Antony Odellneeded to raise money for a biotechnology company with 19 employees and no sales, not an easy task in the U.K. Enter Neil Woodford, a star investor overseeing $51 billion at Invesco Fund Managers Ltd.
Odell followed a well-trodden path to Invesco’s offices in Henley-on-Thames, England, and Woodford agreed to invest about 25 million pounds for 29 percent of Tissue Regenix Group Plc. (TRX) Plenty of others make the same trek -- Invesco, via Woodford, owns stakes in small publicly traded companies such as e-Therapeutics Plc and Retroscreen Virology Group Plc (RVG), as well as unlisted, venture-capital-stage companies such as Oxford Nanopore Technologies Ltd. and Circassia Holdings Ltd.
The positions have made Woodford one of the U.K.’s biggest investors in early-stage health-care companies at a time when financing for the industry has shrunk. As investors shied away from risk amid the economic crisis, Woodford-managed funds plugged the gap with investments ranging from a few million pounds to 100 million pounds, executives, analysts and others who know him said in interviews.
“If it wasn’t for him, it would be quite grim,” said Navid Malik, an analyst at Cenkos Securities in London who follows some of the small companies Woodford invests in. “There would be a few CEOs throwing themselves off the roof.”
Financing for biotechnology companies in the U.K. fell 84 percent to 363 million euros ($493 million) in 2012 from 2.2 billion euros in 2007, according to data compiled by Ernst & Young. Venture capital declined 37 percent to 172 million euros and loans and initial public offerings ground to a near halt, according to the firm.
U.S. companies, in contrast, have been able to count on increased funding. Financing rose 7 percent in the U.S. in the same period, according to Ernst & Young.
While cash from Woodford has been crucial to the U.K.’s small health-care companies, the investments aren’t even his main focus at Invesco. Rather, the 53-year-old investor manages funds totaling about 32 billion pounds ($51 billion) in assets, focused on giant, dividend-paying companies. His 14-billion-pound flagship Invesco Perpetual High Income Fund (INVHIII), the U.K.’s largest stock mutual fund, counts companies such as GlaxoSmithKline Plc (GSK), British American Tobacco Plc, BAE Systems Plc and BT Plc among its biggest holdings.
Woodford’s dual role means he may be one of the few fund managers in the world courted by fledgling health businesses like Odell’s one day and CEOs of the world’s biggest companies the next. When Odell sat across from Woodford in November 2011, the fund manager said Glaxo Chief Executive Officer Andrew Witty had occupied the same chair a few weeks earlier.
Invesco is the third-biggest investor in Glaxo, the U.K.’s largest drugmaker with a market value of 75.5 billion pounds. Tissue Regenix, based in York, England, first sold shares on London’s Alternative Investment Market in 2010 and was raising more money in 2011 to develop replacement body parts made from animal tissue, such as pig heart valves. The company has a market value of 66.1 million pounds.
“You’re aware you’re a very small fish in a very big pond,” Odell said in an interview. “We got into a discussion about what it would take to fund these programs and Neil was up for it.”
Invesco Perpetual doesn’t break out most of Woodford’s holdings in smaller U.K. health companies. Woodford rarely talks to journalists and, through Invesco spokeswoman Lucy Forgan, declined to be interviewed.
Biotech executives can find getting an audience with Woodford challenging, too. Oxford Nanopore Chief Executive Officer Gordon Sanghera tried to see Woodford for four years before meeting him in 2011, the executive said.
Invesco invested in the closely held Oxford, England-based company, which is developing a portable gene-sequencing device for about $1,000, in 2011. Oxford Nanopore has raised 145 million pounds since it was founded in 2005. Charles Weston, an analyst at Numis Securities in London, estimates the company’s value at $1.5 billion.
Invesco also is the largest shareholder in IP Group Plc (IPO) and Imperial Innovations Group Plc (IVO), publicly traded venture-capital firms that invest in startups spawned by U.K. universities. Imperial and IP Group are the source of some of Woodford’s investments in up-and-coming companies.
Woodford learned about Tissue Regenix via IP Group, an early backer, according to Odell. IP Group also was an early investor in Oxford Nanopore, Retroscreen and Revolymer Plc (REVO), while Imperial backed Circassia, PsiOxus Therapeutics Ltd. and Cell Medica Ltd. Invesco owns 29 percent of IP Group and 47 percent of Imperial, both of which are based in London.
“He uses his investments in those to cherry pick,” said Kate Bingham, managing partner of investment firm SV Life Sciences Advisers LLP in London. “It would be nice to have more like him.”
Woodford visits top managers or invites them to Perpetual Park, Invesco’s collection of brick office buildings in Henley, a town 38 miles west of London known for its summer rowing regatta and as the 13th richest in the U.K., according to a survey this year by real-estate firm Savills and The Telegraph newspaper.
“Every company gets their 15 minutes of fame out at Invesco’s park,” said Mark Warne, IP Group’s head of life sciences. “He insists on having a one-to-one conversation for a decent period of time to get an idea of them.”
Last year Woodford met with executives of Revolymer, which makes polymers for use in nicotine gum and chewing gum products, before its 25-million-pound initial public offering.
“If he picks up the phone and says ‘I want to see you about your projects,’ he will come down,” Chief Financial Officer Robin Cridland said. “We met him on the road show and we met him for a long time. It was our job to persuade him.”
Woodford doesn’t meddle in day-to-day operations, company executives said. Tissue Regenix updates Woodford two or three times a year, Odell said.
“He does let them get on with it,” Warne said. “The sums of money are to last several years so they can’t keep coming back every six months.”
About half of Woodford’s stakes in publicly traded small health companies fall just below the U.K. Takeover Panel’s 30 percent ownership threshold that requires a shareholder to make a cash offer for all the other shares, unless it obtains a waiver.
Woodford, an economics and agriculture graduate of Exeter University, rides horses at home in the Chiltern hills, where he lives with his family in a rambling manor house for which he paid 6.85 million pounds in May 2004, according to U.K. Land Registry records. It’s surrounded by a swimming pool, a show-jumping ring, oak gates and security cameras.
He made headlines in 2011 when he sought to redevelop a farm in a neighboring village into an equestrian center, irking neighbors. The proposal failed after neighbors objected.
U.K. newspapers routinely cite Woodford’s views on stocks, and he also weighs in on public policy and corporate strategy. Last month, he said the leader of the Labor Party, Ed Miliband, committed “economic vandalism” by proposing a freeze on energy bills. Invesco is the biggest shareholder in U.K. utility Centrica Plc. Woodford last year also criticized BAE Systems Plc’s planned merger with European Aeronautic, Defence & Space Co., a deal that fell through.
Not all of Woodford’s biotech investments have ended in the winner’s circle. Antisoma Plc’s (ASM) stock price has slid for much of its 15 years as a public company, and Invesco dumped 22.9 million of its 31.7 million shares of the the cancer-drug developer as the stock plunged 64 percent on Jan. 31, 2011.
Still, his biggest fund, Invesco Perpetual High Income, returned an average of 12 percent a year the past five years, better than 63 percent of competing funds, after Woodford steered clear of banking stocks before the 2008 meltdown.
“Whatever he’s done, he’s done very well,” says Vadim Alexandre, an analyst at Daniel Stewart & Co. in London. “He’s definitely a heavy hitter in the sector.”
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