Patient Capital Trust update, November 2016

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Mitchell Fraser-Jones 16 December 2016 Est. reading: 3 min read

The trust delivered a positive return in November. Among the portfolio’s strongest performers were its US biotech holdings. In part, these stocks were beneficiaries of the post-election relief rally in the US healthcare sector, but they were also helped by some positive fundamental developments.

For example, Prothena announced highly encouraging clinical data from an early-stage trial of PRX002, a potential treatment for Parkinson’s disease, which is being developed in collaboration with Roche. The PRX002 antibody appears to be safe and – crucially – it is able to penetrate into the brain. Currently available treatments only moderate the symptoms of the disease because, thus far, it hasn’t been possible to get drugs into the brain to modify the disease itself. This latest clinical data therefore offers the prospect of a major breakthrough in the struggle against a condition that affects millions worldwide as PRX002’s ability to reach the brain makes it a potentially disease-modifying therapy. Prothena now has three high potential assets under development, all of which are progressing through the pipeline rapidly and positively.

Another good performer was Theravance Biopharma, whose shares were helped by positive news on the Closed Triple (a combination of three respiratory drugs into one) therapy for patients with chronic obstructive pulmonary disease (COPD), which is being developed by GlaxoSmithKline and Innoviva. GlaxoSmithKline has filed a New Drug Application in the US for this therapy, marking an important milestone in its progress towards commercialisation. Recent developments bring forward the point at which Theravance will benefit from the royalty interest that it retains in the drug’s future sales.

Company spotlight: Ultrahaptics (by Paul Lamacraft)

Founded in 2013 around intellectual property originally developed at the University of Bristol, Ultrahaptics has developed a revolutionary new technology that enables consumers to interact with electronic devices in a way never seen – or in this case, felt – before. A few weeks ago, we visited the company’s offices in Bristol for a business update and took the opportunity to ask Tom Carter, Chief Technology Officer and Co-Founder of Ultrahaptics, to explain how the technology works and, in time, where it is likely to be found. Please watch the video below to find out more.

By contrast, shares in Idex weakened despite some positive fundamental news. The company released very encouraging third quarter results, announcing that it has progressed from development to commercialisation across all three of its target markets – mobile, internet of things and financial. We are very excited about the commercial opportunity that Idex is now beginning to tap into, and believe the company will deliver very attractive long-term growth as it continues to mature.

Meanwhile, unquoted early-stage Swiss business Cequr was revalued downwards, as a result of technical design difficulties in its PaQ device, a 3-day patch-like insulin delivery system for people with type-2 diabetes. While this is disappointing, it reflects a delay to development progress rather than an insurmountable problem. We are reassured that the company is already doing some of the things necessary to remedy the situation and continue to see significant potential in Cequr’s underlying technology which we believe will be highly disruptive. Not only is PaQ an injection-free insulin delivery system but it also lasts for longer and is more cost–effective than currently available insulin patches.

Turning to portfolio activity, we added a new unquoted position in the form of Accelerated Digital Ventures (ADV), a newly-formed business that aims to provide patient capital to young British digital businesses with significant growth potential. The business has a strong leadership team, a well-thought through business model and we believe it has the ability to identify, invest in and help nurture some very exciting technology start-ups.

In terms of outlook, we remain very excited about the long-term potential in the portfolio we have built. The vast majority of the businesses in which we have invested are delivering solid, positive operational progress. That this progress typically is not yet fully reflected in valuations, is additive to the conviction that we have in the long-term prospects for the trust.

We would like to take this opportunity to wish you a Merry Christmas and a Happy New Year.

Woodford Patient Capital Trust plc
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What are the risks?

  • 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. This means the price may be volatile in response to changes in demand
  • The trust may invest in overseas securities and be exposed to currencies other than pound sterling – as a result, exchange rate movements may cause the sterling value of investments to decrease or increase
  • The trust may invest in unquoted securities, which may be less liquid and more difficult to value, because they are generally not publicly traded – the lack of an open market may also make it more difficult to establish fair value
  • 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

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.

© 2019 Woodford Investment Management Ltd.
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