BioPharma Credit (BPCR) recently announced that it has entered into an agreement to provide a US$80m senior secured loan to BioDelivery Sciences International (BDSI), a Nasdaq-listed commercial-stage pharma company. BDSI’s main assets include Belbuca, an FDA-approved partial opioid agonist classified as a Schedule III drug, as well as Symproic, an FDA-approved drug for the treatment of opioid-induced constipation (OIC). This agreement represents BPCR’s first investment this year. Moreover, it invested US$25m in BDSI’s recent share issue, which constitutes BPCR’s first equity investment since inception. We estimate that BPCR still has around US$500m in uncommitted cash available for further deals.
BPCR has agreed to provide US$80m of debt funding through a senior secured loan (secured on substantially all of BDSI’s assets). US$60m was provided on 28 May, with the additional US$20m tranche available until May 2020. The loan has a coupon rate of Libor plus 7.5% and BPCR will also receive a funding fee of 2.0%. These terms are in line with BPCR’s last deal (Amicus) which concluded in September 2018 and is broadly comparable with the earlier Tesaro transaction. The loan is interest-only for the first three years.
BPCR also acquired a US$25m equity stake during BDSI’s secondary public offering in April 2019 (representing 50% of the new share issue) priced at US$5.00/share (vs the last close which was US$4.24). BPCR’s equity stake now represents c 6% of BDSI’s share capital. As per its investment policy, its total equity exposure can be up to 15% of BPCR’s gross assets. Overall, the BDSI deal is a somewhat smaller transaction for BPCR, as the combined debt and equity investment (including the second US$20m tranche not yet funded) equals c 7% of BPCR’s NAV as at end-April 2019. This compares with the share of each of the other senior secured loans in the company’s portfolio, at c 9–12%. However, we appreciate that it moderately reduces BPCR’s current high cash position.
At 30 May 2019, BPCR’s shares are trading at a minor 0.5% premium to its last reported NAV (as at end-April 2019). Including the DPS of 1.8c payable in June, the shares offer a c 7% trailing dividend yield, in line with BPCR’s target.