above and the balance
would be deferred to a future performance period.
Any performance fee (whether deferred or otherwise) shall be
paid as soon as practicable after the end of the relevant
performance period and, in any event, within 15 business days of
the publication of the Company's audited annual financial
statements relating to such period.
The Board of Directors approved an amendment, effective 19
September 2018, to the performance fee provisions. The amendment
was to provide that where the payment of performance fee (or any
deferred performance fee from previous performance periods) in full
would result in the failure of condition (i) above, the Investment
Manager shall only be entitled to 50 per cent. of such fee that
does not result in the failure of condition (i) with the balance
being deferred to a future performance period.
If, during the last month of a performance period, the Shares
have, on average, traded at a discount of 1 per cent. or more to
the NAV per Share (calculated by comparing the middle market
quotation of the Shares at the end of each business day in the
month to the prevailing published NAV per Share (exclusive of any
dividend declared) as at the end of such business day and averaging
this comparative figure over the month), the Investment Manager
shall (or shall procure that its Associate does) apply 50 per cent.
of any Performance Fee paid by the Company to the Investment
Manager (or its Associate) in respect of that performance period
(net of all taxes and charges applicable to such portion of the
Performance Fee) to make market acquisitions of Shares (the
"Performance Shares") as soon as practicable following the payment
of the Performance Fee by the Company to the Investment Manager (or
its Associate) and at least until such time as the Shares have, on
average, traded at a discount of less than 1 per cent. to the NAV
per Share over a period of five business days (calculated by
comparing the middle market quotation of the Shares at the end of
each such business day to the prevailing published NAV per Share
(exclusive of any dividend declared) and averaging this comparative
figure over the period of five business days). The Investment
Manager's obligation:
1) shall not apply to the extent that the acquisition of the
Performance Shares would require the Investment Manager to make a
mandatory bid under Rule 9 of the Takeover Code; and
2) shall expire at the end of the performance period which
immediately follows the performance period to which the obligation
relates.
The below table shows the accrued
and payable performance fee.
As at As at
30 June 30 June At 31 December
2020 2019 2019
$000 $000 $000
Accrued
performance
fee - - 13,570
Performance
fee payable - - 21,364
Performance
fee deferred 564 - 731
During the period a performance fee
of $20,968,000 was paid to Pharmakon.
The Performance Fee for a performance period shall be paid as
soon as practicable after the end of the relevant performance
period and, in any event, within three calendar months of the end
of such performance period.
C) DIRECTORS
Each of the Directors is entitled to receive a fee from the
Company at such rate as may be determined in accordance with the
Articles. The Directors' remuneration is $70,000 per annum for each
Director other than:
-- the Chairman, who receives an additional $30,000 per annum;
and
-- the Chairman of the Audit and Risk Committee, who receives an
additional $15,000 per annum.
5. TAXATION ON ORDINARY ACTIVITIES
It is the intention of the Directors to conduct the affairs of
the Company so as to satisfy the conditions for approval of the
Company by HMRC as an investment trust under Section 1158 of the
Corporation Tax Act 2010 (as amended) and pursuant to regulations
made under Section 1159 of the Corporation Tax Act 2010. As an
investment trust, the Company is exempt from corporation tax on
capital gains.
The current taxation charge for the period is different from the
standard rate of corporation tax in the UK of 19.00 per cent. The
effective tax rate was 0.00 per cent. The differences are explained
below.
Period ended 30 June Period ended 30 June
2020 2019
Revenue Capital Total Revenue Capital Total
$000 $000 $000 $000 $000 $000
-------------------------- -------- -------- -------- --------- -------- ---------
Total return on ordinary
activities before
taxation 38,879 1,487 40,366 83,354 (3,420) 79,934
-------------------------- -------- -------- -------- --------- -------- ---------
Theoretical tax at
UK Corporation tax
rate of 19.00% (30
June 2019: 19.00%)* 7,387 283 7,670 15,837 (650) 15,187
Effects of:
Capital items that
are not taxable - (283) (283) - 650 650
Tax deductible interest
distributions (7,387) - (7,387) (15,837) - (15,837)
-------------------------- -------- -------- -------- --------- -------- ---------
Total tax charge - - - - - -
-------------------------- -------- -------- -------- --------- -------- ---------
* The theoretical tax rate is calculated using a blended tax
rate over the period.
At 30 June 2020, the Company had no unprovided deferred tax
liabilities. At that date, based on current estimates and including
the accumulation of net allowable losses, the Company had no
unrelieved losses.
Deferred tax is not provided on capital gains and losses arising
on the revaluation or disposal of investments because the Company
meets (and intends to continue to meet for the foreseeable future
to meet) the conditions for approval as an Investment Trust
company.
6. DIVIDS
Dividends paid in respect of the period under review:
Period ended 30 June 2020 Period ended 30 June 2019
Revenue Capital* Total Revenue Capital Total
$000 $000 $000 $000 $000 $000
------------------------------------------------------ --------- ---------- ------- ---------- --------- -------
First interim dividend of $0.0175 per Ordinary share
(2019: $0.0175 per Ordinary share) 24,044 - 24,044 - 24,044 24,044
In respect of the previous period ended 31 December
2019:
Special dividend of $0.0128 per Ordinary share (2019:
$nil per Ordinary share) 17,586 - 17,586 - - -
Fourth interim dividend of $0.0175 per Ordinary share 24,044 - 24,044 22,804 1,240 24,044
Second special dividend of $0.00177441 per Ordinary
share - - - - 2,438 2,438
65,674 65,674 22,804 27,722 50,526
------------------------------------------------------ --------- ---------- ------- ---------- --------- -------
7. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS
As at As at
-----------------------------------------------
30 June 31 December
-----------------------------------------------
2020 2019
$000 $000
----------------------------------------------- ---------- ------------
Investment portfolio summary
Listed investments at fair value through
profit and loss 11,751 16,980
Listed fixed interest investments through
profit and loss 4,376 19,656
Unlisted investments in subsidiaries measured
at fair value through profit and loss 1,082,148 -
Unlisted fixed interest investments at
fair value through profit and loss 125,796 495,525
Unlisted floating interest investments
at fair value through profit and loss 122,013 583,966
1,346,084 1,116,127
----------------------------------------------- ---------- ------------
Period ended 30 June 2020
Unlisted Unlisted
Listed fixed investments Unlisted fixed floating
-------------------------------
Listed interest in interest interest
-------------------------------
investments investments subsidiaries investments investments Total
$000 $000 $000 $000 $000 $000
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
Investment portfolio
summary
Opening cost at beginning
of period 13,544 19,950 - 494,738 584,366 1,112,598
Opening unrealised
appreciation/ (depreciation)
at beginning of period 3,436 (294) - 787 (400) 3,529
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
Opening fair value
at beginning of period 495,525 583,966 1,116,127
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
Movements in the period:
Purchases at cost - - - 16,500 209,636 226,136
Redemption and sales
proceeds - (10,753) - - (8,308) (19,061)
Transfer of assets
to subsidiary* - - 1,070,139 (385,500) (663,281) 21,358
Realised loss on sale
of investments - (247) - - (400) (647)
Movement in unrealised
/(depreciation)/appreciation (5,229) (4,280) 12,009 (729) 400 2,171
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
-
Closing fair value
at the end of the
period 11,751 4,376 1,082,148 125,796 122,013 1,346,084
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
Closing cost at end
of period 13,544 8,950 1,070,139 125,738 122,013 1,340,384
Closing unrealised
(depreciation)/appreciation
at end of period (1,793) (4,574) 12,009 58 - 5,700
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
Closing fair value
at the end of the
period 11,751 4,376 1,082,148 125,796 122,013 1,346,084
------------------------------- ------------ ------------- ------------- --------------- ------------ ----------
*On 22 May 2020, the Company transferred the full carrying
amount of several investments to its newly incorporated,
wholly-owned subsidiary BPCR LP in return for an investment in BPCR
LP of the same amount $1,048 million. The balance on the transfer
line $21 million relates to accrued income which is subsequently
reflected in the fair value of BPCR LP, previously disclosed as
part of trade and other receivables in the Company and expenses
paid on the behalf of BPCR LP.
Period
Period ended ended
30 June 30 June
2020 2019
$000 $000
--------------------------- ---- ---- ------------- ---------
Realised gains on sale of
investments (647) -
--------------------------- ---- ---- ------------- ---------
Unrealised appreciation/
(depreciation) 2,171 (3,366)
--------------------------------------- ------------- ---------
1,524 (3,366)
In addition, legal fees incidental to the acquisition of
investments totalled $nil (30 June 2019: $48,000 and 31 December
2019: $48,000) as disclosed in Note 4, have been taken to the
capital column in the Condensed Statement of Comprehensive Income
since they are capital in nature.
The Company is required to classify fair value measurements
using a fair value hierarchy that reflects the significance of the
inputs used in making the measurements. The fair value hierarchy
consists of the following three levels:
-- Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
-- Level 2 - Inputs other than quoted prices included within
Level 1 that are observable for the asset or liability, either
directly (that is, as prices) or indirectly (that is, derived from
prices).
-- Level 3 - Inputs for the asset or liability that are not
based on observable market data (unobservable inputs).
The level of the fair value hierarchy, within which the fair
value measurement is categorised, is determined on the basis of the
lowest level input that is significant to the fair value of the
investment. The level of the fair value hierarchy, within which the
fair value measurement is categorised, is determined on the basis
of the lowest level input that is significant to the fair value of
the investment.
As at 30 June 2020
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
---------------------------- -------- -------- ---------- ----------
Investment portfolio
summary
Listed investments
at fair value through
profit and loss 11,751 - - 11,751
Listed fixed interest
investments at fair
value through profit
or loss 4,376 - - 4,376
Unlisted investments
in subsidiaries measured
at fair value through
profit and loss - - 1,082,148 1,082,148
Unlisted fixed interest
investments at fair
value through profit
and loss - 1,296 124,500 125,796
---------------------------- -------- -------- ---------- ----------
Unlisted floating interest
investments at fair
value through profit
and loss - - 122,013 122,013
---------------------------- -------- -------- ---------- ----------
16,127 1,296 1,328,661 1,346,084
Liquidity/money market
funds 44,091 - - 44,091
---------------------------- -------- -------- ---------- ----------
Total 60,218 1,296 1,328,661 1,390,175
---------------------------- -------- -------- ---------- ----------
As at 31 December 2019
Level 1 Level 2 Level 3 Total
$000 $000 $000 $000
---------------------------- -------- -------- ---------- ----------
Investment portfolio
summary
---------------------------- -------- -------- ---------- ----------
Listed investments at
fair value through profit
and loss 16,980 - - 16,980
Listed fixed interest
investments at fair
value through profit
and loss 19,656 - - 19,656
Unlisted investments
in subsidiaries measured
at fair value through
profit and loss - - - -
Unlisted fixed interest
investments at fair
value through profit
and loss - 2,025 493,500 495,525
Unlisted floating interest
investments at fair
value through profit
and loss - - 583,966 583,966
---------------------------- -------- -------- ---------- ----------
36,636 2,025 1,077,466 1,116,127
Liquidity/money market
funds 291,025 - - 291,025
---------------------------- -------- -------- ---------- ----------
Total 327,661 2,025 1,077,466 1,407,152
---------------------------- -------- -------- ---------- ----------
A reconciliation of fair value measurements in Level 3 is set
out below.
LEVEL 3 FINANCIAL ASSETS AT FAIR VALUE THROUGH PROFIT OR
LOSS
Period ended 30 June 2020
Unlisted Unlisted Unlisted
----------------------
investments fixed floating
----------------------
in interest
subsidiaries investments interest investments Total
---------------------- -------------- ------------- --------------------- ----------
$000 $000 $000 $000
---------------------- -------------- ------------- --------------------- ----------
Opening balance - 493,500 583,966 1,077,466
Purchases - 16,500 209,636 226,136
Redemptions* - - (8,308) (8,308)
Transfer of assets
to subsidiary** 1,070,139 (385,500) (663,281) 21,358
Realised loss on
sale of investments - - (400) (400)
Change in unrealised
appreciation 12,009 - 400 12,409
Closing balance
at 30 June 2020 1,082,148 124,500 122,013 1,328,661
---------------------- -------------- ------------- --------------------- ----------
* Redemptions are the proceeds received from the repayment of
investments.
** On 22 May 2020, the Company transferred the full carrying
amount of several investments to its newly incorporated,
wholly-owned subsidiary BPCR LP in return for an investment in BPCR
LP of the same amount $1,048 million. The balance on the transfer
line $21 million relates to accrued income which is subsequently
reflected in the fair value of BPCR LP, previously disclosed as
part of trade and other receivables in the Company and expenses
paid on the behalf of BPCR LP.
There were no transfers between levels during the period.
VALUATION TECHNIQUES
Unrealised gains and losses recorded on Level 1 financial
instruments ae reported in net gains on investments at fair value
on the Condensed Statement of Comprehensive Income. The fund
administrator utilises quoted prices in active markets that they
have access to and the Investment Manager verifies the quoted
prices on Bloomberg.
Unrealised gains and losses recorded on Level 2 and 3 financial
instruments are reported in net gains on investments at fair value
on the Condensed Statement of Comprehensive Income. Level 2 and
Level 3 financial instruments are fair valued using inputs that
reflect management's best estimate of what market participants
would use in pricing the assets or liabilities at the measurement
date. Consideration is given to the risk inherent in the valuation
techniques and the risk inherent in the inputs of the model.
Level 3 financial instruments ae fair valued using a discounted
cash flow methodology. For capped royalty investments, discount
rates are applied to the consensus forecasts or the manager's
forecast for sales of the underlying products to determine fair
value. The significant unobservable input used in the fair value
measurement of the Company's Level 3 investments is the discount
rate used to discount future cash flows from borrowers. Significant
increases (decreases) in the discount rate would result in a
significantly lower (higher) fair value measurement. The Investment
Manager believes 10 per cent. is an appropriate threshold for
determining a reasonably possible change in fair value.
Investments held in subsidiaries, namely BPCR LP, are based on
the fair value of the investments held in those entities.
The Company's unlisted investments are all classified as Level 3
investments. The fair values of the unlisted investments have been
determined principally by reference to discounted cash flows. The
sensitivity analysis includes both the investments of the company
and the investments held in the subsidiary, namely BPCR LP. The
significant unobservable input used is detailed below:
As at 30 June 2020
Fair value
at Level
3 financial Fair value Fair value
assets sensitivity sensitivity
at fair to a 100bps to a 100bps
value decrease increase
through in the in the
profit Valuation Unobservable Discount discount discount
Assets or loss technique input rate rate rate
$000 $000 $000
------------------------- ------------- ------------ ------------- --------- ----------------- ----------------
Discounted Discount
Lexicon Pharmaceuticals 124,500 cash flow rate 10.4% 127,405 122,468
Discounted Discount
Sebela 122,013 cash flow rate 11.3% 123,105 120,944
Assets held
by BPCR LP
Discounted Discount
Akebia 40,000 cash flow rate 11.0% 40,968 39,067
Discounted Discount
Amicus 150,000 cash flow rate 9.9% 153,285 146,821
Discounted Discount
BDSI 80,000 cash flow rate 11.1% 81,995 8,080
Discounted Discount
BMS 162,032 cash flow rate 10.9% 165,737 158,474
Other assets
of BPCR LP 33,679
Discounted Discount
Collegium 154,687 cash flow rate 11.7% 156,824 152,612
Discounted Discount
Epizyme 35,000 cash flow rate 11.2% 5,904 34,130
Global Blood Discounted Discount
Therapeutics 41,250 cash flow rate 10.7% 42,467 40,084
Discounted Discount
Novocure 150,000 cash flow rate 10.6% 152,881 147,203
OptiNose Discounted Discount
US 60,500 cash flow rate 12.5% 61,920 59,130
Discounted Discount
Sarepta Therapeutics 175,000 cash flow rate 10.3% 179,497 170,667
1,328,611 1,321,988 1,269,680
As at 31 December 2019
-------------------------------------------------------------------------- --------------------
Fair value Fair value Fair value
at Level 3 sensitivity sensitivity
financial to a 100bps to a 100bps
assets at fair decrease increase
value through Valuation Unobservable Discount in the discount in the discount
Assets profit or loss technique input rate rate rate
-------------------- ---------------- ----------- ------------- --------- ----------------- --------------------
$000 $000 $000
-------------------- ---------------- ----------- ------------- --------- ----------------- --------------------
Discounted Discount
Akebia 40,000 cash flow rate 10.9% 41,103 38,941
Discounted Discount
Amicus 150,000 cash flow rate 11.3% 153,937 146,211
Discounted Discount
BDSI 60,000 cash flow rate 11.5% 61,670 58,398
Discounted Discount
BMS 149,896 cash flow rate 10.4% 154,172 145,803
BPCR LP - - - - - -
Collegium - - - - - -
Discounted Discount
Epizyme 12,500 cash flow rate 10.7% 12,888 12,129
Global Blood Discounted Discount
Therapeutics 41,250 cash flow rate 9.9% 42,705 39,865
Lexicon Discounted Discount
Pharmaceuticals 124,500 cash flow rate 10.4% 127,451 121,649
Discounted Discount
Novocure 150,000 cash flow rate 10.4% 153,433 146,681
Discounted Discount
OptiNose US 44,000 cash flow rate 12.4% 45,174 42,871
Sarepta Discounted Discount
Therapeutics 175,000 cash flow rate 10.1% 180,112 170,094
Discounted Discount
Sebela 130,320 cash flow rate 12.6% 131,630 128,728
1,077,466 1,104,275 1,051,370
-------------------- ---------------- ----------- ------------- --------- ----------------- --------------------
8. TRADE AND OTHER RECEIVABLES
As at As at
----------------------------------------------------------
30 June 31 December
----------------------------------------------------------
2020 2019
$000 $000
---------------------------------------------------------- -------- ------------
Listed fixed interest income receivable 114 26
Unlisted fixed interest income receivable 2,832 3,061
Unlisted floating interest income receivable - 3,938
Interest accrued on liquidity/money market funds 4 429
US floating interest income receivable from BPCR Ongdapa - 8,417
Other debtors 273 335
---------------------------------------------------------- -------- ------------
3,223 16,206
---------------------------------------------------------- -------- ------------
A portion of trade and other receivables relating to accrued
interest were transferred to BPCR LP on 22 May 2020 and is now
reflected in the fair value of BPCR LP.
9. CASH AND CASH EQUIVALENTS
As at As at
------------------------------
30 June 31 December
------------------------------
2020 2019
$000 $000
------------------------------ -------- ------------
Cash at bank 16,697 5,613
Liquidity/money market funds 44,091 291,025
61,058 296,638
------------------------------ -------- ------------
10. TRADE AND OTHER PAYABLES
As at As at
30 June 31 December
2020 2019
$000 $000
-------------------------- -------- ------------
Current liabilities
Amounts due to BPCR LP 27,598 -
Performance fee payable - 20,633
Management fees accrual 3,427 3,496
Accruals 348 375
31,373 24,504
-------------------------- -------- ------------
Non-current liabilities
Deferred performance fee 564 731
-------------------------- -------- ------------
31,937 25,235
-------------------------- -------- ------------
The amounts due to BPCR LP relate to items received by the
Company on behalf of BPCR LP. This amount is unsecured and interest
free.
11. RETURN PER ORDINARY SHARE
Revenue return per ordinary share is based on the net revenue
after taxation of $38,879,000 (30 June 2019: $83,354,000) and
1,373,932,067 (30 June 2019: 1,373,932,067) ordinary shares, being
the weighted average number of ordinary shares for the period.
Capital return per ordinary share is based on net capital gain
for the period of $1,487,000 (30 June 2019: loss $3,420,000) and on
1,373,932,067 (30 June 2019:1,373,932,067) ordinary shares, being
the weighted average number of ordinary shares for the period.
Basic and diluted return per share are the same as there are no
arrangements which could have a dilutive effect on the Company's
ordinary shares.
12. NET ASSET VALUE PER ORDINARY SHARE
The basic total net assets per ordinary share is based on the
net assets attributable to equity shareholders at 30 June 2020 of
$1,378,428,000 (30 June 2019: $1,409,430,000 and 31 December 2019:
$1,403,736,000) and ordinary shares of 1,373,932,067 (30 June 2019:
1,373,932,067 and 31 December 2019: 1,373,932,067), being the
number of ordinary shares in issue at 30 June 2020.
There is no dilution effect and therefore there is no difference
between the diluted total net assets per ordinary share and the
basic total net assets per ordinary share.
13. SHARE CAPITAL
Period ended Year ended
30 June 2020 31 December 2019
Number of Number of
---------------------------
shares $000 shares $000
--------------------------- -------------- ------- -------------- -------
Issued and fully paid:
Ordinary shares of $0.01:
Balance at beginning
of the period 1,373,932,067 13,739 1,373,932,067 13,739
Balance at end of the
period 1,373,932,067 13,739 1,373,932,067 13,739
--------------------------- -------------- ------- -------------- -------
Total voting rights at 30 June 2020 were 1,373,932,067 (31
December 2019: 1,373,932,067).
14. SUBSIDIARIES
The Company formed a wholly-owned subsidiary, BPCR Ongdapa
Limited ("BPCR Ongdapa"), incorporated in Ireland on 5 October 2017
for the purpose of entering into a purchase, sale and assignment
agreement with a wholly-owned subsidiary of Royalty Pharma for the
purchase of a 50 per cent. interest in a stream of payments
acquired by Royalty Pharma from Bristol-Myers Squibb ("BMS"). In
accordance with IFRS 10, the Company is exempt from consolidating a
controlled investee as an investment trust. Therefore, the
Company's investment in BPCR Ongdapa is recognised at fair value
through profit and loss. The registered address for BPCR Ongdapa is
BPCR Ongdapa Limited, 2 Grand Canal Square, Grand Canal Harbour,
Dublin, Ireland. The aggregate amount of its capital reserves as at
30 June 2020 is $1 (30 June 2019: $1 and 31 December 2019: $1) and
the profit and loss for the period ended 30 June 2020 is $nil (30
June 2019: $nil and 31 December 2019: $nil).
The Company formed a wholly-owned subsidiary, BPCR Limited
Partnership, incorporated in England and Wales on 27 March 2020 for
the purpose of entering into a three year $200 million revolving
credit facility with JPMorgan Chase Bank. BPCR Limited Partnership
has its registered office at 51 New North Road, Exeter, United
Kingdom, EX4 4EP and received an initial contribution of GBP1.00 at
formation from the Company, its sole Limited Partner. In accordance
with IFRS 10, the Company is exempt from consolidating a controlled
investee as an investment trust. Therefore, the Company's
investment in BPCR LP will be recognised at fair value through
profit and loss.
The General Partner for BPCR LP is BPCR GP Limited, incorporated
in England and Wales on 11 March 2020. In accordance with IFRS 10,
the Company is not exempt from consolidating. However, the
insignificance of BPCR GP Limited's account balances results in
consolidation providing a set of accounts with almost identical
balances to the Company. The registered address for BPCR GP Limited
is BPCR GP Limited, 51 New North Road, Exeter, United Kingdom, EX4
4EP. The aggregate amount of its capital reserves as at 30 June
2020 is $nil (2019: $nil) and the profit and loss for the period to
30 June 2020 is $nil (2019: $nil).
15. RECONCILIATION OF TOTAL RETURN FOR THE PERIOD BEFORE
TAXATION TO CASH
GENERATED FROM OPERATIONS
Period ended Period ended
---------------------------------------------
30 June 2020 30 June 2019
---------------------------------------------
$000 $000
--------------------------------------------- ------------- -------------
Total return for the period before taxation 40,366 79,934
Capital (gains)/losses (1,487) 3,372
Decrease in trade receivables 12,983 10,680
increase/(decrease) in trade payables 6,702 (1,553)
Additional consideration (400) -
Other assets transferred to BPCR LP* (21,358) -
--------------------------------------------- ------------- -------------
Cash generated from operations 36,806 92,433
--------------------------------------------- ------------- -------------
* On 22 May 2020, the Company transferred the full carrying
amount of several investments to its newly incorporated,
wholly-owned subsidiary BPCR LP in return for an investment in BPCR
LP of the same amount $1,048 million. The balance on the transfer
line $21 million relates to accrued income which is subsequently
reflected in the fair value of BPCR LP, previously disclosed as
part of trade and other receivables in the Company and expenses
paid on the behalf of BPCR LP.
ANALYSIS OF NET CASH AND NET DEBT
Net cash
At 1 January Exchange At 30 June
2020 Cash flow movement 2020
$000 $000 $000 $000
Cash and cash equivalents 296,638 (235,543) (37) 61,058
--------------------------- ------------- ---------- --------- -----------
16. FINANCIAL INSTRUMENTS
The Company's financial instruments include its investment
portfolio, cash balances, trade receivables and trade payables that
arise directly from its operations. Adherence to the Company's
investment policy is key in managing risk. Refer to the Strategic
Overview on pages 22 to 24 of the Company's annual financial
statements for the year ended 31 December 2019 for a full
description of the Company's investment objective and policy.
The Investment Manager monitors the financial risks affecting
the Company on an ongoing basis and the Directors regularly receive
financial information, which is used to identify and monitor risk.
All risks are actively reviewed and monitored by the Board. Details
of the Company's principal risks can be found in the Strategic
Report on pages 25 to 28 of the Company's annual financial
statements for the year ended 31 December 2019.
The main risks arising from the Company's financial instruments
are:
i) market risk, including price risk, currency risk and interest
rate risk;
ii) liquidity risk; and
iii) credit risk.
(i) Market risk
Market risk is the risk of loss arising from movements in
observable market variables. The fair value of future cash flows of
a financial instrument held by the Company may fluctuate because of
changes in market prices. The Investment Manager assesses the
exposure to market risk when making each investment decision and
these risks are monitored by the Investment Manager on a regular
basis and the Board at quarterly meetings with the Investment
Manager.
Market price risk
The Company is exposed to price risk arising from its
investments whose future prices are uncertain. The Company's
exposure to market price risk comprises movements in the value of
the Company's investments. See Note 7 above for investments that
fall into Level 3 of the fair value hierarchy and refer to the
description of valuation policies in Note 2(D). The nature of the
Company's investments, with a high proportion of the portfolio
invested in unlisted debt instruments, means that the investments
are valued by the Company after consideration of the most recent
available information from the underlying investments. The
Company's portfolio is diversified among counterparties and by the
sectors in which the underlying companies operate, minimising the
impact of any negative industry-specific trends.
The table below analyses the effect of a 10 per cent. change in
the fair value of investments. The Investment Manager believes 10
per cent. is the appropriate threshold for determining whether a
material change in market value has occurred.
As at 30 June 2020 As at 30 June 2019 At 31 December 2019
10 per 10 per 10 per
cent. Increase/ cent. Increase/ cent. Increase/
decrease decrease decrease
in market in market in market
Fair value value Fair value value Fair value value
$000 $000 $000 $000 $000 $000
---------------------- ----------- ----------------- ----------- ----------------- ----------- -----------------
Lexicon Senior
Secured Loan 124,500 12,450 124,500 12,450 124,500 12,450
Sebela Senior
Secured Loan 122,013 12,201 164,782 16,478 130,320 13,032
Biodelivery
Sciences
International
Equity 11,751 1,175 23,300 2,330 16,979 1,698
Convertible
bonds 4,376 438 21,337 2,134 19,656 1,966
OptiNose
US warrants 1,296 130 - - 2,026 203
Assets held
by BPCR LP
Sarepta Therapeutics 175,000 17,500 - - 175,000 17,500
BMS Purchased
Payments
(BPCR Ongdapa) 162,032 16,203 103,031 10,303 149,896 14,990
Collegium 154,687 15,469 - - - -
Amicus Senior
Secured Loan 150,000 15,000 150,000 15,000 150,000 15,000
Novocure
Senior Secured
Loan 150,000 15,000 150,000 15,000 150,000 15,000
Biodelivery
Sciences
International
Loan 80,000 8,000 60,000 6,000 60,000 6,000
OptiNose
US 60,500 6,050 - - 44,000 4,400
Global Blood
Therapeutics 41,250 4,125 - - 41,250 4,125
Akebia 40,000 4,000 - - 40,000 4,000
Epizyme 35,000 3,500 - - 12,500 1,250
Other Assets
of BPCR LP 33,679 3,368 - - - -
1,346,084 134,609 796,950 79,695 1,116,127 111,614
---------------------- ----------- ----------------- ----------- ----------------- ----------- -----------------
The Board manages the risks inherent in the investment portfolio
by ensuring full and timely reporting of relevant information from
the Investment Manager. Investment performance and exposure are
reviewed at each Board meeting.
Currency risk
Currency risk is the risk that fair values of future cash flows
of a financial instrument fluctuate because of changes in foreign
exchange rates.
At 30 June 2020, the Company held cash balances in GBP Sterling
of GBP20,000 ($24,000) (30 June 2019: GBP291,000 ($371,000) and 31
December 2019: GBPnil ($nil)) and in Euro of EUR10,000 ($11,000)
(30 June 2019: EUR3,000 ($4,000) and 31 December 2019: EUR3,000
($4,000)).
The currency exposures (including non-financial assets) of the
Company as at 30 June 2020:
Other net
-----------
assets/
-----------
Cash Investments (liabilities) Total
$000 $000 $000 $000
----------- ------- ------------ -------------- ----------
Sterling 24 - (33) (9)
Euro 11 - - 11
US Dollar 61,023 1,346,084 (28,681) 1,378,426
----------- ------- ------------ -------------- ----------
61,023 1,346,084 (28,714) 1,378,428
----------- ------- ------------ -------------- ----------
The currency exposures (including non-financial assets) of the
Company as at 30 June 2019:
Other net
-----------
assets/
Cash Investments (liabilities) Total
$000 $000 $000 $000
----------- -------- ------------ -------------- ----------
Sterling 371 - 2 373
Euro 4 - - 4
US Dollar 612,513 796,950 (410) 1,409,053
----------- -------- ------------ -------------- ----------
612,888 796,950 (408) 1,409,430
----------- -------- ------------ -------------- ----------
The currency exposures (including non-financial assets) of the
Company as at 31 December 2019:
Other net
-----------
assets/
Cash Investments (liabilities) Total
$000 $000 $000 $000
----------- -------- ------------ -------------- ----------
Sterling - - - -
Euro 4 - - 4
US Dollar 296,634 1,116,127 (9,230) 1,403,531
----------- -------- ------------ -------------- ----------
296,638 1,116,127 (9,230) 1,403,535
----------- -------- ------------ -------------- ----------
A 10 per cent. increase in the Sterling exchange rate would have
increased net assets by $21,000 (30 June 2019: $30,000 and 31
December 2019: $nil). A 10 per cent. decrease would have decreased
net assets by the same amount (30 June 2019: same and 31 December
2019: same).
Interest rate risk
Interest rate risk is the risk that fair value of future cash
flows of a financial instrument will fluctuate because of changes
in market interest rates. Interest rate movements may potentially
affect future cash flows from:
-- investments in fixed interest rate securities and unquoted
loans; and
-- the level of income receivable on cash deposits and liquidity
funds.
The Sarepta Therapeutics, Novocure, Lexicon, OptiNose US loans
and the convertible bond have a fixed interest rate and therefore
are not subject to interest rate risk. The below table shows the
percentage of the Company's net assets they represent.
As at As at
30 June 30 June At 31 December
2020 2019 2019
% of Company % of Company % of Company
Net Assets Net Assets Net Assets
Sarepta Therapeutics 12.70 - 12.47
Novocure Senior Secured Loan 10.88 10.64 10.69
Lexicon Senior Secured Loan 9.03 8.83 8.87
OptiNose US 4.39 - 3.13
Convertible bonds 0.32 1.51 1.40
The BMS Purchased Payments, the Collegium, Amicus, Sebela, BSI, Global
Blood Therapeutics, Akebia, and Epizyme loans and cash and cash equivalents,
including investments in liquidity funds, have a floating rate of
interest. The below table shows the percentage of the Company's net
assets they represent.
As at As at
30 June 30 June At 31 December
2020 2019 2019
% of Company % of Company % of Company
Net Assets Net Assets Net Assets
BMS Purchased Payments (BPCR Ongdapa) 11.75 7.31 10.68
Collegium 11.22 - -
Amicus Senior Secured Loan 10.88 10.64 10.69
Sebela Senior Secured Loan 8.85 11.69 9.28
Biodelivery Sciences International Loan 5.80 4.26 4.27
Global Blood Therapuetics 2.99 - 2.94
Akebia 2.90 - 2.85
Epizyme 2.54 - 0.89
Cash and cash equivalents 4.43 43.48 21.13
(ii) Liquidity risk
This is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities. At 30
June 2020, the Company had cash and cash equivalents, including
investments in liquidity/money market funds with balances of
$61,058,000 (30 June 2019: $612,888,000 and 31 December 2019:
$296,638,000) and maximum unfunded commitments of $248,250,000 (30
June 2019: $76,969,000 and 31 December 2019: $319,386,000).
The Company maintains sufficient liquid investments through its
cash and cash equivalents to pay accounts payable, accrued expenses
and ongoing expenses of the Company. Liquidity risk is manageable
through a number of options, including the Company's ability to
issue debt and/or equity and by selling all or a portion of an
investment in the secondary market. On 22 May 2020, the Company
entered into a $200 million revolving credit facility with JPMorgan
Chase Bank. This facility will increase the Company's flexibility
in relation to funding new lending opportunities and provide
liquidity for funding outstanding obligations.
(iii) Credit risk
This is the risk the Company's trade and other receivables will
not meet their obligations to the Company. While the Company will
often seek to be a secured lender for each debt asset, there is no
guarantee that the relevant borrower will repay the loan or that
the collateral will be sufficient to satisfy the amount owed. All
of the Company's investments are senior secured investments as
detailed in the Investment Manager's Report above.
When the Investment Manager makes an investment, the
creditworthiness of the counterparty is taken into account so as to
minimise the risk to the Company of default. Creditworthiness is
assessed on an ongoing basis and changes to a counterparty's risk
profile are monitored by the Investment Manager on a regular basis,
and discussed with the Board at quarterly meetings.
The Company's maximum exposure to credit risk at any given time
is the fair value of its investment portfolio. At 30 June 2020, the
Company's maximum exposure to credit risk was $1,346,084,000 (30
June 2019: $800,999,000 and 31 December 2019: $1,116,127,000). The
Company's concentration of credit risk by counterparty can be found
in the Investment Manager's Report above.
Capital management
The Company's primary objectives in relation to the management
of capital are:
-- to ensure its ability to continue as a going concern;
-- to ensure that the Company conducts its affairs to enable it
to continue to meet the criteria to qualify as an investment trust;
and
-- to maximise the long-term shareholder returns in the form of
sustainable income distributions through an appropriate balance of
equity capital and debt.
The Company is subject to externally imposed capital
requirements:
-- as a public company, the Company has a minimum share capital
of GBP50,000.
The Company has complied with all the above requirements during
this financial period.
17. RELATED PARTY TRANSACTIONS
The amount incurred in respect of management fees during the
period to 30 June 2020 was $6,872,000 (30 June 2019: $7,053,000),
of which $3,427,000 (30 June 2019: $3,510,000) was outstanding at
30 June 2020. The amount due to the Investment Manager for
performance fees at 30 June 2020 was $564,000 (31 December 2019:
$7,794,000).
The amount incurred in respect of Directors' fees during the
period to 30 June 2020 was $198,000 (30 June 2019: $191,000) of
which $nil was outstanding at 30 June 2020 (30 June 2019:
$nil).
The Shared Services Agreement was entered into by and between RP
Management, LLC, an affiliate of Pharmakon Advisors, L.P., and the
Investment Manager on 30 November 2016 and deemed effective as of 1
January 2016. Under the terms of the Shared Services Agreement, the
Investment Manager will have access to the expertise of certain
Royalty Pharma employees, including its research, legal and
compliance, and finance teams.
BPCR Limited Partnership and its General Partner, BPCR GP
Limited, are related entities of the Company, as they are
wholly-owned subsidiaries and formed for the purpose of entering
into a new credit facility. On 22 May 2020, several investments
totalling $1,070,139,000 were transferred to BPCR LP from the
Company. In the period to 30 June 2020, the Company recorded income
of $12,009,000 (30 June 2019: $nil) and the outstanding balance as
at 30 June 2020 was $1,082,148,000 (30 June 2019: $nil). BPCR GP
Limited had an outstanding balance as at 30 June 2020 of $nil (30
June 2019: $nil).
On 7 February 2020, the Company and BioPharma Credit Investments
V (Master) LP ("BioPharma V"), entered into a definitive senior
secured term loan agreement for $200,000,000 with Collegium
Pharmaceutical, Inc. (Nasdaq: COLL). The Company's share of the
transaction was $165,000,000 and the Company funded the term loan
on 13 February 2020. The loan will mature in January 2024 and will
bear interest at 3-month LIBOR plus 7.50 per cent. per annum
subject to a 2.00 per cent. floor along with a one-time additional
consideration of 2.50 per cent. of the loan amount which was paid
at funding. In the period to 30 June 2020, the Company recorded
interest of $2,864,000 (2019: $Nil). The outstanding balance as at
30 June 2020 was $154,687,500 (2019: $nil).
On 18 December 2019, the Company and BioPharma V, a fund managed
by the Investment Manager, entered into a definitive senior secured
term loan agreement with Global Blood Therapeutics (Nasdaq: GBT).
The Company will invest up to $82,500,000 ($41,250,000 in the first
tranche and up to an additional $41,250,000 by 31 December 2020)
and BioPharma V will invest an additional $67,500,000. The loan
will mature in December 2025 and will bear interest at three-month
LIBOR plus 7.00 per cent. per annum subject to a 2.00 per cent.
floor along with a one-time additional consideration of 1.50 per
cent. of the total loan amount payable upon funding and an
additional 2.00 per cent. payable upon the repayment of the loan.
The Company funded the first tranche on 20 December 2019. In the
first half of 2020, the Company recorded interest of $4,354,000 (30
June 2019: $nil). The outstanding balance as at 30 June 2020 was
$41,250,000 (30 June 2019: $nil).
On 13 December 2019, the Company and BioPharma V entered into a
definitive senior secured term loan agreement with Sarepta
Therapeutics (Nasdaq: SRPT). The Company will invest up to
$350,000,000 in two tranches ($175,000,000 in the first tranche and
up to an additional $175,000,000 by 31 December 2020) and BioPharma
V will invest up to an additional $150,000,000. The loan will
mature in December 2023 and will bear interest at 8.50 per cent.
per annum along with a one-time additional consideration of 1.75
per cent. of the total loan amount payable upon funding and an
additional 2.00 per cent. payable upon the repayment of the loan.
In first half of 2020, the Company recorded interest of $5,909,000
(30 June 2019: $nil). The Company funded the first tranche on 20
December 2019. The outstanding balance as at 30 June 2020 was
$175,000,000 (30 June 2019: $nil).
On 11 November 2019, the Company and BioPharma V entered into a
definitive senior secured term loan agreement for up to
$100,000,000 with Akebia (Nasdaq: AKBA). The Company's share of the
transaction will be up to $50,000,000 and the Company initially
invested $40,000,000 on 25 November 2019. The loan will mature in
November 2024 and will bear interest at LIBOR plus 7.50 per cent.
per annum along with a one-time additional consideration of 2.00
per cent. of the total loan amount. In the first half of 2020, the
Company recorded interest of $1,509,000 (30 June 2019: $nil). The
outstanding balance as at 30 June 2020 was $40,000,000 (30 June
2019: $nil).
On 4 November 2019, the Company and BioPharma V entered into a
definitive senior secured term loan agreement for up to $70,000,000
with Epizyme (Nasdaq: EPZM). The Company's share of the transaction
will be up to $35,000,000 and the Company invested $12,500,000 on
18 November 2019, $12,500,000 on 27 March 2020 and $10,000,000 on
30 June 2020. The loan will mature in November 2024 and will bear
interest at LIBOR plus 7.75 per cent. per annum along with a
one-time additional consideration of 2.00 per cent. of the total
loan amount. On 4 November 2019, Royalty Pharma, an affiliate of
Pharmakon Advisors, announced an agreement to purchase future
royalties on tazemetostat net sales outside of Japan owned by Eisai
Co. for $330,000,000 and a separate $100,000,000 equity investment
directly in Epizyme. Pablo Legorreta, a principal of Pharmakon and
RP management was named to the Epizyme board of directors. In the
first half of 2019, the Company recorded interest of $677,000 (30
June 2019: $nil). The outstanding balance as at 30 June 2020 was
$35,000,000 (30 June 2019: $nil).
On 12 September 2019, the Company and BioPharma V, entered into
a definitive senior secured note purchase agreement for the
issuance and sale of senior secured notes in an aggregate original
principal amount of up to $150,000,000 by OptiNose US. OptiNose US
is a wholly-owned subsidiary of OptiNose (Nasdaq: OPTN), a
commercial-stage specialty pharmaceutical company. The Company's
share of the transaction will be up to $82,500,000 and the Company
invested $44,000,000 on 12 September 2019 and $16,500,000 on 13
February 2020. Under the terms of the agreement, Optinose has until
2021 September to purchase the remaining $11 million of notes.
Senior secured notes in an aggregate original principal amount of
up to $150,000,000 will be issued and sold in up to four tranches,
each maturing in September 2024 and bearing interest at 10.75 per
cent. per annum along with a one-time additional consideration of
0.75 per cent. of the aggregate original principal amount of senior
secured notes which the Company and BioPharma V are committed to
purchase under the facility and approximately 800,000 warrants
exercisable into common stock of OptiNose. In the first half of
2020, the Company recorded interest of $2,372,000 (30 June 2019:
$nil). The outstanding balance as at 30 June 2020 of the
outstanding notes was $60,500,000 (30 June 2019: $nil).
On 7 February 2018, the Company entered into a senior secured
term loan agreement for $150,000,000 with Novocure Limited (NASDAQ:
NVCR) ("Novocure"). The $150,000,000 loan was originally scheduled
to mature in February 2023 and bore interest at 9.0 per cent. per
annum. Novocure used $100,000,000 of the net proceeds to entirely
prepay the $100,000,000, 10.0 per cent. coupon loan made by
BioPharma III Holdings, LP ("BioPharma III") in 2015 that was
scheduled to mature in 2020. The Company is a limited partner in
BioPharma III and therefore received a distribution of
approximately $46,000,000 from BioPharma III as a result of the
prepayment from Novocure. In the first half of 2020, the Company
recorded interest of $5,363,000 (2019: $6,788,000). The outstanding
balance as at 30 June 2020 was $150,000,000 (30 June 2019:
$150,000,000).
On 8 December 2017, the Company's wholly-owned subsidiary BPCR
Ongdapa entered into a purchase, sale and assignment agreement with
RPI Acquisitions (Ireland) Limited ("RPI Acquisitions"), an
affiliate of Royalty Pharma, for the purchase of a 50 per cent.
interest in a stream of Purchased Payments acquired by RPI
Acquisitions from Bristol-Myers Squibb through a purchase agreement
dated 14 November 2017. As a result of the arrangements, RPI's
subsidiary and the Company's subsidiary are each entitled to the
benefit of 50 per cent. of the Purchased Payments under identical
economic terms. The Purchased Payments are linked to tiered
worldwide sales of Onglyza and Farxiga, diabetes agents marketed by
AstraZeneca, and related products. The Company was expected to fund
$140,000,000 to $165,000,000 between 2018 and 2020, determined by
product sales and will receive payments from 2020 through 2025
estimated to yield a return in the high single-digits per annum.
The Company advanced $12,136,000 to RPI Acquisitions in the first
half 2020 (30 June 2019: $38,622,000) for the Purchased Payments.
In the first half of 2020, the Company recorded interest of
$3,440,000 (30 June 2019: $2,542,000).
On 4 December 2017, the Company and BioPharma Credit Investments
IV, S.àr.L. ("BioPharma IV"), a fund managed by the Investment
Manager, entered into a definitive term loan agreement for up to
$200,000,000 with Lexicon Pharmaceuticals (NASDAQ: LXRX), a fully
integrated biopharmaceutical company ("Lexicon"). The loan was
secured by substantially all of Lexicon's assets, including its
rights to XERMELO(R) and sotagliflozin. The $200,000,000 loan was
available in two tranches, each maturing in December 2022 and
bearing interest at 9.0 per cent. per annum. The first $150,000,000
was available immediately and an additional tranche of $50,000,000
was not drawn down as net Xermelo sales did not meet the required
target by March 2019. The Company funded $124,500,000 of the first
tranche on 18 December 2017 and Lexicon has not drawn the second
tranche. In the first half of 2020, the Company recorded interest
of $5,665,000 (2019: $5,634,000). The outstanding balance as at 30
June 2020 was $124,500,000 (2019: $124,500,000).
On 21 November 2017, the Company and BioPharma IV entered into a
definitive loan agreement for up to $500,000,000 with Tesaro
(NASDAQ: TSRO), an oncology-focused biopharmaceutical company
("Tesaro"). Under the terms of the transaction, the Company funded
$222,000,000 of the $300,000,000 first tranche on 6 December 2017
and committed to invest up to $148,000,000 of the $200,000,000
second tranche by 20 December 2018 at Tesaro's option with
BioPharma IV committing to invest up to $130,000,000 in parallel
with the Company acting as collateral agent. The Company funded
$100,000,000 of the second tranche on 29 June 2018 and assigned its
remaining $48,000,000 commitment to other investors. The loan has a
term of seven periods and is secured by Tesaro's US rights to
ZEJULA(R) and VARUBI(R). The first $300,000,000 tranche bears
interest at LIBOR plus 8 per cent. and the second tranche bears
interest at LIBOR plus 7.5 per cent. The LIBOR rate is subject to a
floor of 1 per cent. and certain caps. Each tranche of the loan was
interest-only for the first two periods, amortises over the
remaining term, and can be prepaid at Tesaro's discretion, at any
time, subject to prepayment fees. In the period to 30 June 2020,
the Company recorded interest of $nil (30 June 2019: $2,191,000).
Following its acquisition by GlaxoSmithKline, Tesaro repaid the
$500,000,000 loan on 23 January 2019. The Company received a
payment of
$369,953,000 on its $322,000,000 share of the loan, including
the make-whole and prepayment premium totalling $45,762,000. The
outstanding balance as at 30 June 2020 was $nil (30 June 2019:
$nil).
BioPharma V, BioPharma IV, and RPI Acquisitions are related
entities of the Company due to a principal of the Investment
Manager having significant influence over each of these
entities.
18. CONTINGENCIES, GUARANTEES AND FINANCIAL COMMITMENTS
At 30 June 2020, there were outstanding commitments of up to
$248,250,000 (30 June 2019: $76,969,000 million and 31 December
2019: $319,386,000) in respect of investments (see Note 17 for
further details).
19. SUBSEQUENT EVENTS
On 30 July 2020, Amicus Therapeutics, Inc. (NASDAQ: FOLD) repaid
their loan and the Company received a payment of $156.3 million
comprised of $150 million in principal, $1.1 million in accrued
interest, and $5.2 million in make-whole amount and prepayment
fees.
On 18 August 2020, NovoCure Limited (NASDAQ: NVCR) repaid their
loan and the Company received a payment of $154.8 million comprised
of $150 million in principal, $1.8 million in accrued interest, and
$3.0 million in prepayment fees.
On 8 September 2020, Lexicon Pharmaceuticals (NASDAQ: LXRX)
repaid their loan and the Company received a payment of $132.3
million comprised of $124.5 million in principle, $2.2 million in
accrued interest, and $5.6 million in make-whole amount and
prepayment fees.
Subsequent to the period end and up to 15 September 2020, the
Company purchased 59,694 shares into treasury at an average price
of $0.9947 and a total cost of $60,000.
Subsequent to the period end the Company sold their remaining
8,950,000 face value of convertible bonds at a price of 56 cents
for proceeds of $5,100,000.
GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES (APM)
NET INCOME
Net income includes $12.0 million relating to the change in fair
value of its subsidiary, BPCR Limited Partnership. This change in
fair value of $12.0 million is equal to the undistributed net
income earned by BPCR Limited Partnership in the period, reflecting
changes in the fair value of and income earned on the investment it
holds. Details of these investments are set out in note 7,
investments at fair value through profit and loss.
NAV PER ORDINARY SHARE
Net Asset Value (NAV) is the value of total assets less
liabilities. The NAV per share is calculated by dividing this
amount by the number of ordinary shares outstanding.
PREMIUM (DISCOUNT) TO NAV PER ORDINARY SHARE
As stock markets and share prices vary, an investment trust's
share price is rarely the same as its NAV. When the share price is
lower than the NAV per share it is said to be trading at a
discount. The size of the discount is calculated by subtracting the
share price from the NAV per share and it is usually expressed as a
percentage of the NAV per share. If the share price is higher than
the NAV per share, it is said to be trading at a premium.
RETURN PER ORDINARY SHARE
Revenue return per Ordinary share is based on the net revenue
after taxation divided by the weighted average number of Ordinary
Shares for the year. Capital return per Ordinary Share is based on
net capital gains divided by weighted average number of Ordinary
Shares for the year.
ONGOING CHARGES
Ongoing charges are the Company's expenses expressed (excluding
and including performance fee) as a percentage of its average
monthly net assets and follows the AIC recommended methodology.
Ongoing charges are different to total expenses as not all expenses
are considered to be operational and recurring.
DIRECTORS, ADVISERS AND OTHER SERVICE PROVIDERS
DIRECTORS
Jeremy Sillem (Chairman)
Harry Hyman (Senior Independent Director)
Colin Bond
Duncan Budge
Stephanie Léouzon
INVESTMENT MANAGER AND AIFM
Pharmakon Advisors L.P.
110 East 59th Street #3300
New York, NY 10022
USA
ADMINISTRATOR
Link Alternative Fund Administrators Limited
Beaufort House
51 New North Road
Exeter
EX4 4EP
COMPANY SECRETARY AND REGISTERED OFFICE
Link Company Matters Limited
Beaufort House
51 New North Road
Exeter
EX4 4EP
FINANCIAL AND STRATEGIC COMMUNICATIONS
Buchanan Communications Limited
107 Cheapside
London
EC2V 6DN
INDEPENDENT AUDITOR
Pricewaterhouse Coopers LLP
7 More London Riverside
London
SE1 2RT
JOINT BROKERS
J.P. Morgan Cazenove
25 Bank Street
London
E14 5JP
Goldman Sachs International
Peterborough Court
133 Fleet Street
London
EC4A 2BB
LEGAL ADVISER
Herbert Smith Freehills LLP
Exchange House
Primrose Street
London
EC2A 2EG
REGISTRAR
Link Market Services Limited
The Registry
34 Beckenham Road
Beckenham
Kent
BR3 4TU
TISE SPONSOR
Carey Commercial Limited
1st and 2nd Floors
Elizabeth House
Les Ruettes Brayes
St Peter Port
Guernsey
GY1 1EW
COMPANY WEBSITE
www.bpcruk.com
COMPANY INFORMATION
The Company is a closed-ended investment company incorporated on
24 October 2016. The Ordinary Shares were admitted to trading on
the Specialist Fund Segment of the Main Market of the LSE and TISE
on 27 March 2017.
The Company intends to carry on business as an investment trust
within the meaning of Chapter 4 of Part 24 of the Corporation Tax
Act 2010 and an investment company within the meaning of Section
833 of the Companies Act 2006.
INVESTMENT OBJECTIVE
The Company aims to generate long-term shareholder returns,
predominantly in the form of sustainable income distributions from
exposure to the life sciences industry.
SUMMARY OF INVESTMENT POLICY
The Company will seek to achieve its investment objective
primarily through investments in debt assets secured by royalties
or other cash flows derived from sales of approved life sciences
products. Subject to certain restrictions and limitations, the
Company may also invest in unsecured debt and equity issued by
companies in the life sciences industry.
The Investment Manager will select investment opportunities
based upon in-depth, rigorous analysis of the life sciences
products backing an investment as well as the legal structure of
the investment. A key component of this process is to examine
future sales potential of the relevant product which is affected by
several factors, including but not limited to; clinical utility,
competition, patent estate, pricing, reimbursement (insurance
coverage), marketer strength, track record of safety, physician
adoption and sales history.
The Company will seek to build a diversified portfolio by
investing across a range of different forms of assets issued by a
variety of borrowers. In particular, no more than 30 per cent. of
the Company's gross assets will be exposed to any single
borrower.
SHAREHOLDER INFORMATION
KEY DATES
March Annual results announced
Payment of fourth interim dividend
June Annual General Meeting
Company's half-year end
Payment of first interim dividend
September Half-yearly results announced
Payment of second interim dividend
December Company's year end
Payment of third interim dividend
FREQUENCY OF NAV PUBLICATION
The Company's NAV is released to the LSE and TISE on a monthly
basis and is published on the Company's website.
ANNUAL AND HALF-YEARLY REPORT
Copies of the Company's Annual and Half-yearly Reports, stock
exchange announcements and further information on the Company can
be obtained from the Company's website www.bpcruk.com.
IDENTIFICATION CODES
SEDOL: BDGKMY2
ISIN: GB00BDGKMY29
TICKER: BPCR
LEI: 213800AV55PYXAS7SY24
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
IR BIGDCDSBDGGU
(END) Dow Jones Newswires
September 16, 2020 02:00 ET (06:00 GMT)
Biopharma Credit (LSE:BPCR)
Historical Stock Chart
From Feb 2024 to Mar 2024
Biopharma Credit (LSE:BPCR)
Historical Stock Chart
From Mar 2023 to Mar 2024