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Currency in USD
Last close As at 28/03/2023
USD0.95
— 0.00 (0.00%)
Market capitalisation
USD1,258m
Research: Investment Companies
On 24 March 2021, BioPharma Credit (BPCR) announced that it has entered into a US$150m senior secured loan agreement alongside BioPharma Fund V (which provided a further US$150m) with LumiraDx – a next-generation, point-of-care diagnostic company. LumiraDx manufactures rapid diagnostics equipment, including antibody and antigen tests to detect SARS-CoV-2 infections, used by the UK National Health Service, the CVS Pharmacy chain in the US and widely deployed in Africa in cooperation with the Bill & Melinda Gates Foundation. The transaction assists BPCR in achieving full dividend cover this year.
BioPharma Credit |
Debt investment in a COVID-19 test provider |
Investment trusts |
1 April 2021 |
Analysts
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On 24 March 2021, BioPharma Credit (BPCR) announced that it has entered into a US$150m senior secured loan agreement alongside BioPharma Fund V (which provided a further US$150m) with LumiraDx – a next-generation, point-of-care diagnostic company. LumiraDx manufactures rapid diagnostics equipment, including antibody and antigen tests to detect SARS-CoV-2 infections, used by the UK National Health Service, the CVS Pharmacy chain in the US and widely deployed in Africa in cooperation with the Bill & Melinda Gates Foundation. The transaction assists BPCR in achieving full dividend cover this year.
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Steady deployment of prepayment proceeds |
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Source: BioPharma Credit. Note: *Pro-forma at end-February 2021 post LumiraDx deal. |
Expected IRR close to portfolio average
The LumiraDx loan offers a yield to maturity of c 10%, which is broadly in line with BPCR’s historical deals (weighted average projected internal rate of return (IRR) of 10.8% at the time of investment), as the somewhat lower coupon rate (fixed at 8.0% vs c 9% weighted average for BPCR’s portfolio) is offset by higher funding and exit fees, at 2.5% and 1.5%, respectively. The IRR will be higher if LumiraDx repays the loan prior to its maturity in March 2024 (we note that US$425m of BPCR loans were prepaid in 2020) with the loan being subject to a two-year make-whole arrangement. BPCR also received warrants that currently have no value attached in BPCR’s net asset value (NAV) and are a potential NAV kicker on LumiraDx’s IPO (its planned Nasdaq listing, through which it aims to raise US$100m, is currently in progress). No detailed terms of the warrants were disclosed though.
Dividend and ongoing charge covered
The transaction reduces BPCR’s cash drag, with its net cash currently at c 7% of NAV based on our calculations. BPCR’s investment manager has indicated that this transaction goes a long way to covering the US$0.07 annualised dividend (implying a c 7.2% yield) and while this is still contingent on future prepayments and new transactions, we believe that BPCR still has time to generate additional income in 2021 to facilitate full dividend cover.
Deal rationale
LumiraDx developed and markets the LumiraDx Platform – a portable device with replaceable tests providing results within minutes from samples with lab test accuracy. It currently markets four tests used with its device, with a total addressable market of c US$20bn in FY21 (according to company estimates):
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LumiraDx SARS-CoV-2 Ab Test – for qualitative detection of SARS-CoV-2 antibodies,
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LumiraDx SARS-CoV-2 Ag Test – for detection of infection with SARS-CoV-2,
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LumiraDx INR Test – measuring the prothrombin time, used for monitoring patients on oral anticoagulation therapy with Vitamin-K Antagonist drugs, and
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LumiraDx D-Dimer Test – used to quantify D-Dimer levels – an aid in the assessment and diagnosis of patients with suspected venous thromboembolism such as deep vein thrombosis and pulmonary embolism.
All the tests are cleared for sale in the European market, while the LumiraDx SARS-CoV-2 Ag Test is also authorised in the US (and is, for example, sold to the CVS Pharmacy chain) under the Emergency Use Authorization. Requests for clearance of the other three tests in the US are to be filed in 2021 (with LumiraDx SARS-CoV-2 Ab Test already pending approval). LumiraDx reported last 12 month revenues as at end-June 2020 of c US$25m, which only includes the sale of INR and D-Dimer tests, as both SARS-CoV-2 tests were cleared for sale in Europe in H220 and should act as a significant revenue driver going forward. As at end-December 2020, the company had placed more than 7,000 devices with over 500 customers across more than 25 countries.
Furthermore, LumiraDx also has a rich pipeline of 30 tests under development to be used with the device. In 2021, the company expects to submit six of them for regulatory certifications in the areas of infectious diseases (including flu), diabetes and cardiovascular diseases. In addition to the LumiraDx platform, the company is developing its Amira System (expected submission in 2021 as well), which is currently in the feasibility phase. The system is a high-volume, lower-cost SARS-CoV-2 mass population screening solution for potential use in home COVID-19 testing.
The company was launched in 2014 by Ron Zwanziger, Dave Scott and Jerry McAleer. The founders have extensive experience in the med-tech business, including founding Alere in 1991 (then SelfCare), a global manufacturer of rapid point-of-care diagnostic tests, which was acquired by Abbott Laboratories in 2017 for US$5.3bn. The company is supported by institutional investors, including the Bill & Melinda Gates Foundation, Morningside Ventures and U.S. Boston Capital Corporation.
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Research: Healthcare
The year 2020 was transformational for Acacia Pharma, with the US approval of its two lead assets, BARHEMSYS (amisulpride injection) for the treatment and prevention of post-operative nausea and vomiting (PONV) and BYFAVO (remimazolam), an IV sedative for use during invasive medical procedures. Both assets have now been launched, BARHEMSYS in August 2020 and BYFAVO in January 2021. By marketing two products through a small but experienced salesforce, Acacia should realise significant operational synergies. Launches are in the early phase, with the focus on gaining wide formulary access in FY21; this should translate to significant revenue generation from FY22 onwards and maiden operating profit from FY23. Our updated valuation of Acacia Pharma is €1,278m.
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