BioPharma Credit (BPCR) offers investors access to a diverse portfolio of secured debt instruments for life science companies based on BPCR’s pool of investment opportunities. The ongoing specialisation and fragmentation of the drug discovery process is translating into an increased number of market players seeking additional funding backed by sales from approved products and/or royalty streams from out-licensed products. During its IPO in March 2017 and follow-on placings, the trust has so far raised gross proceeds of US$1,080m (of which US$339m is in seed assets) and already deployed US$690m in four large deals. It also has outstanding potential commitments of up to US$350m.
BPCR is aiming at long-term returns mostly in the form of sustainable income distributions, with a targeted dividend yield of 7% and a net total NAV return of 8- 9% per year in the medium term. The trust intends to achieve this mostly through investments in debt assets of life sciences companies mainly in the US, Europe and Japan, such as senior secured loans, royalty debt instruments and priority royalty tranches. BPCR is focusing on borrowers with approved drugs or medical devices which offer predictable cash flows and significant downside protection.
BPCR’s investment story is based on the expanding group of small to medium life sciences companies that own rights and royalties from life science products, coupled with a growing number of drugs (including niche/orphan drugs) entering clinical trials and being approved as a result of a supportive regulatory environment and increasing R&D costs of drug development. Also, there is an increasing number of companies commercialising products on their own. Although the current positive sentiment in equity markets may encourage companies to raise equity rather than debt and M&A activity in 2017 was relatively subdued, a positive M&A outlook for 2018 coupled with the ongoing structural changes of the life sciences industry should translate into new investment opportunities for BPCR.
At 24 April 2018, BPCR’s shares traded at a 2.6% premium to its last reported NAV (as at end March 2018). The shares currently offer a 4% trailing dividend yield, in line with the trust’s target for the first financial year. On 29 March, BPCR paid a dividend of US$0.021, which includes a special dividend of US$0.011.