Patient Capital Trust update, August 2017

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Mitchell Fraser-Jones 15 September 2017 Est. reading: 5 min read

August is typically a quiet month for the UK equity market but there were several developments from companies in the Woodford Patient Capital Trust portfolio.

Theravance Biopharma

The month commenced with some positive trial news from Theravance Biopharma on 2 August. Results from its Phase IIb study of velusetrag, an oral drug in development for patients with diabetic and idiopathic gastroparesis, demonstrated improvements in symptoms and the drug was well-tolerated. Many analysts don’t have this asset in their models, but this is an indication with high unmet need and could represent a meaningful opportunity. Nevertheless, the share price actually fell on the day of this announcement, before rallying as the month progressed.


Prothena reported second quarter results on 8 August which, unsurprisingly for a company that is still in its development phase, confirmed a first half operating loss. Financial results statements from biotechnology companies with negligible revenues are rarely noteworthy fundamental events, but this was an opportunity for Prothena to update investors on its developmental progress. This confirmed solid progress, with the successful initiation of its Phase II Pasadena study in patients with early Parkinson’s disease which triggered a $30m milestone payment from Roche, it’s partner on this programme. Prothena also announced it had completed patient enrolment in the Phase III Vital study, which is evaluating its lead asset NEOD001 in AL amyloidosis.

As a reminder, although other developments from Prothena’s pipeline may be expected in the meantime, the next big news from the company is expected in the second quarter of 2018, when we expect headline results from its Phase IIb Pronto study in NEOD001.

Tissue Regenix

On 9 August, Tissue Regenix, which manufactures replacement body parts from biological animal materials, announced the completion of its acquisition of US business, Cellright Technologies. We are positive on this transformational deal, which creates a world-leading regenerative medical devices company, significantly increases Tissue Regenix’s US presence and, with a broader product shelf and deeper development pipeline, accelerates the pace at which the business can move towards profitability. We added to the portfolio’s position in the shares in the fundraising that has accompanied the deal.

Thin Film Electronics

Norwegian technology business Thin Film Electronics, which specialises in printed electronics, released a solid set of quarterly results on 11 August. The company shipped products to over 30 customers during the period as it moves through the early-stages of product commercialisation. Additionally, Thin Film has successfully opened its new NFC (near field communication) Innovation Centre in the US. This facility is an important part of Thin Film’s transition to a roll-to-roll manufacturing line, which will enable the company to produce its innovative technologies with increasing cost efficiency.

The company has also expanded its geographical footprint by opening three more sales offices – in London, Singapore and Shanghai. Furthermore, Thin Film launched a number of field trials during the second quarter, including with Barbadillo (a Spanish wine producer) where the company provided its tags in the largest global deployment of NFC technology in the wine and spirits industry as part of a consumer-focused marketing campaign.

We are very pleased with the progress that Thin Film is making and believe the company is on the cusp of meaningful, large scale commercial breakthroughs for its innovative technology, which has numerous applications related to what is now being called the ‘internet of everything’. We added to the trust’s position in Thin Film during the month.

Allied Minds

Allied Minds reported half-year results on 17 August, which contained very little new information further to the restructuring earlier this year. The share price weakened on the day of the results, perhaps in response to the wider financial loss that was announced although that should not have come as a surprise. We have seen nothing in the announcement to justify a lower share price, and continue to view the long-term outlook for Allied Minds and its portfolio of young businesses, many of which we have co-invested in, positively.

Sphere Medical

Sphere Medical has been a publicly-listed business since 2011, and has been held as a position in the Patient Capital portfolio since April 2015. Since then, the company has progressed broadly according to plan, successfully developing and launching its miniature blood gas analyser, Proxima. Despite this progress, its share price has steadily declined, reflecting a lack of institutional investor interest in early-stage, science-based businesses, almost regardless of the quality of their technology.

As a result, the company no longer sees any benefit to being a quoted company and on 21 August, it announced it was pursuing a delisting. We continue to recognise the investment potential of Proxima, particularly the 4th generation product that is currently in development, which has the potential to open up the lucrative US market. We support Sphere’s decision to delist and focus on the development of this ground-breaking product as a private business.

Gilead / Kite Pharma

Gilead, a US biopharmaceutical company, announced on 28 August its acquisition of Kite Pharma, which develops novel immuno-oncology products, focusing primarily on T-cell therapies. While neither Gilead nor Kite Pharma are part of the Patient Capital Trust portfolio, we believe that the deal bodes well for some investments that the trust does hold.

T-cell therapies, such as CAR-T, and immuno-oncology more broadly are areas of interest for us to which we have exposure through the likes of Autolus, Cell Medica and Immunocore. The deal and the price paid for Kite Pharma, shines a very positive light on the future potential of these assets and the growing interest that major pharma companies are showing in the technology.

IP Group and Touchstone Innovations

The merger between IP Group and Touchstone Innovations is moving closer to completion. On 30 August, IP Group announced that it had received over 90% acceptances from Touchstone’s shareholders. We are supportive of the deal, which forms a scaled business, with an exciting combined portfolio of science-based British businesses across a diverse and complementary range of sectors. Furthermore, the merger should increase institutional investor interest in the sector, which should help the enlarged group to successfully mature existing assets and identify new investment opportunities. In turn, we believe this will be positive for shareholders and bring wider long-term economic benefits.

In conclusion, we remain very happy with the overall shape of the Woodford Patient Capital Trust portfolio, and confident in its ability to deliver very attractive long-term returns to its shareholders.

Woodford Patient Capital Trust plc
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