Annual Financial Report

BIOPHARMA CREDIT PLC

(THE "COMPANY")

ANNUAL REPORT AND FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 DECEMBER 2020

ONGOING ROBUST PORTFOLIO PERFORMANCE

BioPharma Credit PLC (LSE: BPCR), the specialist life sciences debt investor, today announces the Annual Report of the Company for the period ended 31 December 2020.

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.

SHAREHOLDER RETURNS

· 8.29 cents per share in total dividends during period referencing net income for the four quarters ending 30 September 2020, comfortably ahead of the target to distribute at least 7 cents per share

· Post period end, the Company declared a further dividend of 2.04 cents per share including a special dividend of 0.29 cents per share in addition to the ordinary quarterly dividend of 1.75 cents per share

· Company NAV was highly stable during the period decreasing by $0.018 from $1.0217 to $1.0037

· The Company reported total net income for 2020 of $89m, this is down from $122m reported during 2019 which included $46m in fees linked to the prepayment of the Company's Tesaro loan

· No material impact on the credit quality of any loan as a result of the global disruption caused by the Covid-19 pandemic

INVESTMENT HIGHLIGHTS

· In the twelve month-period, the Company's portfolio continued to mature and perform robustly with significant further investments and a number of attractive realisations:

o The Company and its subsidiaries invested $548m in the period

o This included $308m of commitments entered into prior to the start of the year, $165m for the new senior secured loan with Collegium Pharmaceutical, Inc. (NASDAQ: COLL) announced 7 February 2020 and $75m as part of the amendment and upsizing of the Company's loan with Epizyme (NASDAQ: EPZM) announced 9 November 2020

o The Company saw increased liquidity from three early attractive repayments from Amicus, Novocure and Lexicon totalling $425m. Additional prepayment and other fees totalled an additional $14m enhancing attractive overall rates of return on these investments:

§ Novocure 10.2% Realised gross IRR

§ Lexicon 12.1% Realised gross IRR

§ Amicus 13.4% Realised gross IRR

· The Company's investment manager, Pharmakon Advisors continues to progress an active pipeline of additional potential investments to further grow and diversify the portfolio

PERFORMANCE HIGHLIGHTS

* Net income includes $20.5 million relating to the change in fair value of the Company's subsidiary, BPCR Limited Partnership. This change in fair value of $20.5 million is equal to the undistributed net income earned by BPCR Limited Partnership in the year, reflecting changes in the fair value of and income earned on the investment it holds. Details of these investments are set out in Note 2F, accounting policy for income and Note 7, investment at fair value through profit or loss. Details of its subsidiaries including its newly formed entities in 2020 are set out in Note 14.

PORTFOLIO COMPOSITION

* Includes cash at the Company and its subsidiaries

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

"During 2020, Covid-19 caused considerable economic turmoil leading to volatile equity markets and major stress for business models in many staple sectors for investor income resulting in widespread disruption for dividend distributions.

Against an uncertain macro backdrop, portfolio performance has been exceptional, with 8.28 cents per share paid for the four quarters ended September 2020, ahead of the Company's target to distribute at least 7 cents. The Company has also recently declared a special dividend after this period end of 0.29 cents per share. The high level of distributed income has been complemented by an exceptionally resilient NAV, decreasing by $0.018 in the period to $1.0037.

The stable nature of the Company's return profile over the past 12 month period further underlines the uncorrelated nature of the underlying revenue streams, uniquely among London listed investment companies drawn from cash flows linked to approved life science products. There has been no material change in the Company's investment market during the period, which continues to be capital intensive and suffers from a major shortfall in supply. It remains clear that the senior secured loans that form the majority of the Company's portfolio continue to be one of the most attractive financing options for the life sciences sector.

Accordingly, the Company continues to seek additional attractive investment opportunities and is consistently engaged in a number of productive discussions from our considerable investment pipeline. We look forward to further updating the market in due course."

Results presentation

As announced on 17 February 2021, a management presentation for analysts will be delivered via a conference call facility at 2:00pm GMT on the day of results. To request dial-in details please RSVP [email protected]

Enquiries

Buchanan

David Rydell / Mark Court / Jamie Hooper / Henry Wilson

+44 (0) 20 7466 5000

[email protected]

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.

2020 Investments

2020 Repayments

INVESTMENT

*includes cash at the Company and its subsidiaries

CHAIRMAN'S STATEMENT

During 2020, the Company invested $548 million, including $322 million from its financing subsidiary, BPCR Limited Partnership.

INTRODUCTION

2020 was the Company's third full year of operations and I am pleased to be able to report on another year of consistent returns and targets met.

INVESTMENTS

Over the course of 2020, the Company and its subsidiaries invested $548 million, $308 million of which comprised the funding of commitments entered into prior to the start of the year, $165 million for the new Collegium loan and $75 million as part of the amendment and upsizing of the Epizyme loan. The Company, including assets and liabilities from its financing subsidiary, BPCR Limited Partnership, ended the year with total net assets of $1,379 million, comprising $1,142 million of investments, $250 million of cash and $13 million of other net liabilities.

The Company and its subsidiaries saw increased liquidity from three early repayments of its Amicus, Novocure and Lexicon investments in the third quarter of 2020 totalling $425 million. These repayments were accompanied by prepayment and other fees totalling $14 million, thereby enhancing attractive overall rates of return on these investments.

SHAREHOLDER RETURNS

The Company reported total income for 2020 of $89 million, which includes $20.5 million relating to the change in fair value of its subsidiary, BPCR Limited Partnership, down from the $122 million reported during 2019 which included $46 million in fees linked to the prepayment of the Tesaro loan.

On 31 December 2020, the Company's Ordinary Shares closed at $0.9960, below the closing price on 31 December 2019 of $1.0200. Net Asset Value ("NAV") per Ordinary Share decreased over the same timeframe by $0.018 from $1.0217 to $1.0037. The Company made four dividend payments over the year totalling $0.0829 per share, referencing net income for the four quarters ending 30 September 2020. 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 2020 of 2.04 cents per share made up of an ordinary dividend of 1.75 cents per share together with a special dividend of 0.2901 cents per share. Total dividends from 2020 results reached 7.3 cents per share.

During the year, the COVID-19 pandemic led to restrictions to the movement of people and disruption to business operations. So far the portfolio has proved resilient. Pharmakon Advisors, our investment manager, believes that the COVID-19 virus has not had a material impact on the credit quality of the loans. The Investment Manager continues to monitor the situation and will inform shareholders of any material changes to this assessment.

BOARD CHANGES

A number of Board changes have taken place during the year. Jeremy Sillem retired as a Director and Chairman of the Company on 16 September 2020. On behalf of the Board, I would like to thank Jeremy for his leadership of the Company since IPO. The Board also welcomed Rolf Soderstrom as an additional Director of the Company, with effect from 16 September 2020. Rolf brings over 30 years of experience in finance and extensive strategic, operational and international experience including M&A, fundraisings and disposals to the Board. Finally, following my appointment as Chairman, Duncan Budge has been appointed as Senior Independent Director of the Company.

OUTLOOK

The Investment Manager continues to develop a pipeline of additional potential investments and, as a consequence, we expect to be evaluating a number of potential alternatives to fund future growth and further diversify our portfolio.

On behalf of the Board, I should like to express our thanks to Pharmakon for their continued achievements on behalf of the Company in 2020 and to our shareholders for their continued support.

Harry Hyman

Chairman

15 March 2021

INVESTMENT MANAGER'S REPORT

AN ATTRACTIVE INVESTMENT ENVIRONMENT TO BUILD ON PAST PERFORMANCE

INTRODUCTION TO THE INVESTMENT MANAGER

Pharmakon Advisors, the Company's Investment Manager, was founded in 2009 and has invested $4.6 billion in over 40 transactions on behalf of its clients. As at 31 December 2020, Pharmakon clients included four previous BioPharma Funds (I, II, III and IV), BioPharma V, a private fund also investing in life sciences debt managed by Pharmakon Advisors launched in June 2019, and seven managed co-investor accounts. The four previous BioPharma Funds have now reached the end of their investment period and have returned all capital to investors generating an average 10.4 per cent. IRR. BioPharma V has raised $742 million in commitments and had invested $521 million to date.

The Pharmakon team has extensive expertise investing in debt and other cash flows backed by life sciences products. Pharmakon prides itself on its ability to identify and structure investments that meet its target returns while minimising risk through its rigorous diligence process and industry expertise. As a result, Pharmakon has been able to generate consistent returns throughout its history.

Through a shared services agreement with RP Management LLC, Pharmakon has access to the complementary expertise of the team behind the market-leading investor in pharmaceutical royalties. RP Management LLC, an affiliate of Pharmakon, was established in 1996 and acquires revenue-producing intellectual property as the investment manager of Royalty Pharma PLC which had its IPO on 16 June 2020 (Nasdaq: RPRX) and had a market capitalisation of $25,820 million as of 5 March 2021.

INVESTMENTSPharmakon is pleased to present an update on the Company and its subsidiaries' portfolio and investment outlook. We are delighted with the results over the past year and look forward to a productive 2021 as we continue to solidify our position as the leading investor in life sciences debt. Since its IPO in March 2017 the Company and its subsidiaries have invested $2,263 million using proceeds from capital raises and have reinvested $1,227 million in amortisations, loan repayments and prepayments received by the Company and its subsidiaries.

2020 started with the Company and its subsidiaries' $165 million investment of the $200 million loan to Collegium. Over the following months, the Company and its subsidiaries funded an additional $308 million in previous commitments to GBT, BDSI, BMS and Akebia plus an additional $75 million as part of an upsizing of the Epizyme loans. In total, the Company and its subsidiaries' funded $548 million during 2020 including $322 million from its financing subsidiary, BPCR Limited Partnership. Three investments in the Company and its subsidiaries portfolio were prepaid early during the third quarter of 2020 (Novocure, Amicus and Lexicon) generating $444 million in cash ($425 million in principal, $5 million in accrued interest and $14 million in fees). Also during 2020, the Company and its subsidiaries negotiated a $200 million credit line with JPMorgan which the Company has not drawn upon. During the year the COVID-19 pandemic has impacted the global economy and has led to significant volatility in both the equity and debt capital markets. Pharmakon Advisors believes that the COVID-19 virus has not had a material impact on the credit quality of the loans. Pharmakon Advisors continues to monitor the situation and will inform shareholders of any material changes to this assessment. Below is an update on the Company and its subsidiaries portfolio.

Collegium

On 7 February 2020, the Company and BioPharma-V, a private fund also investing in life sciences debt managed by Pharmakon Advisors, 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").

The Company and its subsidiaries funded $165 million of the $200 million loan in February 2020. The loan will mature in February 2024 and will bear interest at three-month LIBOR plus 7.50 per cent. per annum subject to a 2.00 per cent. LIBOR floor with a one-time additional consideration of 2.50 per cent. of the loan amount payable upon funding. The loan amortises quarterly and had a remaining balance of $134 million as of 31 December 2020.

Collegium currently markets Xtampza® ER, an abuse-deterrent, extended-release, oral formulation of oxycodone and Nucyanta® (tapentadol), a centrally acting synthetic analgesic. Sales of the two drugs totalled $310 million during 2020, up 4 per cent. from $297 million during 2019. Collegium had a market capitalisation of approximately $779 million as at 5 March 2021.

GBT

On 18 December 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $150 million with Global Blood Therapeutics (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.

The Company and its subsidiaries funded $41 million of each tranche for a total investment of $83 million. The loan will mature in December 2025 and will bear interest at three month LIBOR plus 7.00 per cent. per annum subject to a 2.00 per cent. floor along with a one-time additional consideration of 1.50 per cent. of the total loan amount payable upon funding and an additional 2.00 per cent. payable upon the repayment of the loan.

GBT manufactures and sells Oxbryta TM (voxelotor) for the treatment of sickle cell disease in adults and pediatric patients 12 years of age and older. Oxbryta was launched in early 2020 and generated total sales of $124 million during its first year. GBT had a market capitalisation of approximately $2,495 million as of 5 March 2021.

Sarepta Therapeutics

On 13 December 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $500 million with Sarepta Therapeutics (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 will mature in December 2023 and the second tranche in December 2024. The loan will bear 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 payable upon funding and an additional 2 per cent. payable upon the repayment of the loan.

Sarepta currently markets Exondys 51 (eteplirsen) and Vyondys 53 (golodirsen) in the US for the treatment of Duchenne muscular dystrophy (DMD). Sales of the two drugs totalled $456 million during 2020, up 20 per cent. from $381 million during 2019. Sarepta had a market capitalisation of approximately $6,726 million as at 5 March 2021.

Akebia

On 11 November 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $100 million with Akebia (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 $40 million of the $80 million first tranche and $10 million of the second tranche. The loan will mature in November 2024 and will bear 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. 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. Sales of Auryxia totalled $129 million during 2020, up 16 per cent. from $111 million during 2019. Akebia had a market capitalisation of approximately $516 million as at 5 March 2021.

Epizyme

On 4 November 2019, the Company and BioPharma-V entered into a definitive senior secured term loan agreement for up to $70 million with Epizyme (Nasdaq: EPZM), a late-stage biopharmaceutical company developing novel epigenetic therapies ("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 will mature in November 2024 and will bear 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. Epizyme's lead product, TAZVERIK (tazemetostat), is a first-in-class, oral EZH2 inhibitor that received FDA approval for epithelioid sarcoma on 23 January 2020 and follicular lymphoma on 18 June 2020. TAZVERIK was launched in early 2020 and generated total sales of $16 million during its first year. Epizyme had a market capitalisation of approximately $959 million as at 5 March 2021.

Optinose

On 12 September 2019, the Company and BioPharma-V 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 US$150 million by OptiNose US, a wholly-owned subsidiary of OptiNose (Nasdaq: OPTN), a commercial-stage specialty pharmaceutical company ("OptiNose"). Optinose drew a total of US$130 million on 12 September 2019, $30 million on 13 February 2020 and $20 million on 1 December 2020. There are no additional funding commitments.

On 2 March 2021, the sales covenants in the notes were reduced by 16 per cent. for 2021 and 3 per cent. thereafter to allow for slower growth due to the temporary impact of Covid 19 from reduced patient visits. The revised covenant for 2021 of $80 million still represents growth of 65 per cent. from 2020.

The Company and its subsidiaries funded a total $72 million across all tranches and was allocated 445,696 warrants. The notes mature in September 2024 and bear 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 and BioPharma-V are committed to purchase under the facility and 810,357 warrants exercisable into common stock of OptiNose.

OptiNose's leading product, XHANCE® (fluticasone propionate), is a nasal spray approved by the U.S. Food and Drug Administration (FDA) in September 2017 for the treatment of nasal polyps in patients 18 years or older. XHANCE® utilises a novel and proprietary exhalation delivery system to deliver the drug high and deep into the sinuses, targeting areas traditional intranasal spray are not able to reach. Sales of XHANCE totalled $48 million during 2020, up 60 per cent. from $30 million during 2019. Optinose had a market capitalisation of approximately $186 million as at 5 March 2021.

Biodelivery Sciences International

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"). BDSI utilises its novel and proprietary BioErodible MucoAdhesive (BEMA®) technology, to develop and commercialize new applications of proven therapies aimed at addressing important unmet medical needs. 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 will mature in May 2025 and bears interest at LIBOR plus 7.5 per cent., along with 2 per cent. additional consideration. The Company sold 46% of its BDSI shares during 2019 at an average price of $6.5. BDSI shares closed at $4.08 on 10 March 2021.

BDSI leading products include BELBUCA® (buprenorphine buccal film) and Symproic® (naldemedine). Sales of the two drugs totalled $151 million during 2020, up 42 per cent. from $106 million during 2019. BDSI had a market capitalisation of approximately $407 million as at 5 March 2021.

Sebela Pharmaceuticals

On 1 May 2018, the Company was lead arranger of a $316 million senior secured term loan for Sebela BT Holdings Inc. ("Sebela"), a subsidiary of Sebela Pharmaceuticals. The Company committed to a $194 million investment, with the remaining $122 million balance coming from co-investors.

The five-year senior secured loan began amortising in the third quarter of 2018 and fully matures in December 2022. The loan bears interest at LIBOR (un-capped) plus a single-digit spread and includes additional consideration.

Sebela is a private specialty pharmaceutical company focused on gastrointestinal medicines, dermatology, and women's health. As at 31 December 2020, the principal amount outstanding of the Company's investment was $92 million.

Bristol-Myers Squibb

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 Bristol-Myers Squibb (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 and 2019, 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. As of 31 December 2020, the Company funded seven of the Purchased Payments based on sales from 1 January 2018 to 30 September 2019 for a total of $162 million.

Repaid investments

Since its IPO in March 2017, the Company and its subsidiaries have received $1,200 million in proceeds from repayments and pre-payments of various investments. These investments generated attractive returns, particularly those that were prepaid early and earned prepayment and make-whole fees:

Amicus Therapeutics

On 20 September 2018, the Company entered into a senior secured loan agreement for $150 million with Amicus Therapeutics, Inc, a commercial stage, rare metabolic disease-focused biopharmaceutical company ("Amicus").

The $150 million loan had a five-year maturity with only interest to be repaid for the first four years. The loan bore interest at LIBOR plus 7.50 per cent. (subject to certain caps) and included a 2.00 per cent. additional consideration. Following the restructuring of this loan with another third party, Amicus repaid the $150 million loan on 30 July 2020. The Company and its subsidiaries received a payment of $156 million, including the make-whole and prepayment premium totalling $5 million. The Company and its subsidiaries earned a 13.4 per cent. internal rate of return on its Amicus investment.

Lexicon Pharmaceuticals

On 4 December 2017, the Company and BioPharma IV entered into a definitive term loan agreement for up to $200 million with Lexicon Pharmaceuticals ("Lexicon"), a fully integrated biopharmaceutical company.

The $200 million loan was available in two tranches, each maturing in December 2022. The Company funded $125 million of the $200 million first tranche and Lexicon did not draw the second tranche. The loan had a fixed 9.0% coupon. Lexicon repaid the $125 million loan on 8 September 2020. The Company and its subsidiaries received a payment of $132 million including the make-whole and prepayment premium totalling $6 million. The Company and its subsidiaries earned a 12.1 per cent. internal rate of return on its Lexicon investment.

Novocure

On 7 February 2018, the Company entered into a senior secured loan agreement for $150 million with Novocure Limited (NASDAQ: NVCR), a commercial stage oncology company ("Novocure").

The $150 million loan was originally scheduled to mature in February 2023 and bear interest at 9.0 per cent. per annum. Novocure repaid the $150 million loan on 18 August 2020. The Company and its subsidiaries received a payment of $155 million, including a prepayment premium totalling $3 million. The Company earned a 10.2 per cent. internal rate of return on its Novocure investment.

Tesaro

On 21 November 2017, the Company and BioPharma Credit Investments IV, S.àr.L. ("BioPharma IV") entered into a definitive loan agreement for up to $500 million with Tesaro (NASDAQ: TSRO) ("Tesaro").

The Company funded $222 million of the $300 million first tranche on 6 December 2017 and $100 million of the $200 million second tranche on 29 June 2018 for a total investment of $322 million.

The Tesaro loan had a term of seven years and was secured by Tesaro's US rights to ZEJULA®. The first $300 million tranche bore interest at LIBOR plus 8 per cent. and the second tranche bore interest at LIBOR plus 7.5 per cent. The LIBOR rate was subject to a floor of 1 per cent. and certain caps. Each tranche of the loan was interest only for the first two years, amortises over the remaining term. Following its acquisition by GlaxoSmithKline, Tesaro repaid the $500 million loan on 23 January 2019.

The Company received a payment of $370 million on its $322 million share of the loan, including the make-whole and prepayment premium totalling $46 million, or 14.2 per cent., of the $322 million investment, which is the equivalent of what the Company would have received had the loan remained outstanding for another approximately fifteen months. The Company earned a 29.0 per cent. internal rate of return on its Tesaro investment.

Seed assets

The Company acquired $339 million in seed assets at the time of the IPO in March 2017, consisting of a $185 million investment in the RPS Note and a 46 per cent. limited partnership interest in BioPharma III, valued at $154 million at the time of the IPO. On 15 October 2018, the Company received its final payment on the RPS Note of $20 million, realising a 12.9 per cent. internal rate of return. On 29 January 2019, the Company received $8 million as its final payment from BioPharma III, realising a 13.6 per cent. internal rate of return.

Investment outlook

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 straight 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"). 2020 was a volatile year, with the BTK index declining 12 per cent. during the first three months of the year followed by a quick recovery, rising 28 per cent. from March to December, ending 2020 with a 13 per cent. increase for the year. Companies in the industry took advantage of the increased volatility and sudden recovery in share prices to issue $15.3 billion in convertible notes, a 129 per cent. increase from the previous year as well as $130 billion in equity, a 110% increase from 2019. The strong equity market also allowed for a 50 per cent. increase in IPO proceeds compared to 2019.

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 2020 was negatively affected by the Covid pandemic, declining 40% from 2019 levels to $118.8 billion.

We continue to see a robust pipeline of investment opportunities and expect it to continue to grow as new products are approved. 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. Further, Pharmakon remains confident of our ability to deliver attractive returns that will enable the Company to pay a robust dividend yield for our investors.

Pedro Gonzalez de Cosio

Co-founder and CEO, Pharmakon

15 March 2021

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.

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 limb (i) and limb (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 30 per cent. of the Company's gross assets will be exposed to any single Borrower;

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

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

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 2019 so as to be able to continue to qualify as an investment trust.

The Company has three wholly-owned subsidiaries, BPCR Ongdapa Limited, BPCR Limited Partnership and BPCR GP 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.

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 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 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, 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.

While the ongoing Covid-19 pandemic and resulting prohibition on public gatherings meant that shareholders were not be permitted to attend the AGM in June 2020, Shareholders were able to provide questions to the Company Secretary in advance of the AGM and a separate shareholder call was scheduled for any such questions to be answered by the Board and Investment Manager.

Although the Company has been established with an indefinite life, the Articles provide that a continuation vote be put to shareholders at the first AGM of the Company to be held following the fifth anniversary of Initial Admission i.e. in 2022 and, if passed, at the annual general meeting of the Company held every third year thereafter; and within two months of the expiration of any 12-month rolling period where 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 NAV per Ordinary Share (exclusive of any dividend declared) as at such month end and averaging this comparative figure over the relevant period).

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 it to achieve its 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 Specialist Fund 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. 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 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 Corporate Governance Statement 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 2020 was $1.0037 per Share, compared to $1.0217 per Share at 31 December 2019.

A full description of the Company's performance for the year ended 31 December 2020 is included in the Investment Manager's Report above.

Share price return

The Company's Share price at 31 December 2020 was $0.996, giving a return since 31 December 2019 of (2.4) per cent.

Share price discount / premium to NAV per Share

The Company's Share price was at a discount to the NAV per Share at 31 December 2020 of 0.77 per cent. The daily closing price of the Company's Shares ranged from $0.86 - $1.03 throughout the year.

In accordance with the Company's Articles of Association, if the Share price declines to a point where the Shares trade on average at a discount to NAV per Share in excess of 5 per cent. in any three-month rolling period, the Company has certain discount control mechanisms in place, one of which requires the Company to repurchase Shares until such time as the Share price discount to NAV per Share moves below 1 per cent.

On 22 June 2020, the Company announced that it was required to purchase shares in the market as a result of the shares trading in excess of a 5% discount to its NAV per Ordinary Share over a 3 month rolling period. At 16 July 2020, the Company's shares traded at an average discount of 1% or less to the NAV per Ordinary Share over the most recent two week rolling period, the Company therefore ceased to repurchase its shares in the market. During the period from 22 June 2020 to 16 July 2020, the Company repurchased a total of 59,694 shares.

As of 31 December 2020, the Investment Manager invested $5.2 million from the performance fee paid related to the year ended 31 December 2019 acquiring 5.6 million shares. Refer to section 4 (B) in the Notes to the Financial Statements.

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

Dividends totalling 8.29 cents per Ordinary Share, including two special dividends of 1.28 cents and 0.01 cents, have been paid during the year ended 31 December 2020.

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 2020, 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.

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 he 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 five Directors, four male and one female. Further information on the composition and operation of the Board is detailed in the Corporate Governance Statement in the full Annual Report.

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

Harry Hyman

Chairman

15 March 2021

EXTRACTS FROM THE DIRECTORS' REPORT

The Directors are pleased to present the Annual Report and audited financial statements for the year ended 31 December 2020.

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 (appointed as Chairman on 16 September 2020)

Duncan Budge - Senior Independent Director

Colin Bond - Chairman of the Audit and Risk Committee

Stephanie Léouzon - Director

Jeremy Sillem - Director and Chairman (retired on 16 September 2020)

Rolf Soderstrom - Director (appointed on 16 September 2020)

Share capital

At the general meeting held on 28 February 2017, the Company was granted authority to allot Ordinary Shares or C Shares up to an aggregate nominal amount of $20 million on a non-pre-emptive basis for a period of five years from the date of the resolution. No Ordinary Shares or C Shares have been allotted under this authority during the year. As at the date of this report, the Company may allot further Ordinary Shares or C Shares up to an aggregate nominal amount of $6,244,038.87 under its existing authority. Further information on the Company's share capital is set out in Note 13 to the financial statements.

As a result of volatile equity market conditions and in accordance with Section 9 of its prospectus published on 14 March 2018, the Company was required to purchase shares in the market during the year as a result of the shares trading in excess of a 5% discount to its NAV per ordinary share over a 3 month rolling period using the methodology described in the prospectus. At the annual general meeting held on 25 June 2020, 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. As set out in the Chairman's Statement above, 59,694 Ordinary Shares of $0.01 were bought back under this authority during the year, at a total cost of $60,009, and are held in treasury. This represented 0.004% of the issued share capital at 31 December 2020. No shares were purchased during the year for cancellation. At 31 December 2020, and as at the date of this report, the Company has the authority to buy back 205,892,722 Ordinary Shares under this authority. This authority will expire at the conclusion of, and renewal will be sought at, the annual general meeting to be held in June 2021.

At 31 December 2020, and as at the date of this report, there are 1,373,932,067 Ordinary Shares in issue, of which 59,694 Ordinary Shares are held in treasury. 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 2020, and as at the date of this report, were 1,373,872,373.

Dividends

Dividends paid in respect of the year ended 31 December 2020 are set out in Note 6 to the financial statements.

Dividend policy

The Company pays dividends in US dollars or GBP Sterling, if requested by a specific shareholder, on a quarterly basis. The Company may, where the Directors consider it appropriate, use the special distributable reserve created by the cancellation of its Share premium account to pay dividends.

The Company targets an annual dividend yield of 7 per cent. on the Ordinary Shares (calculated by reference to the issue price at IPO), together with a net total return on NAV of 8-9 per cent. per annum on the Ordinary Shares in the medium term.

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 International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board (IASB).

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 IFRSs as issued by the International Accounting Standards Board (IASB) 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

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

· the company financial statements, which have been prepared in accordance with IFRSs as issued by the International Accounting Standards Board (IASB), 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

15 March 2021

NON-STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2019 and 31 December 2020 but is derived from those accounts. Statutory accounts for the year ended 31 December 2019 have been delivered to the Registrar of Companies, and those for the year ended 31 December 2020 will be delivered in due course. The Auditor has reviewed those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the Auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Financial Statements.

STATEMENT OF COMPREHENSIVE INCOME

For the year ended 31 December 2020

(In $000s except per share amounts)

The total column of this statement is the Company's Statement of Comprehensive Income prepared in accordance with IFRS. The supplementary revenue and capital columns are presented for information purposes as recommended by the Statement of Recommended Practice ("SORP") issued by the Association of Investment Companies ("AIC").

All items in the above Statement derive from continuing operations.

There is no other comprehensive income, and therefore the return on ordinary activities after finance costs and taxation is also the total comprehensive income.

The notes below form part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

For the year ended 31 December 2020

(In $000s)

* The special distributable and revenue reserves can be distributed in the form of a dividend.

** The capital reserve can be used to repurchase treasury shares. It cannot be used for distributions.

The notes below form part of these financial statements.

STATEMENT OF FINANCIAL POSITION

As at 31 December 2020

(In $000s except per share amounts)

The financial statements of BioPharma Credit PLC registered number 10443190 were approved and authorised for issue by the Board of Directors on 15 March 2021 and signed on its behalf by:

Harry Hyman

Chairman

15 March 2021

The notes below form part of these financial statements.

CASH FLOW STATEMENT

For the year ended 31 December 2020

(In $000s)

*Purchases of investments includes Collegium, Optinose Tranche B, Q4 2019 BMS purchased payment, Epizyme Tranche B and BDSI Tranche B fundings before assets were transferred in kind to the financing subsidiary BPCR LP, on 22 May 2020. These payment do not include investments made by BPCR LP.

The notes below form part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

For the year ended 31 December 2020

1. GENERAL INFORMATION

BioPharma Credit PLC is a closed-ended investment company incorporated and domiciled in the United Kingdom on 24 October 2016 with registered number 10443190. The registered office of the Company is Beaufort House, 51 New North Road, Exeter, EX4 4EP. On 6 February 2017 the Company changed its name from PRECIS (2772) PLC.

The Company carries on business as an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010.

The Company's Investment Manager is Pharmakon Advisors L.P. ("Pharmakon"). Pharmakon is a limited partnership established under the laws of the State of Delaware. It is registered as an investment adviser with the SEC under the United States Investment Advisers Act of 1940, as amended.

Pharmakon is authorised as an Alternative Investment Fund Manager ("AIFM") under the Alternative Investment Fund Managers Directive ("AIFMD"). Pharmakon has, with the consent of the Directors, delegated certain administrative functions to Link Alternative Fund Administrators Limited ("Link").

2. ACCOUNTING POLICIES

a) Basis of preparation

The Company's annual financial statements covers the year from 1 January 2020 to 31 December 2020 and have been prepared in conformity with International Financial Reporting Standards ("IFRS") and interpretations issued by the IFRS Interpretations Committee ("IFRS IC"), which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and as applied in accordance with the Disclosure Guidance Transparency Rules sourcebook of the Financial Conduct Authority (FCA) and the AIC SORP (issued in October 2019) for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS. The financial statements have been prepared in accordance with the Companies Act 2006, as applicable to companies using IFRS. The financial statements have adopted the following accounting policies in their preparation, which remain consistent with the accounting policies adopted in the audited financial statements for the year ended 31 December 2019, with the exception of the change explained in note 2 (F).

The financial statements are presented in US dollars, being the functional currency of the Company. The financial statements have been prepared on a going concern basis under historical cost convention, except for the measurement at fair value of investments measured at fair value through profit or loss.

Assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10 'Consolidated Financial Statements' are required to measure their subsidiaries at fair value through profit or loss rather than consolidate the entities. The criteria which define an investment entity are as follows:

• an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

• an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

• an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Directors have concluded that the Company meets the characteristics of an investment entity, in that it has more than one investor and its investors are not related parties; holds a portfolio of investments, predominantly in the form of loans which generates returns through interest income. All investments, including its subsidiaries BPCR Ongdapa Limited and BPCR Limited Partnership, are reported at fair value to the extent allowed by IFRS.

b) Presentation of Statement of Comprehensive Income

In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been prepared alongside the Income Statement.

c) Segmental reporting

The Directors are of the opinion that the Company has one operating and reportable segment being the investment in debt assets secured by royalties or other cash flows derived from the sales of approved life sciences products.

d) Investments at fair value through profit or loss

The principal activity of the Company is to invest in interest-bearing debt assets with a contractual right to future cash flows derived from royalties or sales of approved life sciences products. In accordance with IFRS, the financial assets are measured at fair value through profit or loss. They are accounted for on their trade date at fair value, which is equivalent to the cost of the investment. The fair value of the asset reflects any contractual amortising balance and accrued interest.

The fair value hierarchy consists of the following three levels:

• Level 1 - Quoted market price for identical instruments in active markets

• Level 2 - Valuation techniques using observable Inputs

• Level 3 - Valuation techniques using significant unobservable inputs

Listed level 1 investments where a financial instrument is active are priced by quoted market prices.

Level 2 investments may be valued using market data obtained from external, independent sources. The data used could include quoted prices for similar assets and liabilities in active markets, prices for identical or similar assets and liabilities in inactive markets, or models with observable inputs.

For unlisted level 3 investments where the market for a financial instrument is not active, fair value is established using valuation techniques in accordance with the International Private Equity and Venture Capital Valuation ("IPEV") Guidelines (issued in December 2018), which may include recent arm's length market transactions between knowledgeable, willing parties, if available, reference to the current fair value of another instrument that is substantially the same, discounted cash flow analysis and option pricing models. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has proved reliable from estimates of prices obtained in actual market transactions, that technique is utilised.

Unlisted investments often require the manager to make estimates and judgements and apply assumptions or subjective judgement to future events and other matters that may affect fair value. For unlisted investments valued using a discounted cash flow analysis, the key judgements are the size of the market, pricing, projected sales of the product at trade date and future growth and other factors that will support the repayment of a senior secured or royalty debt instrument.

Changes in the fair value of investments held at fair value through profit or loss, and gains or losses on disposal, are recognised in the Statement of Comprehensive Income as gains or losses from investments held at fair value through profit or loss. Transaction costs incurred on the purchase and disposal of investments are included within the cost or deducted from the proceeds of the investments. All purchases and sales are accounted for on trade date.

e) Foreign currency

Transactions denominated in currencies other than US dollars are recorded at the rates of exchange prevailing on the date of the transaction. Items which are denominated in foreign currencies are translated at the rates prevailing on the balance sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the Statement of Comprehensive Income.

f) Income

There are five main sources of revenue for the Company: interest income, income from subsidiaries, royalty revenue, make- whole and prepayment income, dividends and paydown fees.

Interest income is recognised when it is probable that the economic benefits will flow to the Company. Interest is accrued on a time basis, by reference to the principal outstanding and the effective interest rate that is applicable. Accrued interest is included within trade and other receivables on the Statement of Financial Position.

The Company recognises accrued income for investments that it holds directly. The Company also holds an investment in BPCR Limited Partnership, its wholly owned subsidiary which it measures at fair value through profit or loss rather than consolidate. BPCR Limited Partnership also recognises accrued income for investments it holds directly. When the accrued income is recorded at the Partnership, the Company recognises the income in capital within the Statement of Comprehensive Income. When the Company's right to receive the income is established, funds are transferred from the Partnership to the Company and income is transferred to revenue within the Statement of Comprehensive Income.

Royalty revenue is recognised on an accrual basis in accordance with the substance of the relevant agreement (provided that it is probable that the economic benefits will flow to the Company and the amount of revenue can be measured reliably). Royalty arrangements that are based on production, sales and other measures are recognised by reference to the underlying arrangement.

Make-whole and prepayment income is recognised when payments are received by the Company and is recorded to revenue within the Statement of Comprehensive Income.

Dividends are receivable on equity shares and recognised on the ex-dividend date. Where no ex- dividend date is quoted, dividends are recognised when the Company's right to receive payment is established. Dividends from investments in unquoted shares and securities are recognised when they become receivable.

Some investments include additional consideration in the form of structuring fees, which are paid on completion of the transaction. As the investments are classified as level 3 in the fair value hierarchy, there is no observable evidence of the fair value of the investments excluding the fees, therefore the fees should be included in the day one fair value of the investments. From 1 January 2020, such fees are included in the fair value of the investment and released to the Statement of Comprehensive Income over the life of the investment. Prior to this date they were recognised as a gain in the Statement of Comprehensive Income at the funding date. We consider incorporating the fees in the fair value gains and losses over the life of the loans to be more reflective of the period over which the benefit is received. The impact of this change is immaterial to both the current and prior period. These fees are allocated to revenue within the Statement of Comprehensive Income.

Bank interest and other interest receivable are accounted for on an accruals basis.

g) Dividends paid to shareholders

The Company intends to pay dividends in US Dollars on a quarterly basis, however, shareholders can elect to have dividends paid in sterling. The Company may, where the Directors consider it appropriate, use the reserve created by the cancellation of its share premium account to pay dividends.

The Company intends to comply with the requirements for maintaining investment trust status for the purposes of section 1158 of the Corporation Tax Act 2010 (as amended) regarding distributable income. As such, the Company will distribute amounts such that it does not retain in respect of an accounting period an amount greater than 15 per cent. of its income (as calculated for UK tax purposes) for that period.

h) Expenses

All expenses are accounted for on an accruals basis. Expenses, including investment management fees, performance fees and finance costs, are charged through the revenue account except as follows:

• expenses which are incidental to the acquisition or disposal of an investment are treated as capital costs and separately identified and disclosed in Note 4; and

• expenses of a capital nature are accounted for through the capital account.

The performance fee is considered to be an annual fee and is only recognised at the end of each performance period. It is calculated in accordance with the details in Note 4(b) below. Any performance fee triggered, whether payable or deferred, is recognised in the Statement of Comprehensive Income. Where a performance fee is payable within the next twelve months, it is treated as a current liability in the Statement of Financial Position. Where a performance fee is deferred by more than twelve months, it is treated as a non-current liability in the Statement of Financial Position. It becomes payable to the Investment Manager at the end of the first performance period in respect to which the compounding condition is satisfied.

i) Trade and other receivables

Trade and other receivables are recognised and carried at amortised cost as the Company collects contractual interest payments from its borrowers. An allowance for estimated unrecoverable amounts are measured and recognised where necessary. The Company assesses, on a forward-looking basis, the expected losses associated with its trade and other receivables.

j) Cash and cash equivalents

Cash and cash equivalents are defined as cash in hand, demand deposits, and short-term, highly liquid investments readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

Cash and cash equivalents includes interest and income from money market funds.

k) Trade and other payables

Trade and other payables are recognised and carried at amortised cost, do not carry any interest and are short-term in nature.

l) Taxation

The Company may, if it so chooses, designate as an 'interest distribution' all or part of the amount it distributes to shareholders as dividends, to the extent that it has 'qualifying interest income' for the accounting period. Were the Company to designate any dividend it pays in this manner, it should be able to deduct such interest distributions from its income in calculating its taxable profit for the relevant accounting period. The Company intends to elect for the 'streaming' regime to apply to the dividend payments it makes to the extent that it has such 'qualifying interest income'. shareholders in receipt of such a dividend will be treated, for UK tax purposes, as though they had received a payment of interest, which results in a reduction of the corporation tax payable by the Company.

Tax on the profit or loss for the year comprises current and deferred tax. Corporation tax is recognised in the Statement of Comprehensive Income.

Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous periods. The tax effect of different items of expenditure is allocated between revenue and capital on the same basis as the particular item to which it relates, using the Company's marginal method of tax, as applied to those items allocated to revenue, for the accounting period.

Deferred tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax basis of assets and liabilities and their carrying amount for financial reporting purposes. Deferred tax liabilities are measured at the tax rates that are expected to apply to the period when the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

m) Share capital and reserves

The share capital represents the nominal value of the Company's ordinary shares.

The share premium account represents the excess over nominal value of the fair value of consideration received for the Company's ordinary shares, net of expenses of the share issue. This reserve cannot be distributed.

The special distributable reserve was created on 29 June 2017 to enable the Company to buy back its own shares and pay dividends out of such distributable reserve, in each case when the Directors consider it appropriate to do so, and for other corporate purposes.

The capital reserve represents realised and unrealised capital and exchange gains and losses on the disposal and revaluation of investments and of foreign currency items. The realised capital reserve can be used for the repurchase of shares. This reserve cannot be distributed.

The revenue reserve represents retained profits from the income derived from holding investment assets less the costs and interest on cash balances associated with running the Company. This reserve can be distributed.

n) Critical accounting estimates and assumptions

The preparation of these financial statements in conformity with IFRS requires the Directors to make accounting estimates which will not always equal the actual results. The Directors also need to exercise judgement in applying the Company's accounting policies.

This note provides an overview of the areas that involve a higher degree of judgement or complexity and of items which are more likely to be materially adjusted due to estimates and judgements included in other notes, together with information about the basis of calculation for each line in the financial statements.

In particular estimates are made in determining the fair valuation of unquoted investments for which there is no observable market and may cause material adjustments to the carrying value of those investments. Determining fair value of investments with unobservable market inputs is an area involving management estimates, requiring assessment as to whether the value of assets can be supported by the net present value of future cash flows derived from such assets using cash flow projections which have been discounted at an appropriate rate. In calculating the net present value of the future cash flows, certain critical assumptions are required to be made including management's expectations of short and long term growth rates in product sales and the selection of discount rates to reflect the risks involved. These are valued in accordance with Note 2(d) above and using the valuation techniques described in Note 7 below.

Also, estimates including cash flow projections, discount rates and growth rates in product sales are made when determining any deferred performance fee; this may be affected by future changes in the Company's portfolio and other assets and liabilities. Any deferred performance fee is calculated in accordance with Note 4(b) below and is recognised in accordance with Note 2(h) above.

These estimates are reviewed on an ongoing basis. Revisions to these estimates are also reviewed on an ongoing basis. Revisions are recognised prospectively.

o) New accounting standards effective since 1 January 2020

Amendment to IFRS 3 'Business Combinations'

The Directors have considered the implications of the amendments to IFRS 3 and are of the opinion that the Company's subsidiaries are already measured at fair value. Therefore, there has been no impact on the current and comparative financial statements for this accounting standard.

Definition of Material (Amendments to IAS 1 and IAS 8)

The Directors have considered the implications of the amendments to IAS 1 and IAS 8 and are of the opinion that there is no impact to the Company. Therefore, there has been no impact on the current and comparative financial statements for this accounting standard.

p) Accounting standards not yet effective

The IASB and International Financial Reporting Interpretations Committee ("IFRIC") have issued and endorsed the following standards and interpretations, applicable to the Company, which are not yet effective for the year ended 31 December 2020 and have therefore not been applied in preparing these financial statements.

COVID-19-Related Rent Concessions (Amendment to IFRS 16) - amending the standard to provide lessees with an exemption from assessing whether a COVID-19- related rent concession is a lease modification, effective for annual reporting periods beginning on or after 1 June 2020.

The Directors do not expect that the adoption of the standards and interpretations will have a material impact on the financial statements.

Other future development includes the IASB undertaking a comprehensive review of existing IFRSs. The Company will consider the financial impact of these new standards as they are finalised.

3. INCOME

* In 2020 the Company's senior secured term loan to Lexicon included make whole interest investment income of $3,082,000, which was paid upon the loan repayment and recognised as income in the year. In 2019 the Company's senior secured term loan to Tesaro included make whole interest investment income of $36,102,000, which was paid upon the loan repayment and recognised as income in the year.

** In 2020 the Company's senior secured term loans to Lexicon and Sebela included a prepayment premium of $2,675,000, which was paid upon the loan repayment and recognised as income in the year. In 2019 the Company's senior secured term loan to Tesaro included a prepayment premium of $9,660,000, which was paid upon the loan repayment and recognised as income in the year.

***In 2020 the Company's senior secured term loan to Collegium included additional consideration in the form of structuring fees of $4,125,000 which was paid upon the completion of the transaction and $467,000 of this amount recognised as income in the year. In 2019 the Company's senior secured term loan to Biodelivery Services, and the tranche A notes to OptiNose US, Epizyme, Akebia, Global Blood Therapeutics and Serepta Therapeutics included additional consideration in the form of structuring fees of $1,200,000, $1,856,000, $700,000, $1,000,000, $1,237,500 and $3,062,500 respectively, which was paid upon the completion of the transaction and recognised as income in the year.

4. FEES AND EXPENSES

EXPENSES

For the year ended 31 December 2019, the Auditor was also paid $129,000 for services performed in connection with reporting accounting work. There were no similar costs incurred in 2020.

For the year ended 31 December 2019, the negative balance of legal fees in the prior year relates to the reversal of an accrual for legal work carried out in relation to a potential revolving credit facility. Following a negotiation of the fee subsequent to the year end, the amount paid in respect of the services was revised down from $1,658,000 to $500,000. 

a) Investment management fee

With effect from the Initial Admission, the Investment Manager is entitled to a management fee (''Management Fee'') calculated on the following basis: (1/12 of 1 per cent. of the NAV on the last business day of the month in respect of which the Management Fee is to be paid (calculated before deducting any accrued Management Fee in respect of such month)) minus (1/12 of $100,000).

The Management Fee payable in respect of any quarter will be reduced by an amount equal to the Company's pro rata share of any transaction fees, topping fees, break-up fees, investment banking fees, closing fees, consulting fees or other similar fees which the Investment Manager (or an affiliate) receives in connection with transactions involving investments of the Company (''Transaction Fees''). The Company's pro rata share of any Transaction Fees will be in proportion to the Company's economic interest in the investment(s) to which such Transaction Fees relate.

b) Performance fee

Subject to: (i) the NAV attributable to the Ordinary Shares as at the end of a performance period representing a minimum of 6 per cent. annualised rate of return on the Company's IPO gross proceeds (adjusted for dividends, share issues and buybacks as appropriate), (ii) the total return on the NAV attributable to the Ordinary Shares (adjusted for dividends, share issues and buybacks as appropriate) exceeding 6 per cent. over such performance period, and (iii) a high watermark, the Investment Manager will be entitled to receive a performance fee equal to the lesser of: (a) 50 per cent. of the total return above 6 per cent.; and (b) 10 per cent. of the total return over such performance period provided always that the amount of any performance fee payable to the Investment Manager will be reduced to the extent necessary to ensure that after account is taken of such fee, condition (iii) above remains satisfied.

Where the Investment Manager is not entitled to a performance fee solely because condition (i) has not been satisfied, such fee will be deferred and paid in a subsequent performance period in which such condition is satisfied. Where condition (i) is satisfied in a performance period but the payment of a performance fee (or any deferred performance fee from previous performance periods) in full would result in that condition failing, the Investment Manager shall be entitled to such a portion of such fee that does not result in the failure of the condition (i) above and the balance would be deferred to a future performance period.

Any performance fee (whether deferred or otherwise) shall be paid as soon as practicable after the end of the relevant performance period and, in any event, within 15 business days of the publication of the Company's audited annual financial statements relating to such period.

Where the payment of performance fee (or any deferred performance fee from previous performance periods) in full would result in the failure of condition (i) above, the Investment Manager shall only be entitled to 50 per cent. of such fee that does not result in the failure of condition (i) with the balance being deferred to a future performance period.

If, during the last month of a performance period, the Shares have, on average, traded at a discount of 1 per cent. or more to the NAV per Share (calculated by comparing the middle market quotation of the Shares at the end of each business day in the month to the prevailing published NAV per Share (exclusive of any dividend declared) as at the end of such business day and averaging this comparative figure over the month), the Investment Manager shall (or shall procure that its Associate does) apply 50 per cent. of any Performance Fee paid by the Company to the Investment Manager (or its Associate) in respect of that performance period (net of all taxes and charges applicable to such portion of the Performance Fee) to make market acquisitions of Shares (the "Performance Shares") as soon as practicable following the payment of the Performance Fee by the Company to the Investment Manager (or its Associate) and at least until such time as the Shares have, on average, traded at a discount of less than 1 per cent. to the NAV per Share over a period of five business days (calculated by comparing the middle market quotation of the Shares at the end of each such business day to the prevailing published NAV per Share (exclusive of any dividend declared) and averaging this comparative figure over the period of five business days). The Investment Manager's obligation:

1) shall not apply to the extent that the acquisition of the Performance Shares would require the Investment Manager to make a mandatory bid under Rule 9 of the Takeover Code; and

2) shall expire at the end of the performance period which immediately follows the performance period to which the obligation relates.

The below table shows the accrued and payable performance fee.

The Performance Fee for a performance period shall be paid as soon as practicable after the end of the relevant performance period and, in any event, within three calendar months of the end of such performance period.

c) Directors

Each of the Directors is entitled to receive a fee from the Company at such rate as may be determined in accordance with the Articles. The Directors' remuneration is $70,000 per annum for each Director other than:

• the Chairman, who will receive an additional $30,000 per annum; and

• the chairman of the Audit and Risk Committee, who will receive an additional $15,000 per annum.

5. TAXATION ON ORDINARY ACTIVITIES

It is the intention of the Directors to conduct the affairs of the Company so as to satisfy the conditions for approval of the Company by HMRC as an investment trust under Section 1158 of the Corporation Tax Act 2010 (as amended) and pursuant to regulations made under Section 1159 of the Corporation Tax Act 2010. As an investment trust, the Company is exempt from corporation tax on capital gains.

The current taxation charge for the year is different from the standard rate of corporation tax in the UK of 19.00 per cent., the effective tax rate was 0.00 per cent. The differences are explained below.

* The theoretical tax rate is calculated using a blended tax rate over the year.

At 31 December 2020, the Company had no deferred tax liabilities.

At that date, based on current estimates and including the accumulation of net allowable losses, the Company had no unrelieved losses.

Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an Investment Trust company.

6. DIVIDENDS

Set out below are the interim dividends paid or proposed on Ordinary Shares in respect of the financial year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.

On 11 March 2021, the Board approved a fourth interim dividend, for the year ended 31 December 2020, of $0.0175 per Ordinary Share and a special dividend of $0.00290119 per Ordinary Share, both payable on 16 April 2021. In accordance with IFRS, these dividends have not been included as a liability in these financial statements.

7. INVESTMENTS AT FAIR VALUE THROUGH PROFIT AND LOSS

Transaction costs, (incurred at the point of the transaction) incidental to the acquisition of investments totalled $nil (2019: $nil) for the year. In addition, legal fees incidental to the acquisition of investments totalled $nil (2019: $48,000) as disclosed in Note 4, have been taken to the capital column in the Statement of Comprehensive Income since they are capital in nature.

The Company is required to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy consists of the following three levels:

· Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.

· Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).

· Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).

The level of the fair value hierarchy, within which the fair value measurement is categorised, is determined on the basis of the lowest level input that is significant to the fair value of the investment.