BenevolentAI's reported down round spells trouble for Woodford

BenevolentAI, a drug discovery company, is looking to raise money at a “level far below” the $2bn valuation bequeathed on it last year by investors including Woodford Investment Management, according to a report from the Sunday Times.

News of a potential down round follows FT Alphaville's long analysis of the business, published over a fortnight ago. The company was brought to our attention thanks to its prominence in Woodford's investment vehicles, including the now-gated Equity Income Fund and the Patient Capital Trust.

The Sunday Times article covers the story well, but one thing missed is that, as of December, BenevolentAI had yet to draw down the full £84.1m it raised last year. According to Companies House filings, the medical technology business still had £20.5m to come in as of Dec 31 2018.

So if you include the £19.9m it had on its balance sheet, there was a pool of £40.4m readily available at the turn of the year — enough to cover last year's operating loss of £32.6m. In other words, the company had wriggle room at last year's spending levels.

We asked Benevolent AI about the news, and a spokesperson for the company said:

Fast-growing companies like ours are always talking to potential new investors. However, the Sunday Times report is inaccurate. We do not have an agreed term sheet or a valuation.

So the valuation has not been agreed yet, but there have been talks. The spokesperson also said:

We are growing our licensing revenues both from out licensing IP from our internal drug pipeline and partnering with the pharmaceutical industry, such as the recently announced collaboration with AstraZeneca and other such deals are in progress.

Woodford's Patient Capital Trust, in which BenevolentAI is its second largest holding at around £85m, didn't react well to the news. At pixel time its shares are down 2.72 per cent to 55.94p in lunchtime trading, a discount to net asset value of 30.44 per cent per Hargreaves Lansdown.

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