Preliminary Announcement
NEWS RELEASE
28 November 2008
FINSBURY WORLDWIDE PHARMACEUTICAL TRUST PLC
Unaudited Preliminary Results for the six months ended 30 September 2008
Finsbury Worldwide Pharmaceutical Trust PLC today announces its interim results
for the six months ended 30 September 2008.
Financial Highlights
30 September 31 March % Change
2008 2008
Shareholders' funds £254.7m £224.8m +13.3
Net asset value per share - basic 584.1p 486.6p +20.0
Net asset value per share - 560.3p 482.4p +16.1
diluted (for warrants)
Share price 515.0p 457.0p +12.7
Warrant price 44.5p 27.5p +61.8
Discount of share price to diluted 8.1% 5.3% -
net asset value per share
Benchmark Index * 7,643.7 7,049.7 +8.4
Gearing # 12.4% 1.8% -
Total Expense Ratio (annualised) 1.2% 1.3% -
* Datastream World Pharmaceutical and Biotechnology Index, total return,
sterling adjusted.
#Calculated using the Association of Investment Companies' definition (prior
charges as a percentage of net assets).
Attached: * Chairman's Statement
* Review of Investments
* Income Statement
* Reconciliation of Movements in Shareholders' Funds
* Balance Sheet
* Cash Flow Statement
* Notes to the Financial Statements
For further information please contact:
Martin Smith, Finsbury Worldwide Pharmaceutical Trust PLC 020 3 008 4913
Mark Pope, Frostrow Capital LLP 020 3008 4913Chairman's Statement
Performance
In my first Chairman's Statement, I am delighted to report that despite the
severe effects of the economic slowdown on global financial markets the Company
has performed well, both in relative and absolute terms during the period under
review. The six month period has been an extremely challenging one for stock
markets as a whole and, against a background of turbulent market conditions
particularly towards the end of the summer, the Datastream World Pharmaceutical
& Biotechnology Index measured in sterling terms on a total return basis, rose
by 8.4% as the healthcare sector was able to provide some insulation from the
significant declines seen in other equity sectors. Against this background of
difficult market conditions, I am pleased to report that the Company's
undiluted net asset value per share rose by 20.0% over the same period, an
outperformance of some 11.6%. This outperformance was derived principally from
the Company's holdings in biotechnology stocks which performed strongly when
compared to larger capitalisation pharmaceutical stocks, the latter having been
held back due to a combination of weak drug development pipelines, low R&D
productivity and the prospect of an increase in patent expirations commencing
in 2010. The Company's performance was also helped by a strengthening U.S.
dollar; during the half year it appreciated 10.3% against sterling.
The Company's share price rose over the period by 12.7% as the discount of
share price to net asset value per share widened slightly from 5.3% at 31 March
2008 to 8.1% at the interim stage.
The difficult market environment has continued post the half year end and the
Company's net asset value per share and share price fell by c. 5.0% in October
compared to a small rise in the benchmark index. Early November, however, has
seen a recovery in the Company's performance. It is pleasing to note that for
the calendar year to 31 October 2008, the Company's share price performance
(total return) was ranked fifth out of 247 UK listed investment companies
(source: Winterflood Securities Limited).
Share Capital
The Company continues to exercise its power to buy-back shares in order to
support the discount control mechanism and enhance net asset value per share.
During the six months under review the Company repurchased a total of 2,595,750
shares at a cost of £12.6m (including expenses) to be held in treasury. On 23
July 2008, all of the shares held in treasury, totalling 2,679,750 shares, were
cancelled; the Board confirms that any shares held in treasury will be
cancelled following the Annual General Meeting each year. As at 30 September
2008, the Company held 812,000 shares in treasury.
The annual exercise date for the Company's warrants occurred on 31 July 2008,
at which time a total of 13,070 warrants were exercised, raising £61,000. The
remaining 10.7m warrants have a final exercise date of 31 July 2009 at an
exercise price 464.0p per share which compares to the current share price of
482.00p per share.
Revenue and Dividends
The revenue return for the period was £614,000 (Six months ended 30 September
2007: 674,000) and no interim dividend is declared (Six months ended 30
September 2007: nil).
VAT
The position with regard to the repayment of VAT remains as described in the
Chairman's Statement in the Annual Report & Accounts for the year ended 31
March 2008. We continue to work towards a settlement with the Company's
previous Manager, Close Investments Limited and will report on developments as
they arise.
Outlook
Market turbulence has resulted in unprecedented write-downs in financial assets
and losses for many of the world's largest banks leading to a shortage of
liquidity within the financial sector. When this is combined with the prospect
of a deflationary environment and with many governments and individuals still
financially over-stretched, a further slowdown in economic growth may be
expected. Against this background, merger and acquisition activity within the
pharmaceutical and biotechnology sectors is expected to continue and will be a
key strategic focus for the Company. On balance, it is not expected that Barack
Obama's victory in the U.S. Presidential Election will be a significant factor
for the industry in the future. Your Board remains cautious in its outlook but
it continues to believe that the underlying secular trends are positive for the
healthcare sector overall and that current market conditions will offer
interesting buying opportunities.
Martin Smith
Chairman
25 November 2008
Review of Investments (Companies held in the investment portfolio are shown in
bold type)
Performance
Amidst a collapsing broader equity market triggered by the worst global
financial crisis in decades, we are pleased to report that the Company posted a
strong increase of 20.0% in its undiluted net asset value per share during the
period, well ahead of the benchmark increase of 8.4%.
Our strategy of emphasising investments in the biotechnology sector to a
greater extent than traditional "big pharma" companies paid dividends during
this period as the biotechnology sector increased while pharmaceutical stocks
declined slightly on average. Our top individual contributors to performance
reflect the success of several different investment strategies: ImClone Systems
is an example of our focus on mergers and acquisition ("M&A") candidates,
Vertex Pharmaceuticals' performance reflects investor enthusiasm for their
exciting novel treatment for Hepatitis C, and both Schering-Plough and Amgen
reflect contrarian "value play" investments in stocks which were
indiscriminately sold by the market because of overblown concerns about key
marketed products.
Contribution by Investment - Excluding Options
Contribution Contribution
per Share (p)
*
for the six
months
£'000
Top Five contributors
ImClone Systems 7,344 16.40
Schering-Plough 3,720 8.31
Tepnel Life Sciences 3,220 7.19
Vertex Pharmaceuticals 3,059 6.83
Amgen 3,027 6.76
45.49
Bottom Five contributors
Roche Holdings (1,454) (3.25)
Amylin (1,177) (2.63)
BioMarin Pharmaceutical (1,135) (2.53)
Par Pharmaceutical (1,075) (2.40)
Biogen Idec (650) (1.45)
(12.26)
based on the weighted average number of the Company's shares in issue during
the six months ended 30 September 2008 (44,783,068)
Source: Frostrow Capital LLP
Sector Developments
The market's performance during the period proved somewhat parabolic, with
depressed conditions at the beginning and end of the period interposed by a
strong rally in July. The spring months proved treacherous, particularly for
smaller capitalisation companies as investor risk appetite diminished amidst
the credit crisis. Financial market conditions were difficult for biotechnology
companies, and the pace of total financing raised by the biotech sector
declined nearly 65.0% from the previous year.
During July however, the healthcare sector rallied strongly thanks to a
combination of resurgent M&A activity and strong fund flows driven by
increasingly favourable investor sentiment towards the sector. This rotation
into healthcare generally, and biotechnology in particular, is reminiscent of
the 1990/1991 economic slowdown, a period with many parallels to today's
declining housing market, financial market stresses, rising corporate and
individual default rates and poor economic growth. The biotechnology sector
posted extraordinary gains during this period, with the Amex Biotechnology
Index increasing 46% in 1990 and over 190% in 1991 (both in US$ terms).
Markets declined towards the end of the summer months as the credit crisis
accelerated and the financial markets generally started to unravel. However the
healthcare sector has been able to offer a modest degree of insulation from the
precipitous declines seen in other equity sectors thanks to several fundamental
underpinnings of the industry: products which are generally non-discretionary
consumer purchases, historically low valuations, continuing robust levels of M&
A activity providing support for biotech companies in particular, and an
unexpectedly quiet election cycle with fewer attacks on "big pharma " companies
than we have come to expect during U.S. Presidential election years. In fact we
believe that Barack Obama's victory in the U.S. Presidential race will not be a
crucial determinant of industry fortunes in the coming years, as he favours
increased healthcare coverage (favourable to industry) and increased government
influence on drug prices (unfavourable to industry).
We hope that the new Democrat administration will bring a welcome changing of
the guard at the U.S. Food and Drug Administration ("FDA"), where the situation
has gone from bad to worse as drugs under evaluation are increasingly getting
delayed or rejected. The bar for outright drug approval is at historical highs,
and 2008 is on track to have among the lowest level of new drug approvals in
history. An example of the current FDA morass is the blood-thinning agent
Prasugrel, being developed in the U.S. by Eli Lilly. The FDA had an original
deadline for rendering a decision last June, and notified the company that it
would require a 90 day extension to late September. The revised deadline has
come and gone with no word from the FDA about a decision. Investors typically
assume the worst in these situations and punish the stock prices of companies
caught up in these delays.
Strategy Review
Our M&A theme yielded strong results during the period and continues to be a
key strategic focus for the Company. The recent surge in acquisitions coupled
with high premiums for the acquired companies demonstrate continued strong
demand from "big pharma" companies as they look to smaller biotechs to offset
their generally low R&D productivity and pipeline gaps. As shown in the table
below, the past six months have seen over a dozen acquisitions of smaller drug
companies, with acquisition premiums ranging from 15% to 233%. In addition to
these smaller deals, there have been several blockbuster announcements such as
Teva's US$9 billion bid (including debt) for Barr Pharmaceuticals, Roche's
US$44 billion bid for 100% ownership of Genentech, and a bidding war for
ImClone between Bristol-Myers Squibb and Eli Lilly. Both ImClone and Genentech
were significant holdings when the deals were announced. Eventually Lilly
triumphed with a US$6.5 billion bid, and we expect the offer price for
Genentech, currently US$89, will also be raised before the acquisition process
is concluded by Roche.
Recent Biotechnology Acquisition Announcements
Announce Date Target Acquirer Deal Size Premium
Paid
06/10/08 ImClone Eli Lilly US$6.5 billion 51%
25/07/08 Acambis Sanofi Aventis US£275 million 65%
23/07/08 Arius Research RocheHoldings $119 million 15%
(CAD)
15/07/08 Lev ViroPharma US$443 million 49%
Pharmaceuticals
10/07/08 Speedel Novartis US$880 million 94%
08/07/08 SGX Eli Lilly US$64 million 119%
Pharmaceuticals
07/07/08 APP Fresenius US$3.6 billion 29%
Pharmaceuticals
03/07/08 Jerini Shire US$521 million 73%
23/06/08 Barrier Stiefel US$148 million 136%
Therapeutics Laboratories
09/06/08 Third Wave Hologic US$580 million 7%
Technologies
05/06/08 Tercica Ipsen US$665 million 104%
29/05/08 Kosan Bristol-MyersSquibb US$190 million 233%
12/05/08 Iomai Intercell US$189 million 128%
22/04/08 Sirtris GlaxoSmithKline US$720 million 84%
11/04/08 Millennium Takeda US$8.8 billion 53%
Another key investment theme for the Company is our expectation for significant
price/earnings multiple expansion at the larger biotechnology companies as
investors properly discount the future earnings growth potential of these
companies. The second quarter was a strong period for these "big biotechs", as
companies such as Genentech, Genzyme and Biogen Idec announced strong EPS
growth and reiterated future EPS growth expectations of 20-25% per year.
Finally, during the past few months we have taken advantage of the difficult
market conditions to add exposure to a selection of "fallen angels":
development stage companies with promising compounds that had fallen 50% or
more from their highs.
The number of holdings has remained relatively concentrated at approximately
35, exclusive of unquoted investments and options contracts. The approximate
geographic distribution of the assets is 80% North America, 15% Europe and 5%
Far East including Japan. Consistent with the Company's mandate, we are
currently invested 60% in larger companies and 40% in smaller capitalisation
companies. Our large capitalisation holdings are weighted slightly in favour of
the biotechnology sector versus traditional "big pharma" companies, while our
smaller capitalisation holdings emphasise biotechnology companies but also
include a selection of generic pharmaceuticals, diagnostics companies and
specialty pharmaceutical investments.
Samuel D. Isaly
OrbiMed Capital LLC
Investment Manager
Income Statement
For the six months ended 30 September 2008
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 2008 30 September 2007 31 March 2008
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) - 47,367 47,367 - 15,373 15,373 - (16,666) (16,666)
on investments
held at fair
value through
profit or loss
Exchange - (3,090) (3,090) - 1,024 1,024 - 1,332 1,332
(losses)/gains
on currency
balances
Income from 1,208 - 1,208 1,363 - 1,363 3,404 - 3,404
investments
held at fair
value through
profit or loss
(note 2)
Investment (55) (1,052) (1,107) (65) (1,244) (1,309) (122) (2,323) (2,445)
management and
management fee
(note 3)
Operating (289) - (289) (304) - (304) (708) - (708)
expenses
Net return/ 864 43,225 44,089 994 15,153 16,147 2,574 (17,657) (15,083)
(loss) before
finance
charges and
taxation
Finance (8) (150) (158) (35) (658) (693) (51) (976) (1,027)
charges
Net return/ 856 43,075 43,931 959 14,495 15,454 2,523 (18,633) (16,110)
(loss) on
ordinary
activities
before
taxation
Taxation on (242) 88 (154) (285) 140 (145) (782) 372 (410)
net return/
(loss) on
ordinary
activities
Net return/ 614 43,163 43,777 674 14,635 15,309 1,741 (18,261) (16,520)
(loss) on
ordinary
activities
after taxation
Return/(loss) 1.4p 96.4p 97.8p 1.3p 28.9p 30.2p 3.5p (37.1)p (33.6)p
per share -
basic (note 4)
Return/(loss) 1.4p 95.2p 96.6p 1.3p 28.5p 29.8p 3.5p (37.1p) (33.6)p
per share -
diluted (note
4)
The total column of this statement is the Income Statement of the Company. The
revenue and capital return columns are supplementary to this and are prepared
under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
The Company has no recognised gains and losses other than those shown above and
therefore no separate statement of total recognised gains and losses have been
presented.
No operations were acquired or discontinued during the period.
Reconciliation of Movements in Shareholders' Funds
For the six months ended 30 September 2008
(Unaudited) Called-up Share Warrant Capital Capital Revenue Total £
share premium reserve reserve redemption reserve '000
Six months ended capital £ account £'000 £'000 reserve £ £'000
'000 £'000 '000
30 September 2008
At 31 March 2008 11,772 117,639 7,426 81,611 3,008 3,327 224,783
Net return from - - - 43,163 - 614 43,777
ordinary
activities
Dividends paid in - - - - - (1,344) (1,344)
respect of year
ended 31 March
2008
Proceeds from 3 58 - - - - 61
exercise of
warrants
Transfer from - 9 (9) - - - -
warrant reserve
following
exercise of
warrants
Shares purchased (670) - - (12,582) 670 - (12,582)
including
expenses
At 30 September 11,105 117,706 7,417 112,192 3,678 2,597 254,695
2008
(Unaudited) Called-up Share Warrant Capital Capital Revenue Total £
share premium reserve reserve redemption reserve '000
Six months ended capital £ £'000 £'000 reserve £ £'000
'000 account '000
30 September 2007 £'000
At 31 March 2007 14,401 117,565 7,436 130,724 375 3,130 273,631
Net return from - - - 14,635 - 674 15,309
ordinary
activities
Dividends paid in - - - - - (1,544) (1,544)
respect of year
ended 31 March
2007
Proceeds from 4 64 - - - - 68
exercise of
warrants
Transfer from - 10 (10) - - - -
warrant reserve
following
exercise of
warrants
Shares purchased (946) - - (19,077) 946 - (19,077)
including
expenses
At 30 September 13,459 117,639 7,426 126,282 1,321 2,260 268,387
2007
(Audited) Called-up Share Warrant Capital Capital Revenue Total £
share premium reserve reserve redemption reserve '000
Year ended capital £ £'000 £'000 reserve £ £'000
'000 account '000
31 March 2008 £'000
At 31 March 2007 14,401 117,565 7,436 130,724 375 3,130 273,631
Net/(loss)return - - - (18,261) - 1,741 (16,520)
from ordinary
activities
Dividends paid in - - - - - (1,544) (1,544)
respect of year
ended 31 March
2007
Proceeds from 4 64 - - - - 68
exercise of
warrants
Transfer from - 10 (10) - - - -
warrant reserve
following
exercise of
warrants
Shares purchased (2,633) - - (30,852) 2,633 - (30,852)
including
expenses
At 31 March 2008 11,772 117,639 7,426 81,611 3,008 3,327 224,783
Balance Sheet
As at 30 September 2008
(Unaudited) (Unaudited) (Audited)
30 September 30 September 31 March
2008 2007 2008
£'000 £'000 £'000
Fixed assets
Investments held at fair value through 284,207 283,534 220,587
profit or loss
11,133 6,312 10,244
M & A Basket - OTC Swap
295,340 289,846 230,831
Current assets
Debtors 441 5,191 4,399
Cash at bank 5,458 1,971 7,050
Derivative (options) - financial - 83 -
investments
5,899 7,245 11,449
Creditors
Amounts falling due within one year (45,796) (28,704) (17,035)
Derivative (options) - financial (748) - (462)
investments
(46,544) (28,704) (17,497)
Net current liabilities (40,645) (21,459) (6,048)
Total net assets 254,695 268,387 224,783
Capital and reserves
Called up share capital 11,105 13,459 11,772
Share premium account 117,706 117,639 117,639
Warrant reserve 7,417 7,426 7,426
Capital reserves 112,192 126,282 81,611
Capital redemption reserve 3,678 1,321 3,008
Revenue reserve 2,597 2,260 3,327
Total equity shareholders' funds 254,695 268,387 224,783
Net asset value per share - basic 584.1p 551.7p 486.6p
(note 5)
Net asset value per share - diluted 560.3p 535.9p 482.4p
(note 5)
Cash Flow Statement
For the six months ended 30 September 2008
(Unaudited) (Unaudited) (Audited)
Six months Six months Year
ended ended ended
30 September 30 September 31 March
2008 2007 2008
£'000 £'000 £'000
Net cash outflow from operating (210) (432) (332)
activities
Servicing of finance
Interest paid (168) (644) (1,023)
Taxation 24 135 124
Taxation recovered
Financial investment
Purchases of investments (143,872) (98,888) (219,443)
Sales of investments 132,902 119,927 269,680
Net cash (outflow)/inflow from (10,970) 21,039 50,237
financial investment
Equity dividends paid (1,344) (1,544) (1,544)
Net cash (outflow)/inflow before (12,668) 18,554 47,462
financing
Financing
Shares issued from exercise of 61 68 68
warrants
Purchase of shares (13,236) (19,382) (30,618)
Increase/(decrease) in short term 24,725 2,098 (10,308)
loans
Net cash inflow/ (outflow) from 11,550 (17,216) (40,858)
financing
(Decrease)/increase in cash in the (1,118) 1,338 6,604
period
Notes to the Financial Statements
1. Accounting Policies
The condensed financial statements have been prepared under the historical cost
convention, modified to include the valuation of investments at fair value and
in accordance with United Kingdom Generally Accepted Accounting Practice and
with the Statement of Recommended Practice `Financial Statements of Investment
Trust Companies' dated December 2005. All of the Company's operations are of a
continuing nature.
The same accounting policies used for the year ended 31 March 2008 have been
applied.
2. Income
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2008 2007 2008
£'000 £'000 £'000
Investment income 1,149 1,152 3,032
Interest receivable 59 211 372
Total 1,208 1,363 3,404
3. Investment Management and Management Fees
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
30 September 30 September 31 March
2008 2007 2008
£'000 £'000 £'000
Investment management and
management fees
1,107 1,309 2,445
Total 1,107 1,309 2,445
Notes to the Financial Statements (continued)
4. Return/(Loss) per Share
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended 30 ended 30
September 2008 September 2007 31 March 2008
£'000 £'000 £'000
The return/(loss) per share is
based on the following figures:
Revenue return 614 674 1,741
Capital return/(loss) 43,163 14,633 (18,261)
Total return/(loss) 43,777 15,307 (16,520)
Weighted average number of 44,783,068 50,710,624 49,231,108
shares in issue for the period/
year - basic
Revenue return per share 1.4p 1.3p 3.5p
Capital return/(loss) per share 96.4p 28.9p (37.1)p
Total return/(loss) per share 97.8p 30.2p (33.6)p
Weighted average number of 45,332,435 51,325,484 49,675,682
shares in issue for the period -
diluted
Revenue return per share 1.4p 1.3p *3.5p
Capital return/(loss) per share 95.2p 28.5p *(37.1)p
Total return/(loss) per share - 96.6p 29.8p *(33.6)p
diluted
* dilution not applicable
5. Net Asset Value per Share and Issued Share Capital
Net asset value per share is calculated on attributable assets at 30 September
2008 of £254,695,000 (30 September 2007: £268,387,000 and 31 March 2008: £
224,783,000) and 43,607,481 being the number of shares in issue at 30 September
2008 (30 September 2007: 48,643,468 and 31 March 2008: 46,190,161).
The diluted net asset value per share assumes all 10,745,610 outstanding
warrants are exercised at 464p per share resulting in assets attributable to
equity shareholders of £304,555,000 (30 September 2007: £318,307,000, 31 March
2008: 274,703,000) and on the resultant number of shares of 54,353,091 (30
September 2007: 59,402,148, 31 March 2008: 56,948,841).
Notes to the Financial Statements (continued)
6. Transaction Costs
Purchase transaction costs for the six months ended 30 September 2008 were £
161,000 (six months ended 30 September 2007: £165,000; year ended 31 March
2008: £349,000).
Sales transaction costs for the six months ended 30 September 2008 were £
168,000 (six months ended 30 September 2007: £218,000; year ended 31 March
2008: £395,000).
7. Publication of Non Statutory Accounts
The financial information contained in this preliminary announcement does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the half years ended 30 September 2008 and
30 September 2007 has not been audited or reviewed by the auditors.
The information for the year ended 31 March 2008 has been extracted from the
latest published audited financial statements. The audited financial statements
for the year ended 31 March 2008 have been filed with the Registrar of
Companies. The report of the auditors on those accounts was unqualified, did
not include a reference to any matters to which the auditors drew attention by
way of emphasis without qualifying the report, and did not contain statements
under section 237(2) or 237(3) of the Companies Act 1985.
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