Woodford's Fund Freeze Sends Chill Through U.K. Biotechs
Woodford's Fund Freeze Sends Chill Through U.K. Biotechs
(Bloomberg) -- The U.K. biotech industry is feeling the pain as one of its biggest backers, money manager Neil Woodford, grapples with an investor exodus that prompted him to freeze redemptions from his flagship fund.
Woodford, 59, has been one of the most prolific investors in budding U.K. biotech, life-science and health-technology firms. After an 18% drop in the LF Woodford Equity Income Fund over the last year, which led to his decision to stem withdrawals, he may have to sell stakes in some of his biotech holdings.
A former portfolio manager at Invesco, Woodford set out on his own in 2014. He’s widely known for his 2017 “Glaxit” proclamation, when he exited a large position in GlaxoSmithKline Plc, saying the drugmaker should break up.
Health-care investment can be unpredictable, requiring big bets on new technologies -- a handful of which can yield marketable products, while many others go down in flames. Woodford played a key role by making late-stage investments in companies preparing to sell shares to the public, facilitating stock listings when support from institutional investors was lacking.
“He invested in everything, in all the companies at different stages, but the later stages is where that gap will be felt more,” said Brigitte de Lima, a biotech analyst with Goetzpartners in London.
Woodford’s investments in unlisted stocks, including biotech companies, have been a big part of his current pain. The equity income fund is allowed to have no more than 10% of its holdings in unlisted stocks. As more investors pull money, the private portion gets closer to that threshold. The unlisted securities are harder to sell, which could make it more difficult for him to meet redemption demands.
A spokesman for Woodford didn’t immediately respond to a request for comment.
While private companies have other sources of backing -- including investors from China who have surged into the U.K. -- small public companies need long-term shareholders with the patience to sit through development cycles, said Daniel Mahony, a fund manager at Polar Capital in London. Such backers are getting harder to find in Britain, he said.
“It’s not cataclysmic, but it means London is a bit of a backwater when it comes to life sciences,” he said.
Woodford has acted almost like a venture capitalist with his commitment to promising privately held companies, which instilled confidence when he jumped aboard as an investor, said Nooman Haque, managing director of life sciences and health care at Silicon Valley Bank’s U.K. unit. Now his struggles could have a ripple effect.
“This has a psychological impact because for so long he has been seen as a stalwart who really sold this idea of patient capital and getting away from the short term,” said Haque, who has invested personally with the U.K. money manager. “One of the key issues is what it means for other potential funds that were pursuing similar strategies.”
Here are a few of Woodford’s health-care bets:
Autolus Therapeutics
Autolus Therapeutics Plc, which was spun out from University College London in 2014 and listed on Nasdaq four years later, is developing next-generation cancer therapies that harness a patient’s immune system to fight tumors. After a big surge last year, the shares have lost almost half their value since the start of the year. Woodford began investing in the company in 2016, and Autolus was among the equity income fund’s top 10 holdings at the end of April, according to his website.
Oxford Nanopore
Spun out of the University of Oxford in 2005, Oxford Nanopore Technologies Ltd. is one of a number of companies competing in the growing field of DNA sequencing equipment that allows scientists to decode the genes that determine how cells and tissue are made. Doctors and researchers use the information to diagnose disease and design treatments for conditions including cancer. The private company was valued at 1.5 billion pounds ($1.9 billion) in March 2018, according to Woodford’s website.
Benevolent AI
Pharma companies are increasingly turning to artificial intelligence and machine learning to speed the costly process of discovering and developing new drugs. Benevolent AI Ltd., based in London, is using the approach to discover treatments for brain cancers, Parkinson’s disease and other disorders, and just entered a collaboration with AstraZeneca Plc to research treatments for lung and kidney illnesses. The company was valued at just over $2 billion last year when it completed a financing round with investors including Woodford, who first invested in 2014, according to his website.
Sensyne Health
Founded by former science minister Paul Drayson, Sensyne Health Plc is engaged in an effort to allow the U.K.’s National Health Service to profit from one of its most important resources: patient data. The company contracts with NHS trusts to collect data from their patients’ health records and make them available to companies researching diseases and potential treatments. The shares have declined almost 20% since their August offering, and Woodford’s firm is the biggest holder with about 20%, according to data compiled by Bloomberg.
To contact the reporters on this story: James Paton in London at jpaton4@bloomberg.net;William Mathis in London at wmathis2@bloomberg.net
To contact the editors responsible for this story: Eric Pfanner at epfanner1@bloomberg.net, John Lauerman, John J. Edwards III
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