Woodford Patient Capital says that 2016 was a challenging year, with its net asset value declining modestly from 97.37p to 93.24p. Meanwhile, the share price moved from a 3.7 per cent premium to net asset value at the end of 2015, to a slight discount of -2.4 per cent at the end of the period, which meant a share price decline of -9.9 per cent during 2016.
The manager says that operational progress made during the year, across the majority of the portfolio, was extremely encouraging. Although much of this fundamental progress has yet to be reflected in the net asset value. The unquoted portion of the portfolio, which accounted for approximately 40 per cent of the Company’s assets, delivered a positive contribution to returns of more than two per cent in 2016. In contrast, the quoted part of the portfolio, which accounted for approximately 60 per cent of assets, delivered a negative contribution of more than five per cent during the year.
They are asking shareholders to approve a change to the investment policy so that up to 80% of the fund can be invested in unquoted investments.
Having performed well in 2015, Prothena’s share price fell significantly in the first few weeks of 2016, primarily as a result of an increase in the short interest in the stock. The manager added to the position. He says that his increasing conviction is due to the progress that Prothena has made with its leading drug development candidate, which is for AL amyloidosis, a rare and often fatal organ disease affecting fewer than 10,000 patients a year. Results from its phase I and II trials have been outstanding, while patient advocacy groups have been calling for its urgent approval. There are currently no approved drugs for AL amyloidosis and in 2018 we will learn the results of two late-stage trials, which, if positive, would result in a significant revaluation of the company.
From a fundamental perspective, the AL amyloidosis opportunity on its own would warrant a valuation far above that of today’s, in his view. Meanwhile, Prothena has also made significant progress on two other development candidates, one in Parkinson’s disease and the other in psoriatic arthritis. The speed with which it has identified and developed these three assets suggests to him that there could be more to follow in time. The company’s rapid progress and its positive share price performance in the second half of the year are the principal reasons why its position in the portfolio has grown significantly from 6.3 per cent of assets to 14.4 per cent at year end.
Circassia announced results from a late-stage trial into its cat allergy vaccine in June. Although many aspects of the trial data were highly encouraging, further evidencing the drug’s strong therapeutic benefits, the results also showed that a placebo had broadly the same impact on symptoms. This development led to Circassia’s share price declining by more than two-thirds during the period, making it a significant negative contributor to performance. More recently (and outside the period under review), it announced similar results for its house dust mite vaccine and has now decided to stop investing in the development of its allergy portfolio.
They remain supportive shareholders, believing that there is much more to Circassia than its allergy platform and it remains in a strong position. They say it continues to successfully develop the asthma and respiratory assets that it acquired in 2015, with three new pipeline candidates added in the second half of the period under review. In March 2017, it announced a commercial collaboration with AstraZeneca, which significantly strengthens the company’s strategy as a speciality biopharma business.
Neil Woodford said “At launch, I set out to deliver double-digit annualised long-term returns. It is, of course, critical that I do so and I remain absolutely confident that I will.”
WPCT : More patience required for Woodford Patient Capital shareholders