BioPharma Credit (BPCR) is poised to smash through the £1 billion mark after raising $305 million (£235 million), more than double its original target, in an oversubscribed share placing.
Last month the high-yielding debt fund, which specialises in loans to drugs companies, announced it was looking to raise a further $150 million. It subsequently lifted the target to $200 million but such was the strength of investor demand it closed the issue at $305 million with investors' applications for more shares scaled back.
Invesco Perpetual, the company's largest shareholder with a stake of nearly 17%, topped up its position but did not back the issue as strongly as it has done previously, buying nearly 10.2 million of the 297.5 million shares to be issued on Monday, an investment of $10.4 million (£8 million).
Much of this is likely to go to Invesco's flagship Income and High Income funds run by Mark Barnett, which hold nearly 14% of BPCR, according to Thomson Reuters data.
The new shares in the dollar-denominated fund, which invests mainly in the US, will be issued at $1.025, a 2.85% premium over their net asset value at the end of September.
Tihis will take the £860 million fund's market value to £1.1 billion, putting it on a par with GCP Infrastructure Investments (GCP) and just behind Sequoia Economic Infrastructure (SEQI) which recently lifted its capitalisation above £1.1 billion with a £250 million share issue.
BPCR's growth has been swift, reflecting the wider growth in income-producing debt funds and also its unique status as the UK's only listed pharma credit fund.
It lends money to drug companies with repayments secured on the cashflows from their products to underpin its quarterly dividends and 6% yield.
It was the biggest investment company launch of last year when it attracted $762 million in its initial public offer (IPO) in March 2017. It followed up with a $154 million ordinary share issue in December and a $164 million issue of 'C'-shares in April this year.
The use of ordinary shares in the latest funding round, rather than C-shares, where the money raised is initially invested in a separate pool of assets, raises the potential problem of 'cash drag' on returns if the money is not invested quickly.
However, the company deployed its C-share funds in five months and fund manager Pedro Gonzalez de Cosio said it had a strong pipeline of investments.
‘The global life sciences industry has significant funding needs and the company is pleased to offer innovative financing alternatives that help the sector grow whilst improving the lives of patients,’ de Cosio stated.
‘We are keen to continue to grow and diversify the portfolio, delivering consistent, robust shareholder returns primarily through uncorrelated recurring income distributions,’ he added.
Numis analyst Ewan Lovett-Turner was impressed. ‘We believe the investments to-date have the potential to deliver the fund’s target return of 8-9% per annum, with low correlation to equity and traditional bond markets. The fund’s unique mandate should appeal to a broad investor base.’