Prothena drag on Woodford Patient Capital
A 45% fall in the value of its large shareholding in Prothena since the end of the third quarter seems to have been the main factor behind a decline in the value of Woodford Patient Capital Trust (WPCT) over the same period, according to the trust’s latest monthly update. WPCT’s shares have fallen from 95p at the end of September to 85p over the fourth quarter, with the trust’s discount to NAV widening from 5.6% to 8.6% as investors have become concerned at the prospects for its largest single investment (see graph attached).
Woodford’s investment in Ireland-based but Nasdaq-listed Prothena has been controversial both for its size – it now accounts for 11.8% of NAV, but has been above 15% – in what is otherwise a diversified biotech/tech portfolio (with over 75 investments) as well as its risky “binary” nature. Prothena’s lead product, an anti-beta-amyloid monoclonal antibody coded NEOD001, in currently in two clinical trials: a Phase IIb study called Pronto and Phase III codenamed Vital, both for a condition called AL amyloidosis. Results from Pronto are expected in the second quarter next year, while those from Vital in the second half of 2019.
Prothena came under a short attack from Kerrisdale Capital, a US investment firm with a reputation for this strategy in early November (see thesis) and prompting a decline in its stock price from around $68/share to around $37/share (WPCT’s average purchase price for Prothena is c$40/share). Kerrisdale predicts the failure of both studies based on complex arguments around endpoints measured, although Woodford has published arguments to the contrary. Most covering sell-side analysts remain positive about the drug’s chances of success.
Woodford Patient Capital shares have lost 15% of their value since launch on 1 May 2015, with the NAV down by 6%, an under-performance relative to benchmarks that stands in marked contrast to other UK specialist biotech/pharma investment trusts that have seen seen impressive returns over the same period. Woodford has made a number of biotech investments on behalf of that the trust that have performed very poorly including Sphere Medical, Allied Minds, Northwest Biosciences, Vernalis and 4D Pharma, all of which have lost more than 50% of value in the year to end September and in most cases more over a longer period. Neverthless, the WPCT offers investors exposure to some high-profile private UK biotech companies including Benevolent AI, Immunocore and Autolus, all of which feature among its top 10.
WPCT : Prothena drag on Woodford Patient Capital