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PATIENT CAPITAL TRUST UPDATE, JULY 2017

Mitchell Fraser-Jones, 22 August 2017

The views expressed in this article are those


of the author at the date of publication and
not necessarily those of Woodford
Investment Management Ltd. The contents
of this article are not intended as investment
advice and will not be updated after
publication unless otherwise stated.

What are the risks?

Young businesses have a different risk


profile to mature blue-chip companies –
risks are much more stock-specific, which
implies a lower correlation with equity
markets and the wider economy
Long-term outcomes are more binary –
extremely attractive rewards for success but
some businesses will inevitably fail to fulfil
their potential and this may expose investors
to the risk of capital losses
As it can take years for young businesses to
fulfil their potential, this investment requires
patience
The value of the trust as well as any income
it pays will fluctuate which may partly be the
result of exchange rate changes
The price of shares in the trust is
determined by market supply and demand,
and this may be different to the net asset As Neil said in the recently published interim results, which cover the six months to the end
value of the trust of June, the portfolio is in excellent shape and is showing signs of incredible operational
The trust may invest in overseas securities progress across many of its holdings. This progress continued in July.
and be exposed to currencies other than
pound sterling Horizon Discovery, the gene editing business, acquired Dharmacon, a GE company with a
fast-growing gene editing product portfolio, for £65m. We believe this is a positive
The trust may invest in unquoted securities, development for Horizon for a number of reasons. Firstly, Dharmacon has a strong brand
which may be less liquid and more difficult among the academic and research community and therefore, the deal will expand Horizon’s
to realise than publicly traded securities customer base which was previously focused primarily on pharmaceutical companies.
Secondly, the acquisition enlarges Horizon’s gene editing product offering and creates
Important information market access for the company’s gene editing technologies through an e-commerce
platform and established global distribution channels. Thirdly, Dharmacon is already a profit-
We do not give investment advice so you
making business and the deal is expected to prove immediately beneficial to Horizon’s
need to decide if an investment is suitable
earnings as well as accelerating the company’s revenue growth profile. Consequently, in our
for you. If you are unsure whether to invest,
view, the acquisition of Dharmacon further strengthens Horizon’s position in the exciting and
you should contact a financial adviser. The
fast-evolving field of gene editing.
trust currently intends to conduct its affairs
so that its securities can be recommended Meanwhile, unquoted Kind Consumer was revalued upwards during the month. The
by IFAs to ordinary retail investors in company has developed the UK’s first medically approved non-electronic nicotine inhaler,
accordance with the FCA’s rules in relation to Voke, that replicates the form and ritual of a cigarette, but without the harmful side effects.
non-mainstream investment products and In 2016, the company ran into manufacturing and commercialisation difficulties but it has
intends to continue to do so for the made good progress to get back on track – Kind Consumer retained the know-how, assets
foreseeable future. The securities are and intellectual property rights to Voke and is currently in the process of re-establishing its
excluded from the FCA’s restrictions which supply chain. These positive developments put the company in a better position to launch
apply to non-mainstream investment Voke into the market and are now reflected by Kind Consumer’s higher valuation.
products because they are shares in an
investment trust.
PATIENT CAPITAL TRUST UPDATE, JULY 2017

Mitchell Fraser-Jones, 22 August 2017

US biotechnology business, Prothena announced that it has initiated a phase II trial for
PRX002, its potential treatment for patients with Parkinson’s disease, which is being
developed in collaboration with Roche. As Neil stated in the last October’s company spotlight
for Prothena, PRX002 could be a game-changer for Parkinson’s because it can reach the
brain to treat the causes of the disease, unlike current treatments which merely treat the
symptoms. The initiation of the trial also triggered a $30m milestone payment to Prothena
and, in our view is further evidence of the progress Prothena is delivering on many fronts. Its
lead asset, NEOD001 (a potential treatment for AL amyloidosis), is currently in a phase III trial
which is expected to read out in the second half of 2018. Based on previous highly
encouraging clinical data, we believe there is a good chance of a positive read out.
Meanwhile, its potential treatment for psoriatic arthritis, PRX003, is currently in a phase 1b
trial and Prothena has already outlined its plans to progress this drug into a phase II study.
Therefore, we expect much more to come from this innovative biotechnology company in
the future.

Turning to portfolio activity, we participated in a placing for Tissue Regenix, a healthcare


company which is developing a novel regenerative medical technology. The company will use
part of the proceeds to finance the acquisition of CellRight Technologies, a US-based
regenerative medicine business which develops human tissue products for clinical
applications.

Also, we participated in a couple of funding rounds, each being a further investment tranche
in line with our initial investment agreements with unquoted businesses Autolus (a
1
biotechnology businesses developing CAR T-cell therapies ) and Evofem (a
biopharmaceutical company focused on the development and commercialisation of
therapeutics for women’s sexual and reproductive health). The additional capital will enable
these young companies to continue to develop their technologies, bringing them a step
closer towards commercialising their products. We also added to the portfolio’s Norwegian
technology businesses – Idex and Thin Film Electronics.

It is pleasing that the operational progress of many of the holdings in the portfolio has
started to come through in terms of performance but the share price and NAV progress we
have seen in recent months is insubstantial in the context of what, we believe, lies ahead.
Therefore, going forward, we remain very confident in the trust’s long-term return outlook.

Footnotes
1. A novel class of immuno-oncology treatments which involves re-engineering T-cells –
a type of white blood cells – in order to make them more efficient in fighting cancers.

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

Woodford Patient Capital Trust plc is incorporated in England and Wales, company number
09405653. Registered as an investment company under section 833 of the Companies Act
2006. Registered address 40 Dukes Place, London EC3A 7NH.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo
Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland, Tel: +41 21 311 17 77,
email: info@oligofunds.ch. The Fund’s Swiss paying agent is Neue Helvetische Bank AG. All
fund documentation including, Prospectus, Key Investor Information Documents, Instrument
of Incorporation and financial reports may be obtained free of charge from the Swiss
Representative in Lausanne. The place of performance and jurisdiction for all shares
distributed in or from Switzerland is at the registered office of the Swiss Representative.
Fund prices can be found at www.fundinfo.com.

© 2017 Woodford Investment Management Ltd.


All rights reserved.

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