Neil Woodford. Woodford Investment Management via YouTube

Wood­ford braces po­lit­i­cal storm as UK fi­nan­cial reg­u­la­tors scru­ti­nize fund sus­pen­sion

The shock of Neil Wood­ford’s de­ci­sion to block with­drawals for his flag­ship fund is still rip­pling through the rest of his port­fo­lio — and be­yond. Un­der po­lit­i­cal pres­sure, UK fi­nan­cial reg­u­la­tors are now tak­ing a hard look while in­vestors con­tin­ue to flee.

In a re­sponse let­ter to an MP, the Fi­nan­cial Con­duct Au­thor­i­ty re­vealed that it’s opened an in­ves­ti­ga­tion in­to the sus­pen­sion fol­low­ing months of en­gage­ment with Link Fund So­lu­tions, which tech­ni­cal­ly del­e­gat­ed Wood­ford’s firm to man­age its funds.

Ear­li­er this month, in­vestors were abrupt­ly no­ti­fied that they would not be al­lowed to re­deem, sell, trans­fer or can­cel their shares in the Wood­ford Eq­ui­ty In­come Fund for at least 28 days. At that point, as­sets added up to £3.7 bil­lion — down from £10.2 bil­lion just two years ago due large­ly to an ex­o­dus of in­vestors dis­ap­point­ed with the fund’s per­for­mance.

An­drew Bai­ley, FCA chief ex­ec­u­tive, shed some light on the fi­nal straw that forced Wood­ford’s hand:

Dur­ing May 2019, net out­flows (mean­ing re­demp­tions were larg­er than sub­scrip­tions) av­er­aged one per cent of [net as­set val­ue] per week. How­ev­er, the re­demp­tion re­quests on 31st May and the 3rd June amount­ed to £296m, rep­re­sent­ing 8.2% of NAV, with the fund hold­ing no cash at the time, hav­ing pre­vi­ous­ly drawn down some of an over­draft fa­cil­i­ty. Funds are per­mit­ted to have ac­cess to over­draft fa­cil­i­ties, to pro­vide liq­uid­i­ty where nec­es­sary, but the val­ue of the over­draft is re­strict­ed rel­a­tive to the size of the fund. The re­demp­tions on 31st May and 3rd June were very high and co­in­cid­ed with the re­pay­ment of the over­draft.

Wood­ford’s whole busi­ness is reel­ing. As much as the fund man­ag­er tried to stress that the sus­pen­sion was lim­it­ed to the Eq­ui­ty Fund, in­vestors have pulled out of the Fo­cus Fund (which is still open) and sent shares of the FTSE 250-list­ed Pa­tient Cap­i­tal Trust down more than 30%. Among the dis­en­chant­ed was Har­g­reaves Lans­down — which has in the past sold and pro­mot­ed the Wood­ford funds via its re­tail in­vest­ment plat­form — pulling its en­tire po­si­tion of £45 mil­lion from the Fo­cus Fund.

On Tues­day Fi­deli­ty, an­oth­er house­hold name in per­son­al in­vest­ment, said it’s al­so ban­ning clients from putting new mon­ey in­to the Fo­cus Fund.

Wood­ford has made a slew of biotech in­vest­ments, many of which have soured. They ranged from Cir­cas­sia and Alk­er­mes, both hit by set­backs in 2016, to on­go­ing trou­bles at now-pen­ny stock biotech North­west Bio­ther­a­peu­tics. More re­cent­ly, Prothena owned up to ut­ter fail­ure in two late-stage tests of its lead drug, which was ul­ti­mate­ly rel­e­gat­ed to the scrap heap.

Cen­tral to the sus­pen­sion de­ba­cle was the pro­por­tion of illiq­uid and/or un­list­ed as­sets in the Eq­ui­ty Fund port­fo­lio, which made it hard­er to re­trieve cus­tomers’ in­vest­ments on de­mand. Bai­ley sug­gest­ed that un­list­ed se­cu­ri­ties made up around 20% of the Eq­ui­ty Fund in Feb­ru­ary — al­most dou­ble the re­quired lev­el — hav­ing breached that lim­it twice in 2018.

Mean­while, Wood­ford has at­tract­ed the ire of Nicky Mor­gan, chair of the Par­lia­men­tary trea­sury com­mit­tee, for still pock­et­ing as much as £100,000 in to­tal man­age­ment fees from in­vestors who were es­sen­tial­ly trapped. Mor­gan has since is­sued in­quiries to the FCA and Har­g­reaves Lans­down on their knowl­edge of the mat­ter.

Bai­ley and Charles Ran­dell, chair­man of the FCA, are set to give ev­i­dence at a trea­sury com­mit­tee meet­ing next week.

In a state­ment pro­vid­ed to the Fi­nan­cial Times, Wood­ford In­vest­ment Man­age­ment said they’re co­op­er­at­ing with the in­ves­ti­ga­tion and in­sists the brief spikes in per­cent­age of un­list­ed stock hold­ings did not con­sti­tute breach­es.

“Wood­ford al­ways pro­vid­ed month-end da­ta for in­vestors and at no time was there a month-end pas­sive breach,” they said. “The FCA ref­er­ence to breach­es in Feb­ru­ary and March 2018 re­lates to two in­ad­ver­tent in­tra-month pas­sive breach­es, both re­solved be­fore month-end.”

Vlad Coric (Biohaven)

In an­oth­er dis­ap­point­ment for in­vestors, FDA slaps down Bio­haven’s re­vised ver­sion of an old ALS drug

Biohaven is at risk of making a habit of disappointing its investors. 

Late Friday the biotech $BHVN reported that the FDA had rejected its application for riluzole, an old drug that they had made over into a sublingual formulation that dissolves under the tongue. According to Biohaven, the FDA had a problem with the active ingredient used in a bioequivalence study back in 2017, which they got from the Canadian drugmaker Apotex.

Francesco De Rubertis

Medicxi is rolling out its biggest fund ever to back Eu­rope's top 'sci­en­tists with strange ideas'

Francesco De Rubertis built Medicxi to be the kind of biotech venture player he would have liked to have known back when he was a full time scientist.

“When I was a scientist 20 years ago I would have loved Medicxi,’ the co-founder tells me. It’s the kind of place run by and for investigators, what the Medicxi partner calls “scientists with strange ideas — a platform for the drug hunter and scientific entrepreneur. That’s what I wanted when I was a scientist.”

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Af­ter a decade, Vi­iV CSO John Pot­tage says it's time to step down — and he's hand­ing the job to long­time col­league Kim Smith

ViiV Healthcare has always been something unique in the global drug industry.

Owned by GlaxoSmithKline and Pfizer — with GSK in the lead as majority owner — it was created 10 years ago in a time of deep turmoil for the field as something independent of the pharma giants, but with access to lots of infrastructural support on demand. While R&D at the mother ship inside GSK was souring, a razor-focused ViiV provided a rare bright spot, challenging Gilead on a lucrative front in delivering new combinations that require fewer therapies with a more easily tolerated regimen.

They kept a massive number of people alive who would otherwise have been facing a death sentence. And they made money.

And throughout, John Pottage has been the chief scientific and chief medical officer.

Until now.

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Chas­ing Roche's ag­ing block­buster fran­chise, Am­gen/Al­ler­gan roll out Avastin, Her­ceptin knock­offs at dis­count

Let the long battle for biosimilars in the cancer space begin.

Amgen has launched its Avastin and Herceptin copycats — licensed from the predecessors of Allergan — almost two years after the FDA had stamped its approval on Mvasi (bevacizumab-awwb) and three months after the Kanjinti OK (trastuzumab-anns). While the biotech had been fielding biosimilars in Europe, this marks their first foray in the US — and the first oncology biosimilars in the country.

Seer adds ex-FDA chief Mark Mc­Clel­lan to the board; Her­cules Cap­i­tal makes it of­fi­cial for new CEO Scott Bluestein

→ On the same day it announced a $17.5 million Series C, life sciences and health data company Seer unveiled that it had lured former FDA commissioner and ex-CMS administrator Mark McClellan on to its board. “Mark’s deep understanding of the health care ecosystem and visionary insights on policy reform will be crucial in informing our thinking as we work to bring our liquid biopsy and life sciences products to market,” said Seer chief and founder Omid Farokhzad in a statement.

Daniel O'Day

No­var­tis hands off 3 pre­clin­i­cal pro­grams to the an­tivi­ral R&D mas­ters at Gilead

Gilead CEO Daniel O’Day’s new task hunting up a CSO for the company isn’t stopping the industry’s dominant antiviral player from doing pipeline deals.

The big biotech today snapped up 3 preclinical antiviral programs from pharma giant Novartis, with drugs promising to treat human rhinovirus, influenza and herpes viruses. We don’t know what the upfront is, but the back end has $291 million in milestones baked in.

Vas Narasimhan, AP Images

On a hot streak, No­var­tis ex­ecs run the odds on their two most im­por­tant PhI­II read­outs. Which is 0.01% more like­ly to suc­ceed?

Novartis CEO Vas Narasimhan is living in the sweet spot right now.

The numbers are running a bit better than expected, the pipeline — which he assembled as development chief — is performing and the stock popped more than 4% on Thursday as the executive team ran through their assessment of Q2 performance.

Year-to-date the stock is up 28%, so the investors will be beaming. Anyone looking for chinks in their armor — and there are plenty giving it a shot — right now focus on payer acceptance of their $2.1 million gene therapy Zolgensma, where it’s early days. And CAR-T continues to underperform, but Novartis doesn’t appear to be suffering from it.

So what could go wrong?

Actually, not much. But Tim Anderson at Wolfe pressed Narasimhan and his development chief John Tsai to pick which of two looming Phase III readouts with blockbuster implication had the better odds of success.

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H1 analy­sis: The high-stakes ta­ble in the biotech deals casi­no is pay­ing out some record-set­ting win­nings

For years the big trend among dealmakers at the major players has been centered on ratcheting down upfront payments in favor of bigger milestones. Better known as biobucks for some. But with the top 15 companies competing for the kind of “transformative” pacts that can whip up some excitement on Wall Street, with some big biotechs like Regeneron now weighing in as well, cash is king at the high stakes table.

We asked Chris Dokomajilar, the head of DealForma, to crunch the numbers for us, looking over the top 20 deals for the past decade and breaking it all down into the top alliances already created in 2019. Gilead has clearly tipped the scales in terms of the coin of the bio-realm, with its record-setting $5 billion upfront to tie up to Galapagos’ entire pipeline.

Dokomajilar notes:

We’re going to need a ‘three comma club’ for the deals with over $1 billion in total upfront cash and equity. The $100 million-plus club is getting crowded at 164 deals in the last decade with new deals being added towards the top of the chart. 2019 already has 14 deals with at least $100 million in upfront cash and equity for a total year-to-date of over $9 billion. That beats last year’s $8 billion and sets a record.

Add upfronts and equity payments and you get $11.5 billion for the year, just shy of last year’s record-setting $11.8 billion.

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Part club, part guide, part land­lord: Arie Bellde­grun is blue­print­ing a string of be­spoke biotech com­plex­es in glob­al boom­towns — start­ing with Boston

The biotech industry is getting a landlord, unlike anything it’s ever known before.

Inspired by his recent experiences scrounging for space in Boston and the Bay Area, master biotech builder, investor, and global dealmaker Arie Belldegrun has organized a new venture to build a new, 250,000 square foot biopharma building in Boston’s Seaport district — home to Vertex and a number of up-and-coming biotech players.

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