Half-year Report

BioPharma Credit PLC

24 September 2024

 

24 September 2024

BIOPHARMA CREDIT PLC

(THE "COMPANY")

HALF YEAR REPORT FOR THE PERIOD ENDED 30 JUNE 2024

Net revenue per share of 6.15 cents in the six months substantially covers the annual dividend target of 7 cents

LumiraDx investment resolved with anticipated 96 per cent. of invested capital recovered

Share buybacks continue with $76 million purchased in the half year

2.04 cent special dividend declared post period end with dividends totalling 7.29 cents per share for the calendar year to date

BioPharma Credit PLC (LSE: BPCR), the specialist life sciences debt investor, is pleased to present the Half Yearly Report of the Company for the six-month period ended 30 June 2024 (the "Period").

The full Half Yearly Report and Financial Statements can be accessed via the Company's website at www.bpcruk.com or by contacting the Company Secretary by telephone on 44 (0) 333 300 1950.

INVESTMENT HIGHLIGHTS

·    Net revenue per share of 6.15 cents, substantially covers the annual dividend target in six months

·    Share buybacks have continued in accordance with the revised terms announced on 27 March 2024

o  During the Period, the Company bought back 83,579,397 shares at a cost of $76.1 million and post period end an additional 20,463,663 shares at a cost of $18.8 million giving total shares bought back year to date of 104,043,060 shares at a cost of $94.9 million

·    The Company is debt free having terminated its revolving credit facility as of 11 April 2024

·    The investment manager continued to work diligently in seeking an optimal outcome for the investment in LumiraDx

o  On 29 July, the Company announced the successful closing of the acquisition of a majority of LumiraDx's assets by Roche Diagnostics Limited

o  On 31 July the Company received $165.3 million and the Company expects to receive a further $5.3 million within 90 days, equating to a 96 per cent. recovery of invested proceeds

o  In addition, the Company is expected to receive its share ownership of LumiraDx's Colombian subsidiary which the Company will seek to sell

·    During the Period, the Company announced two new transactions totalling $300 million in fresh commitments:

o  $100 million for the loan to Tarsus announced on 24 April 2024

o  $200 million for the loan to Novocure announced on 2 May 2024

·    The Company also received increased liquidity from the BMS purchased payments investment and amortisation payments of the Collegium loan and repayments from Akebia, Coherus and ImmunoGen

·    At Period end, the Company had $258.4 million in cash to make new investments

·    Post Period end, the Company announced an investment of up to $130 million for the new loan to Collegium announced on 30 July 2024

·    The Company's investment manager continues to develop a pipeline of additional potential investments to further strengthen the portfolio using the cash available

FINANCIAL HIGHLIGHTS

·    The percentage of floating rate senior secured loans within the portfolio remains extremely high at 96 per cent. which has benefited the Company in the rising interest rate environment

o  Investment returns increased 1.3 per cent. during the first six months of 2024 compared with the same period in 2023

·    With an overall expectation of decreasing interest rates, the Company benefits from the interest rate floors in its portfolio that set minimum coupons

·    The Company made three dividend payments over the Period totalling 8.5 cents per share¹

·    On 19 September 2024, the Company declared an interim dividend of 3.79 cents per share, which was inclusive of a 2.04 cent special distribution. Dividends for the calendar year to date will total 7.29 cents per share

SUMMARY

as at 30 June 2024

Share Price	Ordinary shares in issue with voting rights (m)
$0.8400	1,219.1m
(31 December 2023: $0.8400)	(31 December 2023: 1,302.7m)
Net Revenue per Share	Shares in treasury (m)
$0.0615	154.8m
(31 December 2023: $0.0538)	(31 December 2023: 71.2m)
NAV per Share	Net assets
$1.0074	$1,228.1m
(31 December 2023: $1.0293)	(31 December 2023: $1,340.9m)
Dividends declared	Discount to NAV per share
8.5 cents per share¹	16.6%
(31 December 2023: 10.2 cents per share)	(31 December 2023: 18.4%)

¹The Company paid total dividends in the period of 8.46 cents of which 6.71 cents per share references net income for the two quarters ending 30 September 2023 and 31 December 2023 paid on 5 January 2024 and 15 March 2024 respectively and 1.75 cents per share that was paid on 30 April 2024 referencing the quarter ending 31 March 2024. 

PORTFOLIO COMPOSITION

	As at 30 June 2024 ($m)	As at 31 December 2023 ($m)	As at 30 June 2024 (%)	As at 31 December 2023 (%)
Cash and cash equivalents	258.4	260.8	21.0%	19.4%
LumiraDx senior secured loan and warrants	168.0	136.0	13.7%	10.1%
Collegium senior secured loan	160.4	206.3	13.1%	15.4%
Insmed senior secured loan	156.0	151.0	12.7%	11.3%
BioCryst senior secured loan	129.5	125.5	10.5%	9.4%
OptiNose senior secured note, shares and warrants	74.3	71.5	6.0%	5.3%
BMS purchased payments	66.3	83.6	5.4%	6.2%
Evolus senior secured loan	62.5	62.5	5.1%	4.7%
UroGen senior secured loan	50.0	50.0	4.1%	3.7%
Novocure Luxembourg senior secured loan	50.0	-	4.1%	-
Tarsus senior secured loan	37.5	-	3.1%	-
Immunocore senior secured loan	25.0	25.0	2.0%	1.9%
Coherus senior secured loan	-	125.0	0.0%	9.3%
ImmunoGen senior secured loan	-	48.2	0.0%	3.6%
Akebia senior secured loan	-	17.5	0.0%	1.3%
Other net liabilities	(9.8)	(22.0)	-0.8%	-1.6%
Total net assets	1,228.1	1,340.9	100%	100%

Pedro Gonzalez de Cosio, CEO and co-founder of Pharmakon Advisors LP, the Investment Manager of BioPharma Credit PLC, said:

"We are pleased to see the Company's income rise a further 1.3 per cent. during the first six months of 2024 compared with 2023 with net income per share almost covering the annual dividend in a six-month period. During the period three investments were repaid and two new commitments totalling $300 million were made to Tarsus and Novocure. As new approved products enter the market during the remainder of 2024 we expect our investment pipeline to grow further, and we continue to assess an attractive pipeline of potential new investment opportunities with $258.4 million in cash at the Period end.

"The hard work during the Period on LumiraDx has resulted in 96 per cent. of invested capital anticipated to be recovered and substantially resolves this issue. While the Company's shares continue to trade at a discount to the net asset value, we remain committed to our discount control policy and have bought back 104,043,060 million shares at a cost of $94.9 million during the Period / year to date.

"We remain focused on our mission of being the premier dedicated provider of debt capital to the life sciences industry while generating attractive returns and remain extremely confident of our ability to continue delivering high income to our investors."

Results presentation

As announced on 16 August 2024, a management presentation for sell side analysts will be held via a webcast call facility at 2pm BST today. To request details or to register to attend please RSVP [e-mail].

Enquiries

Burson Buchanan

Mark Court / Jamie Hooper / Henry Wilson / Samuel Adams

[phone]

[e-mail]

Notes to Editors

BioPharma Credit PLC is London's only specialist debt investor in the life sciences industry and joined the LSE in March 2017. The Company seeks to provide long-term shareholder returns, principally in the form of sustainable income distributions from exposure to the life sciences industry. The Company seeks to achieve this objective primarily through investments in debt assets secured by royalties or other cash flows derived from the sales of approved life sciences products.

CHAIRMAN'S STATEMENT   

DURING THE FIRST HALF OF 2023, THE COMPANY ANNOUNCED THREE NEW TRANSACTIONS TOTALING $380 MILLION IN FRESH COMMITMENTS 

INTRODUCTION 

I am pleased to present the half yearly report for the Company, which covers the period 1 January 2024 to 30 June 2024. The Company reported net revenue per share of $0.0615 for the period, almost covering in just six months the 7.0 cent target annual dividend. As a reminder, the Company's policy is to pay special dividends for any excess income over the 7.0 cent annual dividend. Total dividends paid for calendar 2022 and 2023 were 13.1 and 10.2 cents, respectively. The Company continues to offer investors exposure to an attractive and diversified portfolio of secured loans. Consistent with challenges seen across the market, the Company's shares have traded at a discount to NAV throughout the period. The Company has purchased 104,043,060 shares during 2024, including 83,579,397 shares during the first six months of the year. The Company terminated its JPMorgan revolving credit facility as of 11 April 2024 and currently has no debt.  

INVESTMENTS 

Over the first six months of 2024, the Company and its subsidiaries invested $117.1 million, comprised of $29.6 million for LumiraDx, $37.5 million for Tarsus and $50.0 million for Novocure.

The Company, including its financing subsidiary ended the period with total net assets of $1,228.1 million, comprising $979.5 million of investments, $258.4 million of cash (comprised of $37.5 million from the Company and $221.3 million from BPCR Limited Partnership) and $9.8 million of other net liabilities. The Company and its subsidiaries saw $247.2 million increased liquidity from BMS purchased payments and amortisation payments of the Collegium loan, and repayments from Akebia, Coherus and ImmunoGen during the first half of the year. The post balance sheet deployment of $135 million has partially reduced of cash drag from these inflows.

During this period, Pharmakon Advisors, LP, the Company's investment manager ("Pharmakon" or the "Investment Manager") continued to work diligently in seeking an optimal outcome for the investment in LumiraDx, which had gone into administration on 29 December 2023. On 29 July, the Company announced the successful closing of the acquisition of a majority of LumiraDx's assets by a subsidiary of Roche Diagnostics Limited. On 31 July 2024, the Company received $165.3 million from FTI Consulting LLP, LumiraDx's administrators. Assuming Roche releases 100 per cent. of the holdback amount, and estimated total expenses of $10.0 million, the Company is expected to receive an additional payment of approximately $5.3 million within 90 days. With the addition of cash interest received from LumiraDx to date, this equates to an approximate 96 per cent. recovery rate of our investment. Additionally, in due course the Company is expected to receive its share holding of LumiraDx's Colombian subsidiary which the Company will seek to sell.  

SHAREHOLDER RETURNS 

The Company reported net income on ordinary activities after finance costs and before taxation for the first half of 2024 of $82.9 million, up from the $77 million reported during the first half of 2023. On 30 June 2024 and 31 December 2023, the Company's ordinary shares closed at $0.8400. Net Asset Value ("NAV") per ordinary share decreased since 30 June 2023 by $0.0104 from $1.0178 to $1.0074. The Company made three dividend payments over the period totaling 8.46 cents per share, referencing net income for the quarters ending 30 September 2023, 31 December 2023 and 31 March 2024.1

¹ Past performance is not an indication of future performance  

INVESTMENT VALUATIONS 

The valuation of the Company's investments is performed by the Investment Manager. The valuation principles of the Company's unlisted secured loans are valued based on a discounted cash flow methodology. A fair value for each loan is calculated by applying a discount rate to the cash flows expected to arise from each loan. Investments with quoted prices in active markets are verified with independent sources. Further details on the valuation methodology are given in note 7 to the financial statements.  

ESG 

The Board has supported the Investment Manager's Environmental, Social and Governance ("ESG") programme over the first six months of 2024, with progress made in embedding ESG as an integral part of the investment process. The key areas are described in more detail in the full report.

We are proud that a large portion of the Company's past and current investments help to fund clinical trials and research that benefit patients suffering from a wide variety of serious diseases, including various forms of cancer and rare or orphan conditions. Through its investments, the Company helps bring new life sciences products to market which help patients globally.  

OUTLOOK 

The first half year of 2024 was strong, with the Company having announced two new transactions that represent $300 million in new commitments. The Company had $258.4 million in cash to make new investments at 30 June 2024. With 94 per cent. of its portfolio consisting of loans with floating interest rates, the Company has benefited from the recent period of rising interest rates. As the future outlook for interest rates remains uncertain, with an overall expectation of decreasing interest rates, the Company benefits from the interest rate floors in its portfolio that set minimum coupons.

The Investment Manager continues to develop a pipeline of additional potential investments and, as a consequence, we are currently evaluating a number of potential opportunities which will further diversify our portfolio. On behalf of the Board I would like to recognize the perseverance and fortitude demonstrated by the Investment Manager in addressing the difficulties created by the LumiraDx loan. While the outcome was disappointing, the substantial amount recovered through the management of the collateral helps validate the Company's investment thesis on the value of unique, patent-protected healthcare assets. I should also like to express our thanks to our Investment Manager for their continued achievements on behalf of the Company in 2024 and to our shareholders for their continued support.  

Harry Hyman 

Chairman 

23 September 2024 

INVESTMENT MANAGER'S REPORT

Pharmakon is pleased to present an update on the Company's portfolio and investment outlook.

Pharmakon's engagement with potential counterparties during the first six months of the year resulted in $300 million of new commitments(1) for the Company. The Company's portfolio continues to perform well. The proportion of floating rate loans in the portfolio and higher reference interest rates led to investment returns increasing by 1.3 per cent. during the first six months of 2024 compared to the same period in 2023. Three investments, Akebia, ImmunoGen and Coherus were repaid in the first half of 2024.

(1)   New investments figure represents overall commitments inclusive of any unfunded commitments.

Below is an update on the Company and its subsidiaries portfolio.

Novocure

On 1 May 2024, the Company along with the Private Fund also managed by the Investment Manager (the "Private Fund"), entered into a senior secured term loan agreement for up to $400 million with a wholly‑owned subsidiary of Novocure Limited (Nasdaq: NVCR) a proprietary platform technology that uses electric fields that exert physical forces to kill cancer cells via a variety of mechanisms ("Novocure").

Novocure drew down $100 million of the $400 million loan on 1 May 2024. The Company's share was $50 million, which was funded at closing by the Company and its subsidiaries, and will mature in May 2029. Of the remaining $300 million, $100 million is required to be drawn by 30 June 2025, subject to customary conditions precedent, and $200 million is available to be drawn after achieving certain sales-based milestones. The loan has a coupon of 3-month secured overnight financing rate ("SOFR"), plus 6.25 per cent. (subject to a 3.25 per cent. floor). Novocure is a global oncology company that has a proprietary platform technology called Tumor Treating Fields ("TTFields"), which are electric fields that exert physical forces to kill cancer cells via a variety of mechanisms. Novocure's product, Optune Gio, is approved for the treatment of adult patients with newly diagnosed glioblastoma. Novocure also has ongoing or completed trials investigating TTFields in brain metastases, gastric cancer, GBM, liver cancer, NSCLC, and pancreatic cancer.

Investment Type	Secured Loan
Initial investment date	1 May 2024
Total loan amount	$400m
Company commitment	$200m
Maturity	May 2029

Tarsus

On 19 April 2024, the Company and the Private Fund entered into a senior secured term loan agreement for up to $200 million with Tarsus Pharmaceuticals, Inc. (Nasdaq: TARS). Tarsus is a biopharmaceutical company focused on addressing several diseases with high unmet need across a range of therapeutic categories, including eye care, dermatology, and infectious disease prevention ("Tarsus").

Tarsus drew down $75 million at closing. The Company's share of the transaction was $37.5 million, which was funded at closing by the Company and its subsidiaries, and will be maturing in April 2029. Tranche B of $25 million may be drawn by December 2024, and Tranche C of $50 million, and Tranche D of $50 million, may be drawn after achieving certain sales-based milestones. The loan has a coupon of 3-month SOFR, plus 6.75 per cent. (subject to a 3.75 per cent. floor).

Tarsus currently markets XDEMVY® (lotilaner ophthalmic solution), a treatment for Demodex blepharitis. XDEMVY® was approved in the US in July 2023. Tarsus also has 3 additional clinical programs. Its clinical programs are TP-03 for Meibomian Gland Disease, TP-04 for Rosacea, and TP-05 for the prevention of Lyme disease, all of which are in Phase 2.

Investment Type	Secured Loan
Initial investment date	19 April 2024
Total loan amount	$200m
Company commitment	$100m
Maturity	April 2029

BioCryst

On 17 April 2023, the Company along with the Private Fund entered into a senior secured term loan agreement for up to $450 million with BioCryst Pharmaceuticals Inc. (Nasdaq: BCRX), a biopharmaceutical company that discovers and commercializes novel, oral and small molecule medicines ("BioCryst").

BioCryst drew down $300 million at closing on 16 April 2023. The Company's share of the transaction is $180 million, of which $120 million was funded at closing by the Company and its subsidiaries. BioCryst has elected the option to accrue 50 per cent. of their interest due from closing through 30 June 2024 as a payment in-kind as allowed in the loan agreement. The remaining three tranches of up to $50 million each will be available through 30 September 2024.

The Company's share of the remaining three tranches is $20 million each. The loan has a coupon of 3-month SOFR plus 7 per cent. (subject to a 1.75 per cent. floor) and up to 50 per cent. of the interest during the first 18 months may be paid-in-kind (PIK) at a rate of 3-month SOFR plus 7.25 per cent., with an additional consideration of 1.75 per cent. of the total loan amount.

BioCryst's commercial product, Orladeyo, is indicated for prophylaxis to prevent attacks of hereditary angioedema (HAE) in adults and pediatric patients 12 years and older. BioCryst also has one pipeline product for BCX10013, a factor D inhibitor being studied in atypical hemolytic uremic syndrome (aHUS), IgA nephropathy (IgAN), and complement 3 glomerulopathy (C3G).

Investment Type	Secured Loan
Initial investment date	17 April 2023
Total loan amount	$450m
Company commitment	$180m
Maturity	April 2028

Immunocore

On 8 November 2022, the Company along with the Private Fund entered into a senior secured loan agreement for up to $100 million with Immunocore Limited (Nasdaq: IMCR), a biopharmaceutical company focused on developing a novel class of TCR bispecific immunotherapies designed to treat a broad range of diseases, including cancer, infectious diseases and autoimmune diseases ("Immunocore").

The Company and its subsidiaries funded $25 million of the first tranche of $50 million on 8 November 2022. The remaining $50 million commitment, of which the Company's share was $25 million, lapsed so there are no additional funding commitments. On 30 June 2024, Immunocore paid $625,000 to the Company in additional consideration on the expiration of Tranche B.

Tranche A will mature in November 2028 and bears interest at 9.75 per cent. per annum along with an additional consideration of 2.50 per cent. paid at funding.

Immunocore currently markets Kimmtrak (tebentafusp-tebn) for the treatment of people with HLA-A02+ metastatic uveal melanoma. Kimmtrak is approved in 38 countries and has been launched in 17 countries globally to date. Immunocore is also developing teventafusp for the treatment of adjuvant uveal (ocular) melanoma and 2L+ (second line of treatment if the first treatment fails) for advanced cutaneous melanoma.

Investment Type	Secured Loan
Initial investment date	8 November 2022
Total loan amount	$100m
Company commitment	$50m
Maturity	November 2028

Insmed

On 19 October 2022, the Company and the Private Fund entered into a senior secured loan agreement for $350 million with Insmed Incorporated (Nasdaq: INSM), a biopharmaceutical company focused on treating patients with serious and rare diseases ("Insmed").

The Company and its subsidiaries funded $140 million of the $350 million loan on 19 October 2022. Insmed has elected the option to accrue 50 per cent. of their interest due from closing through 30 June 2024 as a payment-in-kind as allowed in the loan agreement.

The loan will mature in October 2027 and bears interest at a rate based upon the 3-month SOFR, plus 7.75 per cent. per annum subject to a SOFR floor of 2.50 per cent. with a one-time additional consideration of 2 per cent. of the total loan amount paid at funding.

Insmed currently markets Arikayce (amikacin liposome inhalation suspension), a novel, inhaled, once-daily formulation of amikacin, for the treatment of mycobacterium avium complex (MAC) lung disease in adult patients. Insmed is also developing brensocatib, a small molecule, oral, reversible inhibitor of dipeptidyl peptidase 1, for the treatment of patients with bronchiectasis.

Investment Type	Secured Loan
Initial investment date	19 October 2022
Total loan amount	$350m
Company commitment	$140m
Maturity	October 2027

Collegium 2022

On 14 February 2022, the Company along with the Private Fund provided Collegium Pharmaceutical, Inc. (Nasdaq: COLL), a biopharmaceutical company focused on developing and commercialising new medicines for responsible pain management ("Collegium"), with a commitment to enter into a new senior secured term loan agreement for $650 million.

On 22 March 2022, proceeds from the new loan were used to fund Collegium's acquisition of BDSI as well as repay the outstanding debt of Collegium and BDSI. At closing, the Company and its subsidiaries invested $325 million in a single drawing. The four-year loan will have $100 million in amortisation payments during the first year and the remaining $550 million balance will amortize in equal quarterly installments. The loan will mature in March 2026 and bears interest at 3-month LIBOR plus 7.50 per cent. per annum subject to a 1.20 per cent. floor along with a one-time additional consideration of 2 per cent. of the loan amount paid upon signing and a one time additional consideration of 1 per cent. of the loan amount paid at funding. On 23 June 2023, the Company and the Private Fund entered into an amendment which modified the loan interest rate to 3-month SOFR plus 7.50 per cent.

On 28 July 2024, the Company along with the Private Fund amended the Collegium loan to, among other things, a) modify the amortization of the then outstanding balance of $320.8 million, b) provide a second tranche of up to $325 million to be drawn upon the closing of an acquisition (40 per cent. of that to be invested by the Company), and c) modify the terms reducing the coupon to 3-month SOFR plus 4.50 per cent. per annum subject to a SOFR floor of 4.00 per cent. A one-time additional consideration of 1.25 per cent. of Tranche A was paid at the signing of the amended loan agreement, and 2.25 per cent. of Tranche B is payable at funding.

Collegium currently markets Xtampza ER, an abuse-deterrent, extended-release, oral formulation of oxycodone, Nucynta (tapentadol), a centrally acting synthetic analgesic, and Belbuca (buprenorphine buccal film), for chronic pain management.

Investment Type	Secured Loan
Initial investment date	22 March 2022
Total loan amount	$650m
Company commitment	$325m
Maturity	March 2026

UroGen

On 7 March 2022, the Company and the Private Fund entered into a senior secured loan agreement for up to $100 million with UroGen Pharma, Inc. (Nasdaq: URGN), a biopharmaceutical company dedicated to creating novel solutions that treat urothelial and specialty cancers ("UroGen").

UroGen drew down $75 million at closing and the remaining $25 million on 16 December 2022. The Company and its subsidiaries funded $50 million across the two tranches. The loan will mature in March 2027 and bears interest at 3-month LIBOR plus 8.25 per cent. per annum subject to a 1.25 per cent. floor along with a one-time additional consideration of 1.75 per cent. of the total loan amount paid at funding of the first tranche. On 29 June 2023, the Company and the Private Fund entered into an amendment which modified the loan interest rate to 3-month SOFR plus 8.25 per cent.

On 13 March 2024, the Company entered into an Amendment and Restatement of its Loan Agreement with UroGen. The Amended and Restated Loan Agreement includes an additional third and fourth tranche of senior secured loans of $25,000,000 and $75,000,000 respectively. In addition, the interest rate was reduced from 3-month SOFR plus 8.25 per cent. per annum to 3-month SOFR plus 7.25 per cent. per annum, and the SOFR floor was increased from 1.25 per cent. to 2.50 per cent. Under the Amended and Restated Loan Agreement, the third and fourth tranches were allocated in full to the Private Fund in consideration of the Company's then current Discount Control Mechanism which restricted the Company's ability to make new investments. The maturity date can be extended to March 2028 if the conditions for Tranche D are met.

UroGen markets JELMYTO (mitomycin), a prescription medicine used to treat adults with a type of cancer of the lining of the upper urinary tract including the kidney called low grade Upper Tract Urothelial Cancer (LG-UTUC). UroGen is also developing UGN-102 (mitomycin) for the treatment of low-grade intermediate risk non-muscle invasive bladder cancer.

Investment Type	Secured Loan
Initial investment date	16 March 2022
Total loan amount	$300m
Company commitment	$50m
Maturity	March 2027

Evolus

On 14 December 2021, the Company and the Private Fund entered into a senior secured loan agreement for up to $125 million with Evolus, Inc. (Nasdaq: EOLS), a biopharmaceutical company that develops, produces, and markets clinical neurotoxins for aesthetic treatments ("Evolus").

The Company and its subsidiaries funded $37.5 million of the first tranche of $75 million on 29 December 2021. The remaining $50 million was drawn down in two installments of $12.5 million each on 13 May 2023 and on 14 December 2023. The Company's share of the final tranche was $25 million. The loan will mature in December 2027 and bears interest at 3-month LIBOR plus 8.50 per cent. per annum subject to a 1 per cent. floor along with a one-time additional consideration of 2.25 per cent. of the total loan amount paid at funding of the

first tranche.

On 5 December 2022, the Evolus loan was amended to extend the draw down date for Tranche B in exchange for a $500,000 amendment fee, of which 50 per cent. was allocated to the Company.

On 9 May 2023, the Evolus loan was amended to: (i) allow Tranche B to be drawn in two installments, (ii) switching the LIBOR component of the loan coupon to SOFR, with an additional 0.17 per cent. adjustment, (iii) certain modifications to the amortization schedule, and (iv) subject to specified conditions, allow for up to a $15 million revolver facility to be secured by accounts receivable and inventory.

On 31 May 2023 and 15 December 2023, the Company funded installments of Tranche B of $12.5 million each. Evolus currently markets Jeuveau (prabotulinumtoxinA-xvfs), the first and only neurotoxin dedicated exclusively to aesthetics.

Investment Type	Secured Loan
Initial investment date	14 December 2021
Total loan amount	$125m
Company commitment	$63m
Maturity	December 2027

LumiraDx

On 23 March 2021, the Company and the Private Fund entered into a senior secured loan agreement for $300 million with LumiraDx Investment Limited and LumiraDx Group Limited (collectively "LumiraDx").

The Company and its subsidiaries funded $150 million of the $300 million loan on 29 March 2021.

On 22 February 2023, the LumiraDx loan was amended to provide LumiraDx with certain waivers in exchange for increasing the fee payable at maturity from 3 to 9 per cent. of the loan. The LumiraDx loan was amended fourteen times during the year ended 31 December 2023.

On 29 December 2023, LumiraDx announced the appointment of joint administrators for two of its subsidiaries and Roche announced that it would acquire select parts of LumiraDx for a purchase price of $295 million. As part of the acquisition, the Company agreed to provide up to $34.6 million in funding for LumiraDx to fund the business until the closing of the acquisition, Roche agreed to reimburse up to $27.5 million to the Company in the period to completion of the acquisition. At the time, it was anticipated that all of the sale proceeds of the acquisition would be used to repay certain amounts outstanding under the Company's loan agreement, and that no sale proceeds will be distributed to LumiraDx or its shareholders.

On 29 July 2024, the Company announced the successful closing of the acquisition of a majority of LumiraDx's assets by Roche Diagnostics Limited. On 31 July 2024, the Company received $165.3 million from FTI Consulting LLP, LumiraDx's administrators. Assuming the administrators release 100 per cent. of the holdback amount and estimated total expenses of $10 million, the Company is expected to receive an additional payment of approximately $5.3 million within 90 days. With the addition of cash interest received from LumiraDx to date, this equates to an approximate 96 per cent. recovery rate of invested capital. Additionally, in due course the Company is expected to receive its proceeds from its share ownership of LumiraDx's Colombian subsidiary from the administrator, which the Company will seek to sell.

Investment Type	Secured Loan
Initial investment date	23 March 2021
Total loan amount	$350m
Company commitment	$175m
Maturity	March 2024

OptiNose

On 12 September 2019, the Company and the Private Fund entered into a senior secured note purchase agreement for the issuance and sale of senior secured notes in an aggregate original principal amount of up to $150 million by OptiNose US, Inc. a wholly owned subsidiary of OptiNose Inc. (Nasdaq: OPTN), a commercial stage specialty pharmaceutical company ("OptiNose").

OptiNose drew a total of $130 million in three tranches: $80 million on 12 September 2019, $30 million on 13 February 2020 and $20 million on 1 December 2020. There are no additional funding commitments.

The Company and its subsidiaries funded a total $72 million across all tranches. The notes mature in September 2024 and bore interest at 10.75 per cent. per annum along with a one- time additional consideration of 0.75 per cent. of the aggregate original principal amount of senior secured notes which the Company was committed to purchase under the facility and 445,696 warrants exercisable into common stock of OptiNose at a strike price of $6.72. In prior years, there were two amendments to the OptiNose note purchase agreement, resulting in re-tiered sales covenants, permission for an equity issuance, amended amortisation and make-whole provisions, and the issuance of new three-year warrants, with the original warrants being canceled.

On 10 August 2022, the OptiNose note and purchase agreement were amended resulting in re-tiered sales covenants in exchange for an amendment fee of $780,000, payable upon repayment, of which the Company will be allocated $429,000.

On 9 November 2022, OptiNose negotiated certain waivers in exchange for a waiver fee, of which the Company earned $715,000 of the total $1.3 million waiver fee.

On 21 November 2022, OptiNose entered into an Amended and Restated Note Purchase Agreement (the "A&R NPA"). As part of the A&R NPA, Pharmakon revised the sales covenants, amended the amortization and make-whole, and modified the loan interest from a fixed rate of 10.75 per cent. to a floating rate equal to 3-month SOFR plus 8.50 per cent., subject to a 2.50 per cent. floor, in exchange for an amendment fee.

From 5 March 2024 through 9 May 2024, the Company entered into three amendments with OptiNose. The amendments collectively waived the no 'going concern' requirement with respect to its financial statements until the end of the 2025 fiscal year, extended the make-whole period by 6 months and revised the sales and minimum liquidity covenants . The waiver of the no 'going concern' requirement until the end of the 2025 fiscal year and the revised minimum liquidity covenant were contingent on a successful equity raise. OptiNose announced on 9 May 2024 a successful $55 million registered direct offering. In connection with these amendments, OptiNose also issued 4.7 million shares in the aggregate to the Company and Private Fund in satisfaction of approximately $4.7 million of outstanding amendment and waiver fees to the Company and the Private Fund.

On 15 March 2024, the FDA approved XHANCE (flucticasone propionate) nasal spray for the treatment of chronic rhinosinusitis with and without nasal polyps in patients 18 years of age or older. OptiNose's leading product, XHANCE (flucticasone propionate), had already been approved by the FDA for the treatment of chronic rhinosinusitis with nasal polyps in September 2017, and without nasal polyps in March 2024.

Investment Type	Secured Loan
Initial investment date	12 September 2019
Total loan amount	$130m
Company commitment	$72m
Maturity	June 2027

Bristol-Myers Squibb Company

On 8 December 2017, the Company's wholly‑owned subsidiary entered into a purchase, sale and assignment agreement with a wholly‑owned subsidiary of Royalty Pharma Investments ("RPI"), an affiliate of the Investment Manager, for the purchase of a 50 per cent. interest in a stream of payments (the "Purchased Payments") acquired by RPI's subsidiary from Bristol‑Myers Squibb (NYSE: BMY) through a purchase agreement dated 14 November 2017.

As a result of the arrangements, RPI's subsidiary and the Company's subsidiary are each entitled to the benefit of 50 per cent. of the Purchased Payments under identical economic terms. The Purchased Payments are linked to tiered worldwide sales of Onglyza and Farxiga, diabetes agents between marketed by AstraZeneca, and related products. The Company was expected to fund $140 million and $165 million during 2018 and 2019, determined by product sales over that period, and will receive payments from 2020 through 2025. The Purchased Payments are expected to generate attractive risk-adjusted returns in the high single digits per annum.

The Company funded all of the Purchased Payments based on sales from 1 January 2018 to 31 December 2019 for a total of $162 million.

From 1 January 2020 to 30 June 2024, the Company received 42,398,427 of interest income and 109,849,954 on principle, totaling 152,248,381.

REALIZED INVESTMENTS

REATA

On 5 May 2023, the Company and the Private Fund, entered into a senior secured term loan agreement for up to $275 million with Reata Pharmaceuticals Inc. ("Reata") originally due to mature in May 2028. Tranche A of $75 million was funded at closing. Tranche B of $50 million and Tranche C of $75 million were originally due to be drawn after achieving certain performance-based milestones, and Tranche D of $75 million was originally due to be available at the Company's discretion after achieving certain sales-based milestones. The loan had a coupon of 3-month secured overnight financing rate ("SOFR"), plus 7.50 per cent. (subject to a 2.50 per cent. floor). There was also a 2 per cent. upfront fee upon each draw. The interest only period for the loan was for 3 years but could have been extended to 4 years if trailing twelve month sales were greater than $250 million. The Company's share of the transaction was $137.5 million, of which $37.5 million was funded at closing. On 10 July 2023, the Company funded Tranche B of the Reata loan for $25 million. On 28 July 2023, Inc. ("Biogen") Biogen announced an agreement pursuant to which Biogen will acquire Reata for an enterprise value of approximately $7.3 billion. The acquisition closed on 29 September 2023. As of the acquisition closing date, the Company received prepayment of the principal of the loan and in addition, $15.5 million in prepayment and make-whole fees.

AKEBIA

On 11 November 2019, the Company and the Private Fund entered into a senior secured term loan agreement for up to $100 million with Akebia Therapeutics, Inc. (Nasdaq: AKBA), a fully integrated biopharmaceutical company focused on the development and commercialisation of therapeutics for people living with kidney disease ("Akebia"). Akebia drew down $80 million at closing and an additional $20 million on 10 December 2020. The Company and its subsidiaries funded $50 million across both tranches. The loan was due to mature in November 2024 and bore interest at LIBOR plus 7.5 per cent. per annum along with a one-time additional consideration of 2 per cent. of the total loan amount paid at funding. The Akebia loan began amortising in September 2022. On 15 July 2022, the Akebia loan was amended to provide Akebia with certain waivers. As a result of this amendment, Akebia made a $25 million pre-payment, of which $12.5 million went to the Company, as well as a 2 per cent. prepayment fee. On 30 June 2023, the Company and the Private Fund entered into an amendment which modified the loan interest rate to 3-month SOFR plus 7.50 per cent. On 31 October 2023, the Akebia loan was amended to extend the maturity of the senior secured loan to 31 March 2025, delayed the payment of additional principal until 31 October 2024 and if certain pre-specified events occurred, required Akebia to make payments of principal commencing on the original maturity date through the new extended maturity date and repay all unpaid principal that would have been due or payable on or after 1 July 2024. On 29 January 2024, Akebia prepaid its remaining $17,500,000 of the balance that was due to amortise to the Company and the Company received $87,500 in prepayment fees.

IMMUNOGEN

On 6 April 2023, the Company along with the Private Fund entered into a senior secured loan agreement with ImmunoGen, Inc. ("ImmunoGen") for up to $125 million. ImmunoGen drew down $75 million at closing on 6 April 2023. The Company and its subsidiaries funded $37.5 million. The loan would have matured in April 2028 and bore interest at SOFR plus 8 per cent. (subject to a 2.75 per cent. floor), with an additional consideration of 2 per cent. of the total loan amount. On 30 November 2023, AbbVie announced it had entered into a agreement to acquire ImmunoGen, Inc. The ImmunoGen investment was marked up by $10.7 million as of 31 December 2023 to account for the discounted value of the expected prepayment and the make-whole fees. The ImmunoGen repayment was accompanied by prepayment and make-whole fees totaling $13.1 million. On 12 February 2024, ImmunoGen repaid its remaining $37.5 million balance to the Company and the Company received $13.2 million of accrued interest, additional consideration, and prepayment and make-whole fees.

COHERUS

On 5 January 2022, the Company and the Private Fund entered into a senior secured loan agreement for up to $300 million with Coherus BioSciences, Inc. (Nasdaq: CHRS), a biopharmaceutical company building a leading immunooncology franchise funded with cash generated by its commercial biosimilars business ("Coherus"). Coherus drew down $100 million at closing, another $100 million on 31 March 2022, and an additional $50 million on 14 September 2022. The remaining $50 million commitment, of which the Company's share was $25 million, lapsed so there were no additional funding commitments. The Company and its subsidiaries funded $125 million across the first three tranches. The loan was due to mature in January 2027 and bore interest at 3-month SOFR plus 8.25 per cent. per annum subject to a 1.00 per cent. floor along with a one-time additional consideration of 2.00 per cent. of the total loan amount paid at funding of the first tranche. On 6 February 2023, the Coherus loan was amended to allow for a short-term waiver to the sales covenant, as well switching the LIBOR component of the loan coupon to SOFR. On 19 January 2024, Coherus announced that it had entered into a Purchase and Sales Agreement with Sandoz Inc. (the "Purchase Agreement"). On 5 February 2024, Coherus announced that it had entered into a Consent, Partial Release and Third Amendment to the Coherus loan agreement, under which certain subsidiaries and assets of Coherus were released in connection with the Purchase Agreement. Further, Coherus was permitted to make a partial prepayment of the principal of the loans outstanding under the Coherus loan agreement in the amount of $175 million of the outstanding principal balance of $250 million, and the minimum net sales covenant was adjusted. On 1 April 2024, Coherus prepaid $87.5 million of its balance to the Company and the Company received $3.1 million of accrued interest, additional consideration, and prepayment and make-whole fees. On 10 May 2024, Coherus repaid its remaining $37.5 million balance to the Company and the Company received $2.3 million of accrued interest and prepayment and make-whole fees.

MARKET ANALYSIS

The life sciences industry is expected to continue to have substantial capital needs during the coming years as the number of products undergoing clinical trials continues to grow. All else being equal, companies seeking to raise capital are generally more receptive to straight debt financing alternatives at times when equity markets are soft, increasing the number and size of fixed-income investment opportunities for the Company, and will be more inclined to issue equity or convertible bonds at times when equity markets are strong. A good indicator of the life sciences equity market is the New York Stock Exchange Biotechnology Index ("BTK Index"). While there was substantial volatility during the period, the BTK Index decreased 2.4 per cent. during the first six months of 2024, compared to a 1.1 per cent. decrease during the same period in 2023*. Global equity issuance by life sciences companies during the first six months of 2024 was $28 billion, a 29 per cent. increase from the $22 billion issued during the same period in 2023*. This dynamic contributed to additional deal flow for the Company during the recent period from 4Q 2023 through 2Q 2024, as we deployed $179.6 million across two new investments and additional funding tranches of an existing investment. We anticipate a continued slowdown in equity issuance coupled with greater appetite for fixed income as a source of capital during the remainder of 2024.

Acquisition financing is an important driver of capital needs in the life sciences industry in general and a source of investment opportunities. An active M&A market helps drive opportunities for investors such as the Company, as acquiring companies need capital to fund acquisitions. Global life sciences M&A volume during the first six months of 2024 was $54 billion, a 59 per cent. increase from the $34 billion witnessed during the same period in 2023.*

* Source: FactSet

USD SOFR

On 5 March 2021, the Financial Conduct Authority ("FCA"), the regulatory supervisor of USD LIBOR's administrator ("IBA") announced in a public statement the future cessation of the 3-month USD LIBOR tenor setting. As of that date, 30 June 2023, all available tenors of USD LIBOR have either permanently or indefinitely ceased to be provided by IBA. As of 30 June 2023, the benchmark replacement rate is based on Secured Overnight Financing Rate ("SOFR"), and all LIBOR-based interest payments are now calculated with SOFR beginning on the respective effective date. The Company has eleven loans with coupons that reference 3-month USD SOFR and six have a 2.50 per cent. floor or greater and four have a floor ranging from 1.00 per cent. to 2.00 per cent. As of 30 June 2024, the 3-month SOFR rate was 5.33 per cent, significantly above the floors in the eleven loans.

INVESTMENT OUTLOOK

We expect our investment pipeline to grow as new products and companies enter the market during the remainder of 2024. Pharmakon's extensive network and thorough approach will continue to identify strong investment opportunities. We remain focused on our mission of creating the premier dedicated provider of debt capital to the life sciences industry while generating attractive returns and sustainable income to investors. Further, Pharmakon remains confident of our ability to deliver its target dividend yield to its investors.

Pedro Gonzalez de Cosio

Co-founder and CEO, Pharmakon

23 September 2024

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors confirm that to the best of their knowledge:

• this set of condensed financial statements has been prepared in accordance with UK adopted International Accounting Standard ("IAS") 34, 'Interim Financial Reporting', and gives a true and fair view of the assets, liabilities, financial position, and profit of the Company; and

• this Half-Yearly Report includes a fair review of the information required by:

(a) DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements; and a description of the principal risks and uncertainties for the remaining six months of the year; and

(b) DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being related party transactions that have taken place during the first six months of the financial year and that have materially affected the financial position or performance of the Company during that period; and any changes in the related party transactions that could do so.

This Half-Yearly Report was approved by the Board of Directors on 23 September 2024 and the above responsibility statement was signed on its behalf by Harry Hyman, Chairman.

On behalf of the Board

Harry Hyman

Chairman

23 September 2024

DIRECTORS, ADVISERS AND OTHER SERVICE PROVIDERS

DIRECTORS

Harry Hyman (Chairman)

Colin Bond

Duncan Budge

Stephanie Léouzon

Sapna Shah

Rolf Soderstrom

INVESTMENT MANAGER AND AIFM

Pharmakon Advisors, LP

110 East 59th Street #2800

New York, NY 10022

USA

ADMINISTRATOR

Link Alternative Fund Administrators Limited

Broadwalk House

Southerhay West

Exeter

EX1 1TS

COMPANY SECRETARY AND REGISTERED OFFICE

Link Company Matters Limited

Central Square

29 Wellington Street

Leeds

LS1 4DL

Tel: [phone]

COMPANY WEBSITE

www.bpcruk.com

CUSTODIAN

Bank of New York Mellon

One Canada Square

London

E14 5AL

FINANCIAL AND STRATEGIC COMMUNICATIONS

Burson Buchanan Communications Limited

107 Cheapside

London

EC2V 6DN

INDEPENDENT AUDITOR

Ernst & Young, Chartered Accountants

Harcourt Centre

Harcourt Street

Dublin

DO2 YA40

Ireland

JOINT BROKERS

J.P. Morgan Cazenove

25 Bank Street

London

E14 5JP

Goldman Sachs International

Peterborough Court

133 Fleet Street

London

EC4A 2BB

LEGAL ADVISER

Herbert Smith Freehills LLP

Exchange House

Primrose Street

London

EC2A 2EG

REGISTRAR

Link Group

10^th Floor

Central Square

29 Wellington Street

Leeds

LS1 4DL

COMPANY INFORMATION

The Company is a closed-ended investment company incorporated on 24 October 2016. The Ordinary Shares were admitted to trading on the Specialist Fund Segment of the Main Market of the LSE and TISE on 27 March 2017. The Company's shares were transferred to the premium segment of the Main Market on 5 October 2021. The Company introduced a GBP quote to appear alongside its USD quote on this date.

The Company's shares were transferred to the premium segment of the Main Market on 5 October 2021. The Company introduced a GBP quote to appear alongside its USD quote on this date.

The Company delisted from the TISE on 8 October 2021.

The Company intends to carry on business as an investment trust within the meaning of Chapter 4 of Part 24 of the Corporation Tax Act 2010 and an investment company within the meaning of Section 833 of the Companies Act 2006.

INVESTMENT OBJECTIVE

The Company aims to generate long-term shareholder returns, predominantly in the form of sustainable income distributions from exposure to the life sciences industry.

SUMMARY OF INVESTMENT POLICY

The Company will seek to achieve its investment objective primarily through investments in debt assets secured by royalties or other cash flows derived from sales of approved life sciences products. Subject to certain restrictions and limitations, the Company may also invest in unsecured debt and equity issued by companies in the life sciences industry.

The Investment Manager will select investment opportunities based upon in-depth, rigorous analysis of the life sciences products backing an investment as well as the legal structure of the investment. A key component of this process is to examine future sales potential of the relevant product, which is affected by several factors, including but not limited to; clinical utility, competition, patent estate, pricing, reimbursement (insurance coverage), marketer strength, track record of safety, physician adoption and sales history.

The Company will seek to build a diversified portfolio by investing across a range of different forms of assets issued by a variety of borrowers. In particular, no more than 25 per cent. of the Company gross assets will be exposed to any single borrower.

SHAREHOLDER INFORMATION

KEY DATES

March                   Annual results announced

                                Payment of fourth interim dividend

June                      Annual General Meeting

July                        Company's half-year end

                                Payment of first interim dividend

September         Half-yearly results announced

                                Payment of second interim dividend

December           Company's year end

                                Payment of third interim dividend

FREQUENCY OF NAV PUBLICATION

The Company's NAV is released to the LSE on a monthly basis and is published on the Company's website.

ANNUAL AND HALF-YEARLY REPORT

Copies of the Company's Annual and Half-yearly Reports, stock exchange announcements and further information on the Company can be obtained from the Company's website www.bpcruk.com.

IDENTIFICATION CODES

SEDOL: BDGKMY2

ISIN: GB00BDGKMY29

TICKER: BPCR

LEI: 213800AV55PYXAS7SY24

CONTACTING THE COMPANY

Shareholder queries are welcomed by the Company. While any queries regarding your shareholding should be directed to the Registrar, shareholders who wish to raise any other matters with the Company may do so using the following contact details:

Company Secretary - [e-mail]

Chairman - [e-mail]

Senior Independent Director - [e-mail]

FURTHER INFORMATION 

BioPharma Credit PLC's full Half Yearly Report for the period ended 30 June 2024 will be available today on https://bpcruk.com/

It has also been submitted in full unedited text to the Financial Conduct Authority's National Storage Mechanism and is available for inspection at data.fca.org.uk/#/nsm/nationalstoragemechanism in accordance with DTR 6.3.5(1A) of the Financial Conduct Authority's Disclosure Guidance and Transparency Rules."

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of this announcement.

 

END