Patient Capital Trust update, January 2017

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Mitchell Fraser-Jones 16 February 2017 Est. reading: 6 min read

Home > Words > Insights > Patient Capital Trust update, January 2017

The Woodford Patient Capital Trust portfolio delivered a modestly positive return during the first month of 2017.

The largest positive contribution to performance came from hybrid estate agent, Purplebricks. Its shares have now doubled since its IPO in December 2015 as the stock market has started to appreciate the long-term growth opportunity that exists for the company in disrupting the UK’s traditional estate agency business model. Furthermore, a trading update during the month also confirmed that the roll-out of its Australian business is progressing well, providing further evidence of the substantial international opportunity that exists for Purplebricks.

Meanwhile, shares in Horizon Discovery climbed higher, with a trading update confirming that it is on track to deliver a profit this year. The company offers a suite of gene-editing technologies to other healthcare businesses which are used in the development of personalised medicines. We believe the company is very well-placed to deliver strong growth in the years ahead, as the field of personalised medicine, which offers many advantages over more traditional drug development methods, gains traction.

Other positive performers included animal health business Benchmark and innovative laundry business Xeros, both of which released positive trading updates during the month. By contrast, Allied Minds, Theravance Biopharma and Prothena detracted from performance, despite a lack of news during the month.

Company spotlight: Oxford Nanopore (by Saku Saha)

Oxford Nanopore was spun out of University of Oxford in 2005 in order to transform nanopore sensing from a conceptual science into a platform technology accessible to a broad customer base. Twelve years on, the company has fulfilled its initial goal and it’s now aiming to democratise molecular analysis by making it possible for anyone, no matter where they are, to analyse any living thing.

The company has developed a highly disruptive, next generation nanopore platform technology, which enables the analysis of biological molecules, such as DNA. Its portable DNA sequencer – the MinION – can be acquired at a fraction of the cost of existing technologies and it runs in real-time, allowing the analysis of sequenced data immediately, rather than waiting for days. Oxford Nanopore joined the Woodford Patient Capital Trust portfolio in July 2015 but we’ve known the business and its management for much longer – Neil’s first investment in the company was in April 2011 and it has been a constituent of the Woodford Equity Income Fund since August 2014.

Over the years, Oxford Nanopore has made tremendous progress in developing its technology, at the heart of which is a manufactured nanopore protein – a tiny tube only a few nanometres in diameter. To put into context just how small a nanopore protein is, 1 millimetre equals 1 million nanometres. Thousands of these nanopore proteins are inserted into a synthetic membrane, contained in a consumable item called a flow cell. An ionic current is passed through these tiny tubes so that biological molecules that enter the tube pass through the nanopores or near to their aperture, causing distinctive disruptions in the currents. These disruptions can be measured and analysed to identify the molecules.

The company has built a diverse range of products that harness the power of its nanopore technology to deliver real-time, low cost molecular analysis. Its first commercially available product, the MinION, is a pocket-size DNA sequencer designed for users who need a simple and fast device that can generate real-time data without being confined to a laboratory environment. The MinION has already been successfully used to sequence the human genome (a huge feat in itself), perform surveillance of the Ebola and Zika viruses, to research cancer genetics and to understand the biological composition of complex environments such as seawater and ice.

A key and differentiating feature of the MinION is its long reads which enables the easier and more complete analysis of genetic data. For example, if you are sequencing the human genome, it can be thought of as a jigsaw with 6 billion data units. Current sequencing techniques can only produce ‘reads’ (‘jigsaw pieces’) from 150 to ~10,000 data units at a time. This results in a very small jigsaw pieces, from which a complete picture needs to be assembled. Oxford Nanopore’s MinION can read tens or hundreds of thousands of data units in one ‘read’, resulting in very large jigsaw pieces from which the complete genome can be assembled. This offers clear advantages in analysing not only the human genome but any organism.

Oxford Nanopore is currently releasing PromethION, a desktop-scale, on-demand-DNA sequencer that was designed to satisfy the needs of customers who wish to produce larger data sets, or analyse large numbers of samples. Based on the same core technology as the MinION, it benefits from the long reads feature and real time data generation except on a scale that is designed to compete with the most powerful machines currently on the market.

The company managed to simplify the very complex and time-consuming process of preparing biological samples before they are sequenced.  Its latest kits enable users to prepare a sample in 5-10 minutes, compared to hours or days with traditional technologies. Also, Oxford Nanopore is now launching an automated preparation device called VolTRAX, allowing clients without laboratory-related skills to prepare DNA samples. Additionally, the company has also set up a wholly owned spin-out company called Metrichor, that provides complete data analysis solutions.

We believe the commercial opportunity that lies ahead for Oxford Nanopore’s ingenious platform technology is truly extraordinary. While the current client-base for sequencing technology is primarily academic, with some corporates using it for R&D purposes, this next generation of technology takes sequencing to a much wider potential audience of ‘applied markets’. There is a significant opportunity for Oxford Nanopore’s devices to more routinely access important biological information in a broad range of industries, for an array of different purposes, such as identifying contamination or pathogens in food or water supply chains. These applications include healthcare, agriculture, defence and surveillance, environmental monitoring and forensics – many of these are potentially billion dollar markets in their own right.

Oxford Nanopore’s commercial model is very straightforward. Using just a debit or credit card, interested clients can sign up on the company’s website to receive the MinION starter pack. This starts at $1,000, a small fraction of the current price of hundreds of thousands of dollars for any other DNA sequencing technology on the market, and includes the MinION device, and a range of support services and kits. Remote training is also provided to ensure that all clients make the most out of their nanopore sequencing technology. Users of its nanopore technology continue to purchase consumables, such as the cell flow in large volumes and at discounted prices.

The driving force behind Oxford Nanopore’s success is a dedicated and talented management team with a breadth of experience in developing, manufacturing and commercialising disruptive technologies including DNA sequencing. We hold the company’s management in very high regard and are confident that they will continue to create substantial shareholder value by efficiently executing their strategic vision and further growing the business.

As with many disruptors, the company’s journey hasn’t always been smooth. In 2012-13, Oxford Nanopore had technical challenges around the membrane that held its nanopores. As a result, it had to invest extra time and capital in developing an alternative solution, delaying its introduction to market for more than a year. Ultimately, however, all the effort and investment has paid off. When you identify a company with strong leadership, a clear strategic vision and a powerful technology with large commercial potential, it is important to take a long-term view and support the business on its journey towards reaching maturity.

Oxford Nanopore has come a long way – it is a great example of how it can take a long time to develop and commercialise genuine innovation. Oxford Nanopore is now starting its serious commercial journey, and we believe it is on the cusp of some major breakthroughs that can revolutionise the DNA sequencing industry and beyond, as its technology continues to be applied across multiple industries. We are very excited about Oxford Nanopore’s future growth prospects and highly confident that it will create substantial further shareholder value in the years ahead.

Turning to portfolio activity, we participated in a follow-on founding round for Inivata, the clinical genomics company which uses its proprietary liquid biopsy technology to improve cancer diagnosis. The company has achieved a number of operational milestones since the initial investment in January 2016, including the initiation of a clinical study in non-small lung cancer and demonstrating that its facilities are up to the regulatory standard. This further funding will enable the company to continue to grow and further develop its liquid biopsy technology. Elsewhere, we took advantage of share price weakness to add to the position in Theravance Biopharma.

In conclusion, we remain very confident in the trust’s ability to deliver double-digit annualised returns over the long term.

Woodford Patient Capital Trust plc
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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 value of the trust
  • The trust may invest in overseas securities and be exposed to currencies other than pound sterling
  • The trust may invest in unquoted securities, which may be less liquid and more difficult to realise than publicly traded securities

Important information

We do not give investment advice so you need to decide if an investment is suitable for you. If you are unsure whether to invest, you should contact a financial adviser. The trust currently intends to conduct its affairs so that its securities can be recommended by IFAs to ordinary retail investors in accordance with the FCA’s rules in relation to non-mainstream investment products and intends to continue to do so for the foreseeable future. The securities are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an investment trust.

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 Beaufort House, 51 New North Road, Exeter, EX4 4EP.

The Woodford Funds (Ireland) ICAV (the “Fund”) has appointed as Swiss Representative Oligo Swiss Fund Services SA, Av. Villamont 17, 1005 Lausanne, Switzerland. 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

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