Company Announcements

BioPharma Credit PLC

7 November 2022

BIOPHARMA CREDIT PLC

(THE "COMPANY")

UPDATES TO THE DISCOUNT CONTROL MECHANISM

BioPharma Credit PLC (LSE: BPCR), the specialist life sciences debt investor, announces the following updates to its Discount Control Mechanism ("DCM") following consultation with certain shareholders.

Under the terms of the DCM, described in the Company's Prospectuses dated 1 March 2017 and 14 March 2018, if the shares of the Company trade at a discount greater than 5 per cent. over a three-month period (the "First Trigger"), the Company is required to apply up to 50 per cent. of proceeds from debt repayments in purchasing Company shares until such time that the two-week discount is less than 1 per cent. In addition, if the discount is greater than 10 per cent. over a six-month period (the "Second Trigger"), the Company is required to apply up to 100 per cent. of proceeds from debt repayments until such time that the two-week discount is less than 1 per cent.

While the Investment Manager and the Board firmly believe in the value of a discount control mechanism, they believe that purchasing shares at certain discounts, as opposed to making new investments, may not be in the best interest of shareholders:

·    There are significant friction costs involved in repurchasing and later re-issuing shares. In the Company's experience these expenses have averaged approximately 3 per cent. Therefore, purchasing shares at discounts lower than 3 per cent. would erode shareholder value.

·    While the near-term accretion from share repurchases may seem attractive, this ignores the opportunity cost of foregoing new investments with compelling return characteristics that would help the continued diversification of the portfolio.

·    Share repurchases take time. The Company has acquired ~35m shares since 15 September, approximately 35 per cent. of the shares traded in the market on the days the buyback was active at an average price per share of $0.939.

·    Holding back cash to fund future repurchases, as opposed to investing in new loans, has a significant opportunity cost (cash drag). Funding new investments using debt while holding significant cash is also not in the best interest of the Company.

As a result, the Investment Manager and the Board believe it is in the best interest of the Company to update the DCM so that the trigger levels remain at previous levels but provide for greater flexibility as to when the Company can freely deploy capital:

·    The First Trigger will remain at a 5 per cent. discount to NAV and the Company will be required to apply 50 per cent. of the principal being returned to repurchase shares until such time that the discount to NAV over a two-week period is less than 5 per cent. (compared with less than 1 per cent. previously).

·    The Second Trigger will remain at a 10 per cent discount to NAV and the Company will be required to apply 100 per cent. of the principal being returned to repurchase shares until such time that the discount to NAV over a two-week period is less than 5 per cent. (compared with less than 1 per cent. previously).

·    The Board will consider future changes to the DCM if it considers them to be in the best interest of the Company and the shareholders.

·    The Company intends to continue to purchase shares opportunistically with available capital even if the DCM triggers have not been reached.

·    There will be no changes to the requirement of the Investment Manager to use a portion of the proceeds earned as incentive compensation to purchase shares under certain share price scenarios.

Background

As of 1 September 2022, the three-month average NAV discount of the Company's shares exceeded 5 per cent. Following that date, the Company received $499 million in repayments so the Company would have been required to use up to $250 million to repurchase shares, until such time that the two-week discount became less than 1 per cent.  The Company has invested approximately $28 million buying back shares since the DCM was triggered, leaving approximately $222 million that would not have been available to be deployed in new investments until such time that the two-week discount is less than 1 per cent.

After adjusting for pre-existing commitments, the Company has approximately $264 million in capital available to deploy in share repurchases or new investments. If the Company were to hold back $222 million, it would either (a) be prevented from taking full advantage of near-term investment opportunities, and thereby limit continued diversification, or (b) have to borrow funds under the Company's existing credit facility to make investments and pay interest on such loans while having a significant cash balance. As a reference, the borrowing costs of the Company under the current agreement are SOFR + 2.75 per cent. or approximately 7.00 per cent. at current rates.

Please see below the complete DCM language as updated and as it appears in the two Prospectuses. Terms not otherwise defined below have the meaning given to them in the Company's prospectus dated 1 March 2017.

Revised DCM language

If, in any 3 month rolling period, the Shares have, on average, traded at a discount in excess of 5 per cent. to the Net Asset Value per Share (calculated by comparing the middle market quotation of the Shares at the end of each month in the relevant period to the prevailing published Net Asset Value per Share (exclusive of any dividend declared) as at such month end and averaging this comparative figure over the relevant period), the Company will, subject to meeting its Target Dividend, use 50 per cent. of the Company's capital proceeds generated after the conclusion of such 3 month rolling period, to repurchase Shares at least until such time as the Shares trade at an average discount of 5 per cent. or less to the Net Asset Value per Share over a 2 week rolling period.

If, in any 6 month rolling period, the Shares have, on average, traded at a discount in excess of 10 per cent. to the Net Asset Value per Share (calculated by comparing the middle market quotation of the Shares at the end of each month in the relevant period to the prevailing published Net Asset Value per Share (exclusive of any dividend declared) as at such month end and averaging this comparative figure over the relevant period), the Company will, subject to meeting its Target Dividend, use 100 per cent. of the Company's capital proceeds generated after the conclusion of such 6 month rolling period, to repurchase Shares at least until such time as the Shares trade at an average discount of 5 per cent. or less to the Net Asset Value per Share over a 2 week rolling period.

Previous DCM language

If, in any 3 month rolling period, the Shares have, on average, traded at a discount in excess of 5 per cent. to the Net Asset Value per Share (calculated by comparing the middle market quotation of the Shares at the end of each month in the relevant period to the prevailing published Net Asset Value per Share (exclusive of any dividend declared) as at such month end and averaging this comparative figure over the relevant period), the Company will, subject to meeting its Target Dividend, use 50 per cent. of the Company's capital and income proceeds generated after the conclusion of such 3 month rolling period, to repurchase Shares at least until such time as the Shares trade at an average discount of 1 per cent. or less to the Net Asset Value per Share over a 2 week rolling period.

If, in any 6 month rolling period, the Shares have, on average, traded at a discount in excess of 10 per cent. to the Net Asset Value per Share (calculated by comparing the middle market quotation of the Shares at the end of each month in the relevant period to the prevailing published Net Asset Value per Share (exclusive of any dividend declared) as at such month end and averaging this comparative figure over the relevant period), the Company will, subject to meeting its Target Dividend, use 100 per cent. of the Company's capital and income proceeds generated after the conclusion of such 6 month rolling period, to repurchase Shares at least until such time as the Shares trade at an average discount of 1 per cent. or less to the Net Asset Value per Share over a 2 week rolling period.

Enquiries

Buchanan

David Rydell / Mark Court / Jamie Hooper / Henry Wilson

+44 (0) 20 7466 5000

biopharmacredit@buchanan.uk.com

Notes to Editors

BioPharma Credit PLC is London's only specialist debt investor to the life sciences industry and joined the LSE in March 2017. The Company seeks to provide long-term shareholder returns, principally in the form of sustainable income distributions from exposure to the life sciences industry. The Company seeks to achieve this objective primarily through investments in debt assets secured by royalties or other cash flows derived from the sales of approved life sciences products.

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