This has been a strange year putting it mildly. For life sciences debt investment trust, Biopharma Credit, it received a blow earlier this year when Invesco adjusted its portfolio of investee companies following Mark Burnett’s departure and sold out of the firm.
However, for Pedro Gonzalez de Cosio, (pictured) chief executive of BioPharma Credit's investment manager, there’s still quite a bit to cheer about the company’s first half results to 30 June.
Looking at some of the headline figures, the NAV per share was down slightly compared to the beginning of the reporting period, 31 December 2019 but not by much.
Mr Gonzalez de Cosio told Fundeye that he was buoyed by the company’s ability to cover the dividend which due to a slight decrease in share price means the company trades on a dividend yield of over 7 percent, not bad going in today’s market.
He added that one difference between his fund, which uses patents of drugs as collateral for loans issued, is that it will only do so when the drug has received full FDA approval. This may seem obvious as a patent for a drug not allowed to be sold would not be worth much but the company will get involved with firms before they have received approval.
“It takes time for us to build relationships. After a company has decided not to use convertible bonds, there are still other competitors. They typically have a higher cost of capital than we do. So we tend to have the most competitive cost of capital. It also doesn't hurt to have a relationship and build some trust with the customer,” Mr Gonzalez de Cosio explains.
While this time last year, all the funds were tied up with existing loans, the company has some $300 million available to invest in the right companies. Although a discount to NAV exceeding 5 percent triggered a share buy back during the reporting period, there are some trusts on the market that would clearly love to be in single figure discount territory. This company has a specialism that should see it perform well as it is not as correlated to broader equity markets, evident during this year’s market meltdown and employs stringent due diligence on the loans it grants
