BPCR Biopharma Credit Plc

27 March 2024

BIOPHARMA CREDIT PLC

("BPCR" or "the Company")

FINAL RESULTS FOR THE YEAR ENDED 31 DECEMBER 2023

BioPharma Credit PLC (LSE: BPCR), the specialist life sciences debt investor, is pleased to present its Final Results for the period ended 31 December 2023.

The full Annual Report and Financial Statements can be accessed via the Company's website at www.bpcruk.com or by contacting the Company Secretary by telephone on 01392 477500.

INVESTMENT HIGHLIGHTS

·    Over the course of 2023, the Company and its subsidiaries invested a total of $270.0 million into new and existing investments:

o  $120.0 million senior secured loan agreement with BioCryst.

o  $62.5 million senior secured loan agreement with Reata.

o  $37.5 million senior secured loan agreement with ImmunoGen.

o  The remaining $50 million invested during period was split equally between two existing investments:

§ $25.0 million for Evolus.

§ $25.0 million for LumiraDx.

·    Additionally, the Company has unfunded commitments for Immunocore and BioCryst of $25.0 million and $60.0 million respectively that may be funded over the next six months.

·    The year saw an increase in cash flow of $179.6 million, attributed to:

o  The prepayment of $62.5 million from Reata on 29 September 2023, accompanied by prepayment and make-whole fees as of the closing of the Reata acquisition that totalled a further $15.5 million.

o  Scheduled amortisation payments were received from:

§ the Collegium 2022 loan of $81.2 million.

§ the Akebia loan of $16.0 million.

§ the BMS purchased payments of $19.9 million.

·    On 29 December LumiraDx and Roche Diagnostics Limited announced that Roche Diagnostics would acquire select parts of LumiraDx for a purchase price of $295.0 million. The LumiraDx investment was written down as of 31 December 2023 to reflect the expected recoverable net proceeds discounted at a 21.7 per cent rate to account for remaining risks.

·    In December, the Company's investment in ImmunoGen was marked up by $10.7 million as of 31 December 2023 to account for the discounted value of expected prepayments and make-whole fees following the announcement of AbbVie's definitive agreement to acquire ImmunoGen.

·    The investment manager continues to develop a pipeline of additional potential investments to further diversify the portfolio that may be capitalised upon following adjustments to the Company's Discount Control Mechanism ("DCM") announced this morning following consultation with shareholders on their preferences for capital allocation.

FINANCIAL HIGHLIGHTS

·    Net income return on ordinary activities for the year (after finance costs and before taxation) of $108.4 million.

·    A 1.5% increase in NAV per ordinary share, from 101.39 cents to 102.93 cents.

·    Ordinary shares closed at 84.0 cents at year end, an 11.6% decrease from 95.0 cents from 31 December 2022.

·    Including assets and liabilities from its financing subsidiary, BPCR Limited Partnership, the Company ended the year with total net assets of $1,340.9 million, comprising $1,102.1 million of investments and $260.8 million of cash less $22.0 million of other net liabilities.

·    The Company has maintained a record of paying a dividend of at least 1.75 cents per share every quarter since that quarter ending 30 June 2018. Three dividends paid during the year totalled 7.25 cents per share, with a fourth dividend paid after the year end of 2.96 cents per share comprising a 1.75 cent ordinary dividend and a special dividend of 1.21 cents per share. Total dividends from 2023 results therefore equated to 10.21 cents per share.

·    The Company repurchased a total of 16,499,477 ordinary shares at an average price of $0.92 per share and a total cost of $15.3 million from 9 January 2023 to 11 July 2023. Further purchases were not possible as the Company was in a closed period from 12 July 2023 until 29 December 2023 due to information received on the LumiraDx investment.

POST PERIOD END HIGHLIGHTS

·    Following the completion of AbbVie's acquisition of ImmunoGen, the loan balance of $37.5 million was repaid to the Company in February, this was accompanied by prepayment and make-whole fees totalling a further $13.1 million.

·    As per the Company's DCM policy, which states that if the Company's shares trade at a discount to NAV of greater than 10% over a six-month period, 100% of the proceeds received from debt repayments must be used to repurchase the Company's shares. This must continue until the discount to NAV at which the Company's shares trade over a two-week period is less than 5%.

·    From 1 January 2024 to 26 February 2024, in accordance with the Company's DCM the Company executed significant buyback activity, with 49,041,347 shares repurchased at an average price of $0.93 per share, amounting to $45.9 million.

·    As announced this morning, the Company has amended its DCM policy to provide for greater flexibility as to when the Company can freely deploy capital.

·    Following the end of the year, the Company declared a further dividend in respect of the last quarter of 2023 of 2.96 cents per share, made up of an ordinary dividend of 1.75 cents per share in combination with a special dividend of 1.21 cents per share.

SUMMARY

as at 31 December 2023

PORTFOLIO COMPOSITION

* Discount Rates are as set forth in the full Annual Report. For LumiraDx, the investment was written down as of 31 December 2023 to reflect the expected recoverable net proceeds discounted at an 21.7 per cent. rate to account for remaining risks.

Pedro Gonzalez de Cosio, CEO and co-founder of Pharmakon Advisors, LP, the Investment Manager of BioPharma Credit PLC, said:

"We are pleased to be reporting on another positive year for the Company, with three new investments successfully completed and further capital allocated to existing investments.

The Company and its managers remain committed to providing attractive returns and sustainable income to our investors, uncorrelated to economic cycles and market movements and we are happy to have again delivered dividends that were in excess of our annual target with 10.21 cents per share paid to shareholders as a result of income received during the period. Our cash position remains strong, with an increase in cash flow of $179.6 million.

Following shareholder feedback, we have announced adjustments to the Company's DCM and accordingly we look forward to capitalising on an active pipeline of new investment opportunities to ensure that the Company has the potential to participate in attractive new investments."

Results presentation

As announced previously, a management presentation for sell side analysts will be held via a webcast facility at 2pm GMT today. To request details or to register to attend please RSVP biopharmacredit@buchanan.uk.com

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 listed specialist investor in debt from the life sciences industry and joined the LSE on 27 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.

LEI: 213800AV55PYXAS7SY24

CHAIRMAN'S STATEMENT

INTRODUCTION

2023 marks the sixth full year since the Company's Initial Public Offering ("IPO") on the London Stock Exchange in March 2017. I am pleased to be able to report on another year of consistent returns and targets met. During 2023, the Company generated net income per share of $0.0828, which includes the impact of the mark-up of the ImmunoGen investment and mark-down of the LumiraDx investment described below. The Company was able to benefit from higher interest rates as the portfolio has gradually transitioned to floating coupons.

INVESTMENTS

Over the course of 2023, the Company and its subsidiaries invested a total of $270.0 million into new and existing investments. The new investments totaling $220.0 million are comprised of $37.5 million for ImmunoGen, $120.0 million for BioCryst, and $62.5 million for Reata. The remaining

$50 million was split between two existing investments, $25.0 million for Evolus, and $25.0 million for LumiraDx. The Company has additional unfunded commitments for Immunocore and BioCryst of $25.0 million and $60.0 million respectively that may be funded over the next six months.

Including assets and liabilities from its financing subsidiary, BPCR Limited Partnership, the Company ended the year with total net assets of $1,340.9 million, comprising $1,102.1 million of investments, $260.8 million of cash less $22.0 million of other net liabilities.

The Company and its subsidiaries saw a $179.6 million increase in cash flow due to the prepayment of $62.5 million from Reata on 29 September 2023, as well as the scheduled amortisation payments from the Collegium 2022 loan of $81.2 million, Akebia loan of $16.0 million and the BMS purchased payments of $19.9 million. The Reata prepayment was accompanied by prepayment and make-whole fees totaling $15.5 million as of the closing of the Reata acquisition, which had a positive material impact on the overall rate of return of this investment. The Gross IRR for the prepayment of the Reata loan was 141.4 per cent.* and the Net IRR was 106.1 per cent.*

At 30 November 2023, AbbVie announced it had entered into a definitive agreement to acquire ImmunoGen, Inc. for a total equity value of approximately $10.1 billion. The loan balance of $37.5 million

was repaid to the Company upon the closing of the acquisition on 12 February 2024. The ImmunoGen repayment was accompanied by prepayment and make-whole fees totaling $13.1 million. The ImmunoGen investment was marked up by $10.7 million as of 31 December 2023 to account for the discounted value of the expected prepayment and the make-whole fees.

On 29 December 2023, LumiraDx announced the appointment of joint administrators for two of its subsidiaries and Roche Diagnostics Limited ("Roche") announced that it would acquire select parts of LumiraDx for a purchase price of $295.0 million. As part of the acquisition, the Company agreed to provide up to $29.6 million in funding for LumiraDx until the closing of the acquisition, with Roche agreeing to reimburse up to $27.5 million to the Company in the period to completion of the acquisition which is expected on or before 30 June 2024. The LumiraDx investment was written down as of 31 December 2023 to reflect the expected recoverable net proceeds discounted at a 21.7 percent rate to account for remaining risks.

DCM AND SHARE BUYBACKS

During 2023, the discount control mechanism ("DCM") was triggered, and the Company was required to use its capital to repurchase shares. The Company was in a closed period from 12 July 2023 until 29 December 2023 due to information received on the LumiraDx investment. The Company was not able to implement the DCM but resumed post year end after the acquisition announcement. The Company repurchased a total of 16,499,477 Ordinary shares at an average price of $0.92 per share and a total cost of $15.3 million from 9 January 2023 to 11 July 2023. From 1 January 2024 through 26 February 2024 the DCM continued to be in force and the Company repurchased an additional 49,041,347 shares at an average price of $0.93 per share and a total cost of $45.9 million. The current policy of the DCM will remain in place until the shares trade at an average price that reflects a discount to NAV of less than 5 per cent. for a two week rolling period. Until such time, the Company will be restricted from making additional investments. Please see the full Annual Report for a full description of the current discount mechanism.

In addition, the share price triggered a general meeting and continuation resolution under the DCM. Following a general meeting on 28 December 2023, the Company announced that shareholders approved the continuation of the Company's business as a closed- ended investment trust with 94 per cent. of shares voting, in favor.

SHAREHOLDER RETURNS

The Company reported net income return on ordinary activities after finance costs and before taxation for the year-ended 2023 of $108.4 million. On 31 December 2023, the Company's Ordinary Shares closed at 84.0 cents, below the closing price on 31 December 2022 of 95.0 cents. Net Asset Value ("NAV") per Ordinary Share increased over the same timeframe by 1.54 cents from 101.39 cents to 102.93 cents. The Company made three dividend payments over the calendar year, relating to 2023, totaling 7.25 cents per share, referencing net income for the three quarters ending 30 September 2023. The Company was therefore able to maintain its record of

paying a dividend of at least 1.75 cents per share in every quarter since that ending 30 June 2018.

Following the end of the year, the Company declared a further dividend in respect of the last quarter of 2023 of 2.96 cents per share made up of an ordinary dividend of 1.75 cents per share together with a special dividend of 1.21 cents per share that was paid on 15 March 2024. Total dividends from 2023 results reached 10.21 cents per share. The 2023 dividends were covered from profits.

ESG

The Board has supported the Environmental, Social and Governance ("ESG") programme of Pharmakon Advisors, LP ("Pharmakon" or the "Investment Manager") during 2023, with progress made in further incorporating ESG as part of the investment process.

GEOPOLITICAL STATEMENT

The effects of major geopolitical and social risks, including the invasion by Russia of Ukraine and the war between Israel and Hamas, may have economic consequences that extend beyond the short term. However, the Company does not have any direct investments in Russia, Ukraine, or Israel. We will continue to monitor the situation and will inform shareholders of any material changes to this assessment.

OUTLOOK

The Investment Manager reports a growing pipeline of investment opportunities as new products and companies enter the market in 2024 and beyond. However, future growth and further diversification of the Company's portfolio will be limited by the Company's ability to raise additional funds and use cash for new investments under the terms of the current DCM.

On behalf of the Board, I should like to express our thanks to Pharmakon for their continued efforts and achievements on behalf of the Company in 2023, in particular with regards to the complex process involved in attempting to maximize the recovery to the Company from the LumiraDx loan, and to our shareholders for their continued support.

Harry Hyman

Chairman

26 March 2024

*Gross IRR and Net IRR are as of the acquisition date. The definitions of Gross IRR and Net IRR are set forth in the Glossary, available in the full Annual Report. Past performance is not an indication of future performance.

INVESTMENT MANAGER'S REPORT

Another year of strong investment returns

INTRODUCTION TO THE INVESTMENT MANAGER

Pharmakon is pleased to present an update on the Company's portfolio and investment outlook.

New investments, together with Reata's prepayment and higher reference interest rates, led to total income and net income on the portfolio during 2023 of $136 million and $108 million respectively. Pharmakon's engagement with counterparties during 2023 resulted in $850 million of new transactions⁽¹⁾ for the Company. One investment was prepaid during 2023, Reata. As of the acquisition closing date, this prepayment generated $16 million in a combination of make-whole and prepayment fees. The Gross IRR for the prepaid investment was 141.4 per cent^.(2) and the Net IRR was 106.1 per cent⁽³⁾

⁽¹⁾ New investments figure represents overall commitments inclusive of any unfunded commitments.

⁽²⁾ Gross IRR is as of the acquisition date. The definition of Gross IRR is set forth in the Glossary, available in the full Annual report . Past performance is not an indication of future performance.

⁽³⁾ Net IRR is as of the acquisition date. The definition of Gross IRR is set forth in the Glossary available in the full Annual report . Past performance is not an indication of future performance.

BioCryst

On 17 April 2023, the Company and a Private Fund also managed by the Investment Manager (the "Private Fund"), entered into a definitive senior secured term loan agreement for up to $450 million with BioCryst Pharmaceuticals Inc. ("BioCryst") (Nasdaq: BCRX), a biopharmaceutical company that discovers and commercializes novel, oral, small molecule medicines.

BioCryst drew down $300 million at closing on 16 April 2023. The Company's share of the transaction is $180 million, of which $120 million was funded at closing by the Company and its subsidiaries. BioCryst has elected the option to accrue 50 per cent. of their interest due from closing through 31 December 2023 as a payment-in-kind as allowed in the loan agreement. The remaining three tranches of up to $50 million each will be available through 30 September 2024. The Company's share of the remaining three tranches is $20 million each. The loan has a coupon of 3-month secured overnight financing rate ("SOFR") plus 7 per cent.

(subject to a 1.75 per cent. floor) and up to 50 per cent. of the interest during the first 18 months may be paid-in-kind (PIK) at a rate of 3-month SOFR plus 7.25 per cent., with an

additional consideration of 1.75 per cent. of the total loan amount.

BioCryst's commercial product, Orladeyo, is indicated for prophylaxis to prevent attacks of hereditary angioedema (HAE) in adults and pediatric patients 12 years and older. BioCryst also has one pipeline product for BCX10013, a factor D inhibitor being studied in atypical hemolytic uremic syndrome (aHUS), IgA nephropathy (IgAN), and complement 3 glomerulopathy (C3G).

ImmunoGen

On 6 April 2023, the Company and the Private Fund entered into a definitive senior secured loan

agreement for up to $125 million with ImmunoGen, Inc. ("ImmunoGen") (Nasdaq: IMGN), a biotechnology company focused on developing and commercializing the next generation of antibody-drug conjugates (ADCs) to improve outcomes for cancer patients.

ImmunoGen drew down $75 million at closing on 6 April 2023. The Company and its subsidiaries' funded $37.5 million. The loan would have matured in April 2028 and bore interest at SOFR plus 8 per cent. (subject to a 2.75 per cent. floor), with an additional consideration of 2 per cent. of the total loan amount.

On 30 November 2023, AbbVie announced it had entered into a definitive agreement to acquire ImmunoGen, Inc. The ImmunoGen investment was marked up by $10.7 million as of 31 December 2023 to account for the discounted value of the expected prepayment and the make-whole fees. The ImmunoGen repayment was accompanied by prepayment and make-whole fees totaling $13.1 million.

On 12 February 2024, ImmunoGen repaid its remaining $37.5 million balance to the Company and the Company received $13.2 million of accrued interest, additional consideration, and prepayment and make-whole fees.

ImmunoGen's commercial product, Elahere, is indicated for the treatment of Fra positive, platinum-resistant ovarian cancer and is currently being commercialized in the US. ImmunoGen is also developing pivekimab sunirine for the treatment of blastic plasmacytoid dendritic cell neoplasm (BPDCN) and acute myeloid leukemia (AML).

Immunocore

On 8 November 2022, the Company and the Private Fund, entered into a definitive senior secured loan agreement for up to $100 million with Immunocore Limited (Nasdaq: IMCR), a biopharmaceutical company focused on developing a novel class of TCR bispecific immunotherapies designed to treat a broad range of diseases, including cancer, infectious and autoimmune diseases ("Immunocore").

The Company and its subsidiaries funded $25 million of Tranche A of $50 million on 8 November 2022. The remaining $50 million may be drawn by 30 June 2024. The Company's share of Tranche B is $25 million and will be available through 30 September 2024. Tranche A will mature in November 2028 and bears interest at 9.75 per cent. per annum along with an additional consideration of 2.5 per cent. paid at funding.

Insmed

On 19 October 2022, the Company and the Private Fund entered into a definitive senior secured loan agreement for $350 million with Insmed Incorporated (Nasdaq: INSM), a biopharmaceutical company focused on treating patients with serious and rare diseases ("Insmed").

The Company and its subsidiaries funded $140 million of the $350 million loan on 19 October 2022. Insmed elected the option to accrue 50 per cent. of their interest due from closing through 31 December 2023 as a payment-in-kind as allowed in the loan agreement. The loan will mature in October 2027 and bears interest at a rate based upon the 3-month SOFR, plus 7.75 per cent. per annum subject to a SOFR floor of 2.5 per cent. with a one-time additional consideration of 2 per cent. of the total loan amount paid at funding. 50 per cent. of the interest during the first 24 months may be paid-in-kind (PIK).

UroGen

On 7 March 2022, the Company and the Private Fund entered into a definitive senior secured loan agreement for up to $100 million with UroGen Inc. (Nasdaq: URGN), a biopharmaceutical company dedicated to creating novel solutions that treat urothelial and specialty cancers ("UroGen").

UroGen drew down $75 million at closing and the remaining $25 million on 16 December 2022. The Company and its subsidiaries funded $50 million across the two tranches. The loan will mature in March

2027 and bears interest at 3-month LIBOR plus 8.25 per cent. per annum subject to a 1.25 per cent. floor along with a one-time additional consideration of 1.75 per cent. of the total loan amount paid at funding of the first tranche.

On 29 June 2023, the UroGen loan was amended with a new term loan rate of 3-month SOFR plus an 8.25 per cent. coupon.

On 13 March 2024, the Company entered into an Amendment and Restatement of its Loan Agreement with UroGen. The Amended and Restated Loan Agreement includes an additional third and fourth tranche of senior secured loans of $25,000,000 and $75,000,000 respectively. In addition, the interest rate was reduced from 3‑month SOFR plus 8.25 per cent. per annum to 3‑month SOFR plus 7.25 per cent. per annum, and the SOFR floor was increased from 1.25 per cent. to 2.5 per cent. Under the Amended and Restated Loan Agreement, the third and fourth tranches were allocated in full to the Private Fund.

UroGen markets JELMYTO (mitomycin), a prescription medicine used to treat adults with a type of cancer of the lining of the upper urinary tract including the kidney called low-grade Upper Tract Urothelial Cancer (LG-UTUC). UroGen is also developing UGN-102 (mitomycin) for the treatment of low-grade intermediate risk non-muscle invasive bladder cancer.

Collegium 2022

On 14 February 2022, the Company along with the Private Fund provided Collegium Pharmaceutical, Inc. (Nasdaq: COLL), a biopharmaceutical company focused on developing and commercialising new medicines for responsible pain management ("Collegium"), with a commitment to enter into a new senior secured term loan agreement for $650 million.

On 22 March 2022, proceeds from the new loan were used to fund Collegium's acquisition of BDSI as well as repay the outstanding debt of Collegium and BDSI. At closing, the Company and its subsidiaries invested $325 million in a single drawing.

The four-year loan will have $100 million in amortisation payments during the first year and the remaining $550 million balance will amortize in equal quarterly installments. The loan will mature in March 2026 and bears interest at 3-month LIBOR plus 7.5 per cent. per annum subject to a 1.2 per cent. floor along with a one-time additional consideration of 2 per cent. of the loan amount paid upon signing and a one-time additional consideration of 1 per cent. of the loan amount paid at funding. On 23 June 2023, the Company and the Private Fund entered into an amendment which modified the loan interest rate to 3-month SOFR plus 7.50 per cent.

Collegium currently markets Xtampza ER, an abuse-deterrent, extended-release, oral formulation of oxycodone, Nucynta (tapentadol), a centrally acting synthetic analgesic, and Belbuca (buprenorphine

buccal film), for chronic pain management.

Coherus

On 5 January 2022, the Company and the Private Fund entered into a definitive senior secured loan agreement for up to $300 million with Coherus BioSciences, Inc. (Nasdaq: CHRS), a biopharmaceutical company building a leading immunooncology franchise funded with cash generated by its commercial biosimilars business ("Coherus").

Coherus drew down $100 million at closing, another $100 million on 31 March 2022, and an additional $50 million on 14 September 2022. The remaining $50 million commitment, of which the Company's share was $25 million, lapsed so there are no additional funding commitments. The Company and its subsidiaries funded $125 million across the first three tranches. The loan will mature in January 2027 and bears interest at 3-month LIBOR plus 8.25 per cent. per annum subject to a 1 per cent. floor along with a one-time additional consideration of 2 per cent. Of the total loan amount paid at funding of the

first tranche.

On 6 February 2023, the Coherus loan was amended to allow for a short-term waiver to the sales covenant, as well switching the LIBOR component of the loan coupon to SOFR.

On 19 January 2024, Coherus announced that it had entered into a Purchase and Sales Agreement with Sandoz Inc. (the "Purchase Agreement"). On 5 February 2024, Coherus announced that it had entered into a Consent, Partial Release and Third Amendment to the Coherus loan agreement, under which certain subsidiaries and assets of Coherus were released in connection with the Purchase Agreement. Further, Coherus is permitted to make a partial prepayment of the principal of the loans outstanding under the Coherus loan agreement in the amount of $175,000,000 of the outstanding principal balance of $250,000,000, and the minimum net sales covenant was adjusted. The Company's portion of such partial principal prepayment would be $87,500,000. Coherus anticipates making such partial prepayment in Q2 2024.

Coherus markets UDENYCA® (pegfilgrastim-cbqv), a biosimilar of Neulasta in the United States, YUSIMRY (adalimumab-aqvh), a biosimilar of Humira in the United States, CIMERLI (ranibizumab-eqrn), a biosimilar of Lucentis in the United States, and LOQTORZI (toripalimab-tpzi), for the treatment of adults with metastatic or recurrent locally advanced nasopharyngeal carcinoma.

Evolus

On 14 December 2021, the Company and the Private Fund entered into a definitive senior secured loan agreement for up to $125 million with Evolus Inc (Nasdaq: EOLS), a biopharmaceutical company that develops, produces, and markets clinical neurotoxins for aesthetic treatments ("Evolus").

The Company and its subsidiaries funded $37.5 million of the first tranche of $75 million on 29 December 2021. The remaining $50 million was drawn down in two installments of $12.5 million each on 13 May 2023 and on 14 December 2023. The Company's share of the final tranche was

$25 million. The loan will mature in December 2027 and bears interest at 3-month LIBOR plus 8.5 per cent. per annum subject to a 1 per cent. floor along with a one-time additional consideration of 2.25 per cent. Of the total loan amount paid at funding of the first tranche.

On 5 December 2022, the Evolus loan was amended to extend the draw down date for Tranche B in exchange for a $500,000 amendment fee, of which 50 per cent. was allocated to the Company.

On 9 May 2023, the Evolus loan was amended to: (i) allow Tranche B to be drawn in two installments, (ii) switching the LIBOR component of the loan coupon to SOFR, with an additional 0.170 per cent. adjustment, (iii) certain modifications to the amortization schedule, and (iv) subject to specified conditions, allow for up to a $15 million revolver facility to be secured by accounts

receivables and inventory. On 31 May 2023 and 15 December 2023, the Company funded installments of Tranche B of $12.5 million each. Evolus currently markets Jeuveau (prabotulinumtoxinA-xvfs), the first and only neurotoxin dedicated exclusively to aesthetics.

LumiraDx

On 23 March 2021, the Company and the Private Fund entered into a definitive senior secured loan agreement for $300 million with LumiraDx Investment Limited and LumiraDx Group Limited (collectively "LumiraDx").

The Company and its subsidiaries funded $150 million of the $300 million loan on 29 March 2021.

The loan was originally due to mature in March 2024 and bore interest at 8 per cent. per annum along with an additional consideration of 2.5 per cent. of the loan amount paid at funding and an additional 1.5 per cent. of the loan payable at maturity. On 28 September 2021, LumiraDx became public via a SPAC transaction with CA Healthcare Acquisition Corp. and began trading on NASDAQ under the ticker LMDX. The Company and Private Fund both received 742,924 warrants at a strike price of $10.00, exercisable into common stock of LumiraDx under the terms of the transaction.

On 17 June 2022, the LumiraDx loan was amended to provide LumiraDx with certain waivers in exchange for increasing the fee payable at maturity from 1.5 to 3 per cent. of the loan. On 25 July 2022, LumiraDx raised $100 million in a follow-on offering at a price of $1.75. As part of the financing, Pharmakon re-tiered its sales covenants, received a facility fee, and was issued new five-year warrants with a strike price of $1.75, with the original warrants being cancelled.

On 22 February 2023, the LumiraDx loan was amended to provide LumiraDx with certain waivers in exchange for increasing the fee payable at maturity from 3 to 9 per cent. of the loan. The LumiraDx loan was amended fourteen times during the year ended 31 December 2023.

On 29 December 2023, LumiraDx announced the appointment of joint administrators for two of its subsidiaries and Roche announced that it would acquire select parts of LumiraDx for a purchase price of $295 million. As part of the acquisition, the Company agreed to provide up to $29.6 million in funding for LumiraDx to fund the business until the closing of the acquisition, Roche agreed to reimburse up to $27.5 million to the Company in the period to completion of the acquisition. It is anticipated that all of the sale proceeds of the acquisition will be used to repay certain amounts outstanding under the Company's loan agreement, and that no sale proceeds will be distributed to LumiraDx or its shareholders. The investment was written down to its estimated recoverable value at 31 December 2023 and the acquisition is anticipated to close on or before 30 June 2024.

*Further details of the investment in LumiraDx are set forth in the full Annual Report.

Akebia

On 11 November 2019, the Company and the Private Fund entered into a definitive senior secured term loan agreement for up to $100 million with Akebia Therapeutics Inc. (Nasdaq: AKBA), a fully integrated biopharmaceutical company focused on the development and commercialisation of therapeutics for people living with kidney disease ("Akebia").

Akebia drew down $80 million at closing and an additional $20 million on 10 December 2020. The Company and its subsidiaries funded $50 million across both tranches. The loan would have matured in November 2024 and bore interest at LIBOR plus 7.5 per cent. per annum along with a one-time additional consideration of 2 per cent. of the total loan amount paid at funding. The Akebia loan began amortising in September 2022.

On 18 February 2022, the Akebia loan was amended to provide Akebia certain waivers. On 15 July 2022, the Akebia loan was amended to provide Akebia with certain waivers. As a result of this amendment, Akebia made a $25 million pre-payment, of which $12.5 million went to the Company, as well as a 2 per cent. prepayment fee.

On 30 June 2023, the Akebia loan was amended to end the use of the LIBOR rate and set a new term loan rate of 3-month SOFR plus a coupon of 7.5 per cent. and an additional per annum rate of 0.30316 per cent.

On 31 October 2023, the Akebia loan was amended to extend the maturity of the senior secured loan to 31 March 2025, delayed the payment of additional principal until 31 October 2024 and if certain pre-specified events occurred, required Akebia to make payments of principal commencing on the original maturity date through the new extended maturity date and repay all unpaid principal that would have been due or payable on or after 1 July 2024.

On 29 January 2024, Akebia prepaid $17.5 million to the Company, including $87,500 in prepayment fees.

Akebia currently markets Auryxia® (ferric citrate) which is approved in the US for hyperphosphatemia (elevated phosphorus levels in blood serum) in adult patients with chronic kidney disease ("CKD") on dialysis and iron deficiency anaemia in adult patients with CKD not on dialysis.

OptiNose

On 12 September 2019, the Company and the Private Fund entered into a definitive senior secured note purchase agreement for the issuance and sale of senior secured notes in an aggregate original principal amount of up to $150 million by OptiNose US, Inc. a wholly owned subsidiary of OptiNose Inc. (Nasdaq: OPTN), a commercial stage specialty pharmaceutical company ("OptiNose").

OptiNose drew a total of $130 million in three tranches: $80 million on 12 September 2019, $30 million on 13 February 2020 and $20 million on 1 December 2020. There are no additional funding commitments.

The Company and its subsidiaries funded a total $72 million across all tranches. The notes mature in September 2024 and bore interest at 10.75 per cent. per annum along with a one-time additional consideration of 0.75 per cent. of the aggregate original principal amount of senior secured notes which the Company was committed to purchase under the facility and 445,696 warrants exercisable into common stock of OptiNose at a strike price of $6.72. In prior years, there were two amendments to the OptiNose note purchase agreement, resulting in re-tiered sales covenants, permission for an equity issuance, amended amortisation and make-whole provisions, and the issuance of new three-year warrants with a strike price of $1.60, with the original warrants being canceled.

On 10 August 2022, the OptiNose note and purchase agreement was amended resulting in re-tiered sales covenants in exchange for an amendment fee of $780,000, payable upon repayment, of which the Company was allocated $429,000.

On 9 November 2022, OptiNose negotiated certain waivers in exchange for a waiver fee, of which the Company earned $715,000 of the total $1.3 million waiver fee.

On 21 November 2022, OptiNose entered into an Amended and Restated Note Purchase Agreement (the "A&R NPA"). In the A&R NPA, the sales covenant was revised and the amortization and make-whole were both modified. The loan interest was modified from a fixed rate of 10.75 per cent. to a floating rate equal to 3-month SOFR plus 8.5 per cent., subject to a 2.5 per cent. floor, in exchange for an amendment fee.

On 5 March 2024, OptiNose negotiated an amendment which waived the no 'going concern' requirement with respect to the 2023 fiscal year and first quarter of 2024. On 8 March 2024, OptiNose negotiated an additional amendment which extended the Make‑Whole period by 6 months and revised the sales covenants.

On 15 March 2024, the FDA approved XHANCE (flucticasone propionate) nasal spray for the treatment of chronic rhinosinusitis without nasal polyps in patients 18 years of age or older. OptiNose's leading product, XHANCE (flucticasone propionate), had already been approved by the FDA in September 2017 for the treatment of chronic rhinosinusitis with nasal polyps in patients 18 years of age or older.

Bristol-Meyers Squibb Company

On 8 December 2017, the Company's wholly-owned subsidiary entered into a purchase, sale and assignment agreement with a wholly-owned subsidiary of Royalty Pharma Investments ("RPI"), an affiliate of the Investment Manager, for the purchase of a 50 per cent. Interest in a stream of payments (the "Purchased Payments") acquired by RPI's subsidiary from BristolMyers Squibb Company (NYSE: BMY) through a purchase agreement dated 14 November 2017.

As a result of the arrangements, RPI's subsidiary and the Company's subsidiary are each entitled to the benefit of 50 per cent. of the Purchased Payments under identical economic terms. The Purchased Payments are linked to tiered worldwide sales of Onglyza and Farxiga, diabetes agents marketed by AstraZeneca, and related products. The Company was expected to fund $140 million

to $165 million during 2018 through 2020, determined by product sales over that period, and will receive payments from 2020 through 2025. The Purchased Payments are expected to generate attractive risk-adjusted returns in the high single digits per annum.

The Company funded all of the Purchased Payments based on sales from 1 January 2018 to 31 December 2019 for a total of $162 million.

REALISED INVESTMENTS

GBT

On 17 December 2019, the Company and the Private Fund entered into a definitive senior secured term loan agreement for up to $150 million with Global Blood Therapeutics Inc. (Nasdaq: GBT), a biopharmaceutical company focused on innovative treatments that provide hope to underserved patient communities ("GBT"). GBT drew down $75 million at closing and an additional $75 million on 20 November 2020. On 14 December 2021 the loan agreement was amended and restated. The amendment increased the aggregate principal amount of the loan to $250 million through a $100 million third tranche, which was drawn on 22 December 2021. The Company and its subsidiaries funded $132.5 million across all three tranches. The loan was due to mature in December 2027 and bore interest at three-month LIBOR plus 7 per cent. per annum

subject to a 2 per cent. floor along with a one- time additional consideration of 1.5 per cent. of the total loan amount paid upon funding and an additional 2 per cent. payable upon the repayment of the loan. The third tranche also incurred additional consideration of 1.5 per cent. at the time of funding. As a part of the amendment in 2021, the Company and its subsidiaries received a one-time fee equal to 1.25 per cent. of the first two tranches and the three-year make- whole period was reset to December 2021. On 5 October 2022, Pfizer acquired GBT and, as a result, GBT repaid its $250 million senior secured loan. The Company received its $133 million of principal and $43 million in prepayment and make-whole fees. The Company and its subsidiaries earned a 27.6 per cent. gross internal rate of return* and a 20.7 per cent net internal rate** of return on its GBT investment.

Sarepta

On 13 December 2019, the Company and the Private Fund entered into a definitive senior secured term loan agreement for up to $500 million with Sarepta Therapeutics, Inc. (Nasdaq: SRPT), a fully integrated biopharmaceutical company focused on precision genetic medicine ("Sarepta"). On 24 September 2020 the Sarepta loan agreement was amended, and the loan

amount was increased to $550 million. Sarepta drew down the first $250 million tranche at closing and an additional $300 million on 2 November 2020. The Company and its subsidiaries funded $175 million of each tranche for a total investment of $350 million. The first tranche was originally due to mature in December 2023 and the second tranche in December 2024. The loan bore interest at 8.5 per cent. per annum along with a one-time additional consideration of 1.75 per cent. of the first tranche and 2.95 per cent. of the second

tranche paid upon funding and an additional 2 per cent. payable upon the repayment of the loan. On 12 September 2022, Sarepta announced the early termination and repayment of its existing senior secured debt with proceeds from the issuance of $1 billion in convertible bonds. On 12 September 2022, Sarepta repaid its $550 million senior secured loan.

The Company received its $350 million of principal and $22 million in prepayment, paydown fees, make-whole fees, and accrued interest. The Company and its subsidiaries earned a 12 per cent. gross internal rate of return* and 9 per cent net internal rate of return** on its Sarepta investment

Epizyme

On 4 November 2019, the Company and the Private Fund entered into a definitive senior secured term loan agreement for up to $70 million with Epizyme, Inc. (Nasdaq: EPZM), a late-stage biopharmaceutical company developing novel epigenetic therapies for cancer ("Epizyme").

On 3 November 2020 the Epizyme loan agreement was amended, and the loan amount was increased to $220 million. Epizyme drew down $25 million at closing and an additional $195 million during 2020. The Company and its subsidiaries funded a total of $110 million of the Epizyme loan. The loan was originally due to mature in November 2024 and bore interest at LIBOR plus 7.75 per cent. per annum along with a one-time additional consideration of 2 per cent. of the total loan amount paid upon funding. On 27 June 2022, Ipsen announced a definitive agreement pursuant to which Ipsen would acquire Epizyme. On 12 August 2022, Epizyme repaid its $220 million senior secured loan.

The Company received its $110 million of principal and $8 million in prepayment and make-whole fees. The Company and its subsidiaries earned a 15.2 per cent. gross internal rate of return* and 11.4 per cent net internal rate of return** on its Epizyme investment.

Collegium 2020

On 6 February 2020, the Company and the Private Fund entered into a definitive senior secured term loan agreement for $200 million with Collegium Pharmaceutical, Inc. (Nasdaq: COLL), a biopharmaceutical company focused on developing and commercialising new medicines for responsible pain management ("Collegium 2020"). The Company and its subsidiaries funded $165 million of the $200 million loan on 13 February 2020. The secured loan began amortising immediately and was due to fully mature in February 2024. The loan bore interest at three month LIBOR plus 7.5 per cent. per annum subject to a 2 per cent. LIBOR floor with a one-time additional consideration of 2.5 per cent. of the loan amount paid upon funding. The loan was repaid in its entirety on 22 March 2022. The Company and its subsidiaries earned a 11.9 per cent. gross internal rate of return* and 8.9 per cent net internal rate of return** on its Collegium 2020 investment

Biodelivery Sciences

On 23 May 2019, the Company entered into a senior secured loan agreement for up to $80 million with BioDelivery Sciences International (Nasdaq: BDSI), a commercial- stage specialty pharmaceutical company ("BDSI"). In addition, the Company acquired 5,000,000 BDSI shares at $5.00 each for a total cost of $25 million in a public offering that took place on 11 April 2019. The first tranche of the loan for $60 million was funded on 28 May 2019 and the second $20 million tranche was funded on 22 May 2020. The loan was due to mature in May 2025 and bore interest at LIBOR plus 7.50 per cent., along with 2 per cent. additional consideration paid at closing. On 23 September 2021, BDSI made an early prepayment of $20 million, and made its final payment for the remainder of the loan on 22 March 2022. The Company earned a 11.9 per cent. gross internal rate of return* and a 9 per cent net internal rate of return** on the BDSI loan. The Company sold 46 per cent of its BDSI shares during 2019 at an average price of $6.50 and received $5.60 per remaining shares on the date of the M&A Transaction. The Company earned

a 11.6 per cent. gross internal rate of return* and a 8.7 per cent net internal rate of return** on the BDSI equity investment

Reata

On 5 May 2023, the Company and the Private Fund, entered into a definitive senior secured term loan agreement for up to $275 million with Reata Pharmaceuticals Inc. ("Reata") originally due to mature in May 2028. Tranche A of $75 million was funded at closing. Tranche B of $50 million and Tranche C of $75 million were originally due to be drawn after achieving certain performance-based milestones, and Tranche D of $75 million was originally due to be available at the Company's discretion after achieving certain sales-based milestones. The loan had a coupon of 3-month secured overnight financing rate ("SOFR"), plus 7.5 per cent. (subject to a 2.5 per cent. floor).

There was also a 2 per cent. upfront fee upon each draw. The interest only period for the loan was for 3 years but could have been extended to 4 years if trailing twelve month sales are greater than $250 million. The Company's share of the transaction was $137.5 million, of which $37.5 million was funded at closing.

On 10 July 2023, the Company funded Tranche B of the Reata loan for $25 million.

On 28 July 2023, Inc. ("Biogen") Biogen announced a definitive agreement pursuant to which Biogen will acquire Reata for an enterprise value of approximately $7.3 billion. The acquisition closed on 29 September 2023. As of the acquisition closing date, the Company received prepayments including $15.5 million in prepayment and make-whole fees.

MARKET ANALYSIS

The life sciences industry is expected to continue to have substantial capital needs during the coming years as the number of products undergoing clinical trials continues to grow. All else being equal, companies seeking to raise capital are generally more receptive to non-dilutive debt financing alternatives at times when equity markets are soft, increasing the number and size of fixed-income investment opportunities for the Company, and will be more inclined to issue equity or convertible bonds at times when equity markets are strong. A good indicator

of the life sciences equity market is the New York Stock Exchange Biotechnology Index ("BTK Index"). While there was substantial volatility during the period, the BTK index increased 3 per cent. during 2023, compared to a 4 per cent. decrease during 2022.*** Global equity issuance by life sciences companies during 2023 was $45 billion, a 31 per cent. increase from the $34.4

billion issued during 2022.**** Similarly, convertible bond issuance by life sciences companies increased to $9.7 billion in 2023 from $7.3 billion in 2022.**** We anticipate 2024 equity and convertible bond issuance to remain comparable to 2023 levels which should continue to support appetite for non-dilutive debt during the remainder of 2024.

Acquisition financing is an important driver of capital needs in the life sciences industry in general and a source of investment opportunities. An active M&A market helps drive opportunities for investors such as the Company, as acquiring companies need capital to fund acquisitions. Global life sciences M&A volume during 2023 was $189 billion, a 108 per cent. increase from the $91 billion witnessed during 2022, driven mainly by the volatility in the equity markets. We are encouraged by the number of M&A opportunities that are starting to build up

which should lead to a more active market in the near term.****

USD LIBOR

On 5 March 2021, the Financial Conduct Authority ("FCA"), the regulatory supervisor of USD LIBOR's administrator ("IBA") announced in a public statement the future cessation of the 3-month USD LIBOR tenor setting. As of that date, 30 June 2023, all available tenors of USD LIBOR have either permanently or indefinitely ceased to be provided by IBA. As of 30 June 2023 the benchmark replacement rate is based on Secured Overnight Financing Rate ("SOFR"), and all LIBOR-based interest payments will now be calculated with SOFR beginning on the respective effective date. The Company has eleven loans with coupons that reference 3-month USD SOFR and five have a 2.5 per cent. floor or greater and six have a floor ranging from 1 per cent. to 2.00 per cent. As of 31 December 2023, the 3-month SOFR rate was 5.33 per cent, significantly above the floors in the eleven loans.

INTERNATIONAL OUTLOOK

The invasion of Ukraine by Russia and the war between Israel and Hamas has led to increased market volatility and widespread sanctions on Russian assets and individuals, contributing to the high inflation introduced by the pandemic. While the portfolio has no direct exposure to Russia, Ukraine, Belarus, or Israel, we remain vigilant in monitoring these major events closely and will inform investors of any material changes.

INVESTMENT OUTLOOK

We expect our investment pipeline to grow as new products and companies enter the market in 2024 and beyond. Pharmakon's extensive network and thorough approach will continue to identify strong investment opportunities. We remain focused on our mission of creating the premier dedicated provider of debt capital to the life sciences industry while generating attractive returns and sustainable income to investors.

Although the global economic outlook remains uncertain, Pharmakon remains confident of its ability to deliver its target dividend yield to its investors.

Pedro Gonzalez de Cosio

Co-founder and CEO, Pharmakon

26 March 2024

* Gross IRR is set forth in the Glossary available in the full Annual Report. Past performance is not an indication of future performance.

** Net IRR is set forth in the Glossary available in the full Annual Report. Past performance is not an indication of future performance.

*** Source: BTK Index

**** Source: Bloomberg

The ESG policy is set out in the full Annual Report.

STRATEGIC OVERVIEW

INVESTMENT OBJECTIVE

The Company aims to generate long-term Shareholder returns, predominantly in the form of sustainable income distributions from exposure to the life sciences industry.

INVESTMENT POLICY

The Company will seek to achieve its investment objective predominantly through direct or indirect exposure to Debt Assets, which include Royalty Investments, Senior Secured Debt, Unsecured Debt and Credit Linked Notes.

THE COMPANY MAY ACQUIRE DEBT ASSETS:

·     Directly from the entity issuing the Debt Asset (a "Borrower"), which may be: (i) a company operating in the life sciences industry (a "LifeSci Company"); or (ii) an entity other than a LifeSci Company which directly or indirectly holds an interest in royalty rights to certain products, including any investment vehicle or special purpose vehicle ("Royalty Owner");

·     Or in the secondary market.

The Company may also invest in equity issued by a LifeSci Company, acquired directly from the LifeSci Company or in the secondary market. "Debt Assets" will typically comprise:

·     Royalty debt instruments

Debt issued by a Royalty Owner where the Royalty Owner's obligations in relation to the Debt are secured as to repayment of principal and payment of interest by Royalty Collateral.

·     Priority royalty tranches

Contract with a Borrower that provides the Company with the right to receive payment of all or a fixed percentage of the future royalty payments receivable in respect of a Product (or Products) that would otherwise belong to the Borrower up to a fixed monetary amount or a pre-set rate of return, with such royalty payment being secured by Royalty Collateral in respect of that Product (or Products).

·     Senior secured debt

Debt issued by a LifeSci Company, and which is secured as to repayment of principal and payment of interest by a first priority charge over some or all of such LifeSci Company's assets, which may include: (i) Royalty Collateral; or (ii) other intellectual property and marketing rights to the Products of that LifeSci Company.

·     Unsecured debt

Debt issued by a LifeSci Company which is not secured or is secured by a second lien on assets of the Borrower.

·     Credit linked notes

Derivative instruments referencing Debt Assets, being a synthetic obligation between the Company and another party where the repayment of principal and/or the payment of interest is based on the performance of the obligations under the underlying Debt Assets.

"Royalty Collateral" means, with respect to a Debt Asset, (i) future payments receivable by the Borrower on a Product (or Products) in the form of royalty payments or other revenue sharing arrangements; or (ii) future distributions receivable by the Borrower based on royalty payments generated from a Product (or Products); or (iii) both  (i) and  (ii)"Debt" includes loans, notes, bonds and other debt instruments and securities, including convertible debt, and Priority Royalty Tranches.

Borrowers will predominantly be domiciled in the US, Europe and Japan, though the Company may also acquire Debt Assets issued by Borrowers in other jurisdictions.

INVESTMENT RESTRICTIONS AND PORTFOLIO DIVERSIFICATION

The Company will seek to create a diversified portfolio of investments by investing across a range of different forms of Debt Assets issued by a variety of Borrowers. In particular, the Company will observe the following restrictions when making investments in accordance with its investment policy:

·      no more than 25 per cent. of the Company's gross assets will be exposed to any single Borrower or investment;

·      no more than 35 per cent. of the Company's gross assets will be invested in Unsecured Debt;

·      no more than 15 per cent. of the Company's gross assets will be invested in equity securities issued by LifeSci Companies; and

·      the Company will invest no more than 10 per cent., in aggregate, of gross asset value at the time of acquisition in other listed closed‐ended investment funds.

Each of these investment restrictions will be calculated at the time of each proposed investment. In the event that any of the above limits are breached at any point after the relevant investment has been made (for instance, as a result of any movements in the value of the Company's total assets), there will be no requirement to sell any investment (in whole or in part).

CASH MANAGEMENT

The Company's uninvested capital may be invested in cash instruments or bank deposits for cash management purposes.

HEDGING

The Company does not propose to enter into any hedging or other derivative arrangements other than as may from time to time be considered appropriate for the purposes of efficient portfolio management. The Company will not enter into such arrangements for investment purposes.

BUSINESS AND STATUS OF THE COMPANY

The Company is registered in England as a public limited company and is an investment company in accordance with the provisions of Section 833 of the Companies Act 2006.

The principal activity of the Company is to carry on business as an investment trust. The Company intends at all times to conduct its affairs so as to enable it to qualify as an investment trust for the purposes of Sections 1158/1159 of the Corporation Tax Act 2010 ('S1158/1159"). The Directors do not envisage any change in this activity in the foreseeable future.

The Company has been granted approval from HM Revenue & Customs ('HMRC") as an investment trust under S1158/1159 and will continue to be treated as an investment trust company, subject to there being no serious breaches of the conditions for approval. The Directors are of the opinion that the Company has conducted its affairs for the year ended 31 December 2023 so as to be able to continue to qualify as an investment trust.

The Company has two wholly-owned subsidiaries, BPCR Limited Partnership and BPCR GP Limited, and one indirectly wholly-owned subsidiary, BPCR Ongdapa Limited, details of which can be found in Note 14 to the financial statements.

STAKEHOLDER ENGAGEMENT - SECTION 172(1) STATEMENT

OVERVIEW

The Directors' overarching duty is to promote the success of the Company for the benefit of its shareholders, having regard to the interests of its stakeholders, as set out in section 172(1) of the Companies Act 2006. The Directors have considered each aspect of this section of the Act and consider that the information set out below is particularly relevant in the context of the Company's business as an externally managed investment company which does not have any employees or suppliers.

The importance of stakeholders is taken into account at every Board meeting. All discussions involve careful consideration of the longer-term consequences of any decisions and their implications for stakeholders.

STAKEHOLDERS

The Board seeks to understand the needs and priorities of the Company's stakeholders and these are taken into account during all its discussions and as part of its decision-making. The Board believes that the Company's key stakeholders comprise its shareholders, clients and service providers. The section below discusses why these stakeholders are considered of importance to the Company and the actions taken to ensure that their interests are taken into account. The Company recognises the importance of maintaining high standards of business conduct and seeks to ensure that these are applied in all of its business dealings and in its engagement with stakeholders. Further information on the impact of the Company's operations on the community and the environment is set out below.

The Company's mechanisms for engaging with its stakeholders are set out below. These are kept under review by the Directors and are discussed on a regular basis at Board meetings to ensure that they remain effective. The Company is an investment trust and has no employees. It has therefore not identified employees as a stakeholder group.

For more information on the purpose, culture and values of the Company, and the processes which the Board has put in place to ensure these, see the Corporate Governance Statement as set out in the full Annual Report.

SHAREHOLDERS

Importance

Continued shareholder support and engagement are critical to the existence of the Company and the delivery of its long-term strategy and engagement with shareholders is given a high priority by both the Board and the Investment Manager.

How the Company engages

The Chairman ensures that the Board as a whole has a clear understanding of the views of shareholders by receiving regular updates from the Brokers and Investment Manager. The Investment Manager and the Company's Brokers are in regular contact with major shareholders and report the results of all meetings and the views of those shareholders to the Board on a regular basis. The Investment Manager provides regular investor updates and presentations to shareholders. The Chairman and the other Directors are available to attend these meetings with shareholders if required. Relations with shareholders are also considered as part of the annual Board evaluation process. For further details regarding this process see the full Annual Report.

All shareholders are encouraged to attend and vote at annual general meetings ("AGM"), during which the Board and the Investment Manager will be available to discuss issues affecting the Company and answer any questions. Further information regarding the AGM is detailed in the full Annual Report.

Shareholders wishing to raise questions or concerns directly with the Chairman, Senior Independent Director or Company Secretary, outside of the AGM, should do so using the contact details provided below.

Although the Company has been established with an indefinite life, the Articles provide that a continuation vote be put to shareholders periodically. The next continuation vote will be put to shareholders in 2025.

During the year, as the Company's shares had on average, traded at a discount in excess of 10 per cent. to the Net Asset Value per Ordinary Share over a rolling 12 month period, the Company was required to propose a Continuation Resolution to shareholders. The Continuation Resolution was proposed to shareholders as an ordinary resolution at the general meeting held on 28 December 2023 at which 94.06 per cent. of total votes were cast in favour of the continuation of the Company.

CLIENTS

Importance

The investments made by the Company support the large capital needs of its portfolio companies, supporting their research and development budgets for life sciences products and enable them to achieve their investment objective.

How the Company engages

The Company's clients are pharmaceutical and biotechnology companies within the life sciences industry to which it provides debt capital. The Investment Manager is highly experienced in this area with a strong track record of meeting the capital needs of its clients. The Investment Manager meets regularly with the management teams of current and prospective investee companies to enhance relationships and to understand their views and capital requirements.

The Directors receive updates from the Investment Manager on the companies within its investment portfolio at all Board meetings, and outside of meetings as appropriate.

Further information on the Company's engagement with investee companies during the year, including case studies regarding their products, is set out above.

SERVICE PROVIDERS

Importance
In order to function as an investment trust on the Premium Segment of the London Stock Exchange, the Company relies on a number of reputable advisers for support in complying with all relevant legal and regulatory obligations.

How the Company engages

The Company's day-to-day operational functions are delegated to a number of third-party service providers, each engaged under separate contracts. The Company's principal service providers include the Investment Manager, Company Secretary, Joint Brokers, Administrator, Legal Adviser, Auditor and the Registrar.

The Board keeps the ongoing performance of the Investment Manager under continual review and conducts an annual appraisal of the Investment Manager, along with the performance of all other third-party service providers in December each year. The Investment Manager has executed the investment strategy according to the Board's expectations and it is the opinion of the Directors that the continuing appointment of Pharmakon, as the Investment Manager, is in the interests of shareholders as a whole.

The Audit and Risk Committee reviews and evaluates the control environments in place at each service provider. Further details regarding the role of the Audit and Risk Committee are set out in the full Annual Report.

Further information about the review of service providers and the culture of the Investment Manager is set out in the full Annual Report.

KEY PERFORMANCE INDICATORS

The Company assesses its performance in meeting its investment objectives using the following Key Performance Indicators ("KPIs"):

NAV PERFORMANCE

The NAV at 31 December 2023 was $1.0293 per Share, compared to $1.0139 per Share at 31 December 2022.

A full description of the Company's performance for the year ended 31 December 2023 is included in the Investment Manager's Report above.

SHARE PRICE RETURN

The Company's Share price at 31 December 2023 was $0.8400, compared to $0.9500 at 31 December 2022. The Company's Share price at 31 December 2022 was $0.9500, giving a return since 31 December 2021 of -1.9 per cent.

SHARE PRICE DISCOUNT/PREMIUM TO NAV PER SHARE

Under the terms of the Discount Control Mechanism ("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. If the Company's shares trade at a discount in excess of 10 per cent. to the net asset value per share over a 12 month rolling period, a general meeting and continuation resolution under the DCM is triggered.

On 7 November 2022, the DCM was updated 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).

During the 12 month rolling period ended 1 November 2023, the Company's shares traded at a discount in excess of 10 per cent. to the net asset value per share triggering a general meeting and continuation resolution under the DCM. On 28 December 2023, the Company announced at the general meeting that shareholders approved the continuation of the Company's business as a closed-ended investment trust with 94 per cent. of shares voting, in favor.

ONGOING CHARGES

The Company's ongoing charges ratio is shown in the table below.

* Ongoing charges are the Company's expenses (excluding performance fees) expressed as a percentage of its average monthly net assets and follow the AIC recommended methodology.

DIVIDENDS

Dividend payments totaling 5.25 cents per Ordinary Share, including one special dividend totaling 2 cents have been paid during the year ended 31 December 2023. A dividend was paid in respect of the last quarter of 2023 totaling 1.75 cents per Ordinary Share, including a special of 1.21 cents on 15 March 2024. Dividends totaling 11.50 cents per Ordinary Share, including one special dividend of 4.50 cents, were paid during the year ended 31 December 2022.

RISK MANAGEMENT AND THE INTERNAL CONTROL ENVIRONMENT

The role of the Board

A formal risk identification and assessment process has been adopted by the Company resulting in a risk framework document which summarises the key risks and their mitigation.

The Board undertakes a formal risk review with the assistance of the Audit and Risk Committee at least twice a year in order to robustly assess the effectiveness of the Company's risk management and internal control systems. During the course of its review in respect of the year ended 31 December 2023, the Board has not identified, nor been advised of any failings or weaknesses which it has determined to be of a material nature. The principal risks and uncertainties which the Company faces are set out below.

Principal risks and uncertainties

The Board of Directors has overall responsibility for risk management and internal control of the Company. The Board recognises that risk is inherent in the operation of the Company and that effective risk management is key to the success of the organisation. The Board has delegated responsibility for the assurance of the risk management process and the review of mitigating controls to the Audit and Risk Committee.

The principal risks and the Company's policies for managing these risks are set out below and the policy and practice with regard to financial instruments are summarised in Note 16 to the financial statements.

There were no changes to these risks in the current year or at the date of this report.

The recent events surrounding the LumiraDx investment help illustrate some of the risks and mitigants described below. LumiraDx faced financial difficulties that exposed the Company to counterparty risk as it became clear that the Company will be unable to recover the full principal and fees owed. However, the positive attributes of the collateral and the investment manager's diligent efforts are expected to result in the Company being able to ultimately recover a significant portion of its investment.

GOING CONCERN

The Directors consider that it is appropriate to adopt the going concern basis in preparing the financial statements. After making enquiries, and bearing in mind the nature of the Company's business and assets, the Directors consider that the Company has adequate resources to continue in operational existence for the foreseeable future. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and the Company's ability to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.

VIABILITY STATEMENT

The Board has assessed the principal risks facing the Company over a five-year period, including those that would threaten its business model, future performance, solvency or liquidity. The five-year period was selected to align with the average duration of the Company's existing investments. The Board has developed a matrix of risks facing the Company and has put in place certain investment restrictions which are in line with the Company's investment objective and policy in order to mitigate these risks as far as practicable. The principal risks which have been identified, and the steps taken by the Board to mitigate these risks, are presented above.

The Company believes its borrowing capabilities provide further flexibility and help ensure it is in a position to finance its funding obligations in the event that internally generated cash flow in the period is insufficient to finance the unfunded portion of a lending commitment. The Board reviews the Company's financing arrangements quarterly to ensure that the Company is in a strong position to fund all outstanding commitments on existing investments as well as being able to finance new investments. In addition, the Board regularly reviews the prospects for the Company's portfolio and the pipeline of potential investment opportunities which provide comfort that the Company is able to continue to finance its activities for the medium-term future.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five-year period

ENVIRONMENTAL, HUMAN RIGHTS, EMPLOYEE, SOCIAL AND COMMUNITY ISSUES

The Board recognises the requirement under the Companies Act 2006 to detail information about employees, human rights, environmental and community issues, including information about any policies it has in relation to these matters and the effectiveness of these policies. These requirements do not apply directly to the Company as it has no employees, all the Directors are non-executive and it has outsourced all its functions to third-party service providers. The Company has therefore not reported further in respect of these provisions.

While the Company is not within the scope of the Modern Slavery Act 2015 and it is not, therefore, obliged to make a slavery and human trafficking statement, the Company considers its supply chains to be of low risk as its principal service providers are the professional advisers set out in the Corporate Information section below. Further information on the Company's anti-bribery and corruption policy is set out in the full Annual Report.

There are six Directors, four male and two female. Further information on the composition and operation of the Board is detailed in the full Annual Report.

This Strategic Report has been approved by the Board and signed on its behalf by

Harry Hyman

Chairman

26 March 2024

EXTRACTS FROM THE DIRECTORS' REPORT

The Directors are pleased to present the Annual Report and audited financial statements for the year ended 31 December 2023.

Directors

The Directors of the Company who were in office during the year and up to the date of signing the financial statements are listed below:

Harry Hyman - Chairman

Duncan Budge - Senior Independent Director

Colin Bond - Chairman of the Audit and Risk Committee

Stephanie Léouzon - Director

Rolf Soderstrom - Director

Sapna Shah - Director (appointed 22 March 2023)

Share capital

An allotment authority for the issuance of up to 131,865,488 ordinary or C shares was passed at the Company's Annual General Meeting held on 30 May 2023. This authority will expire at the conclusion of, and renewal will be sought at, the annual general meeting to be held on 12 June 2024. No shares were issued during the year.

At the Annual General Meeting held on 30 May 2023, the Company was granted authority to purchase up to 14.99 per cent. of the Company's Ordinary Share capital in issue at that date, amounting to 205,952,416 Ordinary Shares. This authority will expire at the conclusion of, and renewal will be sought at, the Annual General Meeting to be held in June 2024. No shares were purchased for cancellation during the year.

As set out in the Chairman's Statement above, during the year, the Company's discount control mechanism was triggered and the Company was required to use its capital to repurchase shares. During 2023, 16,499,477 shares of $0.01 were bought back at a total cost of $15,162,792 and are held in treasury. This represented 1.2 per cent. of the issued share capital as at 31 December 2023. No shares were purchased for cancellation.

At 31 December 2023, and as at the date of this report, there are 1,373,932,067 Ordinary Shares in issue. As at 31 December 2023 there were 71,252,875 Ordinary Shares held in treasury. Since 31 December 2023, a further 49,041,347 shares have been repurchased and the total number of shares held in treasury is 120,294,222. At general meetings of the Company, shareholders are entitled to one vote on a show of hands and on a poll, to one vote for every Share held. Shares held in treasury do not carry voting rights. The total voting rights of the Company at 31 December 2023 was 1,302,679,192 and as at the date of this report 1,253,637,845.

                                                                                                               Further information on the Company's share capital is set out in Note 13 to the financial statements.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In respect of the financial statements

The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with UK adopted International Accounting Standards ("UK IAS").

Under company law, directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period. In preparing the financial statements, the directors are required to:

·          select suitable accounting policies and then apply them consistently;

·          state whether applicable UK IASs have been followed, subject to any material departures disclosed and explained in the financial statements;

·          make judgements and accounting estimates that are reasonable and prudent; and

·          prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.

The directors are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the company and enable them to ensure that the financial statements and the Directors' Remuneration Report comply with the Companies Act 2006.The directors are responsible for the maintenance and integrity of the Company's website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

DIRECTORS' CONFIRMATIONS

The Directors consider that the Annual Report and accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Each of the directors, whose names and functions are listed in the Board of Directors above confirm that, to the best of their knowledge:

·      the company financial statements, which have been prepared in accordance with UK IASs, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and

·      the Strategic Report includes a fair review of the development and performance of the business and the position of the company, together with a description of the principal risks and uncertainties that it faces.

On behalf of the Board

Harry Hyman

Chairman

26 March 2024