BioPharma Credit (BPCR), the £1bn high-yielding lender to US drugs companies, is confident of redeploying its large cash pile as a recovery in mergers and acquisitions in the pharmaceutical sector provides new investment opportunities.

Collegium Pharmaceutical’s repayment of a $261.4m loan in December, having achieved its first syndicated credit facility with mainstream banks on lower interest rates, lifted BPCR’s cash pile to $422.3m at the end of the year, equal to 36.5% of net assets.

Chair Harry Hyman said the company was looking forward to reinvest the money in its loan pipeline and broaden the list of 11 borrowers. With interest rates set to remain higher for longer in response to the inflationary impact of higher oil prices resulting from the US war with Iran, Hyman said the portfolio was well positioned to deliver attractive returns.

Last year BPCR made $129.9m of revenue to increase net income per share to 11.4 cents from 9.99c in 2024. This was more than enough to cover total dividends of 9.95c per share, which comprised 8.5c in quarterly payments (ahead of a minimum target of 7c) and 1.45c in the latest of its regular “special” dividends declared last month.

At a current share price of 92c, up from 88.4c at the end of 2024, BPCR offers an historic yield of 10.9%, well above the 7.5% that is often published but which does not reflect the special dividend. It was short-listed in QuotedData’s annual “Investors’ Choice” awards last year.

Net asset value rose by 2.29c to 102c per share, which has since slipped to 100.5c putting the shares on an 8.5% discount. The gap to NAV triggered buybacks of 4.1% of its shares during the year at a cost of $50.3m.

Annual results show the company committed $251.3m to new investments and $50m to an existing borrower last year. Repayments, including Collegium, leaped to $616.6m from $463.1m.

Pharmakon fund manager Pedro Gonzalez de Cosio has been busy since the year-end making $200m of new loan commitments to UroGen, Zenas BioPharma and Paratek. 

Our view

James Carthew, head of investment company research at QuotedData, said: “BioPharma Credit continues to deliver for its shareholders. Once again, the regular dividend has been topped up by a special dividend, which takes the yield to about 10%. The discount has come in, helped by buybacks, and the manager is busy deploying cash into new investments.”

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