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Share Name Share Symbol Market Type Share ISIN Share Description
Biopharma Credit Plc LSE:BPCR London Ordinary Share GB00BDGKMY29 ORD USD0.01
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BioPharma Credit PLC Annual Financial Report

16/03/2021 7:00am

UK Regulatory (RNS & others)


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BioPharma Credit PLC

16 March 2021

BIOPHARMA CREDIT PLC

(THE "COMPANY")

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEARED 31 DECEMBER 2020

ONGOING ROBUST PORTFOLIO PERFORMANCE

BioPharma Credit PLC (LSE: BPCR), the specialist life sciences debt investor, today announces the Annual Report of the Company for the period ended 31 December 2020.

The full Annual 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 01392 477500.

SHAREHOLDER RETURNS

-- 8.29 cents per share in total dividends during period referencing net income for the four quarters ending 30 September 2020, comfortably ahead of the target to distribute at least 7 cents per share

-- Post period end, the Company declared a further dividend of 2.04 cents per share including a special dividend of 0.29 cents per share in addition to the ordinary quarterly dividend of 1.75 cents per share

-- Company NAV was highly stable during the period decreasing by $0.018 from $1.0217 to $1.0037

-- The Company reported total net income for 2020 of $89m, this is down from $122m reported during 2019 which included $46m in fees linked to the prepayment of the Company's Tesaro loan

-- No material impact on the credit quality of any loan as a result of the global disruption caused by the Covid-19 pandemic

INVESTMENT HIGHLIGHTS

-- In the twelve month-period, the Company's portfolio continued to mature and perform robustly with significant further investments and a number of attractive realisations:

o The Company and its subsidiaries invested $548m in the period

o This included $308m of commitments entered into prior to the start of the year, $165m for the new senior secured loan with Collegium Pharmaceutical, Inc. (NASDAQ: COLL) announced 7 February 2020 and $75m as part of the amendment and upsizing of the Company's loan with Epizyme (NASDAQ: EPZM) announced 9 November 2020

o The Company saw increased liquidity from three early attractive repayments from Amicus, Novocure and Lexicon totalling $425m. Additional prepayment and other fees totalled an additional $14m enhancing attractive overall rates of return on these investments:

-- Novocure 10.2% Realised gross IRR

-- Lexicon 12.1% Realised gross IRR

-- Amicus 13.4% Realised gross IRR

-- The Company's investment manager, Pharmakon Advisors continues to progress an active pipeline of additional potential investments to further grow and diversify the portfolio

PERFORMANCE HIGHLIGHTS

 
 Shares                        Assets 
  as at 31 December 2020        as at 31 December 2020 
 
 Share price                   Net assets 
 $0.9960                       $1,378.9m 
 (31 December 2019: $1.0200)   (31 December 2019: $1,403.7m) 
 
 NAV per share                 Shares in issue 
 $1.0037                       1,373.9m 
 (31 December 2019: $1.0217)   (31 December 2019: 1,373.9m) 
 
 Discount to NAV per share     Target dividend 
 0.8%                          7 cents per annum 
 (31 December 2019: 0.2%)      Dividend paid 7.3 cents 
                                (31 December 2019: 8.3 cents) 
 
 Net income per share*         Leverage 
 $0.0732                       0% 
 (31 December 2019: $0.0828)   (31 December 2019: 0%) 
 

* Net income includes $20.5 million relating to the change in fair value of the Company's subsidiary, BPCR Limited Partnership. This change in fair value of $20.5 million is equal to the undistributed net income earned by BPCR Limited Partnership in the year, reflecting changes in the fair value of and income earned on the investment it holds. Details of these investments are set out in Note 2F, accounting policy for income and Note 7, investment at fair value through profit or loss. Details of its subsidiaries including its newly formed entities in 2020 are set out in Note 14.

PORTFOLIO COMPOSITION

 
 ($ in millions)                As at 31 December   As at 31 December   % Change 
                                       2020                2019 
 
 Sarepta Therapeutics senior 
  secured loan                         350                 175            100% 
 BMS purchased payments                160                 150            6.7% 
 Collegium Therapeutics                134                  -              - 
  senior secured loan 
 Epizyme senior secured 
  loan                                 110                 13            746.2% 
 Sebela senior secured 
  loan                                 92                  130           -29.2% 
 Global Blood Therapeutics 
  senior secured loan                  83                  41             100% 
 BioDelivery Sciences senior 
  secured loan                         80                  60            33.3% 
 OptiNose senior secured 
  note and warrants                    72                  46            56.5% 
 Akebia senior secured 
  loan                                 50                  40            25.0% 
 BioDelivery Sciences equity           11                  17            -35.3% 
 Novocure senior secured                -                  150             - 
  loan 
 Amicus senior secured                  -                  150             - 
  loan 
 Lexicon senior secured                 -                  125             - 
  loan 
 Convertible bonds                      -                  20              - 
 Cash and cash equivalents            250*                 297           -15.7% 
 Other net assets                     (13)                 (9)           44.4% 
-----------------------------  ------------------  ------------------  --------- 
 Total net assets                     1,379               1,405          -1.8% 
-----------------------------  ------------------  ------------------  --------- 
 

* Includes cash at the Company and its subsidiaries

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

"During 2020, Covid-19 caused considerable economic turmoil leading to volatile equity markets and major stress for business models in many staple sectors for investor income resulting in widespread disruption for dividend distributions.

Against an uncertain macro backdrop, portfolio performance has been exceptional, with 8.28 cents per share paid for the four quarters ended September 2020, ahead of the Company's target to distribute at least 7 cents. The Company has also recently declared a special dividend after this period end of 0.29 cents per share. The high level of distributed income has been complemented by an exceptionally resilient NAV, decreasing by $0.018 in the period to $1.0037.

The stable nature of the Company's return profile over the past 12 month period further underlines the uncorrelated nature of the underlying revenue streams, uniquely among London listed investment companies drawn from cash flows linked to approved life science products. There has been no material change in the Company's investment market during the period, which continues to be capital intensive and suffers from a major shortfall in supply. It remains clear that the senior secured loans that form the majority of the Company's portfolio continue to be one of the most attractive financing options for the life sciences sector.

Accordingly, the Company continues to seek additional attractive investment opportunities and is consistently engaged in a number of productive discussions from our considerable investment pipeline. We look forward to further updating the market in due course."

Results presentation

As announced on 17 February 2021, a management presentation for analysts will be delivered via a conference call facility at 2:00pm GMT on the day of results. To request dial-in details please RSVP biopharmacredit@buchanan.uk.com

Enquiries

Buchanan

David Rydell / Mark Court / Jamie Hooper / Henry Wilson

+44 (0) 20 7466 5000

biopharmacredit@buchanan.uk.com

Notes to Editors

BioPharma Credit PLC is London's only specialist debt investor to 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.

2020 Investments

 
 Collegium        GBT              Sarepta          Akebia           Epizyme          Optinose         BioDelivery 
 Funded in        Funded           Funded in        Funded in        Funded in        Funded in        Funded in 
 2020:            in 2020:         2020:            2020:            2020:            2020:            2020: 
 $165 million     $41 million      $175 million     $10 million      $97 million      $28 million      $20 million 
 
 Previously       Previously       Previously       Previously       Previously       Previously       Previously 
 funded:          funded:          funded:          funded:          funded:          funded:          funded: 
 $nil             $41 million      $175 million     $40 million      $13 million      $44 million      $60 million 
 
 Total            Total            Total            Total            Total            Total            Total 
 investment:      investment:      investment:      investment:      investment:      investment:      investment: 
 $165 million     $83 million      $350 million     $50 million      $110 million     $72 million      $80 million 
                 ---------------  ---------------  ---------------  ---------------  ---------------  ---------------- 
 
   In addition, $12 million was advanced to BMS in 2020. 
 
   All remaining investment commitments are $0 as at 31 December 2020. 
 

2020 Repayments

 
 Novocure                Lexicon                 Amicus 
 Investment date:        Investment date:        Investment date: 
  7 February 2018         18 December 2017        28 September 2018 
 
  Amount: $150 million    Amount: $125 million    Amount: $150 million 
 
  Prepayment fees:        Prepayment fees:        Prepayment fees: 
  $3 million              $6 million              $5 million 
 
  Reali s ed gross IRR    Reali s ed gross IRR    Reali s ed gross IRR 
  10.2%                   12.1%                   13.4% 
                        ----------------------  ---------------------- 
 

INVESTMENT

 
                                           As at            As at 
                                     31 Dec 2020      31 Dec 2019 
                                   (in millions)    (in millions)       % change 
-------------------------------  ---------------  ---------------  ------------- 
 Cash and cash equivalents                  250*              297         -15.7% 
 Lexicon senior secured loan                   -              125              - 
 Novocure senior secured                       -              150              - 
  loan 
 Sebela senior secured loan                   92              130         -29.2% 
 BMS purchased payments                      160              150           6.7% 
 Amicus senior secured loan                    -              150              - 
 BioDelivery Sciences senior 
  secured loan                                80               60          33.3% 
 BioDelivery Sciences equity                  11               17         -35.3% 
 OptiNose senior secured 
  note and warrants                           72               46          56.5% 
 Epizyme senior secured loan                 110               13         746.2% 
 Akebia senior secured loan                   50               40          25.0% 
 Sarepta Therapeutics senior 
  secured loan                               350              175         100.0% 
 Global Blood Therapeutics 
  senior secured loan                         83               41         100.0% 
 Collegium Therapeutics senior               134                -              - 
  secured loan 
 Convertible bonds                             -               20              - 
 Other net assets                           (13)              (9)          44.4% 
-------------------------------  ---------------  ---------------  ------------- 
 Total net assets                          1,379            1,405          -1.8% 
-------------------------------  ---------------  ---------------  ------------- 
 
 
 
 Investment Type as at 31 December                Percentage           Percentage 
  2020                                     as at 31 December    as at 31 December 
                                                        2020                 2019 
---------------------------------------  -------------------  ------------------- 
 Cash and cash equivalents                             18.1%                21.1% 
 Lexicon senior secured loan                               -                 8.9% 
 Novocure senior secured loan                              -                10.7% 
 Sebela senior secured loan                             6.7%                 9.3% 
 BMS purchased payments                                11.6%                10.7% 
 Amicus senior secured loan                                -                10.7% 
 BioDelivery Sciences senior secured 
  loan                                                  5.8%                 4.3% 
 BioDelivery Sciences equity                            0.8%                 1.2% 
 OptiNose senior secured note and 
  warrants                                              5.2%                 3.3% 
 Epizyme senior secured loan                            8.0%                 0.9% 
 Akebia senior secured loan                             3.6%                 2.8% 
 Sarepta Therapeutics senior secured 
  loan                                                 25.4%                12.5% 
 Global Blood Therapeutics senior 
  secured loan                                          6.0%                 2.9% 
 Collegium Therapeutics senior secured 
  loan                                                  9.7%                 0.0% 
 Convertible bonds                                         -                 1.4% 
 Other net assets                                      -0.9%                -0.6% 
---------------------------------------  -------------------  ------------------- 
 Total net assets                                     100.0%               100.0% 
---------------------------------------  -------------------  ------------------- 
 

* includes cash at the Company and its subsidiaries

CHAIRMAN'S STATEMENT

During 2020, the Company invested $548 million, including $322 million from its financing subsidiary, BPCR Limited Partnership.

INTRODUCTION

2020 was the Company's third full year of operations and I am pleased to be able to report on another year of consistent returns and targets met.

INVESTMENTS

Over the course of 2020, the Company and its subsidiaries invested $548 million, $308 million of which comprised the funding of commitments entered into prior to the start of the year, $165 million for the new Collegium loan and $75 million as part of the amendment and upsizing of the Epizyme loan. The Company, including assets and liabilities from its financing subsidiary, BPCR Limited Partnership, ended the year with total net assets of $1,379 million, comprising $1,142 million of investments, $250 million of cash and $13 million of other net liabilities.

The Company and its subsidiaries saw increased liquidity from three early repayments of its Amicus, Novocure and Lexicon investments in the third quarter of 2020 totalling $425 million. These repayments were accompanied by prepayment and other fees totalling $14 million, thereby enhancing attractive overall rates of return on these investments.

SHAREHOLDER RETURNS

The Company reported total income for 2020 of $89 million, which includes $20.5 million relating to the change in fair value of its subsidiary, BPCR Limited Partnership, down from the $122 million reported during 2019 which included $46 million in fees linked to the prepayment of the Tesaro loan.

On 31 December 2020, the Company's Ordinary Shares closed at $0.9960, below the closing price on 31 December 2019 of $1.0200. Net Asset Value ("NAV") per Ordinary Share decreased over the same timeframe by $0.018 from $1.0217 to $1.0037. The Company made four dividend payments over the year totalling $0.0829 per share, referencing net income for the four quarters ending 30 September 2020. The Company was therefore able to maintain its record of paying a dividend of at least 1.75 cents per share in every quarter since that ending 30 June 2018.

Following the end of the year, the Company declared a further dividend in respect of the last quarter of 2020 of 2.04 cents per share made up of an ordinary dividend of 1.75 cents per share together with a special dividend of 0.2901 cents per share. Total dividends from 2020 results reached 7.3 cents per share.

During the year, the COVID-19 pandemic led to restrictions to the movement of people and disruption to business operations. So far the portfolio has proved resilient. Pharmakon Advisors, our investment manager, believes that the COVID-19 virus has not had a material impact on the credit quality of the loans. The Investment Manager continues to monitor the situation and will inform shareholders of any material changes to this assessment.

BOARD CHANGES

A number of Board changes have taken place during the year. Jeremy Sillem retired as a Director and Chairman of the Company on 16 September 2020. On behalf of the Board, I would like to thank Jeremy for his leadership of the Company since IPO. The Board also welcomed Rolf Soderstrom as an additional Director of the Company, with effect from 16 September 2020. Rolf brings over 30 years of experience in finance and extensive strategic, operational and international experience including M&A, fundraisings and disposals to the Board. Finally, following my appointment as Chairman, Duncan Budge has been appointed as Senior Independent Director of the Company.

OUTLOOK

The Investment Manager continues to develop a pipeline of additional potential investments and, as a consequence, we expect to be evaluating a number of potential alternatives to fund future growth and further diversify our portfolio.

On behalf of the Board, I should like to express our thanks to Pharmakon for their continued achievements on behalf of the Company in 2020 and to our shareholders for their continued support.

Harry Hyman

Chairman

15 March 2021

INVESTMENT MANAGER'S REPORT

AN ATTRACTIVE INVESTMENT ENVIRONMENT TO BUILD ON PAST PERFORMANCE

INTRODUCTION TO THE INVESTMENT MANAGER

Pharmakon Advisors, the Company's Investment Manager, was founded in 2009 and has invested $4.6 billion in over 40 transactions on behalf of its clients. As at 31 December 2020, Pharmakon clients included four previous BioPharma Funds (I, II, III and IV), BioPharma V, a private fund also investing in life sciences debt managed by Pharmakon Advisors launched in June 2019, and seven managed co-investor accounts. The four previous BioPharma Funds have now reached the end of their investment period and have returned all capital to investors generating an average 10.4 per cent. IRR. BioPharma V has raised $742 million in commitments and had invested $521 million to date.

The Pharmakon team has extensive expertise investing in debt and other cash flows backed by life sciences products. Pharmakon prides itself on its ability to identify and structure investments that meet its target returns while minimising risk through its rigorous diligence process and industry expertise. As a result, Pharmakon has been able to generate consistent returns throughout its history.

Through a shared services agreement with RP Management LLC, Pharmakon has access to the complementary expertise of the team behind the market-leading investor in pharmaceutical royalties. RP Management LLC, an affiliate of Pharmakon, was established in 1996 and acquires revenue-producing intellectual property as the investment manager of Royalty Pharma PLC which had its IPO on 16 June 2020 (Nasdaq: RPRX) and had a market capitalisation of $25,820 million as of 5 March 2021.

INVESTMENTS

Pharmakon is pleased to present an update on the Company and its subsidiaries' portfolio and investment outlook. We are delighted with the results over the past year and look forward to a productive 2021 as we continue to solidify our position as the leading investor in life sciences debt. Since its IPO in March 2017 the Company and its subsidiaries have invested $2,263 million using proceeds from capital raises and have reinvested $1,227 million in amortisations, loan repayments and prepayments received by the Company and its subsidiaries.

2020 started with the Company and its subsidiaries' $165 million investment of the $200 million loan to Collegium. Over the following months, the Company and its subsidiaries funded an additional $308 million in previous commitments to GBT, BDSI, BMS and Akebia plus an additional $75 million as part of an upsizing of the Epizyme loans. In total, the Company and its subsidiaries' funded $548 million during 2020 including $322 million from its financing subsidiary, BPCR Limited Partnership. Three investments in the Company and its subsidiaries portfolio were prepaid early during the third quarter of 2020 (Novocure, Amicus and Lexicon) generating $444 million in cash ($425 million in principal, $5 million in accrued interest and $14 million in fees). Also during 2020, the Company and its subsidiaries negotiated a $200 million credit line with JPMorgan which the Company has not drawn upon. During the year the COVID-19 pandemic has impacted the global economy and has led to significant volatility in both the equity and debt capital markets. Pharmakon Advisors believes that the COVID-19 virus has not had a material impact on the credit quality of the loans. Pharmakon Advisors continues to monitor the situation and will inform shareholders of any material changes to this assessment. Below is an update on the Company and its subsidiaries portfolio.

Collegium

On 7 February 2020, the Company and BioPharma-V, a private fund also investing in life sciences debt managed by Pharmakon Advisors, entered into a definitive senior secured term loan agreement for $200 million with Collegium Pharmaceutical, Inc. (Nasdaq: COLL), a biopharmaceutical company focused on developing and commercialising new medicines for responsible pain management ("Collegium").

The Company and its subsidiaries funded $165 million of the $200 million loan in February 2020. The loan will mature in February 2024 and will bear interest at three-month LIBOR plus 7.50 per cent. per annum subject to a 2.00 per cent. LIBOR floor with a one-time additional consideration of 2.50 per cent. of the loan amount payable upon funding. The loan amortises quarterly and had a remaining balance of $134 million as of 31 December 2020.

Collegium currently markets Xtampza (R) ER, an abuse-deterrent, extended-release, oral formulation of oxycodone and Nucyanta (R) (tapentadol), a centrally acting synthetic analgesic. Sales of the two drugs totalled $310 million during 2020, up 4 per cent. from $297 million during 2019. Collegium had a market capitalisation of approximately $779 million as at 5 March 2021.

 
 Investment type     Date invested 
 Secured loan        7 February 2020 
 
 Total loan amount   Company commitment 
 $200m               $165m 
 
 Maturity 
 February 2024 
 

GBT

On 18 December 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $150 million with Global Blood Therapeutics (Nasdaq: GBT), a biopharmaceutical company focused on innovative treatments that provide hope to underserved patient communities ("GBT"). GBT drew down $75 million at closing and an additional $75 million on 20 November 2020.

The Company and its subsidiaries funded $41 million of each tranche for a total investment of $83 million. The loan will mature in December 2025 and will bear interest at three month LIBOR plus 7.00 per cent. per annum subject to a 2.00 per cent. floor along with a one-time additional consideration of 1.50 per cent. of the total loan amount payable upon funding and an additional 2.00 per cent. payable upon the repayment of the loan.

GBT manufactures and sells Oxbryta TM (voxelotor) for the treatment of sickle cell disease in adults and pediatric patients 12 years of age and older. Oxbryta was launched in early 2020 and generated total sales of $124 million during its first year. GBT had a market capitalisation of approximately $2,495 million as of 5 March 2021.

 
 Investment type     Date invested 
 Secured loan        18 December 2019 
 
 Total loan amount   Company commitment 
 $150m               $83m 
 
 Maturity 
 December 2025 
 

Sarepta Therapeutics

On 13 December 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $500 million with Sarepta Therapeutics (Nasdaq: SRPT), a fully integrated biopharmaceutical company focused on precision genetic medicine ("Sarepta"). On 24 September 2020 the Sarepta loan agreement was amended and the loan amount was increased to $550 million. Sarepta drew down the first $250 million tranche at closing and an additional $300 million on 2 November 2020.

The Company and its subsidiaries funded $175 million of each tranche for a total investment of $350 million. The first tranche will mature in December 2023 and the second tranche in December 2024. The loan will bear interest at 8.5 per cent. per annum along with a one-time additional consideration of 1.75 per cent. of the first tranche and 2.95 per cent. of the second tranche payable upon funding and an additional 2 per cent. payable upon the repayment of the loan.

Sarepta currently markets Exondys 51 (eteplirsen) and Vyondys 53 (golodirsen) in the US for the treatment of Duchenne muscular dystrophy (DMD). Sales of the two drugs totalled $456 million during 2020, up 20 per cent. from $381 million during 2019. Sarepta had a market capitalisation of approximately $6,726 million as at 5 March 2021.

 
 Investment type               Date invested 
 Secured loan                  13 December 2019 
 
 Total loan amount             Company commitment 
 $500m                         $350m 
 
 Maturity 
 1(st) Tranche December 2023 
 2(nd) Tranche December 2024 
 

Akebia

On 11 November 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $100 million with Akebia (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 $40 million of the $80 million first tranche and $10 million of the second tranche. The loan will mature in November 2024 and will bear 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. Akebia currently markets Auryxia(R) (ferric citrate) which is approved in the US for hyperphosphatemia (elevated phosphorus levels in blood serum) in adult patients with chronic kidney disease (CKD) on dialysis and iron deficiency anaemia in adult patients with CKD not on dialysis. Sales of Auryxia totalled $129 million during 2020, up 16 per cent. from $111 million during 2019. Akebia had a market capitalisation of approximately $516 million as at 5 March 2021.

 
 Investment type     Date invested 
 Secured loan        11 November 2019 
 
 Total loan amount   Company commitment 
 $100m               $50m 
 
 Maturity 
 November 2024 
 

Epizyme

On 4 November 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $70 million with Epizyme (Nasdaq: EPZM), a late-stage biopharmaceutical company developing novel epigenetic therapies ("Epizyme"). On 3 November 2020 the Epizyme loan agreement was amended and the loan amount was increased to $220 million. Epizyme drew down $25 million at closing and an additional $195 million during 2020.

The Company and its subsidiaries funded a total of $110 million of the Epizyme loan. The loan will mature in November 2024 and will bear interest at LIBOR plus 7.75 per cent. per annum along with a one-time additional consideration of 2 per cent. of the total loan amount. Epizyme's lead product, TAZVERIK (tazemetostat), is a first-in-class, oral EZH2 inhibitor that received FDA approval for epithelioid sarcoma on 23 January 2020 and follicular lymphoma on 18 June 2020. TAZVERIK was launched in early 2020 and generated total sales of $16 million during its first year. Epizyme had a market capitalisation of approximately $959 million as at 5 March 2021.

 
 Investment type     Date invested 
 Secured loan        4 November 2019 
 
 Total loan amount   Company commitment 
 $220m               $110m 
 
 Maturity 
 November 2024 
 

Optinose

On 12 September 2019, the Company and BioPharma-V entered into a definitive senior secured note purchase agreement for the issuance and sale of senior secured notes in an aggregate original principal amount of up to US$150 million by OptiNose US, a wholly-owned subsidiary of OptiNose (Nasdaq: OPTN), a commercial-stage specialty pharmaceutical company ("OptiNose"). Optinose drew a total of US$130 million on 12 September 2019, $30 million on 13 February 2020 and $20 million on 1 December 2020. There are no additional funding commitments.

On 2 March 2021, the sales covenants in the notes were reduced by 16 per cent. for 2021 and 3 per cent. thereafter to allow for slower growth due to the temporary impact of Covid 19 from reduced patient visits. The revised covenant for 2021 of $80 million still represents growth of 65 per cent. from 2020.

The Company and its subsidiaries funded a total $72 million across all tranches and was allocated 445,696 warrants. The notes mature in September 2024 and bear 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 and BioPharma-V are committed to purchase under the facility and 810,357 warrants exercisable into common stock of OptiNose.

OptiNose's leading product, XHANCE(R) (fluticasone propionate), is a nasal spray approved by the U.S. Food and Drug Administration (FDA) in September 2017 for the treatment of nasal polyps in patients 18 years or older. XHANCE(R) utilises a novel and proprietary exhalation delivery system to deliver the drug high and deep into the sinuses, targeting areas traditional intranasal spray are not able to reach. Sales of XHANCE totalled $48 million during 2020, up 60 per cent. from $30 million during 2019. Optinose had a market capitalisation of approximately $186 million as at 5 March 2021.

 
 Investment type     Date invested 
 Secured loan        12 September 2019 
 
 Total loan amount   Company commitment 
 $150m               $82.5m 
 
 Maturity 
 September 2024 
 

Biodelivery Sciences International

On 23 May 2019, the Company entered into a senior secured loan agreement for up to $80 million with BioDelivery Sciences International (Nasdaq: BDSI), a commercial-stage specialty pharmaceutical company ("BDSI"). BDSI utilises its novel and proprietary BioErodible MucoAdhesive (BEMA(R)) technology, to develop and commercialize new applications of proven therapies aimed at addressing important unmet medical needs. In addition, the Company acquired 5,000,000 BDSI shares at $5.00 each for a total cost of $25 million in a public offering that took place on 11 April 2019.

The first tranche of the loan for $60 million was funded on 28 May 2019 and the second $20 million tranche was funded on 22 May 2020. The loan will mature in May 2025 and bears interest at LIBOR plus 7.5 per cent., along with 2 per cent. additional consideration. The Company sold 46% of its BDSI shares during 2019 at an average price of $6.5. BDSI shares closed at $4.08 on 10 March 2021.

BDSI leading products include BELBUCA (R) (buprenorphine buccal film) and Symproic (R) (naldemedine). Sales of the two drugs totalled $151 million during 2020, up 42 per cent. from $106 million during 2019. BDSI had a market capitalisation of approximately $407 million as at 5 March 2021.

 
 Investment type      Date invested 
 Secured loan         28 May 2019 
 
 Total loan amount    Equity 
 $80m                 $25m 
 
 Company commitment   Maturity 
 $105m                May 2025 
 

Sebela Pharmaceuticals

On 1 May 2018, the Company was lead arranger of a $316 million senior secured term loan for Sebela BT Holdings Inc. ("Sebela"), a subsidiary of Sebela Pharmaceuticals. The Company committed to a $194 million investment, with the remaining $122 million balance coming from co-investors.

The five-year senior secured loan began amortising in the third quarter of 2018 and fully matures in December 2022. The loan bears interest at LIBOR (un-capped) plus a single-digit spread and includes additional consideration.

Sebela is a private specialty pharmaceutical company focused on gastrointestinal medicines, dermatology, and women's health. As at 31 December 2020, the principal amount outstanding of the Company's investment was $92 million.

Bristol-Myers Squibb

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 marketed by AstraZeneca, and related products. The Company was expected to fund $140 million to $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. As of 31 December 2020, the Company funded seven of the Purchased Payments based on sales from 1 January 2018 to 30 September 2019 for a total of $162 million.

Repaid investments

Since its IPO in March 2017, the Company and its subsidiaries have received $1,200 million in proceeds from repayments and pre-payments of various investments. These investments generated attractive returns, particularly those that were prepaid early and earned prepayment and make-whole fees:

 
 Investment        Investment     Investment   Maturity/Prepayment       Prepayment   Gross IRR 
                         Date         Amount                  Date    and Makewhole 
                                                                               fees 
 BioPharma 
  III           27 March 2017   $154 million       31 January 2019                -       13.6% 
              ---------------  -------------  --------------------  ---------------  ---------- 
 RPS Note       27 March 2017   $185 million       15 October 2018                -       12.9% 
              ---------------  -------------  --------------------  ---------------  ---------- 
                  21 November 
 Tesaro                  2017   $322 million       23 January 2019      $46 million       28.8% 
              ---------------  -------------  --------------------  ---------------  ---------- 
                  18 December 
 Lexicon                 2017   $125 million      8 September 2020       $6 million       12.1% 
              ---------------  -------------  --------------------  ---------------  ---------- 
                   7 February 
 Novocure                2018   $150 million        18 August 2020       $3 million       10.2% 
              ---------------  -------------  --------------------  ---------------  ---------- 
                 28 September 
 Amicus                  2018   $150 million          30 July 2020       $5 million       13.4% 
              ---------------  -------------  --------------------  ---------------  ---------- 
 

Amicus Therapeutics

On 20 September 2018, the Company entered into a senior secured loan agreement for $150 million with Amicus Therapeutics, Inc, a commercial stage, rare metabolic disease-focused biopharmaceutical company ("Amicus").

The $150 million loan had a five-year maturity with only interest to be repaid for the first four years. The loan bore interest at LIBOR plus 7.50 per cent. (subject to certain caps) and included a 2.00 per cent. additional consideration. Following the restructuring of this loan with another third party, Amicus repaid the $150 million loan on 30 July 2020. The Company and its subsidiaries received a payment of $156 million, including the make-whole and prepayment premium totalling $5 million. The Company and its subsidiaries earned a 13.4 per cent. internal rate of return on its Amicus investment.

Lexicon Pharmaceuticals

On 4 December 2017, the Company and BioPharma IV entered into a definitive term loan agreement for up to $200 million with Lexicon Pharmaceuticals ("Lexicon"), a fully integrated biopharmaceutical company.

The $200 million loan was available in two tranches, each maturing in December 2022. The Company funded $125 million of the $200 million first tranche and Lexicon did not draw the second tranche. The loan had a fixed 9.0% coupon. Lexicon repaid the $125 million loan on 8 September 2020. The Company and its subsidiaries received a payment of $132 million including the make-whole and prepayment premium totalling $6 million. The Company and its subsidiaries earned a 12.1 per cent. internal rate of return on its Lexicon investment.

Novocure

On 7 February 2018, the Company entered into a senior secured loan agreement for $150 million with Novocure Limited (NASDAQ: NVCR), a commercial stage oncology company ("Novocure").

The $150 million loan was originally scheduled to mature in February 2023 and bear interest at 9.0 per cent. per annum. Novocure repaid the $150 million loan on 18 August 2020. The Company and its subsidiaries received a payment of $155 million, including a prepayment premium totalling $3 million. The Company earned a 10.2 per cent. internal rate of return on its Novocure investment.

Tesaro

On 21 November 2017, the Company and BioPharma Credit Investments IV, S.àr.L. ("BioPharma IV") entered into a definitive loan agreement for up to $500 million with Tesaro (NASDAQ: TSRO) ("Tesaro").

The Company funded $222 million of the $300 million first tranche on 6 December 2017 and $100 million of the $200 million second tranche on 29 June 2018 for a total investment of $322 million.

The Tesaro loan had a term of seven years and was secured by Tesaro's US rights to ZEJULA(R). The first $300 million tranche bore interest at LIBOR plus 8 per cent. and the second tranche bore interest at LIBOR plus 7.5 per cent. The LIBOR rate was subject to a floor of 1 per cent. and certain caps. Each tranche of the loan was interest only for the first two years, amortises over the remaining term. Following its acquisition by GlaxoSmithKline, Tesaro repaid the $500 million loan on 23 January 2019.

The Company received a payment of $370 million on its $322 million share of the loan, including the make-whole and prepayment premium totalling $46 million, or 14.2 per cent., of the $322 million investment, which is the equivalent of what the Company would have received had the loan remained outstanding for another approximately fifteen months. The Company earned a 29.0 per cent. internal rate of return on its Tesaro investment.

Seed assets

The Company acquired $339 million in seed assets at the time of the IPO in March 2017, consisting of a $185 million investment in the RPS Note and a 46 per cent. limited partnership interest in BioPharma III, valued at $154 million at the time of the IPO. On 15 October 2018, the Company received its final payment on the RPS Note of $20 million, realising a 12.9 per cent. internal rate of return. On 29 January 2019, the Company received $8 million as its final payment from BioPharma III, realising a 13.6 per cent. internal rate of return.

Investment outlook

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"). 2020 was a volatile year, with the BTK index declining 12 per cent. during the first three months of the year followed by a quick recovery, rising 28 per cent. from March to December, ending 2020 with a 13 per cent. increase for the year. Companies in the industry took advantage of the increased volatility and sudden recovery in share prices to issue $15.3 billion in convertible notes, a 129 per cent. increase from the previous year as well as $130 billion in equity, a 110% increase from 2019. The strong equity market also allowed for a 50 per cent. increase in IPO proceeds compared to 2019.

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 2020 was negatively affected by the Covid pandemic, declining 40% from 2019 levels to $118.8 billion.

We continue to see a robust pipeline of investment opportunities and expect it to continue to grow as new products are approved. 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 attractive returns that will enable the Company to pay a robust dividend yield for our investors.

Pedro Gonzalez de Cosio

Co-founder and CEO, Pharmakon

15 March 2021

STRATEGIC OVERVIEW

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.

Investment policy

The Company will seek to achieve its investment objective predominantly through direct or indirect exposure to Debt Assets.

The Company may acquire Debt Assets:

-- directly from the entity issuing the debt asset (a "Borrower"), which may be: (i) a company operating in the life sciences industry (a "LifeSci Company"); or (ii) an entity other than a LifeSci Company which directly or indirectly holds an interest in royalty rights to certain products, including any investment vehicle or special purpose vehicle ("Royalty Owner"); or

   --      in the secondary market. 

The Company may also invest in equity issued by a LifeSci Company, acquired directly from the LifeSci Company or in the secondary market.

"Debt Assets" will typically comprise:

   --      Royalty debt instruments 

Debt issued by a Royalty Owner where the Royalty Owner's obligations in relation to the Debt are secured as to repayment of principal and payment of interest by Royalty Collateral.

   --      Priority royalty tranches 

Contract with a Borrower that provides the Company with the right to receive payment of all or a fixed percentage of the future royalty payments receivable in respect of a Product (or Products) that would otherwise belong to the Borrower up to a fixed monetary amount or a pre-set rate of return, with such royalty payment being secured by Royalty Collateral in respect of that Product (or Products).

   --      Senior secured debt 

Debt issued by a LifeSci Company, and which is secured as to repayment of principal and payment of interest by a first priority charge over some or all of such LifeSci Company's assets, which may include: (i) Royalty Collateral; or (ii) other intellectual property and marketing rights to the Products of that LifeSci Company.

   --      Unsecured debt 

Debt issued by a LifeSci Company which is not secured or is secured by a second lien on assets of the Borrower.

   --      Credit linked notes 

Derivative instruments referencing Debt Assets, being a synthetic obligation between the Company and another party where the repayment of principal and/or the payment of interest is based on the performance of the obligations under the underlying Debt Assets.

"Royalty Collateral" means, with respect to a Debt Asset, (i) future payments receivable by the Borrower on a Product (or Products) in the form of royalty payments or other revenue sharing arrangements; or (ii) future distributions receivable by the Borrower based on royalty payments generated from a Product (or Products); or (iii) both limb (i) and limb (ii).

"Debt" includes loans, notes, bonds and other debt instruments and securities, including convertible debt, and Priority Royalty Tranches.

Borrowers will predominantly be domiciled in the US, Europe and Japan, though the Company may also acquire Debt Assets issued by Borrowers in other jurisdictions.

Investment restrictions and portfolio diversification

The Company will seek to create a diversified portfolio of investments by investing across a range of different forms of Debt Assets issued by a variety of Borrowers. In particular, the Company will observe the following restrictions when making investments in accordance with its investment policy:

-- no more than 30 per cent. of the Company's gross assets will be exposed to any single Borrower;

-- no more than 35 per cent. of the Company's gross assets will be invested in Unsecured Debt; and

-- no more than 15 per cent. of the Company's gross assets will be invested in equity securities issued by LifeSci Companies.

Each of these investment restrictions will be calculated at the time of each proposed investment. In the event that any of the above limits are breached at any point after the relevant investment has been made (for instance, as a result of any movements in the value of the Company's total assets), there will be no requirement to sell any investment (in whole or in part).

Cash management

The Company's uninvested capital may be invested in cash instruments or bank deposits for cash management purposes.

Hedging

The Company does not propose to enter into any hedging or other derivative arrangements other than as may from time to time be considered appropriate for the purposes of efficient portfolio management. The Company will not enter into such arrangements for investment purposes.

Business and status of the Company

The Company is registered in England as a public limited company and is an investment company in accordance with the provisions of Section 833 of the Companies Act 2006.

The principal activity of the Company is to carry on business as an investment trust. The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Sections 1158/1159 of the Corporation Tax Act 2010 ("S1158/1159"). The Directors do not envisage any change in this activity in the foreseeable future.

The Company has been granted approval from HM Revenue & Customs ("HMRC") as an investment trust under S1158/1159 and will continue to be treated as an investment trust company, subject to there being no serious breaches of the conditions for approval. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2019 so as to be able to continue to qualify as an investment trust.

The Company has three wholly-owned subsidiaries, BPCR Ongdapa Limited, BPCR Limited Partnership and BPCR GP Limited., details of which can be found in Note 14 to the financial statements.

STAKEHOLDER ENGAGEMENT - SECTION 172(1) STATEMENT

Overview

The Directors' overarching duty is to promote the success of the Company for the benefit of its shareholders, having regard to the interests of its stakeholders, as set out in section 172(1) of the Companies Act 2006. The Directors have considered each aspect of this section of the Act and consider that the information set out below is particularly relevant in the context of the Company's business as an externally managed investment company which does not have any employees or suppliers.

The importance of stakeholders is taken into account at every Board meeting. All discussions involve careful consideration of the longer-term consequences of any decisions and their implications for stakeholders.

Stakeholders

The Board seeks to understand the needs and priorities of the Company's stakeholders and these are taken into account during all its discussions and as part of its decision-making. The Board believes that the Company's key stakeholders comprise its shareholders, clients and service providers. The section below discusses why these stakeholders are considered of importance to the Company and the actions taken to ensure that their interests are taken into account. The Company recognises the importance of maintaining high standards of business conduct and seeks to ensure that these are applied in all of its business dealings and in its engagement with stakeholders. Further information on the impact of the Company's operations on the community and the environment is set out below.

The Company's mechanisms for engaging with its stakeholders are set out below. These are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective.

For more information on the purpose, culture and values of the Company, and the processes which the Board has put in place to ensure these, see the Corporate Governance Statement in the full annual report.

Shareholders

Importance

Continued shareholder support and engagement are critical to the existence of the Company and the delivery of its long-term strategy and engagement with shareholders is given a high priority by both the Board and the Investment Manager.

How the Company engages

The Chairman ensures that the Board as a whole has a clear understanding of the views of shareholders by receiving regular updates from the Brokers and Investment Manager. The Investment Manager and the Company's Brokers are in regular contact with major shareholders and report the results of all meetings and the views of those shareholders to the Board on a regular basis. The Chairman and the other Directors are available to attend these meetings with shareholders if required. Relations with shareholders are also considered as part of the annual Board evaluation process. For further details regarding this process see the full annual report.

All shareholders are encouraged to attend and vote at annual general meetings, during which the Board and the Investment Manager will be available to discuss issues affecting the Company and answer any questions. Further information regarding the AGM is detailed in the full annual report. Shareholders wishing to raise questions or concerns directly with the Chairman, Senior Independent Director or Company Secretary, outside of the AGM, should do so using the contact details provided below.

While the ongoing Covid-19 pandemic and resulting prohibition on public gatherings meant that shareholders were not be permitted to attend the AGM in June 2020, Shareholders were able to provide questions to the Company Secretary in advance of the AGM and a separate shareholder call was scheduled for any such questions to be answered by the Board and Investment Manager.

Although the Company has been established with an indefinite life, the Articles provide that a continuation vote be put to shareholders at the first AGM of the Company to be held following the fifth anniversary of Initial Admission i.e. in 2022 and, if passed, at the annual general meeting of the Company held every third year thereafter; and within two months of the expiration of any 12-month rolling period where the Shares have, on average, traded at a discount in excess of 10 per cent. to the Net Asset Value per Share (calculated by comparing the middle market quotation of the Shares at the end of each month in the relevant period to the prevailing published NAV per Ordinary Share (exclusive of any dividend declared) as at such month end and averaging this comparative figure over the relevant period).

Clients

Importance

The investments made by the Company support the large capital needs of its portfolio companies, supporting their research and development budgets for life sciences products and enable it to achieve its investment objective.

How the Company engages

The Company's clients are pharmaceutical and biotechnology companies within the life sciences industry to which it provides debt capital. The Investment Manager is highly experienced in this area with a strong track record of meeting the capital needs of its clients. The Investment Manager meets regularly with the management teams of current and prospective investee companies to enhance relationships and to understand their views and capital requirements.

The Directors receive updates from the Investment Manager on the companies within its investment portfolio at all Board meetings, and outside of meetings as appropriate.

Further information on the Company's engagement with investee companies during the year, including case studies regarding their products, is set out above.

Service Providers

Importance

In order to function as an investment trust on the Specialist Fund Segment of the London Stock Exchange, the Company relies on a number of reputable advisers for support in complying with all relevant legal and regulatory obligations.

How the Company engages

The Company's day-to-day operational functions are delegated to a number of third-party service providers, each engaged under separate contracts. The Company's principal service providers include the Investment Manager, Company Secretary, Joint Brokers, Administrator, Legal Adviser, Auditor and the Registrar.

The Board keeps the ongoing performance of the Investment Manager under continual review and conducts an annual appraisal of the Investment Manager, along with the performance of all other third-party service providers. The Investment Manager has executed the investment strategy according to the Board's expectations and it is the opinion of the Directors that the continuing appointment of Pharmakon is in the interests of shareholders as a whole.

The Audit and Risk Committee reviews and evaluates the control environments in place at each service provider. Further details regarding the role of the Audit and Risk Committee are set out in the full annual report. Further information about the review of service providers and the culture of the Investment Manager is set out in the Corporate Governance Statement in the full annual report.

Key performance indicators

The Company assesses its performance in meeting its investment objectives using the following Key Performance Indicators ("KPIs"):

NAV performance

The NAV at 31 December 2020 was $1.0037 per Share, compared to $1.0217 per Share at 31 December 2019.

A full description of the Company's performance for the year ended 31 December 2020 is included in the Investment Manager's Report above.

Share price return

The Company's Share price at 31 December 2020 was $0.996, giving a return since 31 December 2019 of (2.4) per cent.

Share price discount / premium to NAV per Share

The Company's Share price was at a discount to the NAV per Share at 31 December 2020 of 0.77 per cent. The daily closing price of the Company's Shares ranged from $0.86 - $1.03 throughout the year.

In accordance with the Company's Articles of Association, if the Share price declines to a point where the Shares trade on average at a discount to NAV per Share in excess of 5 per cent. in any three-month rolling period, the Company has certain discount control mechanisms in place, one of which requires the Company to repurchase Shares until such time as the Share price discount to NAV per Share moves below 1 per cent.

On 22 June 2020, the Company announced that it was required to purchase shares in the market as a result of the shares trading in excess of a 5% discount to its NAV per Ordinary Share over a 3 month rolling period. At 16 July 2020, the Company's shares traded at an average discount of 1% or less to the NAV per Ordinary Share over the most recent two week rolling period, the Company therefore ceased to repurchase its shares in the market. During the period from 22 June 2020 to 16 July 2020, the Company repurchased a total of 59,694 shares.

As of 31 December 2020, the Investment Manager invested $5.2 million from the performance fee paid related to the year ended 31 December 2019 acquiring 5.6 million shares. Refer to section 4 (B) in the Notes to the Financial Statements.

Ongoing charges

The Company's ongoing charges ratio is shown in the table below.

 
                                                Year ended         Year ended 
                                          31 December 2020   31 December 2019 
                                                         %                  % 
---------------------------------------  -----------------  ----------------- 
 Ongoing charges excluding performance 
  fee*                                                 1.2                1.0 
 Performance fee                                       0.4                1.0 
 Ongoing charges including performance 
  fee                                                  1.6                2.0 
---------------------------------------  -----------------  ----------------- 
 
 

* Ongoing charges are the Company's expenses (excluding performance fees) expressed as a percentage of its average monthly net assets and follow the AIC recommended methodology.

Dividends

Dividends totalling 8.29 cents per Ordinary Share, including two special dividends of 1.28 cents and 0.01 cents, have been paid during the year ended 31 December 2020.

RISK MANAGEMENT AND THE INTERNAL CONTROL ENVIRONMENT

The role of the Board

A formal risk identification and assessment process has been adopted by the Company resulting in a risk framework document which summarises the key risks and their mitigation.

The Board undertakes a formal risk review with the assistance of the Audit and Risk Committee at least twice a year in order to robustly assess the effectiveness of the Company's risk management and internal control systems. During the course of its review in respect of the year ended 31 December 2020, the Board has not identified, nor been advised of any failings or weaknesses which it has determined to be of a material nature. The principal risks and uncertainties which the Company faces are set out below.

Principal risks and uncertainties

The Board of Directors has overall responsibility for risk management and internal control of the Company. The Board recognises that risk is inherent in the operation of the Company and that effective risk management is key to the success of the organisation. The Board has delegated responsibility for the assurance of the risk management process and the review of mitigating controls to the Audit and Risk Committee.

The principal risks and the Company's policies for managing these risks are set out below and the policy and practice with regard to financial instruments are summarised in Note 16 to the financial statements.

There were no changes to these risks in the current year or at the date of this report.

 
 Risk                    Description and mitigation 
----------------------  ------------------------------------------------------------ 
 Failure to              The target returns are targets only and are based 
  achieve target          on financial projections that are themselves based 
  returns                 on assumptions regarding market conditions, economic 
                          environment, availability of investment opportunities 
                          and investment-specific assumptions that may not 
                          be consistent with conditions in the future. 
 
                          The Company seeks to achieve its investment objective 
                          predominantly through direct or indirect exposure 
                          to debt assets. Debt assets typically comprise 
                          royalty debt instruments, priority royalty tranches, 
                          senior secured debt, unsecured debt and credit-linked 
                          notes. A variety of factors, including lack of 
                          attractive investment opportunities, defaults 
                          and prepayments under debt assets, inability of 
                          the Company to obtain debt at an appropriate rate, 
                          changes in the life sciences industry, exchange 
                          rates, government regulations, the non-performance 
                          (or underperformance) of any life sciences product 
                          (or any life sciences company) could adversely 
                          impact the Company's ability to achieve its investment 
                          objective and deliver the target returns. A failure 
                          by the Company to achieve its target returns could 
                          adversely impact the value of the Shares and lead 
                          to a loss of investment. 
 
                          The Company has an investment policy to achieve 
                          a balanced investment with a diversified asset 
                          base and has investment restrictions in place 
                          to limit exposure to potential risk factors. These 
                          factors enable the Company to build a diversified 
                          portfolio that should deliver returns that are 
                          in line with its stated target return. 
----------------------  ------------------------------------------------------------ 
 The success             In accordance with the Investment Management Agreement, 
  of the Company          the Investment Manager is responsible for the 
  depends on              investment management of the Company's assets. 
  the ability             The Company does not have its own employees and 
  and expertise           all of its Directors are appointed on a non-executive 
  of the Investment       basis. All investment and asset management decisions 
  Manager                 are made by the Investment Manager (or any delegates 
                          thereof) and not by the Company or the Directors 
                          and, accordingly, the Company is completely reliant 
                          upon, and its success depends on, the Investment 
                          Manager and its personnel, services and resources. 
                          The Investment Manager is required, under the 
                          terms of the Investment Management Agreement, 
                          to perform in accordance with the Service Standard. 
                          The Investment Manager does not submit individual 
                          investment decisions to the Board for approval 
                          and the Board does not supervise the due diligence 
                          performed by the Investment Manager. As part of 
                          its asset management decisions, the Investment 
                          Manager may from time to time make commitments 
                          for future investments for which the Company may 
                          need to raise funds in the future by issuing equity 
                          and/or debt or by selling all or part of other 
                          investments to raise liquidity. 
 
                          The Company is entitled to terminate the Investment 
                          Management Agreement if the Investment Manager 
                          has (i) committed fraud, gross negligence or wilful 
                          misconduct in the performance of its obligations 
                          under the Investment Management Agreement, or 
                          (ii) breached its obligations under the Investment 
                          Management Agreement, and the Company is reasonably 
                          likely to suffer a loss arising directly or indirectly 
                          out of or in connection with such breach of an 
                          amount equal to or greater than 10 per cent. of 
                          the NAV as at the date of the breach. The Investment 
                          Management Agreement may also be terminated at 
                          the Company's discretion on not less than six 
                          months' notice to the Investment Manager. 
 
                          Under the terms of the Investment Management Agreement, 
                          the Investment Manager is only liable to the Company 
                          (and will only lose its indemnity) if it has committed 
                          fraud, gross negligence or wilful misconduct or 
                          acted in bad faith, or knowingly violated applicable 
                          securities' laws. The performance of the Company 
                          is dependent on the diligence, skill and judgement 
                          of certain key individuals at the Investment Manager, 
                          including Pedro Gonzalez de Cosio and other senior 
                          investment professionals and the information and 
                          investments' pipeline generated through their 
                          business development efforts. On the occurrence 
                          of a Key Person Event (as defined in the Investment 
                          Management Agreement), the Company may be entitled 
                          to terminate the Investment Management Agreement 
                          with immediate effect (subject to the Investment 
                          Manager's right to find an appropriate replacement 
                          to be approved by the Board (such approval not 
                          to be unreasonably withheld or delayed) within 
                          180 days)). However, if the Company elects to 
                          exercise this right, it would be required to pay 
                          the Investment Manager a termination fee equal 
                          to either 1 per cent. or 2 per cent. of the invested 
                          NAV (depending on the reason for the Key Person 
                          Event), as at the date of such termination. If 
                          the Company elects not to exercise this right, 
                          the precise impact of a Key Person Event on the 
                          ability of the Company to achieve its investment 
                          objective and target returns cannot be determined 
                          and would depend inter alia on the ability of 
                          the Investment Manager to recruit individuals 
                          of similar experience, expertise and calibre. 
                          There can be no guarantee that the Investment 
                          Manager would be able to do so and this could 
                          adversely affect the ability of the Company to 
                          meet its investment objective and target returns 
                          and may adversely affect the NAV and Shareholder 
                          returns and result in a substantial loss of a 
                          Shareholder's investment. 
 
                          Pharmakon Advisors, the Investment Manager, has 
                          extensive expertise and a track record of successfully 
                          investing in debt and other cash flows backed 
                          by life sciences products. The Investment Management 
                          Agreement provides attractive incentives for the 
                          Investment Manager to perform prudently and in 
                          the best interests of the Company. In addition, 
                          the Investment Manager and its affiliates own 
                          approximately 6 per cent. of the Company as at 
                          31 December 2020, creating a strong alignment 
                          of interests between the Investment Manager and 
                          its affiliates and Shareholders of the Company. 
----------------------  ------------------------------------------------------------ 
 The Company             From time to time, the Company may commit to make 
  may from time           future investments for which the Company will 
  to time commit          need to raise funds by issuing equity and/or debt, 
  to make future          or by selling all or part of other investments. 
  investments             Investment opportunities may require the Company 
  that exceed             to fund transactions in two or more tranches, 
  its current             with the later tranches to be funded six or more 
  liquidity               months in the future. Refusing to offer such later 
                          tranches would decrease the attractiveness of 
                          the Company's investment proposals and harm the 
                          Company's ability to successfully deploy its capital. 
                          Requiring the Company to maintain low-yielding 
                          cash balances sufficient to fund all such later 
                          tranches at the time of the initial commitment 
                          would decrease the average yield on the Company's 
                          assets, adversely impacting the returns to investors, 
                          and may also result in missed investment opportunities. 
                          However, in order to fund all such later tranches, 
                          the Company could be forced to issue debt, sell 
                          assets or renegotiate with the party to which 
                          it has committed the funding on unattractive terms. 
                          Furthermore, there can be no assurance that the 
                          Company will always be able to raise sufficient 
                          liquidity (by issuing equity and/or debt, or by 
                          selling investments) to meet its funding commitments. 
                          If the Company were to fail to meet its funding 
                          commitments, the Company could be in breach of 
                          its contractual obligations, which could adversely 
                          affect the Company's reputation, could result 
                          in the Company facing legal action from its counterparty, 
                          and could adversely affect the Company's financial 
                          results. 
 
                          Pharmakon Advisors, the Investment Manager, together 
                          with its affiliate RP Management LLC, believes 
                          that the risks associated with such unfunded commitment 
                          is manageable without undue risk. Pharmakon Advisors 
                          has extensive expertise in raising debt secured 
                          by cash flows from life sciences products and 
                          has extensive relationships with banks and other 
                          financial institutions who can be called on to 
                          provide debt financing to the Company in order 
                          to raise liquidity. In addition, Pharmakon Advisors 
                          has expertise purchasing and selling life sciences 
                          debt assets in the secondary market and has extensive 
                          relationships with the major participants in the 
                          life-sciences debt market who would be the likely 
                          purchasers of any assets offered for sale by the 
                          Company in order to raise liquidity. 
----------------------  ------------------------------------------------------------ 
 The Investment          Returns on the shareholders' investments will 
  Manager's               depend upon the Investment Manager's ability to 
  ability to              source and make successful investments on behalf 
  source and              of the Company. There can be no assurance that 
  advise appropriately    the Investment Manager will be able to do so on 
  on investments          an ongoing basis. Many investment decisions of 
                          the Investment Manager will depend upon the ability 
                          of its employees and agents to obtain relevant 
                          information. There can be no guarantee that such 
                          information will be available or, if available, 
                          can be obtained by the Investment Manager and 
                          its employees and agents. Furthermore, the Investment 
                          Manager will often be required to make investment 
                          decisions without complete information or in reliance 
                          upon information provided by third parties that 
                          is impossible or impracticable to verify. For 
                          example, the Investment Manager may not have access 
                          to records regarding the complaints received regarding 
                          a given life science product or the results of 
                          research and development related to products. 
                          Furthermore, the Company may have to compete for 
                          attractive investments with other public or private 
                          entities, or persons, some or all of which may 
                          have more capital and resources than the Company. 
                          These entities may invest in potential investments 
                          before the Company is able to do so or their offers 
                          may drive up the prices of potential investments, 
                          thereby potentially lowering returns and, in some 
                          cases, rendering them unsuitable for the Company. 
                          An inability to source investments would have 
                          a material adverse effect on the Company's profitability, 
                          its ability to achieve its target returns and 
                          the value of the Shares. 
 
                          The Investment Manager believes that sourcing 
                          investments is one of its competitive advantages. 
                          The Investment Manager's professionals, together 
                          with those at its affiliate RP Management LLC, 
                          accessible through the Shared Services Agreement, 
                          have complementary scientific, medical, licensing, 
                          operating, structuring and financial backgrounds 
                          which the Investment Manager believes provide 
                          a competitive advantage in sourcing, evaluating, 
                          executing and managing credit investments in the 
                          life sciences industry. 
----------------------  ------------------------------------------------------------ 
 There can               Under the terms of the Investment Management Agreement, 
  be no assurance         the Investment Management Agreement may be terminated 
  that the Board          by: (A) the Investment Manager on not less than 
  will be able            six months' notice to the Company, such notice 
  to find a               not to expire earlier than 18 months following 
  replacement             Admission; or (B) the Company on not less than 
  investment              six months' notice to the Investment Manager, 
  manager if              such notice not to expire earlier than: (i) 36 
  the Investment          months following Admission, unless approved by 
  Manager resigns         Shareholders by ordinary resolution; and (ii) 
                          18 months following Admission, in any event. The 
                          Board would, in these circumstances, have to find 
                          a replacement investment manager for the Company 
                          and there can be no assurance that a replacement 
                          with the necessary skills and experience would 
                          be available and/or could be appointed on terms 
                          acceptable to the Company. In this event, the 
                          Board may have to formulate and put forward to 
                          Shareholders proposals for the future of the Company 
                          which may include its merger with another investment 
                          company, reconstruction or winding up. It is possible 
                          that, following the termination of the Investment 
                          Manager's appointment, the Investment Manager 
                          will continue to have a role in the investment 
                          management of certain assets, where a debt asset 
                          is shared with one or more other entity managed 
                          by the Investment Manager that continue to retain 
                          the Investment Manager's services. 
 
                          In the event the Investment Manager resigns, the 
                          Board will put forward to Shareholders proposals 
                          for the future of the Company which may include 
                          its merger with another investment company, reconstruction 
                          or winding up. Entities affiliated with the Investment 
                          Manager own approximately 6 per cent. of the Company 
                          as at 31 December 2020. This affiliate ownership 
                          level, coupled with the fact that the Investment 
                          Manager is fairly compensated, provide further 
                          incentive for them to remain as Investment Manager 
                          to the Company. 
----------------------  ------------------------------------------------------------ 
 Concentration           The Company's published investment policy allows 
  in the Company's        the Company to invest up to 30 per cent. of the 
  portfolio               Company's assets in a single debt asset or in 
  may affect              debt assets issued to a single borrower. While 
  the Company's           the investment limits in the investment policy 
  ability to              have been set keeping in mind the debt capital 
  achieve its             requirements of the life sciences industry and 
  investment              the investment opportunities available to the 
  objective               Investment Manager, it is possible that the Company's 
                          portfolio may be significantly concentrated at 
                          any given point in time. 
 
                          Concentration in the Company's portfolio may increase 
                          certain risks to which the Company is subject, 
                          some or all of which may be related to events 
                          outside the Company's control. These would include 
                          risks around the creditworthiness of the relevant 
                          borrower, the nature of the debt asset and of 
                          any life sciences product(s) in question. The 
                          occurrence of these situations may result in greater 
                          volatility in the Company's investments and, consequently, 
                          its NAV, and may materially and adversely affect 
                          the performance of the Company and the Company's 
                          returns to shareholders. Such increased concentration 
                          of the Company's assets could also result in greater 
                          losses to the Company in adverse market conditions 
                          than would have been the case with a less concentrated 
                          portfolio, and have a material adverse effect 
                          on the Company's financial condition, business, 
                          prospects and results of operations and, consequently, 
                          the Company's NAV and/or the market price of the 
                          Shares. 
----------------------  ------------------------------------------------------------ 
 Life sciences           The biopharmaceutical and pharmaceutical industries 
  products are            are highly competitive and rapidly evolving. The 
  subject to              length of any life sciences product's commercial 
  intense competition     life cannot be predicted. There can be no assurance 
  and various             that the life sciences products will not be rendered 
  other risks             obsolete or non-competitive by new products or 
                          improvements made to existing products, either 
                          by the current marketer of the life sciences products 
                          or by another marketer. Adverse competition, obsolescence 
                          or governmental and regulatory life sciences policy 
                          changes could significantly impact royalty revenues 
                          of life sciences products which serve as the collateral 
                          or other security for the repayment of obligations 
                          outstanding under the Company's investments. If 
                          a life sciences product is rendered obsolete or 
                          non-competitive by new products or improvements 
                          on existing products or governmental or regulatory 
                          action, such developments could have a material 
                          adverse effect on the ability of the borrower 
                          under the relevant debt asset to make payment 
                          of interest on, and repayments of the principal 
                          of, that debt asset, and consequently could adversely 
                          affect the Company's performance. If additional 
                          side effects or complications are discovered with 
                          respect to a life sciences product, and such life 
                          sciences product's market acceptance is impacted 
                          or it is withdrawn from the market, continuing 
                          payments of interest on, and repayment of the 
                          principal of, that debt asset may not be made 
                          on time or at all. It is possible that over time 
                          side effects or complications from one or more 
                          of the life sciences products could be discovered, 
                          and, if such a side effect or complication posed 
                          a serious safety concern, a life sciences product 
                          could be withdrawn from the market, which could 
                          adversely affect the ability of the borrower under 
                          the relevant debt asset to make continuing payments 
                          of interest on, and repayment of the principal 
                          of, that debt asset, in which case the Company's 
                          ability to make distributions to investors may 
                          be materially and adversely affected. 
 
                          Furthermore, if an additional side effect or complication 
                          is discovered that does not pose a serious safety 
                          concern, it could nevertheless negatively impact 
                          market acceptance and therefore result in decreased 
                          net sales of one or more of the life sciences 
                          products, which could adversely affect the ability 
                          of borrowers under the relevant debt asset(s) 
                          to make continuing payments of interest on, and 
                          repayment of the principal of, that debt asset(s), 
                          in which case the Company's ability to make distributions 
                          to investors may be materially and adversely affected. 
 
                          The Investment Manager engages in a thorough diligence 
                          process before entering into any debt instrument 
                          with the counterparty and interacts with each 
                          counterparty as needed to evaluate the status 
                          of its investment on an ongoing basis. 
----------------------  ------------------------------------------------------------ 
 Investments             Debt instruments are subject to credit and interest 
  in debt obligations     rate risks. Credit risk refers to the likelihood 
  are subject             that the borrower will default in the payment 
  to credit               of principal and/or interest on an instrument. 
  and interest            Financial strength and solvency of a borrower 
  rate risks              are the primary factors influencing credit risk. 
                          In addition, lack or inadequacy of collateral 
                          or credit enhancement for a debt asset may affect 
                          its credit risk. Credit risk may change over the 
                          life of an instrument. Interest rate risk refers 
                          to the risks associated with market changes in 
                          interest rates. Interest rate changes may affect 
                          the value of a debt asset indirectly (especially 
                          in the case of fixed rate debt assets) and directly 
                          (especially in the case of debt assets whose rates 
                          are adjustable). In general, rising interest rates 
                          will negatively impact the price of a fixed rate 
                          debt asset and falling interest rates will have 
                          a positive effect on price. Adjustable rate instruments 
                          also react to interest rate changes in a similar 
                          manner although generally to a lesser degree (depending, 
                          however, on the characteristics of the reset terms, 
                          including the index chosen, frequency of reset 
                          and reset caps or floors, among other factors). 
                          Interest rate sensitivity is generally more pronounced 
                          and less predictable in instruments with uncertain 
                          payment or prepayment schedules. In addition, 
                          interest rate increases generally will increase 
                          the interest carrying costs to the Company (or 
                          any entity through which the Company invests) 
                          of leveraged investments. 
 
                          The Company will often seek to be a secured lender 
                          for each Debt Asset. However, there is no guarantee 
                          that the relevant borrower will repay the loan 
                          or that the collateral will be sufficient to satisfy 
                          the amount owed under the relevant Debt Asset. 
                          Credit risk will be assessed on an ongoing basis 
                          along with interest rate risk, and is further 
                          mitigated by the Company's investment policy permitting 
                          up to 30 per cent. of the Company's assets to 
                          be invested in a single Debt Asset or in Debt 
                          Assets issued to a single borrower. Interest rate 
                          risk can be managed in a variety of ways, including 
                          with the use of derivatives. 
----------------------  ------------------------------------------------------------ 
 Counterparty            The Company intends to hold debt assets that will 
  risk                    generate an interest payment. There is no guarantee 
                          that any borrower will honour their obligations. 
                          The default or insolvency of such borrowers may 
                          substantially affect the Company's business, financial 
                          condition, results of operations, the NAV and 
                          Shareholder returns. 
 
                          The Company will often seek to be a secured lender 
                          for each Debt Asset. However, there is no guarantee 
                          that the relevant borrower will repay the loan 
                          or that the collateral will be sufficient to satisfy 
                          the amount owed under the relevant Debt Asset. 
----------------------  ------------------------------------------------------------ 
 Sales of life           There can be no assurance that any regulatory 
  sciences products       approvals for indications granted to one or more 
  are subject             life sciences products will not be subsequently 
  to regulatory           revoked or restricted. Such revocation or restriction 
  actions that            may have a material adverse effect on the sales 
  could harm              of such products and on the ability of borrowers 
  the Company's           under the relevant Debt Asset to make continuing 
  ability to              payments of interest on, and repayment of the 
  make distributions      principal of, that Debt Asset, in which case the 
  to investors            Company's ability to make distributions to investors 
                          may be materially and adversely affected. Changes 
                          in legislation are monitored with the use of third-party 
                          legal advisers and the Investment Manager will 
                          maintain awareness of new approvals or revoked 
                          approvals. 
----------------------  ------------------------------------------------------------ 
 Net asset               Generally, there will be no readily available 
  values published        market for a significant number of the Company's 
  will be estimates       investments and hence, the majority of the Company's 
  only and may            investments are not valued based on market-observable 
  differ materially       inputs. 
  from actual 
  results                 The valuations used to calculate the NAV on a 
                          monthly basis will be based on the Investment 
                          Manager's unaudited estimated fair market values 
                          of the Company's investments. It should be noted 
                          any such estimates may vary (in some cases materially) 
                          from the results published in the Company's financial 
                          statements (as the figures are published at different 
                          times) and that they, and any NAV figure published, 
                          may vary (in some cases materially) from realised 
                          or realisable values. 
 
                          The Investment Manager sends valuations on a monthly 
                          basis to the administrator for calculation of 
                          the NAV. The NAV is prepared by the administrator 
                          on the basis of information received from the 
                          Investment Manager and, once finalised, is reviewed 
                          and approved by a representative of the Investment 
                          Manager. Once approved, the Investment Manager 
                          notifies the Board and the NAV is released to 
                          the market. 
----------------------  ------------------------------------------------------------ 
 Changes in              Any change in the Company's tax status, or in 
  taxation legislation    taxation legislation or practice in the UK, US 
  or practice             or elsewhere, could affect the value of the Company's 
  may adversely           investments and the Company's ability to achieve 
  affect the              its investment objective, or alter the post-tax 
  Company and             returns to Shareholders. It is the intention of 
  the tax treatment       the Directors to conduct the affairs of the Company 
  for Shareholders        so as to satisfy the conditions for approval of 
  investing               the Company by HMRC as an investment trust under 
  in the Company          section 1158 of the Corporation Tax Act 2010 (as 
                          amended) and pursuant to regulations made under 
                          Section 1159 of the Corporation Tax Act 2010. 
                          However, although the approval has been obtained, 
                          neither the Investment Manager nor the Directors 
                          can guarantee that this approval will be maintained 
                          at all times. The Company has been granted approval 
                          from HMRC as an investment trust and will continue 
                          to have investment trust status in each subsequent 
                          accounting period, unless the Company fails to 
                          meet the requirements to maintain investment trust 
                          status, pursuant to the regulations. For example, 
                          it is not possible to guarantee that the Company 
                          will remain a non-close company, which is a requirement 
                          to maintain investment trust status, as the Shares 
                          are freely transferable. Failure to maintain investment 
                          trust status could, as a result, (inter alia) 
                          lead to the Company being subject to UK tax on 
                          its chargeable gains. Existing and potential investors 
                          should consult their tax advisers with respect 
                          to their particular tax situations and the tax 
                          effects of an investment in the Company. 
----------------------  ------------------------------------------------------------ 
 COVID-19 may            The global economic disruption caused by COVID-19 
  affect the              may affect the Company's ability to continue in 
  Company's               operation due to the impact on the market valuations 
  ability to              of its senior secured loans or the ability of 
  continue operations     key service providers (including the Custodian, 
                          the Fund Accountant and the Brokers) to maintain 
                          business continuity and continue to provide appropriate 
                          service levels. The Investment Manager has reviewed 
                          the impact of recent market volatility related 
                          to the COVID-19 pandemic on the Company's portfolio 
                          and have received regular updates on portfolio 
                          performance from the underlying counterparties 
                          and considers that the Company's business model 
                          remains viable and that the Company has sufficient 
                          resources to continue in operation and to meet 
                          all liabilities as they fall due. The Investment 
                          Manager has received updates from key service 
                          providers in respect of their business continuity 
                          plans to address the issues posed by COVID-19 
                          and are confident that they will be able to continue 
                          to provide a good level of service for the foreseeable 
                          future. 
 

GOING CONCERN

The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial

statements. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Company's ability to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.

VIABILITY STATEMENT

The Board has assessed the principal risks facing the Company over a five-year period, including those that would threaten its business model, future performance, solvency or liquidity. The five-year period was selected to align with the average duration of the Company's existing investments. The Board has developed a matrix of risks facing the Company and has put in place certain investment restrictions which are in line with the Company's investment objective and policy in order to mitigate these risks as far as practicable. The principal risks which have been identified, and the steps taken by the Board to mitigate these risks, are presented above.

The Company believes its borrowing capabilities provide further flexibility and help ensure it is in a position to finance its funding obligations in the event that internally generated cash flow in the period is insufficient to finance the unfunded portion of a lending commitment. The Board reviews the Company's financing arrangements quarterly to ensure that the Company is in a strong position to fund all outstanding commitments on existing investments as well as being able to finance new investments. In addition, the Board regularly reviews he prospects for the Company's portfolio and the pipeline of potential investment opportunities which provide comfort that the Company is able to continue to finance its activities for the medium-term future.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five-year period.

ENVIRONMENTAL, HUMAN RIGHTS, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES

The Board recognises the requirement under the Companies Act 2006 to detail information about employees, human rights, environmental and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply directly to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third-party service providers. The Company has therefore not reported further in respect of these provisions.

While the Company is not within the scope of the Modern Slavery Act 2015 and it is not, therefore, obliged to make a slavery and human trafficking statement, the Company considers its supply chains to be of low risk as its principal service providers are the professional advisers set out in the Corporate Information section below. Further information on the Company's anti-bribery and corruption policy is set out in the full Annual Report.

There are five Directors, four male and one female. Further information on the composition and operation of the Board is detailed in the Corporate Governance Statement in the full Annual Report.

The Strategic Report has been approved by the Board and signed on its behalf.

Harry Hyman

Chairman

15 March 2021

EXTRACTS FROM THE DIRECTORS' REPORT

The Directors are pleased to present the Annual Report and audited financial statements for the year ended 31 December 2020.

Directors

The Directors of the Company who were in office during the year and up to the date of signing the financial statements are listed below:

Harry Hyman - Chairman (appointed as Chairman on 16 September 2020)

Duncan Budge - Senior Independent Director

Colin Bond - Chairman of the Audit and Risk Committee

Stephanie Léouzon - Director

Jeremy Sillem - Director and Chairman (retired on 16 September 2020)

Rolf Soderstrom - Director (appointed on 16 September 2020)

Share capital

At the general meeting held on 28 February 2017, the Company was granted authority to allot Ordinary Shares or C Shares up to an aggregate nominal amount of $20 million on a non-pre-emptive basis for a period of five years from the date of the resolution. No Ordinary Shares or C Shares have been allotted under this authority during the year. As at the date of this report, the Company may allot further Ordinary Shares or C Shares up to an aggregate nominal amount of $6,244,038.87 under its existing authority. Further information on the Company's share capital is set out in Note 13 to the financial statements.

As a result of volatile equity market conditions and in accordance with Section 9 of its prospectus published on 14 March 2018, the Company was required to purchase shares in the market during the year as a result of the shares trading in excess of a 5% discount to its NAV per ordinary share over a 3 month rolling period using the methodology described in the prospectus. At the annual general meeting held on 25 June 2020, the Company was granted authority to purchase up to 14.99 per cent. of the Company's Ordinary Share capital in issue at that date, amounting to 205,952,416 Ordinary Shares. As set out in the Chairman's Statement above, 59,694 Ordinary Shares of $0.01 were bought back under this authority during the year, at a total cost of $60,009, and are held in treasury. This represented 0.004% of the issued share capital at 31 December 2020. No shares were purchased during the year for cancellation. At 31 December 2020, and as at the date of this report, the Company has the authority to buy back 205,892,722 Ordinary Shares under this authority. This authority will expire at the conclusion of, and renewal will be sought at, the annual general meeting to be held in June 2021.

At 31 December 2020, and as at the date of this report, there are 1,373,932,067 Ordinary Shares in issue, of which 59,694 Ordinary Shares are held in treasury. At general meetings of the Company, shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every Share held. Shares held in treasury do not carry voting rights. The total voting rights of the Company at 31 December 2020, and as at the date of this report, were 1,373,872,373.

Dividends

Dividends paid in respect of the year ended 31 December 2020 are set out in Note 6 to the financial statements.

Dividend policy

The Company pays dividends in US dollars or GBP Sterling, if requested by a specific shareholder, on a quarterly basis. The Company may, where the Directors consider it appropriate, use the special distributable reserve created by the cancellation of its Share premium account to pay dividends.

The Company targets an annual dividend yield of 7 per cent. on the Ordinary Shares (calculated by reference to the issue price at IPO), together with a net total return on NAV of 8-9 per cent. per annum on the Ordinary Shares in the medium term.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In respect of the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the company and of the profit or loss of the company for that period. In preparing the financial statements, the directors are required to:

   --      select suitable accounting policies and then apply them consistently; 

-- state whether applicable IFRSs as issued by the International Accounting Standards Board (IASB) have been followed, subject to any material departures disclosed and explained in the financial statements;

   --      make judgements and accounting estimates that are reasonable and prudent; and 

-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.

The directors are responsible for the maintenance and integrity of the company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' confirmations

Each of the directors, whose names and functions are listed in the Board of Directors section in the full Annual Report confirm that, to the best of their knowledge:

-- the company financial statements, which have been prepared in accordance with IFRSs as issued by the International Accounting Standards Board (IASB), give a true and fair view of the assets, liabilities, financial position and profit of the company; and

-- the Strategic Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Harry Hyman

Chairman

15 March 2021

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2019 and 31 December 2020 but is derived from those accounts. Statutory accounts for the year ended 31 December 2019 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2020 will be delivered in due course. The Auditor has reviewed those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Financial Statements.

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

(In $000s except per share amounts)

 
 
                                           Year ended 31 December 2020       Year ended 31 December 2019 
                                        --------------------------------  -------------------------------- 
                                  Note     Revenue    Capital      Total     Revenue    Capital      Total 
-------------------------------  -----  ----------  ---------  ---------  ----------  ---------  --------- 
 Income 
 Investment income                 3        99,473          -     99,473     128,935          -    128,935 
 Other income                      3         1,072          -      1,072      13,403          -     13,403 
 Net gains on investments 
  at fair value                    7             -      9,474      9,474           -      8,567      8,567 
 Net currency exchange 
  losses                                         -       (12)       (12)           -       (12)       (12) 
-------------------------------  ----- 
 
 Total income                              100,545      9,462    110,007     142,338      8,555    150,893 
-------------------------------  -----  ----------  ---------  ---------  ----------  ---------  --------- 
 
 Expenses 
 Management fee                    4      (13,745)          -   (13,745)    (14,023)          -   (14,023) 
 Performance fee                   4       (4,909)          -    (4,909)    (13,570)          -   (13,570) 
 Directors' fees                   4         (395)          -      (395)       (395)          -      (395) 
 Other expenses                    4       (1,822)          -    (1,822)       (529)       (48)      (577) 
-------------------------------  ----- 
 
 Total expenses                           (20,871)          -   (20,871)    (28,517)       (48)   (28,565) 
-------------------------------  -----  ----------  ---------  ---------  ----------  ---------  --------- 
 
 Return on ordinary activities 
  after finance costs and 
  before taxation                           79,674      9,462     89,136     113,821      8,507    122,328 
 Taxation on ordinary 
  activities                       5             -          -          -           -          -          - 
 
 Return on ordinary activities 
  after finance costs and 
  taxation                                  79,674      9,462     89,136     113,821      8,507    122,328 
 
 Net revenue and capital 
  return per ordinary share 
  (basic and diluted)              11      $0.0580    $0.0069    $0.0649     $0.0828    $0.0062    $0.0890 
-------------------------------  -----  ----------  ---------  ---------  ----------  ---------  --------- 
 

The total column of this statement is the Company's Statement of Comprehensive Income prepared in accordance with IFRS. The supplementary revenue and capital columns are presented for information purposes as recommended by the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC").

All items in the above Statement derive from continuing operations.

There is no other comprehensive income, and therefore the return on ordinary activities after finance costs and taxation is also the total comprehensive income.

The notes below form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

(In $000s)

 
                                                                                                          Total equity 
                                                                                                          attributable 
 For the year ended 31                               Share          Special                                         to 
 December                                 Share    premium    distributable      Capital     Revenue      Shareholders 
 2020                           Note    capital    account         reserve*    reserve**    reserve*    of the Company 
 Net assets attributable 
  to shareholders at 1 
  January 
  2020                                   13,739    607,125          730,631       10,552      41,689         1,403,736 
 
 Return on ordinary 
  activities 
  after finance costs and 
  taxation                                    -          -                -        9,462      79,674            89,136 
 Dividends paid to Ordinary 
  Shareholders                   6            -          -             (79)            -   (113,818)         (113,897) 
-----------------------------  ----- 
 Cost of shares bought back 
  for treasury                                -          -             (60)            -           -              (60) 
-----------------------------  ----- 
 
 Net assets attributable 
  to shareholders at 31 
  December 
  2020                                   13,739    607,125          730,492       20,014       7,545         1,378,915 
-----------------------------  -----  ---------  ---------  ---------------  -----------  ----------  ---------------- 
 
 
                                                                                                          Total equity 
                                                                                                          attributable 
 For the year ended 31                                Share          Special                                        to 
 December                                  Share    premium    distributable     Capital     Revenue      Shareholders 
 2019                            Note    capital    account         reserve*    reserve*    reserve*    of the Company 
 Net assets attributable 
  to shareholders at 1 January 
  2019                                    13,739   607,125           734,309       2,045      22,804         1,380,022 
 
 Return on ordinary activities 
  after finance costs and 
  taxation                                     -          -                -       8,507     113,821           122,328 
 Dividends paid to Ordinary 
  Shareholders                    6            -          -          (3,678)           -    (94,936)          (98,614) 
------------------------------  ----- 
 
 Net assets attributable 
  to shareholders at 31 
  December 
  2019                                    13,739    607,125          730,631      10,552      41,689         1,403,736 
------------------------------  -----  ---------  ---------  ---------------  ----------  ----------  ---------------- 
 

* The special distributable and revenue reserves can be distributed in the form of a dividend.

** The capital reserve can be used to repurchase treasury shares. It cannot be used for distributions.

The notes below form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

(In $000s except per share amounts)

 
                                                 31 December   31 December 
                                          Note          2020          2019 
---------------------------------------  -----  ------------  ------------ 
 Non-current assets 
 Investments at fair value through 
  profit or loss                           7       1,194,831     1,116,127 
                                                   1,194,831     1,116,127 
---------------------------------------  -----  ------------  ------------ 
 Current assets 
 Trade and other receivables               8             208        16,206 
 Cash and cash equivalents                 9         193,269       296,638 
---------------------------------------  ----- 
 
                                                     193,477       312,844 
---------------------------------------  ----- 
 
 Total assets                                      1,388,308     1,428,971 
---------------------------------------  ----- 
 
 Current liabilities 
 Trade and other payables                  10          9,393        24,504 
---------------------------------------  ----- 
 
 Total current liabilities                             9,393        24,504 
---------------------------------------  -----  ------------  ------------ 
 
 Total assets less current liabilities             1,378,915     1,404,467 
---------------------------------------  -----  ------------  ------------ 
 
 Non-current liabilities 
 Deferred performance fee                  10              -           731 
---------------------------------------  -----  ------------  ------------ 
 
                                                                         - 
---------------------------------------  -----  ------------  ------------ 
 Net assets                                        1,378,915     1,403,736 
---------------------------------------  -----  ------------  ------------ 
 
 Represented by: 
 Share capital                             13         13,739        13,739 
 Share premium account                               607,125       607,125 
 Special distributable reserve                       730,492       730,631 
 Capital reserve                                      20,014        10,552 
 Revenue reserve                                       7,545        41,689 
---------------------------------------  ----- 
 
 Total equity attributable to 
  shareholders of the Company                      1,378,915     1,403,736 
---------------------------------------  -----  ------------  ------------ 
 
 Net asset value per ordinary 
  share (basic and diluted)                12        $1.0037       $1.0217 
---------------------------------------  -----  ------------  ------------ 
 

The financial statements of BioPharma Credit PLC registered number 10443190 were approved and authorised for issue by the Board of Directors on 15 March 2021 and signed on its behalf by:

Harry Hyman

Chairman

15 March 2021

The notes below form part of these financial statements.

CASH FLOW STATEMENT

For the year ended 31 December 2020

(In $000s)

 
                                                     Year ended     Year ended 
                                                    31 December    31 December 
                                            Note           2020           2019 
-----------------------------------------  -----  -------------  ------------- 
 
 Cash flows from operating activities 
 Investment income received                              94,514        134,424 
 Other income received                                    1,498         13,668 
 Investment management fee paid                        (34,610)       (13,721) 
 Finance costs paid                                           -            (3) 
 Amounts paid on behalf of BPCR 
  Limited Partnership                                   (1,357)              - 
 Other expenses paid                                    (1,973)        (2,848) 
-----------------------------------------  -----  -------------  ------------- 
 
 Cash generated from operations              15          58,072        131,520 
 
 Net cash flow generated from 
  operating activities                                   58,072        131,520 
-----------------------------------------  -----  -------------  ------------- 
 
 Cash flow from investing activities 
 Purchase of investments*                             (225,736)      (508,506) 
 Redemptions of investments*                            162,500        387,169 
 Sales of investments*                                   15,764         21,042 
-----------------------------------------  -----  -------------  ------------- 
 
 Net cash flow used in investing 
  activities                                           (47,472)      (100,295) 
-----------------------------------------  -----  -------------  ------------- 
 
 Cash flow from financing activities 
 Dividends paid to Ordinary shareholders     6        (113,897)       (98,614) 
 Share buybacks                                            (60)              - 
 Gross proceeds of C Share issue                              -            467 
 
 Net cash flow used in financing 
  activities                                          (113,957)       (98,147) 
-----------------------------------------  -----  -------------  ------------- 
 
 Decrease in cash and cash equivalents 
  for the year                                        (103,357)       (66,922) 
-----------------------------------------  -----  -------------  ------------- 
 
 Cash and cash equivalents at 
  start of year                              9          296,638        363,572 
 Revaluation of foreign currency 
  balances                                                 (12)           (12) 
-----------------------------------------  -----  -------------  ------------- 
 
 Cash and cash equivalents at 
  end of year                                9          193,269        296,638 
-----------------------------------------  -----  -------------  ------------- 
 

*Purchases of investments includes Collegium, Optinose Tranche B, Q4 2019 BMS purchased payment, Epizyme Tranche B and BDSI Tranche B fundings before assets were transferred in kind to the financing subsidiary BPCR LP, on 22 May 2020. These payment do not include investments made by BPCR LP.

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020

1. GENERAL INFORMATION

BioPharma Credit PLC is a closed-ended investment company incorporated and domiciled in the United Kingdom on 24 October 2016 with registered number 10443190. The registered office of the Company is Beaufort House, 51 New North Road, Exeter, EX4 4EP. On 6 February 2017 the Company changed its name from PRECIS (2772) PLC.

The Company carries on business as an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010.

The Company's Investment Manager is Pharmakon Advisors L.P. ("Pharmakon"). Pharmakon is a limited partnership established under the laws of the State of Delaware. It is registered as an investment adviser with the SEC under the United States Investment Advisers Act of 1940, as amended.

Pharmakon is authorised as an Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive ("AIFMD"). Pharmakon has, with the consent of the Directors, delegated certain administrative functions to Link Alternative Fund Administrators Limited ("Link").

2. ACCOUNTING POLICIES

a) Basis of preparation

The Company's annual financial statements covers the year from 1 January 2020 to 31 December 2020 and have been prepared in conformity with International Financial Reporting Standards ("IFRS") and interpretations issued by the IFRS Interpretations Committee ("IFRS IC"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance with the Disclosure Guidance Transparency Rules sourcebook of the Financial Conduct Authority (FCA) and the AIC SORP (issued in October 2019) for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS. The financial statements have been prepared in accordance with the Companies Act 2006, as applicable to companies using IFRS. The financial statements have adopted the following accounting policies in their preparation, which remain consistent with the accounting policies adopted in the audited financial statements for the year ended 31 December 2019, with the exception of the change explained in note 2 (F).

The financial statements are presented in US dollars, being the functional currency of the Company. The financial statements have been prepared on a going concern basis under historical cost convention, except for the measurement at fair value of investments measured at fair value through profit or loss.

Assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10 'Consolidated Financial Statements' are required to measure their subsidiaries at fair value through profit or loss rather than consolidate the entities. The criteria which define an investment entity are as follows:

-- an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

-- an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

-- an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Directors have concluded that the Company meets the characteristics of an investment entity, in that it has more than one investor and its investors are not related parties; holds a portfolio of investments, predominantly in the form of loans which generates returns through interest income. All investments, including its subsidiaries BPCR Ongdapa Limited and BPCR Limited Partnership, are reported at fair value to the extent allowed by IFRS.

b) Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been prepared alongside the Income Statement.

c) Segmental reporting

The Directors are of the opinion that the Company has one operating and reportable segment being the investment in debt assets secured by royalties or other cash flows derived from the sales of approved life sciences products.

d) Investments at fair value through profit or loss

The principal activity of the Company is to invest in interest-bearing debt assets with a contractual right to future cash flows derived from royalties or sales of approved life sciences products. In accordance with IFRS, the financial assets are measured at fair value through profit or loss. They are accounted for on their trade date at fair value, which is equivalent to the cost of the investment. The fair value of the asset reflects any contractual amortising balance and accrued interest.

The fair value hierarchy consists of the following three levels:

-- Level 1 - Quoted market price for identical instruments in active markets

-- Level 2 - Valuation techniques using observable Inputs

-- Level 3 - Valuation techniques using significant unobservable inputs

Listed level 1 investments where a financial instrument is active are priced by quoted market prices.

Level 2 investments may be valued using market data obtained from external, independent sources. The data used could include quoted prices for similar assets and liabilities in active markets, prices for identical or similar assets and liabilities in inactive markets, or models with observable inputs.

For unlisted level 3 investments where the market for a financial instrument is not active, fair value is established using valuation techniques in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines (issued in December 2018), which may include recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has proved reliable from estimates of prices obtained in actual market transactions, that technique is utilised.

Unlisted investments often require the manager to make estimates and judgements and apply assumptions or subjective judgement to future events and other matters that may affect fair value. For unlisted investments valued using a discounted cash flow analysis, the key judgements are the size of the market, pricing, projected sales of the product at trade date and future growth and other factors that will support the repayment of a senior secured or royalty debt instrument.

Changes in the fair value of investments held at fair value through profit or loss, and gains or losses on disposal, are recognised in the Statement of Comprehensive Income as gains or losses from investments held at fair value through profit or loss. Transaction costs incurred on the purchase and disposal of investments are included within the cost or deducted from the proceeds of the investments. All purchases and sales are accounted for on trade date.

e) Foreign currency

Transactions denominated in currencies other than US dollars are recorded at the rates of exchange prevailing on the date of the transaction. Items which are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the Statement of Comprehensive Income.

f) Income

There are five main sources of revenue for the Company: interest income, income from subsidiaries, royalty revenue, make- whole and prepayment income, dividends and paydown fees.

Interest income is recognised when it is probable that the economic benefits will flow to the Company. Interest is accrued on a time basis, by reference to the principal outstanding and the effective interest rate that is applicable. Accrued interest is included within trade and other receivables on the Statement of Financial Position.

The Company recognises accrued income for investments that it holds directly. The Company also holds an investment in BPCR Limited Partnership, its wholly owned subsidiary which it measures at fair value through profit or loss rather than consolidate. BPCR Limited Partnership also recognises accrued income for investments it holds directly. When the accrued income is recorded at the Partnership, the Company recognises the income in capital within the Statement of Comprehensive Income. When the Company's right to receive the income is established, funds are transferred from the Partnership to the Company and income is transferred to revenue within the Statement of Comprehensive Income.

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably). Royalty arrangements that are based on production, sales and other measures are recognised by reference to the underlying arrangement.

Make-whole and prepayment income is recognised when payments are received by the Company and is recorded to revenue within the Statement of Comprehensive Income.

Dividends are receivable on equity shares and recognised on the ex-dividend date. Where no ex- dividend date is quoted, dividends are recognised when the Company's right to receive payment is established. Dividends from investments in unquoted shares and securities are recognised when they become receivable.

Some investments include additional consideration in the form of structuring fees, which are paid on completion of the transaction. As the investments are classified as level 3 in the fair value hierarchy, there is no observable evidence of the fair value of the investments excluding the fees, therefore the fees should be included in the day one fair value of the investments. From 1 January 2020, such fees are included in the fair value of the investment and released to the Statement of Comprehensive Income over the life of the investment. Prior to this date they were recognised as a gain in the Statement of Comprehensive Income at the funding date. We consider incorporating the fees in the fair value gains and losses over the life of the loans to be more reflective of the period over which the benefit is received. The impact of this change is immaterial to both the current and prior period. These fees are allocated to revenue within the Statement of Comprehensive Income.

Bank interest and other interest receivable are accounted for on an accruals basis.

g) Dividends paid to shareholders

The Company intends to pay dividends in US Dollars on a quarterly basis, however, shareholders can elect to have dividends paid in sterling. The Company may, where the Directors consider it appropriate, use the reserve created by the cancellation of its share premium account to pay dividends.

The Company intends to comply with the requirements for maintaining investment trust status for the purposes of section 1158 of the Corporation Tax Act 2010 (as amended) regarding distributable income. As such, the Company will distribute amounts such that it does not retain in respect of an accounting period an amount greater than 15 per cent. of its income (as calculated for UK tax purposes) for that period.

h) Expenses

All expenses are accounted for on an accruals basis. Expenses, including investment management fees, performance fees and finance costs, are charged through the revenue account except as follows:

-- expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed in Note 4; and

-- expenses of a capital nature are accounted for through the capital account.

The performance fee is considered to be an annual fee and is only recognised at the end of each performance period. It is calculated in accordance with the details in Note 4(b) below. Any performance fee triggered, whether payable or deferred, is recognised in the Statement of Comprehensive Income. Where a performance fee is payable within the next twelve months, it is treated as a current liability in the Statement of Financial Position. Where a performance fee is deferred by more than twelve months, it is treated as a non-current liability in the Statement of Financial Position. It becomes payable to the Investment Manager at the end of the first performance period in respect to which the compounding condition is satisfied.

i) Trade and other receivables

Trade and other receivables are recognised and carried at amortised cost as the Company collects contractual interest payments from its borrowers. An allowance for estimated unrecoverable amounts are measured and recognised where necessary. The Company assesses, on a forward-looking basis, the expected losses associated with its trade and other receivables.

j) Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits, and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

Cash and cash equivalents includes interest and income from money market funds.

k) Trade and other payables

Trade and other payables are recognised and carried at amortised cost, do not carry any interest and are short-term in nature.

l) Taxation

The Company may, if it so chooses, designate as an 'interest distribution' all or part of the amount it distributes to shareholders as dividends, to the extent that it has 'qualifying interest income' for the accounting period. Were the Company to designate any dividend it pays in this manner, it should be able to deduct such interest distributions from its income in calculating its taxable profit for the relevant accounting period. The Company intends to elect for the 'streaming' regime to apply to the dividend payments it makes to the extent that it has such 'qualifying interest income'. shareholders in receipt of such a dividend will be treated, for UK tax purposes, as though they had received a payment of interest, which results in a reduction of the corporation tax payable by the Company.

Tax on the profit or loss for the year comprises current and deferred tax. Corporation tax is recognised in the Statement of Comprehensive Income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous periods. The tax effect of different items of expenditure is allocated between revenue and capital on the same basis as the particular item to which it relates, using the Company's marginal method of tax, as applied to those items allocated to revenue, for the accounting period.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax basis of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

m) Share capital and reserves

The share capital represents the nominal value of the Company's ordinary shares.

The share premium account represents the excess over nominal value of the fair value of consideration received for the Company's ordinary shares, net of expenses of the share issue. This reserve cannot be distributed.

The special distributable reserve was created on 29 June 2017 to enable the Company to buy back its own shares and pay dividends out of such distributable reserve, in each case when the Directors consider it appropriate to do so, and for other corporate purposes.

The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. The realised capital reserve can be used for the repurchase of shares. This reserve cannot be distributed.

The revenue reserve represents retained profits from the income derived from holding investment assets less the costs and interest on cash balances associated with running the Company. This reserve can be distributed.

n) Critical accounting estimates and assumptions

The preparation of these financial statements in conformity with IFRS requires the Directors to make accounting estimates which will not always equal the actual results. The Directors also need to exercise judgement in applying the Company's accounting policies.

This note provides an overview of the areas that involve a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates and judgements included in other notes, together with information about the basis of calculation for each line in the financial statements.

In particular estimates are made in determining the fair valuation of unquoted investments for which there is no observable market and may cause material adjustments to the carrying value of those investments. Determining fair value of investments with unobservable market inputs is an area involving management estimates, requiring assessment as to whether the value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain critical assumptions are required to be made including management's expectations of short and long term growth rates in product sales and the selection of discount rates to reflect the risks involved. These are valued in accordance with Note 2(d) above and using the valuation techniques described in Note 7 below.

Also, estimates including cash flow projections, discount rates and growth rates in product sales are made when determining any deferred performance fee; this may be affected by future changes in the Company's portfolio and other assets and liabilities. Any deferred performance fee is calculated in accordance with Note 4(b) below and is recognised in accordance with Note 2(h) above.

These estimates are reviewed on an ongoing basis. Revisions to these estimates are also reviewed on an ongoing basis. Revisions are recognised prospectively.

o) New accounting standards effective since 1 January 2020

Amendment to IFRS 3 'Business Combinations'

The Directors have considered the implications of the amendments to IFRS 3 and are of the opinion that the Company's subsidiaries are already measured at fair value. Therefore, there has been no impact on the current and comparative financial statements for this accounting standard.

Definition of Material (Amendments to IAS 1 and IAS 8)

The Directors have considered the implications of the amendments to IAS 1 and IAS 8 and are of the opinion that there is no impact to the Company. Therefore, there has been no impact on the current and comparative financial statements for this accounting standard.

p) Accounting standards not yet effective

The IASB and International Financial Reporting Interpretations Committee ("IFRIC") have issued and endorsed the following standards and interpretations, applicable to the Company, which are not yet effective for the year ended 31 December 2020 and have therefore not been applied in preparing these financial statements.

COVID-19-Related Rent Concessions (Amendment to IFRS 16) - amending the standard to provide lessees with an exemption from assessing whether a COVID-19- related rent concession is a lease modification, effective for annual reporting periods beginning on or after 1 June 2020.

The Directors do not expect that the adoption of the standards and interpretations will have a material impact on the financial statements.

Other future development includes the IASB undertaking a comprehensive review of existing IFRSs. The Company will consider the financial impact of these new standards as they are finalised.

3. INCOME

 
                                               Year ended    Year ended 
                                              31 December   31 December 
                                                     2020          2019 
                                                     $000          $000 
-------------------------------------------  ------------  ------------ 
 Income from investments 
 US unfranked investment income from               40,844             - 
  BPCR LP 
 US unfranked investment income from 
  BioPharma III                                         -           844 
 US unfranked investment income from 
  BPCR Ongdapa                                      3,440         7,429 
 US fixed interest investment income               21,856        27,148 
 US floating interest investment income            26,682        38,696 
 US make-whole interest investment income*          3,082        36,102 
 Paydown fee                                          427             - 
 Prepayment premium**                               2,675         9,660 
 Additional consideration received***                 467         9,056 
-------------------------------------------  ------------  ------------ 
                                                   99,473       128,935 
 Other income 
 Interest income from liquidity/money 
  market funds                                      1,072        10,525 
 Interest income from US treasury bonds                 -         2,856 
 Other interest                                         -            22 
-------------------------------------------  ------------  ------------ 
                                                    1,072        13,403 
-------------------------------------------  ------------  ------------ 
 
 Total income                                     100,545       142,338 
-------------------------------------------  ------------  ------------ 
 
 

* In 2020 the Company's senior secured term loan to Lexicon included make whole interest investment income of $3,082,000, which was paid upon the loan repayment and recognised as income in the year. In 2019 the Company's senior secured term loan to Tesaro included make whole interest investment income of $36,102,000, which was paid upon the loan repayment and recognised as income in the year.

** In 2020 the Company's senior secured term loans to Lexicon and Sebela included a prepayment premium of $2,675,000, which was paid upon the loan repayment and recognised as income in the year. In 2019 the Company's senior secured term loan to Tesaro included a prepayment premium of $9,660,000, which was paid upon the loan repayment and recognised as income in the year.

***In 2020 the Company's senior secured term loan to Collegium included additional consideration in the form of structuring fees of $4,125,000 which was paid upon the completion of the transaction and $467,000 of this amount recognised as income in the year. In 2019 the Company's senior secured term loan to Biodelivery Services, and the tranche A notes to OptiNose US, Epizyme, Akebia, Global Blood Therapeutics and Serepta Therapeutics included additional consideration in the form of structuring fees of $1,200,000, $1,856,000, $700,000, $1,000,000, $1,237,500 and $3,062,500 respectively, which was paid upon the completion of the transaction and recognised as income in the year.

4. FEES AND EXPENSES

EXPENSES

 
                                         Year ended 31 December 2020       Period ended 31 December 2019 
                                      --------------------------------  ---------------------------------- 
                                         Revenue     Capital     Total      Revenue     Capital      Total 
                                            $000        $000      $000         $000        $000       $000 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
 Management fee (Note 4a)                 13,745           -    13,745       14,023           -     14,023 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
 Performance fee (Note 4b)                 4,909           -     4,909       13,570           -     13,570 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
 Directors' fees (Note 4c)                   395           -       395          395           -        395 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
 
   Other operating expenses 
 Company Secretarial fee                      85           -        85           88           -         88 
 Administration fee                          118           -       118          126           -        126 
 Legal & professional fees                   368           -       368        (867)          48      (819) 
 Public relations fees                       202           -       202          204           -        204 
 Director's and Officer's liability 
  insurance                                  114           -       114           84           -         84 
 Auditor's remuneration - Statutory 
  audit                                      441           -       441          339           -        339 
 Auditor's remuneration - Other 
  audit related services and Half 
  year review                                 81           -        81           50           -         50 
 Auditor's remuneration - reporting 
  accounting work                              -           -         -          129           -        129 
 VAT                                         102           -       102            3           -          3 
 Other expenses                              311           -       311          373           -        373 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
                                           1,822           -     1,822          529          48        577 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
 
 Total expenses                           20,871           -    20,871       28,517          48     28,565 
------------------------------------  ----------  ----------  --------  -----------  ----------  --------- 
 

For the year ended 31 December 2019, the Auditor was also paid $129,000 for services performed in connection with reporting accounting work. There were no similar costs incurred in 2020.

For the year ended 31 December 2019, the negative balance of legal fees in the prior year relates to the reversal of an accrual for legal work carried out in relation to a potential revolving credit facility. Following a negotiation of the fee subsequent to the year end, the amount paid in respect of the services was revised down from $1,658,000 to $500,000.

a) Investment management fee

With effect from the Initial Admission, the Investment Manager is entitled to a management fee ("Management Fee") calculated on the following basis: (1/12 of 1 per cent. of the NAV on the last business day of the month in respect of which the Management Fee is to be paid (calculated before deducting any accrued Management Fee in respect of such month)) minus (1/12 of $100,000).

The Management Fee payable in respect of any quarter will be reduced by an amount equal to the Company's pro rata share of any transaction fees, topping fees, break-up fees, investment banking fees, closing fees, consulting fees or other similar fees which the Investment Manager (or an affiliate) receives in connection with transactions involving investments of the Company ("Transaction Fees"). The Company's pro rata share of any Transaction Fees will be in proportion to the Company's economic interest in the investment(s) to which such Transaction Fees relate.

b) Performance fee

Subject to: (i) the NAV attributable to the Ordinary Shares as at the end of a performance period representing a minimum of 6 per cent. annualised rate of return on the Company's IPO gross proceeds (adjusted for dividends, share issues and buybacks as appropriate), (ii) the total return on the NAV attributable to the Ordinary Shares (adjusted for dividends, share issues and buybacks as appropriate) exceeding 6 per cent. over such performance period, and (iii) a high watermark, the Investment Manager will be entitled to receive a performance fee equal to the lesser of: (a) 50 per cent. of the total return above 6 per cent.; and (b) 10 per cent. of the total return over such performance period provided always that the amount of any performance fee payable to the Investment Manager will be reduced to the extent necessary to ensure that after account is taken of such fee, condition (iii) above remains satisfied.

Where the Investment Manager is not entitled to a performance fee solely because condition (i) has not been satisfied, such fee will be deferred and paid in a subsequent performance period in which such condition is satisfied. Where condition (i) is satisfied in a performance period but the payment of a performance fee (or any deferred performance fee from previous performance periods) in full would result in that condition failing, the Investment Manager shall be entitled to such a portion of such fee that does not result in the failure of the condition (i) above and the balance would be deferred to a future performance period.

Any performance fee (whether deferred or otherwise) shall be paid as soon as practicable after the end of the relevant performance period and, in any event, within 15 business days of the publication of the Company's audited annual financial statements relating to such period.

Where the payment of performance fee (or any deferred performance fee from previous performance periods) in full would result in the failure of condition (i) above, the Investment Manager shall only be entitled to 50 per cent. of such fee that does not result in the failure of condition (i) with the balance being deferred to a future performance period.

If, during the last month of a performance period, the Shares have, on average, traded at a discount of 1 per cent. or more to the NAV per Share (calculated by comparing the middle market quotation of the Shares at the end of each business day in the month to the prevailing published NAV per Share (exclusive of any dividend declared) as at the end of such business day and averaging this comparative figure over the month), the Investment Manager shall (or shall procure that its Associate does) apply 50 per cent. of any Performance Fee paid by the Company to the Investment Manager (or its Associate) in respect of that performance period (net of all taxes and charges applicable to such portion of the Performance Fee) to make market acquisitions of Shares (the "Performance Shares") as soon as practicable following the payment of the Performance Fee by the Company to the Investment Manager (or its Associate) and at least until such time as the Shares have, on average, traded at a discount of less than 1 per cent. to the NAV per Share over a period of five business days (calculated by comparing the middle market quotation of the Shares at the end of each such business day to the prevailing published NAV per Share (exclusive of any dividend declared) and averaging this comparative figure over the period of five business days). The Investment Manager's obligation:

1) shall not apply to the extent that the acquisition of the Performance Shares would require the Investment Manager to make a mandatory bid under Rule 9 of the Takeover Code; and

2) shall expire at the end of the performance period which immediately follows the performance period to which the obligation relates.

The below table shows the accrued and payable performance fee.

 
                             As at 31 December 2020   As at 31 December 2019 
                                               $000                     $000 
   Accrued performance fee                    4,909                   13,570 
   Performance fee payable                    5,473                   21,364 
  Performance fee deferred                        -                      731 
 

The Performance Fee for a performance period shall be paid as soon as practicable after the end of the relevant performance period and, in any event, within three calendar months of the end of such performance period.

c) Directors

Each of the Directors is entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles. The Directors' remuneration is $70,000 per annum for each Director other than:

-- the Chairman, who will receive an additional $30,000 per annum; and

-- the chairman of the Audit and Risk Committee, who will receive an additional $15,000 per annum.

5. TAXATION ON ORDINARY ACTIVITIES

It is the intention of the Directors to conduct the affairs of the Company so as to satisfy the conditions for approval of the Company by HMRC as an investment trust under Section 1158 of the Corporation Tax Act 2010 (as amended) and pursuant to regulations made under Section 1159 of the Corporation Tax Act 2010. As an investment trust, the Company is exempt from corporation tax on capital gains.

The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 19.00 per cent., the effective tax rate was 0.00 per cent. The differences are explained below.

 
                                            Year ended 31 December 2020       Year ended 31 December 2019 
                                         --------------------------------  -------------------------------- 
                                            Revenue    Capital      Total     Revenue    Capital      Total 
                                               $000       $000       $000        $000       $000       $000 
---------------------------------------  ----------  ---------  ---------  ----------  ---------  --------- 
 Total return on ordinary activities 
  before taxation                            79,674      9,462     89,136     113,821      8,507    122,328 
---------------------------------------  ----------  ---------  ---------  ----------  ---------  --------- 
 
 Theoretical tax at UK Corporation 
  tax rate of 19.00% (2019:19.00%)*          15,138      1,798     16,936      21,626      1,616     23,242 
 
 Effects of: 
 Capital items that are not taxable               -    (1,798)    (1,798)           -    (1,616)    (1,616) 
 Tax deductible interest distributions     (15,138)          -   (15,138)    (21,626)          -   (21,626) 
 
 Total tax charge                                 -          -          -           -          -          - 
---------------------------------------  ----------  ---------  ---------  ----------  ---------  --------- 
 

* The theoretical tax rate is calculated using a blended tax rate over the year.

At 31 December 2020, the Company had no deferred tax liabilities.

At that date, based on current estimates and including the accumulation of net allowable losses, the Company had no unrelieved losses.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust company.

6. DIVIDS

 
                                                     Year ended 31 December       Year ended 31 December 
                                                                       2020                         2019 
                                               ----------------------------  --------------------------- 
                                                Revenue   Capital     Total   Revenue   Capital    Total 
                                                   $000      $000      $000      $000      $000     $000 
---------------------------------------------  --------  --------  --------  --------  --------  ------- 
 In respect of the current year: 
 First interim dividend $0.0175 per Ordinary 
  Share (2019: $0.0175 per Ordinary Share)       24,044         -    24,044    24,044         -   24,044 
 Second interim dividend of $0.0175 per 
  Ordinary Share (2019: $0.0175 per Ordinary 
  Share)                                         24,043         -    24,043    24,044         -   24,044 
 Third interim dividend of $0.0175 per 
  Ordinary Share (2019: $0.0175 per Ordinary 
  Share)                                         24,042         -    24,042    24,044         -   24,044 
 
 In respect of the previous year ended 
  31 December 2019: 
 Special dividend of $0.0128 per Ordinary 
  share (2019: $nil per Ordinary share)          17,586         -    17,586         -         -        - 
 Fourth interim dividend of $0.0175 per 
  Ordinary Share (2019: $0.0175 per Ordinary 
  Share)                                         24,044         -    24,044         -         -        - 
 Special dividend of $0.0001 per Ordinary 
  Share (2019: $nil per Ordinary share)              59        79       138         -         -        - 
 
 In respect of the previous period ended 
  31 December 2018: 
 Fourth interim dividend of $0.0175 per 
  Ordinary Share (2019: $0.0175 per Ordinary 
  share)                                              -         -         -    22,804     1,240   24,044 
 Second special dividend of $0.0018 per 
  Ordinary share                                      -         -         -         -     2,438    2,438 
---------------------------------------------  --------  --------  --------  --------  --------  ------- 
                                                113,818        79   113,897    94,936     3,678   98,614 
---------------------------------------------  --------  --------  --------  --------  --------  ------- 
 

Set out below are the interim dividends paid or proposed on Ordinary Shares in respect of the financial year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.

 
                                                    Year ended 31 December        Year ended 31 December 
                                                                      2020                          2019 
                                               ---------------------------  ---------------------------- 
                                                Revenue   Capital    Total   Revenue   Capital     Total 
                                                   $000      $000     $000      $000      $000      $000 
---------------------------------------------  --------  --------  -------  --------  --------  -------- 
 First interim dividend of $0.0175 per 
  Ordinary share (2019: $0.0175 per Ordinary 
  Share)                                         24,044         -   24,044    24,044         -    24,044 
 Second interim dividend of $0.0175 per 
  Ordinary share (2019: $0.0175 per Ordinary 
  Share)                                         24,043         -   24,043    24,044         -    24,044 
 Third interim dividend of $0.0175 per 
  Ordinary share (2019: $0.0175 per Ordinary 
  Share)                                         24,042         -   24,042    24,044         -    24,044 
 Special dividend of $0.0128 per Ordinary 
  share (2019: $nil per Ordinary share)               -         -        -    17,586         -    17,586 
 Fourth interim dividend of $0.0175 per 
  Ordinary share (2019: $0.0175 per Ordinary 
  Share)                                              -         -        -    24,044         -    24,044 
 Special dividend of $0.0001 per Ordinary 
  share (2019: $nil per Ordinary Share)               -         -        -        59        79       138 
---------------------------------------------  --------  --------  -------  --------  --------  -------- 
                                                 72,129         -   72,129   113,821        79   113,900 
---------------------------------------------  --------  --------  -------  --------  --------  -------- 
 

On 11 March 2021, the Board approved a fourth interim dividend, for the year ended 31 December 2020, of $0.0175 per Ordinary Share and a special dividend of $0.00290119 per Ordinary Share, both payable on 16 April 2021. In accordance with IFRS, these dividends have not been included as a liability in these financial statements.

7. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS

 
                                                             As at              As at 
                                                  31 December 2020   31 December 2019 
                                                              $000               $000 
-----------------------------------------------  -----------------  ----------------- 
 Investment portfolio summary 
 Listed investments at fair value through 
  profit and loss                                           11,320             16,980 
 Listed fixed interest investments at fair 
  value through profit and loss                                  -             19,656 
 Unlisted investments in subsidiaries measured           1,090,887                  - 
  at fair value through profit and loss 
 Unlisted fixed interest investment at fair 
  value through profit and loss                                303            495,525 
 Unlisted floating interest investments 
  at fair value through profit and loss                     92,321            583,966 
-----------------------------------------------  -----------------  ----------------- 
 
 Closing fair value at the end of the year               1,194,831          1,116,127 
-----------------------------------------------  -----------------  ----------------- 
 
 
                                                                         Year ended 31 December 2020 
                               ------------  ------------ 
 
                                                   Listed                     Unlisted      Unlisted 
                                                    fixed       Unlisted         fixed      floating 
                                     Listed      interest    Investments      interest      Interest 
                                                                      in 
                                investments    investment   subsidiaries   investments   investments         Total 
                                       $000          $000           $000          $000          $000          $000 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ------------ 
 Investment portfolio summary 
 Opening cost at beginning 
  of year                            13,544        19,950              -       494,738       584,366     1,112,598 
 Opening unrealised 
  appreciation/(depreciation) 
  at beginning of year                3,436         (294)              -           787         (400)         3,529 
 Opening fair value at 
  beginning 
  of year                            16,980        19,656              -       495,525       583,966     1,116,127 
 Movements in the year: 
 Purchases at cost                        -             -              -        16,500       209,636       226,136 
 Redemption and sales 
  proceeds                                -      (15,764)              -     (124,500)      (38,000)     (178,264) 
 Transfer of assets to 
  subsidiary*                             -             -      1,070,139     (385,500)     (663,281)        21,358 
 Realised loss on sale of 
  investments                             -       (4,186)              -             -         (400)       (4,586) 
 Change in unrealised 
  (depreciation)/appreciation       (5,660)           294         20,748       (1,722)           400        14,060 
                                                           -------------  ------------  ------------  ------------ 
 Closing fair value at the 
  end of the year                    11,320             -      1,090,887           303        92,321     1,194,831 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ------------ 
 Closing cost at end of year         13,544             -      1,070,139         1,238        92,321     1,177,242 
 Closing unrealised 
  (depreciation)/ 
  appreciation at end of year       (2,224)             -         20,748         (935)             -        17,589 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ------------ 
 Closing fair value at the 
  end of the year                    11,320             -      1,090,887           303        92,321     1,194,831 
 
 *On May 2020, the Company transferred the full carrying amount of several investments 
  to its newly incorporated, wholly-owned subsidiary BPCR LP in return for an investment 
  in BPCR LP of the same amount $1,048 million. The balance on the transfer line of $21.358 
  million relates to accrued income which is subsequently reflected in the fair value of 
  BPCR LP, previously disclosed as part of trade and other receivables in the Company and 
  expenses paid on the behalf of BPCR LP. 
 
                                                                        Year ended 31 December 2019 
 
                                     Listed        Listed       Unlisted      Unlisted      Unlisted 
                                                    fixed                        fixed      floating 
                                                 Interest                     interest      interest 
                                Investments   Investments    investments   investments   investments       Total 
                                       $000          $000           $000          $000          $000        $000 
 
 Investment portfolio summary 
 Opening cost at beginning 
  of year                                 -             -          6,805       274,500       725,320   1,006,625 
 Opening unrealised 
  appreciation/(depreciation) 
  at beginning of year                    -             -            840             -         (200)         640 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ---------- 
 Opening fair value at 
  beginning 
  of year                                 -             -          7,645       274,500       725,120   1,007,265 
 Movements in the year: 
 Purchases at cost                   25,490        43,292              -       220,238       239,436     528,456 
 Redemption and sales 
  proceeds                         (15,696)      (25,270)        (6,805)             -     (380,390)   (428,161) 
 Realised gain on sale of 
  investments                         3,750         1,928              -             -             -       5,678 
 Change in unrealised 
  (depreciation)/appreciation         3,436         (294)          (840)           787         (200)       2,889 
 
 
 Closing fair value at the 
  end of the year                    16,980        19,656              -       495,525       583,966   1,116,127 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ---------- 
 
 Closing cost at end of year         13,544        19,950              -       494,738       584,366   1,112,598 
 Closing unrealised 
  (depreciation)/ 
  appreciation at end of year         3,436         (294)              -           787         (400)       3,529 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ---------- 
 
 Closing fair value at the 
  end of the year                    16,980        19,656              -       495,525       583,966   1,116,127 
-----------------------------  ------------  ------------  -------------  ------------  ------------  ---------- 
 
 
 
 
                                          Year ended    Year ended 
                                    31 December 2020   31 December 
                                                              2019 
                                                $000          $000 
---------------------------------  -----------------  ------------ 
 Realised (losses)/gains on sale 
  of investments                             (4,586)         5,678 
 Unrealised appreciation                      14,060         2,889 
 
                                               9,474         8,567 
---------------------------------  -----------------  ------------ 
 

Transaction costs, (incurred at the point of the transaction) incidental to the acquisition of investments totalled $nil (2019: $nil) for the year. In addition, legal fees incidental to the acquisition of investments totalled $nil (2019: $48,000) as disclosed in Note 4, have been taken to the capital column in the Statement of Comprehensive Income since they are capital in nature.

The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:

   --      Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities. 

-- Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

-- Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level of the fair value hierarchy, within which the fair value measurement is categorised, is determined on the basis of the lowest level input that is significant to the fair value of the investment.

 
                                               Year ended 31 December 2020 
                                        ---------------------------------------- 
                                         Level 1   Level       Level       Total 
                                                       2           3 
 Financial assets                           $000    $000        $000        $000 
--------------------------------------  --------  ------  ----------  ---------- 
 Investment portfolio summary 
 Listed investments at fair 
  value through profit and loss           11,320       -           -      11,320 
 Listed fixed interest at fair 
  value through profit and loss                -       -           -           - 
 Unlisted investments in subsidiaries 
  at fair value through profit 
  or loss                                      -       -   1,090,887   1,090,887 
 Unlisted fixed interest investments 
  at fair value through profit 
  or loss                                      -     303           -         303 
 Unlisted floating interest 
  investments at fair value 
  through profit or loss                       -       -      92,321      92,321 
--------------------------------------  --------  ------  ----------  ---------- 
                                          11,320     303   1,183,208   1,194,831 
 
 Liquidity/money market funds            181,532       -           -     181,532 
--------------------------------------  --------  ------  ----------  ---------- 
 
 Total                                   192,852     303   1,183,208   1,376,363 
--------------------------------------  --------  ------  ----------  ---------- 
 
 
 
                                              Year ended 31 December 2019 
                                       ---------------------------------------- 
                                        Level 1   Level       Level       Total 
                                                      2           3 
                                           $000    $000        $000        $000 
-------------------------------------  --------  ------  ----------  ---------- 
 Investment portfolio summary 
 Listed investments at fair 
  value through profit and loss          16,980       -           -      16,980 
 Listed fixed interest at fair 
  value through profit and loss          19,656       -           -      19,656 
 Unlisted investments at fair 
  value through profit and loss               -       -           -           - 
 Unlisted fixed interest investments 
  at fair value through profit 
  and loss                                    -   2,025     493,500     495,525 
 Unlisted floating interest 
  investments at fair value 
  through profit and loss                     -       -     583,966     583,966 
-------------------------------------  --------  ------  ----------  ---------- 
                                         36,636   2,025   1,077,466   1,116,127 
 
 Liquidity/money market funds           291,025       -           -     291,025 
-------------------------------------  --------  ------  ----------  ---------- 
 
 Total                                  327,661   2,025   1,077,466   1,407,152 
-------------------------------------  --------  ------  ----------  ---------- 
 
 

A reconciliation of fair value measurements in Level 3 is set out below.

Level 3 financial assets at fair value through profit or loss

 
                                         Year ended 31 December 2020 
                                           Unlisted   Unlisted floating 
                                              fixed 
                             Unlisted      interest            interest 
                          investments   investments         investments       Total 
                                 $000          $000                $000        $000 
-----------------------  ------------  ------------  ------------------  ---------- 
 Opening balance                    -       493,500             583,966   1,077,466 
 Purchases                          -        16,500             209,636     226,136 
 Redemptions*                       -     (124,500)            (38,000)   (162,500) 
 Transfer of assets**       1,070,139     (385,500)           (663,281)      21,358 
 Realised loss on sale 
  of investments                    -             -               (400)       (400) 
 Change in unrealised 
  appreciation                 20,748             -                 400      21,148 
 Closing balance at 31 
  December 2020             1,090,887             -              92,321   1,183,208 
-----------------------  ------------  ------------  ------------------  ---------- 
 
 
 
                                        Year ended 31 December 2019 
                                          Unlisted   Unlisted floating 
                                             fixed 
                            Unlisted      interest            interest 
                         investments   investments         investments       Total 
                                $000          $000                $000        $000 
----------------------  ------------  ------------  ------------------  ---------- 
 Opening balance               7,645       274,500             725,120   1,007,265 
 Purchases                         -       219,000             239,436     458,436 
 Redemptions*                (6,805)             -           (380,390)   (387,195) 
 Change in unrealised 
  appreciation                 (840)             -               (200)     (1,040) 
 Closing balance at 
  31 December 2019                 -       493,500             583,966   1,077,466 
----------------------  ------------  ------------  ------------------  ---------- 
 
 

* Redemptions are the proceeds received from the repayment of investments.

** On 22 May 2020, the Company transferred the full carrying amount of several investments to its newly incorporated, wholly-owned subsidiary BPCR LP in return for an investment in BPCR LP of the same amount $1,048 million. The balance on the transfer line of $21.358 million relates to accrued income which is subsequently reflected in the fair value of BPCR LP, previously disclosed as part of trade and other receivables in the Company and expenses paid on the behalf of BPCR LP.

There were no transfers between levels during the year.

Valuation techniques

Unrealised gains and losses recorded on Level 1 financial instruments are reported in net gains on investments at fair value on the Statement of Comprehensive Income. The fund administrator utilises quoted prices in active markets that they have access to and the Investment Manager verifies the quoted prices on Bloomberg.

Unrealised gains and losses recorded on Level 2 and 3 financial instruments are reported in net gains on investments at fair value on the Statement of Comprehensive Income. Level 2 and Level 3 financial instruments are fair valued using inputs that reflect management's best estimate of what market participants would use in pricing the assets or liabilities at the measurement date. Consideration is given to the risk inherent in the valuation techniques and the risk inherent in the inputs of the model.

Level 3 financial instruments are fair valued using a discounted cash flow methodology. For capped royalty investments, discount rates are applied to the consensus forecasts or the manager's forecast for sales of the underlying products to determine fair value. The significant unobservable input used in the fair value measurement of the Company's Level 3 investments is the discount rate used to discount future cash flows from borrowers.

Significant increases (decreases) in the discount rate would result in a significantly lower (higher) fair value measurement. The Investment Manager believes 10 per cent. is an appropriate threshold for determining a reasonably possible change in fair value.

Investments held in subsidiaries, namely BPCR LP, are based on the fair value of the investments held in those entities.

The Company's unlisted investments, including those of its wholly owned subsidiary BPCR LP, are all classified as Level 3 investments. The fair values of the unlisted investments have been determined principally by reference to discounted cash flows. The significant unobservable input used is detailed below:

 
                                        As at 31 December 2020 
----------------  ------------------------------------------------------------------  ---------------  --------------- 
                    Fair value at                                                                           Fair value 
                          Level 3                                                          Fair value      sensitivity 
                        financial                                                         sensitivity      to a 100bps 
                   assets at fair                                                         to a 100bps         decrease 
                    value through                                                         decrease in           in the 
                           profit        Valuation     Unobservable                      the discount         discount 
 Assets                   or loss        technique            input    Discount rate             rate             rate 
                             $000                                                                $000             $000 
----------------  ---------------  ---------------  ---------------  ---------------  ---------------  --------------- 
                                        Discounted 
                                              cash 
 Sebela                    92,321             flow    Discount rate            12.4%           92,860           91,789 
 Assets held 
  by BPCR LP** 
                                        Discounted 
                                              cash 
 Akebia                    50,000             flow    Discount rate            11.1%           51,035           48,999 
                                        Discounted 
                                              cash 
 BDSI                      80,000             flow    Discount rate            11.1%           81,717           78,341 
                                        Discounted 
                                              cash 
 BMS                      160,180             flow    Discount rate             9.4%          163,586          150,906 
 Other Net 
 Assets 
 of BPCR LP                52,644   Amortised cost                -                -                -                - 
                                        Discounted 
                                              cash 
 Collegium                134,063             flow    Discount rate            12.0%          135,668          132,500 
                                        Discounted 
                                              cash 
 Epizyme                  110,000             flow    Discount rate            11.0%          113,546          106,615 
                                        Discounted 
 Global Blood                                 cash 
  Therapeutics             82,500             flow    Discount rate            13.9%           84,158           80,894 
                                        Discounted 
                                              cash 
 OptiNose US               71,500             flow    Discount rate            12.8%           72,932           70,112 
                                        Discounted 
 Sarepta                                      cash 
  Therapeutics            350,000             flow    Discount rate            10.4%          358,804          341,514 
                        1,183,208                                                           1,154,713        1,101,277 
 
 

** The Company holds an investment in BPCR Limited Partnership, its wholly owned subsidiary, which it measures at fair value through profit or loss rather than consolidate.

 
                                         As at 31 December 2019 
------------------  ----------------------------------------------------------------  -----------------  ------------- 
                       Fair value at                                                                        Fair value 
                               Level                                                         Fair value    sensitivity 
                         3 financial                                                        sensitivity    to a 100bps 
                           assets at                                                        to a 100bps       increase 
                          fair value                                                           decrease         in the 
                      through profit          Valuation    Unobservable     Discount    in the discount       discount 
            Assets           or loss          technique           input         rate               rate           rate 
                                $000                                                               $000           $000 
------------------  ----------------  -----------------  --------------  -----------  -----------------  ------------- 
                                        Discounted cash 
 Akebia                       40,000               flow   Discount rate        10.9%             41,103         38,941 
                                        Discounted cash 
 Amicus                      150,000               flow   Discount rate        11.3%            153,937        146,211 
                                        Discounted cash 
 BDSI                         60,000               flow   Discount rate        11.5%             61,670         58,398 
                                        Discounted cash 
 BMS                         149,896               flow   Discount rate        10.4%            154,172        145,803 
 BPCR LP                           -                  -               -            -                  -              - 
 Collegium                         -                  -               -            -                  -              - 
                                        Discounted cash 
 Epizyme                      12,500               flow   Discount rate        10.7%             12,888         12,129 
 Global Blood                           Discounted cash 
  Therapeutics                41,250               flow   Discount rate         9.9%             42,705         39,865 
 Lexicon                                Discounted cash 
  Pharmaceuticals            124,500               flow   Discount rate        10.4%            127,451        121,649 
                                        Discounted cash 
 Novocure                    150,000               flow   Discount rate        10.4%            153,433        146,681 
                                        Discounted cash 
 OptiNose US                  44,000               flow   Discount rate        12.4%             45,174         42,871 
 Sarepta                                Discounted cash 
  Therapeutics               175,000               flow   Discount rate        10.1%            180,112        170,094 
                                        Discounted cash 
 Sebela                      130,320               flow   Discount rate        12.6%            131,630        128,728 
                           1,077,446                                                          1,104,275      1,051,370 
 

8. TRADE AND OTHER RECEIVABLES(1)

 
                                                      As at         As at 
                                           31 December 2020   31 December 
                                                                     2019 
                                                       $000          $000 
----------------------------------------  -----------------  ------------ 
 Listed fixed interest income 
  receivable                                              -            26 
 Unlisted fixed interest income 
  receivable                                              -         3,061 
 Unlisted floating interest income 
  receivable                                              -         3,938 
 Interest accrued on liquidity/money 
  market funds                                            3           429 
 US floating interest income receivable 
  from BPCR Ongdapa                                       -         8,417 
 Other debtors                                          205           335 
----------------------------------------  -----------------  ------------ 
 
                                                        208        16,206 
----------------------------------------  -----------------  ------------ 
 

1. A portion of trade and other receivables relating to accrued interest were transferred to BPCR LP on 22 May 2020 and is now reflected in the fair value of BPCR LP. Refer to note 7, investments at fair value through profit and loss, for further information.

9. CASH AND CASH EQUIVALENTS

 
                                            As at         As at 
                                 31 December 2020   31 December 
                                                           2019 
                                             $000          $000 
------------------------------  -----------------  ------------ 
 Cash at bank                              11,737         5,613 
 Liquidity/money market funds             181,532       291,025 
------------------------------  -----------------  ------------ 
 
                                          193,269       296,638 
------------------------------  -----------------  ------------ 
 

10. TRADE AND OTHER PAYABLES

 
                                        As at         As at 
                             31 December 2020   31 December 
                                                       2019 
                                         $000          $000 
--------------------------  -----------------  ------------ 
 Current liabilities 
--------------------------  -----------------  ------------ 
 Performance fee payable                5,473        20,633 
 Management fees accrual                3,431         3,496 
 Accruals                                 489           375 
 
                                        9,393        24,504 
--------------------------  -----------------  ------------ 
 Non-current liabilities 
 Deferred performance fee                   -           731 
--------------------------  -----------------  ------------ 
 
 Total                                  9,393        25,235 
--------------------------  -----------------  ------------ 
 

11. RETURN PER ORDINARY SHARE

Revenue return per ordinary share is based on the net revenue after taxation of $79,674,000 (2019: $113,821,000) and 1,373,904,204 (2019: 1,373,932,067) ordinary shares, being the weighted average number of ordinary shares for the year, excluding treasury shares.

Capital return per ordinary share is based on net capital gain for the year of $9,462,000 (2019: gain $8,507,000) and on 1,373,904,204 (2019:1,373,932,067) ordinary shares, being the weighted average number of ordinary shares for the year.

Basic and diluted return per share are the same as there are no arrangements which could have a dilutive effect on the Company's ordinary shares.

12. NET ASSET VALUE PER ORDINARY SHARE

The basic total net assets per ordinary share is based on the net assets attributable to equity shareholders at 31 December 2020 of $1,378,915,000 (31 December 2019: $1,403,736,000) and the number of ordinary shares in issue at 31 December 2020 of 1,373,872,373 (2019: 1,373,932,067).

There is no dilution effect and therefore there is no difference between the diluted total net assets per ordinary share and the basic total net assets per ordinary share.

13. SHARE CAPITAL

 
                               Year ended 31 December      Period ended 31 December 
                                         2020                        2019 
---------------------------  --------------------------  --------------------------- 
                                                                 Number of 
                              Number of shares     $000             shares      $000 
---------------------------  -----------------  -------  -----------------  -------- 
 Issued and fully paid: 
 Ordinary Shares of $0.01: 
 Balance at beginning of 
  the year                       1,373,932,067   13,739      1,373,932,067    13,739 
 Balance at end of the 
  year                           1,373,932,067   13,739      1,373,932,067    13,739 
---------------------------  -----------------  -------  -----------------  -------- 
 

Total voting rights at 31 December 2020 were 1,373,872,373 (31 December 2019: 1,373,932,067). During the year 59,694 shares were bought back for treasury. The balance of treasury shares on 31 December 2020 was 59,694 (31 December 2019: nil).

14. SUBSIDIARY

The Company formed a wholly-owned subsidiary, BPCR Ongdapa Limited ("BPCR Ongdapa"), incorporated in Ireland on 5 October 2017 for the purpose of entering into a purchase, sale and assignment agreement with a wholly-owned subsidiary of Royalty Pharma for the purchase of a 50 per cent. interest in a stream of payments acquired by Royalty Pharma from Bristol-Myers Squibb ("BMS"). In accordance with IFRS 10, the Company is exempt from consolidating a controlled investee as an investment entity. Therefore, the Company's investment in BPCR Ongdapa is recognised at fair value through profit or loss. The registered address for BPCR Ongdapa is BPCR Ongdapa Limited, 2 Grand Canal Square, Grand Canal Harbour, Dublin, Ireland. The aggregate amount of its capital reserves as at 31 December 2020 is $1 (2019: $1) and a return for the year ended 31 December 2020 is $445,582 (2019: $nil).

The Company formed a wholly-owned subsidiary, BPCR Limited Partnership, incorporated in England and Wales on 27 March 2020 for the purpose of entering into a three year $200 million revolving credit facility with JPMorgan Chase Bank. BPCR Limited Partnership has its registered office at 51 New North Road, Exeter, United Kingdom, EX4 4EP and received an initial contribution of GBP1.00 at formation from the Company, its sole Limited Partner. In accordance with IFRS 10, the Company is exempted from consolidating a controlled investee as it is an investment entity. Therefore, the Company's investment in BPCR Limited Partnership will be recognised at fair value through profit or loss.

The General Partner for BPCR LP is BPCR GP Limited, incorporated in England and Wales on 11 March 2020 and is wholly owned by the Company. The Company is not exempt from consolidating the the financial statements of BPCR GP under IFRS 10, however the highly immaterial (nil) balance of BPCR GP would produce accounts with almost identical balances to the Company. Furthermore with reference to the CA, section 405 (2) "A subsidiary undertaking may be excluded from consolidation if its inclusion is not material for the purpose of giving a true and fair view". The registered address for BPCR GP Limited is BPCR GP Limited, 51 New North Road, Exeter, United Kingdom, EX4 4EP. The aggregate amount of its capital reserves as at 31 December 2020 is $nil (2019: $nil) and a return for the year to 31 December 2020 is $nil (2019: $nil).

The Company formed two wholly-owned structured subsidiaries, BPCR Ongdapa Ltd. and BPCR Limited Partnership to assist in meeting its investment objectives and enter into a revolving credit facility. The Company generates returns and retains the ownership risks in the investments retained in the subsidiaries. These entities meet the definition of an investment entity within IFRS 10 and the Company is required to measure these subsidiaries at fair value through profit and loss rather than consolidate. The maximum exposure to loss for the unconsolidated structured subsidiaries is the fair value and any accrued unpaid fees.

15. RECONCILIATION OF TOTAL RETURN FOR THE YEAR BEFORE TAXATION TO CASH GENERATED FROM OPERATIONS

 
                                      Year ended    Year ended 
                                     31 December   31 December 
                                            2020          2019 
---------------------------------- 
                                            $000          $000 
----------------------------------  ------------  ------------ 
 Total return for the year before 
  taxation                                89,136       122,328 
 Capital gains                           (9,462)       (8,555) 
 Decrease in trade receivables*           15,998         5,764 
 (Decrease)/increase in trade 
  payables                              (15,842)        11,983 
 Non-cash movement for additional          (400)             - 
  consideration** 
 Other assets transferred to BPCR       (21,358)             - 
  LP* 
 Cash generated from operations           58,072       131,520 
----------------------------------  ------------  ------------ 
 

* On 22 May 2020, the Company transferred the full carrying amount of several investments to its newly incorporated, wholly-owned subsidiary BPCR LP in return for an investment in BPCP LP of the same amount $1,048 million. The balance on the transfer line of $21.358 million relates to accrued income which is subsequently reflected in the fair value of BPCR LP, previously disclosed as part of trade and other receivables in the Company and expenses paid on the behalf of BPCR LP. **In 2020 the Company's senior secured term loan of $20,000,000 to BDSI included additional consideration of $400,000. This reduced the value of the payment made.

Analysis of net cash and net debt

 
                                     At                                   At 
                              1 January               Exchange   31 December 
                                   2020   Cash flow   movement          2018 
 Net cash                          $000        $000       $000          $000 
---------------------------  ----------  ----------  ---------  ------------ 
 Cash and cash equivalents      296,638   (103,357)       (12)       193,269 
---------------------------  ----------  ----------  ---------  ------------ 
 
                                     At                                   At 
                              1 January               Exchange   31 December 
                                   2019   Cash flow   movement          2017 
 Net cash                          $000        $000       $000          $000 
---------------------------  ----------  ----------  ---------  ------------ 
 Cash and cash equivalents      363,572    (66,922)       (12)       296,638 
---------------------------  ----------  ----------  ---------  ------------ 
 

16. FINANCIAL INSTRUMENTS

The Company's financial instruments include its investment portfolio, cash balances, trade receivables and trade payables that arise directly from its operations. Adherence to the Company's investment policy is key in managing risk. Refer to the Strategic Overview for a full description of the Company's investment objective and policy.

The Investment Manager monitors the financial risks affecting the Company on an ongoing basis and the Directors regularly receive financial information which is used to identify and monitor risk. All risks are actively reviewed and monitored by the Board. Details of the Company's principal risks can be found in the Strategic Report above.

The main risks arising from the Company's financial instruments are:

i) market risk, including price risk, currency risk and interest rate risk;

ii) liquidity risk; and

iii) credit risk.

(i) Market risk

Market risk is the risk of loss arising from movements in observable market variables. The fair value of future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. The Investment Manager assesses the exposure to market risk when making each investment decision and these risks are monitored by the Investment Manager on a regular basis and the Board at quarterly meetings with the Investment Manager.

Market price risk

The Company is exposed to price risk arising from its investments whose future prices are uncertain. The Company's exposure to price risk comprises movements in the value of the Company's investments. See note 7 above for investments that fall into Level 3 of the fair value hierarchy and refer to the description of valuation policies in Note 2(d). The nature of the Company's investments, with a high proportion of the portfolio invested in unlisted debt instruments, means that the investments are valued by the Company after consideration of the most recent available information from the underlying investments. The Company's portfolio is diversified among counterparties and by the sectors in which the underlying companies operate, minimising the impact of any negative industry-specific trends.

The table below analyses the effect of a 10 per cent. change in the fair value of investments. The Investment Manager believes 10 per cent. is the appropriate threshold for determining whether a material change in market value has occurred.

 
                                        As at                     As at 
                                  31 December 2020           31 December 2019 
                             --------------------------  ----------------------- 
                                                                          10 per 
                                           10 per cent.                    cent. 
                                              Increase/                Increase/ 
                                               decrease                 decrease 
                                                     in                       in 
                                                                          market 
                              Fair value   market value   Fair value       value 
                                    $000           $000         $000        $000 
---------------------------  -----------  -------------  -----------  ---------- 
 Biodelivery Sciences 
  International Equity            11,320          1,132       16,979       1,698 
 Convertible bonds                     -              -       19,656       1,966 
 Lexicon Senior Secured 
  Loan                                 -              -      124,500      12,450 
 OptiNose US warrants                303             30        2,026         203 
 Sebela Senior Secured 
  Loan                            92,321          9,232      130,320      13,032 
 Assets held by BPCR 
  LP 
---------------------------  -----------  ------------- 
 Akebia                           50,000          5,000       40,000       4,000 
---------------------------  -----------  ------------- 
 Amicus Senior Secured 
  Loan                                 -              -      150,000      15,000 
---------------------------  -----------  ------------- 
 Biodelivery Sciences 
  International Loan              80,000          8,000       60,000       6,000 
---------------------------  -----------  ------------- 
 BMS Purchases Payments 
  (BPCR Ongdapa)                 160,180         16,018      149,896      14,990 
---------------------------  -----------  ------------- 
 Collegium                       134,063         13,407            -           - 
---------------------------  -----------  -------------  -----------  ---------- 
 Epizyme                         110,000         11,000       12,500       1,250 
                                                         -----------  ---------- 
 Global Blood Therapeutics        82,500          8,250       41,250       4,125 
                                                         -----------  ---------- 
 OptiNose US Note                 71,500          7,150       44,000       4,400 
 OptiNose US Equity                  101             10            -           - 
 Other Assets of BPCR 
  LP                              52,543          5,254            -           - 
 Novocure Senior Secured 
  Loan                                 -              -      150,000      15,000 
 Sarepta Therapeutics            350,000         35,000      175,000      17,500 
                               1,194,831        119,453    1,116,127     111,614 
---------------------------  -----------  -------------  -----------  ---------- 
 

The Board manages the risks inherent in the investment portfolio by ensuring full and timely reporting of relevant information from the Investment Manager. Investment performance and exposure are reviewed at each Board meeting.

Currency Risk

Currency risk is the risk that fair values of future cash flows of a financial instrument fluctuate because of changes in foreign exchange rates.

At 31 December 2020, the Company held cash balances in GBP Sterling of GBP72,000 ($99,000) (2019:

GBPNil ($nil)) and in Euro of EUR10,000 ($12,000) (2019: EUR3,000 ($4,000)).

The currency exposures (including non-financial assets) of the Company as at 31 December 2020:

 
                                          Other net 
                                            assets/ 
                 Cash   Investments   (liabilities)       Total 
                 $000          $000            $000        $000 
-----------  --------  ------------  --------------  ---------- 
 Sterling          99             -           (209)       (110) 
 Euro              12             -               -          12 
 US Dollar    193,158     1,194,831         (8,976)   1,379,013 
-----------  --------  ------------  --------------  ---------- 
 
              193,269     1,194,831         (9,185)   1,378,915 
-----------  --------  ------------  --------------  ---------- 
 

The currency exposures (including non-financial assets) of the Company as at 31 December 2019:

 
                                          Other net 
                                            assets/ 
                 Cash   Investments   (liabilities)       Total 
                 $000          $000            $000        $000 
-----------  --------  ------------  --------------  ---------- 
 Sterling           -             -               -           - 
 Euro               4             -               -           4 
 US Dollar    296,634     1,116,127         (9,230)   1,403,531 
-----------  --------  ------------  --------------  ---------- 
 
              296,638     1,116,127         (9,230)   1,403,535 
-----------  --------  ------------  --------------  ---------- 
 

A 10 per cent. increase in the Sterling exchange rate would have increased net assets by $20,000 (2019: $nil increase).

A 10 per cent. increase in the Euro exchange rate would have increased net assets by $1,000 (2019: $nil).

A 10 per cent. decrease would have decreased net assets by the same amount (2019: same).

Interest rate risk

Interest rate risk is the risk that fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Interest rate movements may potentially affect future cash flows from:

-- investments in floating rate securities, unquoted loans and purchased payments; and

-- the level of income receivable on cash deposits and liquidity funds.

The Lexicon, Novocure, OptiNose US, Sarepta Therapeutics and the convertible bond have a fixed interest rate and therefore are not subject to interest rate risk. The below table shows the percentage of the Company's net assets they represent.

 
                                  As at 31 December         As at 31 December 
                                               2020                      2019 
                            % of Company Net Assets   % of Company Net Assets 
 Sarepta Therapeutics                         25.38                     12.47 
 Novocure Senior Secured 
  Loan                                            -                     10.69 
 Lexicon Senior Secured 
  Loan                                            -                      8.87 
 OptiNose US                                   5.19                      3.13 
 Convertible bonds                                -                      1.40 
 

The BMS Purchased Payments, Collegium, Amicus, Sebela, BDSI, Global Blood Therapeutics, Akebia, and Epizyme loans and cash and cash equivalents, including investments in liquidity funds, have a floating rate of interest. The below table shows the percentage of the Company's net assets they represent.

 
                                     As at 31 December         As at 31 December 
                                                  2020                      2019 
                               % of Company Net Assets   % of Company Net Assets 
 BMS Purchased Payments 
  (BPCR Ongdapa)                                 11.62                     10.68 
 Collegium                                        9.72                         - 
 Amicus Senior Secured 
  Loan                                               -                     10.69 
 Sebela Senior Secured 
  Loan                                            6.70                      9.28 
 Biodelivery Sciences 
  International Loan                              5.80                      4.27 
 Global Blood Therapeutics                        5.98                      2.94 
 Akebia                                           3.63                      2.85 
 Epizyme                                          7.98                      0.89 
 Cash and cash equivalents*                      14.02                     21.13 
 

* Cash and cash equivalents represents the Company only and does not include cash held by BPCR LP.

A 100 basis point increase in LIBOR would have increased net assets by $198,000 (2019: $11,711,000).

A 100 basis point decrease in LIBOR would have decreased net assets by $nil (2019: $7,427,000).

A 300 basis point increase in LIBOR would have increased net assets by $16,122,000 (2019: $38,600,000).

(ii) Liquidity risk

This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. At 31 December 2020, the Company had cash and cash equivalents, including investments in liquidity/money market funds with balances of $193,269,000 (2019: $296,638,000) and maximum unfunded commitments of $nil (2019: $319,386,000).

The Company maintains sufficient liquid investments through its cash and cash equivalents to pay accounts payable, accrued expenses and ongoing expenses of the Company. Liquidity risk is manageable through a number of options, including the Company's ability to issue debt and/or equity and by selling all or a portion of an investment in the secondary market. On 22 May 2020, the Company entered into a $200 million revolving credit facility with JPMorgan Chase Bank. This facility will increase the Company's flexibility in relation to funding new lending opportunities and provide liquidity for funding outstanding obligations. As of 31 December 2020, the outstanding balance on the credit facility was $nil.

(iii) Credit risk

This is the risk the Company's trade and other receivables will not meet their obligations to the Company.

While the Company will often seek to be a secured lender for each debt asset, there is no guarantee that the relevant borrower will repay the loan or that the collateral will be sufficient to satisfy the amount owed. All of the Company's investments are senior secured investments as detailed in the Investment Manager's Report above.

The Investment Manager performs a robust credit risk analysis during the investment process for all new investments and constantly monitors the collateral on its outstanding senior secured loans as to minimise the credit risk to the Company of default. The credit risk of the senior secured loans will increase significantly after initial recognition when borrowers are not making principal and interest payments as agreed. The fair value of the senior secured loan will be adjusted, either partially or in full, when there is no realistic prospect of recovery and the amount of the change in fair value has been determined by the Investment Manager. Subsequent recoveries of amounts previously adjusted will decrease the amount of the fair value loss recorded. Changes to a counterparty's risk profile are monitored by the Investment Manager on a regular basis and discussed with the Board at quarterly meetings.

The Company's maximum exposure to credit risk at any given time is the fair value of its investment portfolio. At 31 December 2020, the Company's maximum exposure to credit risk was $1,194,831,000 (2019: $1,116,127,000). The Company's concentration of credit risk by counterparty can be found in the Investment Manager's Report above.

Capital management

The Company's primary objectives in relation to the management of capital are:

   --      to ensure its ability to continue as a going concern; 

-- to ensure that the Company conducts its affairs to enable it to continue to meet the criteria to qualify as an investment trust; and

-- to maximise the long-term shareholder returns in the form of sustainable income distributions through an appropriate balance of equity capital and debt.

The Company is subject to externally imposed capital requirements:

   --      as a public company, the Company has a minimum share capital of GBP50,000; 

The Company has complied with all the above requirements during this financial year.

17. RELATED PARTY TRANSACTIONS

The amount incurred in respect of management fees during the year to 31 December 2020 was $13,745,000 (2019: $14,023,000), of which $3,431,000 (2019: $3,496,000) was outstanding at 31 December 2020. The amount due to the Investment Manager for performance fees at 31 December 2020 was $5,473,000 (2019: $21,364,000).

The amount incurred in respect of Directors' fees during the year to 31 December 2020 was $395,000 (2019: $395,000) of which $nil was outstanding at 31 December 2020 (2019: $nil).

The Shared Services Agreement was entered into by and between RP Management, LLC, an affiliate of Pharmakon Advisors, L.P., and the Investment Manager on 30 November 2016 and deemed effective as of 1 January 2016. Under the terms of the Shared Services Agreement, the Investment Manager will have access to the expertise of certain Royalty Pharma employees, including its research, legal and compliance, and finance teams.

BPCR Limited Partnership and its General Partner, BPCR GP Limited, are related entities of the Company, as they are wholly-owned subsidiaries and formed for the purpose of entering into a new credit facility. On 22 May 2020, several investments totaling $1,070,139,000 were transferred to BPCR LP from the Company, in the year to 31 December 2020, the Company recorded income of $61,952,000 (2019: $nil) and the outstanding balance on 31 December 2020 was $20,748,000 (2019: $nil). BPCR GP Limited had an outstanding balance as at 31 December 2020 of $nil (2019: $nil).

On 7 February 2020, the Company and BioPharma Credit Investments V (Master) LP ("BioPharma V"), a fund managed by the Investment Manager, entered into a definitive senior secured term loan agreement for $200,000,000 with Collegium Pharmaceutical, Inc. (Nasdaq: COLL). The Company's share of the transaction was $165,000,000 and the Company funded the term loan on 13 February 2020. The loan will mature in January 2024 and will bear interest at 3-month LIBOR plus 7.50 per cent. per annum subject to a 2.00 per cent. floor along with a one-time additional consideration of 2.50 per cent. of the loan amount which was paid at funding. In 2020, the Company recorded interest income of $4,354,000 (2019: $nil) and a further $8,959,000 was recorded within BPCR LP (2019: $nil). The outstanding balance as at 31 December 2020 was $134,063,000 (2019: $nil).

On 18 December 2019, the Company and BioPharma V entered into a definitive senior secured term loan agreement with Global Blood Therapeutics (Nasdaq: GBT). GBT drew down $75,000,000 at closing on 20 December 2019 and $75,000,000 of the second tranche on 20 November 2020. The Company funded $41,250,000 of each tranche for a total investment of $82,500,000 and BioPharma V invested the remaining $67,500,000. The loan will mature in December 2025 and will bear interest at three-month LIBOR plus 7.00 per cent. per annum subject to a 2.00 per cent. floor along with a one-time additional consideration of 1.50 per cent. of the total loan amount payable upon funding and an additional 2.00 per cent. payable upon the repayment of the loan. In 2020, the Company recorded interest income of $1,475,000 (2019: $113,000) and a further $2,743,000 was recorded within BPCR LP (2019: $nil). The outstanding balance as at 31 December 2020 was $82,500,000 (2019: $41,250,000).

On 13 December 2019, the Company and BioPharma V entered into a definitive senior secured term loan agreement for up to $500,000,000 with Sarepta Therapeutics (Nasdaq: SRPT). On 24 September 2020 the Sarepta loan agreement was amended and the loan amount was increased to $550,000,000. Sarepta drew down the first $250,000,000 tranche on 20 December 2019 and the second $300,000,000 tranche on 2 November 2020. The Company funded $175,000,000 of each tranche for a total investment of $350,000,000 and BioPharma V invested the remaining $200,000,000. The first tranche will mature in December 2023 and the second tranche in December 2024. The loan will bear interest at 8.50 per cent. per annum along with a one-time additional consideration of 1.75 per cent. of the first tranche and 2.95 per cent. of the second tranche payable upon funding and an additional 2.00 per cent. payable upon the repayment of the loan. In 2020, the Company recorded interest income of $5,909,000 (2019: $495,833) and a further $11,693,000 was recorded within BPCR LP (2019: $nil). The outstanding balance as at 31 December 2020 was $350,000,000 (2019: $175,000,000).

On 11 November 2019, the Company and BioPharma V entered into a definitive senior secured term loan agreement for up to $100,000,000 with Akebia (Nasdaq: AKBA). Akebia drew down the first $80,000,000 on 25 November 2019 and the second $20,000,000 tranche on 10 December 2020. The Company invested $40,000,000 and $10,000,000 of the first and second tranche, respectively. The loan will mature in November 2024 and will bear interest at LIBOR plus 7.50 per cent. per annum along with a one-time additional consideration of 2.00 per cent. of the total loan amount. In 2020, the Company recorded interest income of $1,509,000 (2019: $390,556) and a further $2,412,000 was recorded within BPCR LP (2019: $nil). The outstanding balance as at 31 December 2020 was $60,000,000 (2019: $40,000,000).

On 4 November 2019, the Company and BioPharma V entered into a definitive senior secured term loan agreement for up to $70,000,000 with Epizyme (Nasdaq: EPZM). On 3 November 2020, the Epizyme loan agreement was amended and the loan amount was increased to $220,000,000. Epizyme drew down the $25,000,000 on 18 November 2019 and an additional $195,000,000 during 2020. The Company funded a total of $110,000,000 of the Epizyme loan. The first three tranches of the loan will mature in November 2024 and the fourth tranche will mature in November 2026. The loan will bear interest at LIBOR plus 7.75 per cent. per annum along with a one-time additional consideration of 2.00 per cent. of the total loan amount. On 4 November 2019, Royalty Pharma, an affiliate of Pharmakon Advisors, announced an agreement to purchase future royalties on tazemetostat net sales outside of Japan owned by Eisai Co. for $330,000,000 and a separate $100,000,000 equity investment directly in Epizyme. Pablo Legorreta, a principal of Pharmakon and RP management was named to the Epizyme board of directors. In 2020, the Company recorded interest income of $677,000 (2019: $148,958) and a further $2,905,000 was recorded within BPCR LP (2019: $nil). The outstanding balance as at 31 December 2020 was $110,000,000 (2019: $12,500,000).

On 12 September 2019, the Company and BioPharma V, entered into a definitive senior secured note purchase agreement for the issuance and sale of senior secured notes in an aggregate original principal amount of up to $150,000,000 by OptiNose US. OptiNose US is a wholly-owned subsidiary of OptiNose (Nasdaq: OPTN), a commercial-stage specialty pharmaceutical company. Optinose drew a total of $130,000,000 in three tranches: $80,000,000 on 12 September 2019, $30,000,000 on 13 February 2020 and $20,000,000 on 1 December 2020. There are no further funding commitments. The notes mature in September 2024 and bear interest at 10.75% per annum along with a one-time additional consideration of 0.75% of the aggregate original principal amount of senior secured notes which the Company and BioPharma-V are committed to purchase under the facility and 810,357 warrants exercisable into common stock of OptiNose. The Company funded a total 71,500,000 across all tranches and was allocated 445,696 warrants. In 2020, the Company recorded interest income of $2,372,000 (2019: $nil) and a further $4,131,000 was recorded within BPCR LP (2019: $nil). The outstanding balance as at 31 December 2020 was $71,500,000 (2019: $44,000,000).

On 7 February 2018, the Company entered into a senior secured term loan agreement for $150,000,000

with Novocure Limited (NASDAQ: NVCR) ("Novocure"). The $150,000,000 loan was originally scheduled to mature in February 2023 and bore interest at 9.0 per cent. per annum. Novocure used $100,000,000 of the net proceeds to entirely prepay the $100,000,000, 10.0 per cent. coupon loan made by BioPharma III Holdings, LP ("BioPharma III") in 2015 that was scheduled to mature in 2020. The Company was a limited partner in BioPharma III and therefore received a distribution of approximately $46,000,000 from BioPharma III as a result of the prepayment from Novocure. In 2020, the Company recorded interest of $5,363,000 (2019: $13,688,000) and a further $3,300,000 was recorded within BPCR LP (2019: $nil). On 18 August 2020, NovoCure Limited repaid their loan and the Company received a payment of $154,838,000 million comprised of $150,000,000 million in principal, $1,838,000 million in accrued interest, and $3,000,000 million in prepayment fees. The outstanding balance as at 31 December 2020 was $nil (2019: $150,000,000).

On 8 December 2017, the Company's wholly-owned subsidiary BPCR Ongdapa entered into a purchase, sale and assignment agreement with RPI Acquisitions (Ireland) Limited ("RPI Acquisitions"), an affiliate of Royalty Pharma, for the purchase of a 50 per cent. interest in a stream of Purchased Payments acquired by RPI Acquisitions from Bristol-Myers Squibb 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 marketed by AstraZeneca, and related products. The Company was expected to fund $140,000,000 to $165,000,000 between 2018 and 2020, determined by product sales and will receive payments from 2020 through 2025 estimated to yield a return in the high single-digits per annum. The Company advanced $12,136,000 to RPI Acquisitions in the year to 31 December 2020 (2019: $85,687,000) for the Purchased Payments. In the year to 31 December 2020 the Company recorded interest of $3,440,000 (2019: $8,417,000) and a further $10,843,000 was recorded within BPCR LP (2019: $nil).

On 4 December 2017, the Company and BioPharma Credit Investments IV, S.àr.L. ("BioPharma IV"), a fund managed by the Investment Manager, entered into a definitive term loan agreement for up to $200,000,000 with Lexicon Pharmaceuticals (NASDAQ: LXRX), a fully integrated biopharmaceutical company ("Lexicon"). The loan was secured by substantially all of Lexicon's assets, including its rights to Xermelo(R) and sotagliflozin. The $200,000,000 loan was available in two tranches, each maturing in December 2022 and bearing interest at 9.0 per cent. per annum. The first $150,000,000 was available immediately and an additional tranche of $50,000,000 was not drawn down. The Company funded $124,500,000 of the first tranche on 18 December 2017 and Lexicon has not drawn the second tranche. In the year to 31 December 2020, the Company recorded interest of $7,844,000 (2019: $11,361,000). On 8 September 2020, Lexicon repaid the $150,000,000 loan. The Company received a payment of $132,300,000 million on its $124,500,000 share of the loan, including the make-whole and prepayment premium totaling $5,600,000. The outstanding balance as at 31 December 2020 was $nil (2019: $124,500,000).

On 21 November 2017, the Company and BioPharma IV entered into a definitive loan agreement for up to $500,000,000 with Tesaro (NASDAQ: TSRO), an oncology-focused biopharmaceutical company ("Tesaro"). Under the terms of the transaction, the Company funded $222,000,000 of the $300,000,000 first tranche on 6 December 2017 and committed to invest up to $148,000,000 of the $200,000,000 second tranche by 20 December 2018 at Tesaro's option with BioPharma IV committing to invest up to $130,000,000 in parallel with the Company acting as collateral agent. The Company funded $100,000,000 of the second tranche on 29 June 2018 and assigned its remaining $48,000,000 commitment to other investors. The loan had a term of seven years and was secured by Tesaro's US rights to ZEJULA(R) and VARUBI(R). The first $300,000,000 tranche bore interest at LIBOR plus 8 per cent. and the second tranche bore interest at LIBOR plus 7.5 per cent. The LIBOR rate was subject to a floor of 1 per cent. and certain caps. Each tranche of the loan was interest-only for the first two periods, amortised over the remaining term, and can be prepaid at Tesaro's discretion, at any time, subject to prepayment fees. In the year to 31 December 2020, the Company recorded interest of $nil (2019: $2,191,000). Following its acquisition by GlaxoSmithKline, Tesaro repaid the $500,000,000 loan on 23 January 2019. The Company received a payment of $369,953,000 on its $322,000,000 share of the loan, including the make-whole and prepayment premium totaling $45,762,000. The outstanding balance as at 31 December 2020 was $nil (2019: $nil).

BioPharma IV, BioPharma V, and RPI Acquisitions are related entities of the Company due to a principal of the Investment Manager having significant influence over each of these entities.

18. CONTINGENCIES, GUARANTEES AND FINANCIAL COMMITMENTS

At 31 December 2020, there were no outstanding commitments (31 December 2019: $319,386,000) in respect of investments (see Note 17 for further details).

19. SUBSEQUENT EVENTS

No additional subsequent events requiring recognition or disclosure in the financial statements have been determined.

GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES (APM)

Net Income per Ordinary Share

Net income per share is the net revenue for the year divided by the number of ordinary shares outstanding.

NAV per Ordinary Share

Net Asset Value (NAV) is the value of total assets less liabilities. The NAV per share is calculated by dividing this amount by the number of ordinary shares outstanding.

Premium (discount) to NAV per Ordinary Share

As stock markets and share prices vary, an investment trust's share price is rarely the same as its NAV. When the share price is lower than the NAV per share it is said to be trading at a discount. The size of the discount is calculated by subtracting the share price from the NAV per share and it is usually expressed as a percentage of the NAV per share. If the share price is higher than the NAV per share, it is said to be trading at a premium.

Return per Ordinary Share

Revenue return per Ordinary share is based on the net revenue after taxation divided by the weighted average number of Ordinary Shares for the year. Capital return per Ordinary Share is based on net capital gains divided by weighted average number of Ordinary Shares for the year.

Ongoing charges

Ongoing charges are the Company's expenses expressed (excluding and including performance fee) as a percentage of its average monthly net assets and follows the AIC recommended methodology. Ongoing charges are different to total expenses as not all expenses are considered to be operational and recurring.

CORPORATE INFORMATION

Directors

Harry Hyman (Chairman)

Colin Bond

Duncan Budge

Stephanie Léouzon

Rolf Soderstrom

Investment Manager and AIFM

Pharmakon Advisors L.P.

110 East 59th Street #3300

New York, NY 10022

USA

Administrator

Link Alternative Fund Administrators Limited

Beaufort House

51 New North Road

Exeter

EX4 4EP

Company Secretary and Registered Office

Link Company Matters Limited

Beaufort House

51 New North Road

Exeter

EX4 4EP

Tel: 01392 477500

Company Website

www.bpcruk.com

Custodian

Bank of New York Mellon

One Canada Square

London

E14 5AL

Financial and Strategic Communications

Buchanan Communications Limited

107 Cheapside

London

EC2V 6DN

Independent Auditor

PricewaterhouseCoopers LLP

7 More London Riverside

London

SE1 2RT

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

TISE Sponsor

Carey Commercial Limited

1st and 2nd Floors

Elizabeth House

Les Ruettes Brayes

St Peter Port

Guernsey

GY1 1EW

SHAREHOLDER INFORMATION

Key dates

 
 March       Annual results announced 
              Payment of fourth interim 
              dividend 
 June        Annual General Meeting 
              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 and TISE 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 - biopharmacreditplc@linkgroup.co.uk

Chairman - chairman@bpcruk.com

Senior Independent Director - sid@bpcruk.com

National Storage Mechanism

A copy of the full Annual Report and Financial Statements will shortly be submitted to the National Storage Mechanism ("NSM") and will be available for inspection at the NSM, which is situated at

https://data.fca.org.uk/a/nsm/nationalstoragemechanism .

END

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

LEI: 213800AV55PYXAS7SY24

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END

FR FFFFIVTIELIL

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