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Oh dear, why is everyone leaving Woodford’s Immunocore? Has the “unicorn hunter” struck again?

By Cynical Bear | Wednesday 18 July 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

I’ve touched on Immunocore a few times in passing as it one of the largest holdings in Woodford Patient Capital Trust (WPCT) as well as being the largest investment made by Dublin-listed Malin Corporation, of which Woodford is the largest shareholder, obvs! Well, it looks like it’s not a particularly happy ship and I wonder whether a (further) devaluation is required?

Immunocore was the darling of the European biotech scene when it raised the largest round ever seen in Europe of $320 million in July 2015. Woodford and Malin between them put in over half of that amount. Last September there was talk of a further funding round in the hundreds of millions and the Gates Foundation started the ball rolling with an investment of $40 million; however, there has been a deafening silence ever since.

Things started to look a bit shaky when the CEO stepped down abruptly earlier this year in February and Andrew Hotchkiss stepped up to a dual CEO / Chief Commercial Officer role. It also appears that the Chief Business Officer, Eva Lotta-Allan, stepped down in May but things have really accelerated this month.

A week ago, it was announced that the Chief Medical Officer, Dr Christina Coughlin, had decided to leave and move to Trinity Therapeutics, which is always a bullish sign – just ask Prothena shareholders - and on Monday this week, Vectura Group (VEC) announced that Immunocore’s CFO, Paul Fry, would be joining them in October. I presume he has to finish the Immunocore accounts first which are due out at any time. At this rate, Andrew Hotchkiss is going to have to add a few more roles to his job spec!

So, delays in funding, limited newsflow, and lots of senior executives leaving – doesn’t sound great to me. This could also be one of the reasons why Malin Corporation is having such a tough recent time as its share price is currently at €5.75, down from its recent placing price of €8.80 and it has just had a massive board shake-up too. Considering Immunocore made up over 20% of Malin’s NAV as its last results, one would think it might have an impact.

The good news though is that Immuncore hasn’t spent all the money yet. I estimate that it still has close to £100 million in the bank at the moment that should last until late 2019; however, the position will be clearer once the 2017 accounts are published. Nevertheless, it will want to sort out its funding soon and with the Woodford funds up against their unquoted limits and Malin having limited funds, I’m not sure who’s going to pony up a couple of hundred million.

When WPCT issued its end of year results in April, it came up with the following ridiculous operational highlight:

“UNICORN HUNTERS: The Company is invested in four companies valued at more than $1 billion – Purplebricks, Oxford Nanopore, Benevolent AI and Immunocore.”

The point I made at the time was that WPCT used to have many more unicorns in the portfolio, Prothena and Theravance Biopharma to mention two very recent ones. I like to imagine that Neil Woodford is literally hunting them down, investing in them and then shooting them dead from point-blank range.

I also made the point that the valuation of Immunocore at year-end was stated to be based on the price of a future round (that hasn’t happened) which sounded nonsensical. Despite the Chairman, Susan Searle, insisting in the results that the unquoted stock valuation process was robust, it appears to have coincidentally reconsidered the Immunocore valuation as I note that its valuation has dropped a bit between the April and May portfolio listings, dropping by over 10%. For the record, that would be the sixth change in valuation of Immunocore since the last funding round, three up and three down – certainly seems like a robust valuation approach, Susan!

The way things are going, I would have thought that a further cut in valuation might be the prudent course of action from here. On the bright side though, it looks like this could be another kill for the “unicorn hunter” – congrats Neil.

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