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WPCT avoids losses on Woodford backed Abzena

WPCT avoids losses on Woodford-backed Abzena

Woodford Investment Management will have to take a second painful hit on one of its major biotech investments in less than a week, after the UK-based drug discovery services company Abzena agreed to a low-ball private equity takeout today after seeing a sustained share price decline.  This deal follows the acquisition  of Vernalis, another major Woodford investee, by Ligand Pharmaceuticals last week. However, for once Woodford Patient Capital Trust (WPCT) is not exposed to Abzena – although it was well into 2017 – as its shares seem to have been transferred to other Woodford managed funds.

Both Abzena and Vernalis have seen precipitous share price falls as investors have lost confidence in their businesses, although there are also some significant differences. Vernalis’ woes were caused by the failure to make meaningful inroads into the US cough/cold market with in-licensed reformulated products and its shares fell 95% from a peak around three years ago. By contrast, Abzena struggled to raise money to fund a growing – but not yet profitable – drug development services business, albeit against a background of setbacks for products – under development by former clients – in which it held royalty interests. Abzena had seen its shares fall from around 80p in 2015 to 6p yesterday, before the company agreed to a takeover from the US private equity firm WCAS for 16p per share, equivalent to £34m.

Woodford Investment Management holds a 23.7% stake (c50.7m shares) in Abzena, which were acquired at various times. It invested £8m (10m at 80p) in Abzena’s AIM admission in 2014 and a further £12m (20m shares at 60p) in 2015 and £5.7m in 2017 (17.45m at 33p).  It is not clear exactly at what price the shares were transferred out of WPCT, but if completed in 2017 it would presumably have been done at between 30p-40p.

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