BioPharma Credit (BPCR), one of four alternative income funds shortlisted in our Investors’ Choice Awards, has announced a $62.5m (£46.5m) five-year loan to a US drug company developing a treatment for a rare form of sexually transmitted disease.
Precigen, a Maryland-based biotech specialising in difficult-to-treat conditions, has obtained a $125m secured loan from Pharmakion, the manager of BioPharma Credit, split equally between the £1.1bn investment company and another of its funds, BioPharma Credit Investments V.
It will use the money to bring to market Papzimeos, a treatment for respiratory papillomatosis, a debilitating and potentially life-threatening wart-like benign tumour most often found in the larynx.
The treatment received full approval from the US Food and Drug Administration on 15 August, the first to do so.
Shares in $1.4bn Precigen rose 4.4% in pre-trading on news of the financing which strengthens the company’s balance sheet without diluting equity owners.
BioPharma Credit, a specialist fund which now has 15 loans, all to US companies, has advanced $50m to Precigen. A further $12.5m will follow by the end of June 2027 with the loan maturing in September 2030.
Precigen will pay annual interest 6.5% above the US three-month secured overnight financing rate (SOFR). This is currently 4.16% giving a starting rate of 10.6%.
The loan will be subject to a 3.75% SOFR floor protecting the lender should interest rates fall more than expected.
The new loan reduces BioPharma Credit’s cash pile of $215.6m at 31 July and provides more income for its 7 cents a share dividend target. The company has also paid additional special dividends in five of its seven financial years since launch in 2017. In the year to 31 July it distributed a total of 10.18 cents per share. That puts the shares, up 0.7% to 90 cents today, on an 11.4% historic yield. They stand on a 10% discount to net asset value of $1 a share.
The inclusion of a new borrower, accounting for around 6.7% of assets, also slightly reduces concentration of a portfolio dominated by loans to drug developers Collegium and Insmed. These represent over 52% of investments. The company is due to publish its half-year results this month.
Although the shares had fallen 13% from launch in March 2017, by the end of July the cumulative impact of its dividends had generated a 74.3% total return to shareholders, according to the company’s fact sheets.
BioPharma Credit is one of four listed alternative income funds vying for a prize in our second annual Investors’ Choice Awards. The other three are 3i Infrastructure (3IN), TwentyFour Income (TFIF) and Greencoat UK Wind (UKW).
There are 12 awards in all with readers of QuotedData invited to vote on a winner from our shortlists. More information on the shortlists and how to vote is available here.
