The star manager’s American biotech holding became the focal point of the latest set of Patient Capital Trust yearly results, as he attempted to deal with the fall-out from its lead drug failing the final phase of a clinical trial, leading to it being pulled from production.
Woodford currently owns 11.53 million shares or a 30% stake in the group, which is one of the largest holdings in his Patient Capital Trust at 8.6%.
The stock also appears in both the Woodford Equity Income fund and Woodford Income Focus fund, making up 2.7% and 1.7% of the portfolio respectively.
The Patient Capital Trust annual review covered the period ending 31 December, and therefore did not include the Prothena debacle, but Woodford was nevertheless keen to highlight the clinical trial success rates of other biotech groups he has invested in.
Of the 39 studies carried out by the 24 biotech firms backed by Woodford since 2014, the first phase has succeeded 83% of the time, while phase 2 and 3 have succeeded 82% and 80% respectively.
“This amounts to only 7/39 clinical failures from 4/24 of investee companies,” WIM pointed out, comparing favourably to data from a recent BIO Biomed tracker looking at 10,000 studies from 2006 to 2015, which puts the success rate at 63.2%, 30.7% and 58.1% for phase 1,2 and 3.
One of the risks of early-stage investing in biotech firms is that the outcome of trials is “often binary”, said Woodford, “it comes down to whether a final trial is successful or not”.
Nevertheless, he stressed that Prothena “has options” beyond its Pronto and Vital tests with “an early and mid-stage clinical pipeline, collaborations with two major pharmaceutical companies and more than $500m on its balance sheet”.
Woodford has said he and his team will be working with the management team at Prothena to discuss strategy.
The Patient Capital Trust annual review showed the investment trust’s £626m net asset value dropped from 93.24p per share to 91.33p during the year. Meanwhile, its share price fell substantially more from 91p to 84.5p.
Woodford’s Patient Capital trust is fourth quartile for every FE cumulative reporting period since it was launched in 2014, down -17.3% in share price terms over one year and -26.4% over three years compared with the IT UK All Companies sector, up 7% and 26.9% over the same periods respectively.
In terms of NAV, the trust is down -7.4% and -10.7% over one and three years.
Multi-billion dollar potential
Prothena drama aside, the update from the Patient Capital Trust noted several “significant milestones” for its top-10 holdings, which account for 60% of its £723m assets.
“There are many businesses in this portfolio that I believe should become multi-billion-dollar organisations within the next five years,” Woodford stated.
“While Prothena’s announcement is disappointing it should not overshadow the progress many of the portfolio’s companies have made – particularly in recent months.
“Since year end, we have had positive developments from several companies.
“Proton Partners is now the UK’s first high energy proton beam therapy provider having started to treat its first patient in its Newport Centre this month. Benevolent AI announced last week that it received $115 million in additional funding – an investment that now values the business at just over $2 billion, while Purplebricks, whose shares trebled in 2017, has received a strategic investment from one of Europe’s leading digital publishers, Axel Springer.”
Proton Partners and Benevolent AI, online estate agent Purplebricks are in the minority of holdings that are listed. Roughly 80% of the Patient Capital Trust’s gross assets are invested in unquoted securities.
Despite receiving £125m investment from Axel Springer to accelerate its roll out in the US, year-to-date, Purplebricks’ shares are down some 24% at 329p.
Woodford also pointed out that that the trust is now invested in four companies, Purplebricks, Oxford Nanopore, Benevolent AI and Immunocore, valued at over $1bn. These are just some examples of companies in the portfolio that have made meaningful progress on the road to commercialisation, he said.
“Patience has been required to get to this stage and it remains a prerequisite for investing in this part of the asset class. The investment case for WPCT, despite Prothena’s news, remains compelling.”
