Shares in the Woodford Patient Capital (WPCT) investment trust have surged after top holding Prothena (PRTA.O) announced a tie-up with biotech giant Celgene (CELG.O) in a deal that could be worth as much as $2.2 billion (£1.6 billion).
Shares in the trust jumped 7.4% to 78.2p after Prothena, which accounts for 9.8% of the portfolio, announced it would collaborate with Celgene to develop treatments for neurodegenerative diseases.
Shares in US-listed Prothena, also the seventh largest holding in Woodford's flagship Woodford Equity Income fund, surged 23% in aftermarket trading. Prothena is a 1.9% position in the Woodford Incoms Focus fund.
Prothena will receive a $100 million upfront payment from Celgene and a $50 million equity investment from the biotech group, as well as the rights to royalties on the sales of any products that result.
Total payments to the company as part of the tie-up, focused on three proteins, could amount to $2.2 billion.
For each of the three drugs in development, Celgene would have to pay $80 million if it exercised US rights, $55 million for global rights, and up to $562.5 million as the drugs hit regulatory and commercial milestones.
A spokesman for Woodford Investment Management said: 'The deal makes perfect sense for Prothena and allows its research and development engine to be funded by one of the leading US biotech companies.'
Shares in Prothena have been a drag on performance of both the Woodford Patient Capital trust and Woodford Equity Income fund, after the stock came under attack from short-sellers Kerrisdale Capital.
The shares suffered a further sell-off after a delay to a trial of its flagship drug, a potential therapy for AL Amyloidosis in November last year. Even with today's surge, the shares have lost nearly half their value over the last six months.
But Woodford has stuck by the stock, saying the market's reaction to the delay was misguided and that he was 'encouraged' by progress on the drug.
Woodford has been enduring one of the most challenging periods of his fund management career, with his flagship Woodford Equity Income fund languishing at the bottom of the UK Equity Income sector over one year, hurt by heavy share price falls of top holdings like Provident Financial (PFG) and Capita (CPI).
His Woodford Patient Capital trust has also struggled, and even with today's jump the shares remain well below their 100p price at flotation in April 2015.
The trust also received a boost yesterday from its second largest holding, unquoted Oxford Nanopore, which represents 9.5% of the portfolio.
The handheld DNA test maker's £100 million fundraising took its valuation to £1.5 billion, up from £1.25 billion at its last financing round in 2016.
Oxford Nanopore is also a 1.4% holding in the Woodford Equity Income fund, which has also benefited from the news through its top 10 holding in IP Group (IPO), which owns 18.3% of Oxford Nanopore. Shares in IP Group are up 10% over the last two days.
Another Woodford stock, Softcat (SCTS) is down 12% today, however, as the IT infrastructure company, whose shares had nearly doubled over the last 12 months, succumbed to profit-taking after half-year results. Softcat accounts for 2.2% of the Woodford Income Focus fund.