N-Q 1 a19-2161_3nq.htm N-Q

 

 

 

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Expires:

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UNITED STATES

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SECURITIES AND EXCHANGE COMMISSION

 

 

Washington, D.C. 20549

 

 

FORM N-Q

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-22955

 

Tekla Healthcare Opportunities Fund

(Exact name of registrant as specified in charter)

 

100 Federal Street, 19th Floor, Boston, MA

 

02110

(Address of principal executive offices)

 

(Zip code)

 

 

(Name and address of agent for service)

 

Registrant’s telephone number, including area code:

617-772-8500

 

 

Date of fiscal year end:

September 30

 

 

Date of reporting period:

12/31/18

 

 


 

Item 1.  Schedule of Investments.

 


 

TEKLA HEALTHCARE OPPORTUNITIES FUND

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2018

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED AND WARRANTS (Restricted)(a) (b) - 1.3% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

Biotechnology — 1.2%

 

 

 

751,072

 

Atreca, Inc. Series C1

 

$

1,749,998

 

1,106,444

 

Galera Therapeutics, Inc. Series C, 6.00%

 

2,449,999

 

213,333

 

GenomeDx Biosciences, Inc. Series C, 6.00%

 

710,400

 

186,731

 

GenomeDx Biosciences, Inc. Series D, 8.00%

 

569,531

 

36,668

 

GenomeDx Biosciences, Inc. Series D Prime, 8.00%

 

335,516

 

175,122

 

GenomeDx Biosciences, Inc. Series E, 8.00%

 

409,609

 

25,748

 

GenomeDx Biosciences, Inc. Warrants (expiration 11/1/27, exercise price $3.05)

 

0

 

2,538,462

 

Rainier Therapeutics, Inc. Series A, 6.00%

 

1,650,000

 

1,470,588

 

Rainier Therapeutics, Inc. Series B, 6.00%

 

1,100,000

 

 

 

 

 

8,975,053

 

 

 

Health Care Equipment & Supplies — 0.1%

 

 

 

407,078

 

IlluminOss Medical, Inc. Series AA, 8.00%

 

407,078

 

383,470

 

IlluminOss Medical, Inc. Junior Preferred, 8.00%

 

383,470

 

21,885

 

IlluminOss Medical, Inc. Warrants (expiration 1/11/28, exercise price $1.00)

 

0

 

10,942

 

IlluminOss Medical, Inc. Warrants (expiration 11/20/27, exercise price $1.00)

 

0

 

21,885

 

IlluminOss Medical, Inc. Warrants (expiration 2/6/28, exercise price $1.00)

 

0

 

32,792

 

IlluminOss Medical, Inc. Warrants (expiration 3/31/27, exercise price $1.00)

 

0

 

27,356

 

IlluminOss Medical, Inc. Warrants (expiration 9/6/27, exercise price $1.00)

 

0

 

 

 

 

 

790,548

 

 

 

TOTAL CONVERTIBLE PREFERRED AND WARRANTS
(Cost $11,589,740)

 

9,765,601

 

 

 

PREFERRED STOCK — 1.6% of Net Assets

 

 

 

 

 

Real Estate Investment Trust — 1.6%

 

 

 

200,000

 

Welltower Inc., 6.50% (b)

 

12,630,000

 

 

 

TOTAL PREFERRED STOCK
(Cost $11,919,595)

 

12,630,000

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

 

 

 

 

 

 

CONVERTIBLE AND NON-CONVERTIBLE NOTES - 15.4% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

Convertible Notes — 1.4%

 

 

 

 

 

 

 

 

 

 

 

Biotechnology (Restricted) (a) — 0.0%

 

 

 

$

137,301

 

GenomeDx Biosciences, Inc. Promissory Note, 6.00% due 12/28/19

 

137,301

 

 

The accompanying notes are an integral part of this Schedule of Investments.

 


 

PRINCIPAL
AMOUNT

 

 

 

VALUE

 

 

 

 

 

 

 

 

 

Health Care Equipment & Supplies (Restricted) (a) — 0.1%

 

 

 

$

131,169

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 1/31/19

 

$

131,169

 

43,770

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 1/31/19

 

43,770

 

87,539

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 1/31/19

 

87,539

 

87,539

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 1/31/19

 

87,539

 

109,424

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 1/31/19

 

109,424

 

 

 

 

 

459,441

 

 

 

Pharmaceuticals — 1.3%

 

 

 

13,000,000

 

Aegerion Pharmaceuticals, Inc., 2.00% due 8/15/19

 

9,733,750

 

7,000,000

 

Egalet Corporation, 5.50% due 4/01/20 (a)

 

700,000

 

 

 

 

 

10,433,750

 

 

 

TOTAL CONVERTIBLE NOTES

 

11,030,492

 

 

 

 

 

 

 

 

 

Non-Convertible Notes — 14.0%

 

 

 

 

 

 

 

 

 

 

 

Biotechnology — 2.5%

 

 

 

10,000,000

 

Amgen Inc., 3.63% due 5/15/22

 

10,068,633

 

10,000,000

 

Gilead Sciences, Inc., 2.95% due 3/01/27

 

9,309,835

 

 

 

 

 

19,378,468

 

 

 

Health Care Equipment & Supplies — 1.4%

 

 

 

5,000,000

 

Medtronic, Inc., 3.50% due 3/15/25

 

4,980,246

 

6,000,000

 

Zimmer Biomet Holdings, Inc., 4.25% due 8/15/35

 

5,405,237

 

 

 

 

 

10,385,483

 

 

 

Health Care Providers & Services — 8.5%

 

 

 

12,693,000

 

Acadia Healthcare Company, Inc., 5.13% due 7/01/22

 

12,121,815

 

10,500,000

 

Anthem, Inc., 3.50% due 8/15/24

 

10,299,162

 

7,500,000

 

Encompass Health Corporation, 5.75% due 11/01/24

 

7,425,000

 

8,250,000

 

Express Scripts Holding Company, 6.13% due 11/15/41

 

9,210,851

 

9,700,000

 

HCA Healthcare, Inc., 6.25% due 2/15/21

 

9,918,250

 

5,500,000

 

Tenet Healthcare Corporation, 4.63% due 7/15/24

 

5,115,000

 

10,500,000

 

UnitedHealth Group Incorporated, 4.38% due 3/15/42

 

10,516,136

 

 

 

 

 

64,606,214

 

 

 

Pharmaceuticals — 1.6%

 

 

 

4,750,000

 

AstraZeneca PLC, 6.45% due 9/15/37 (e) 

 

5,664,964

 

780,000

 

Mallinckrodt International Finance SA, 4.75% due 4/15/23

 

522,600

 

5,020,000

 

Wyeth LLC, 5.95% due 4/01/37

 

6,020,311

 

 

 

 

 

12,207,875

 

 

 

TOTAL NON-CONVERTIBLE NOTES

 

106,578,040

 

 

 

TOTAL CONVERTIBLE AND NON-CONVERTIBLE NOTES
(Cost $131,797,025)

 

117,608,532

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS - 106.5% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

Biotechnology — 21.2%

 

 

 

337,692

 

AbbVie Inc. (c)

 

31,131,825

 

 

The accompanying notes are an integral part of this Schedule of Investments.

 


 

SHARES

 

 

 

VALUE

 

 

 

 

 

 

 

 

 

Biotechnology — continued

 

 

 

99,290

 

Alexion Pharmaceuticals, Inc. (b)

 

9,666,874

 

151,152

 

Amgen Inc.

 

29,424,760

 

205,771

 

Amicus Therapeutics, Inc. (b)

 

1,971,286

 

54,043

 

Biogen Inc. (b) (c)

 

16,262,620

 

204,109

 

Celgene Corporation (b)

 

13,081,346

 

35,093

 

Esperion Therapeutics, Inc. (b)

 

1,614,278

 

26,921

 

Galapagos NV (b) (d)

 

2,469,733

 

406,366

 

Gilead Sciences, Inc. (c)

 

25,418,193

 

73,552

 

Incyte Corporation (b)

 

4,677,172

 

11,459

 

Ligand Pharmaceuticals Incorporated (b)

 

1,554,986

 

23,436

 

Neurocrine Biosciences, Inc. (b)

 

1,673,565

 

226,241

 

Pieris Pharmaceuticals, Inc. (b)

 

601,801

 

40,496

 

Pieris Pharmaceuticals, Inc., Series A Warrants (expiration 6/8/21, exercise price $3.00) (a) (b)

 

27,537

 

20,248

 

Pieris Pharmaceuticals, Inc., Series B Warrants (expiration 6/8/21, exercise price $2.00) (a) (b)

 

19,843

 

24,196

 

Puma Biotechnology, Inc. (b)

 

492,389

 

12,163

 

Regeneron Pharmaceuticals, Inc. (b)

 

4,542,881

 

6,051

 

Sage Therapeutics, Inc. (b)

 

579,625

 

36,142

 

Sarepta Therapeutics, Inc. (b)

 

3,944,176

 

73,797

 

Vertex Pharmaceuticals Incorporated (b)

 

12,228,901

 

 

 

 

 

161,383,791

 

 

 

Health Care Equipment & Supplies — 14.9%

 

 

 

262,630

 

Abbott Laboratories

 

18,996,028

 

9,200

 

ABIOMED, Inc. (b) 

 

2,990,368

 

107,668

 

Baxter International Inc.

 

7,086,708

 

43,972

 

Becton, Dickinson and Company

 

9,907,771

 

85,475

 

Dentsply Sirona, Inc.

 

3,180,525

 

45,202

 

Edwards Lifesciences Corporation (b)

 

6,923,590

 

18,725

 

IDEXX Laboratories, Inc. (b)

 

3,483,224

 

13,500

 

Inogen, Inc. (b)

 

1,676,295

 

51,470

 

Inovalon Holdings, Inc. (b)

 

729,845

 

301,487

 

Medtronic plc

 

27,423,258

 

28,816

 

NuVasive, Inc. (b)

 

1,428,121

 

16,612

 

STERIS plc

 

1,774,992

 

91,729

 

Stryker Corporation

 

14,378,521

 

6,379

 

Teleflex Incorporated

 

1,648,844

 

25,069

 

Varian Medical Systems, Inc. (b)

 

2,840,568

 

60,991

 

Wright Medical Group N.V. (b) 

 

1,660,175

 

74,924

 

Zimmer Biomet Holdings, Inc.

 

7,771,117

 

 

 

 

 

113,899,950

 

 

 

Health Care Providers & Services — 21.8%

 

 

 

65,768

 

Acadia Healthcare Company, Inc. (b)

 

1,690,895

 

 

The accompanying notes are an integral part of this Schedule of Investments.

 


 

SHARES

 

 

 

VALUE

 

 

 

 

 

 

 

 

 

Health Care Providers & Services — continued

 

 

 

71,307

 

AmerisourceBergen Corporation

 

$

5,305,241

 

93,441

 

Anthem, Inc.

 

24,540,410

 

79,361

 

Centene Corporation (b)

 

9,150,323

 

22,670

 

Charles River Laboratories International, Inc. (b)

 

2,565,791

 

50,745

 

Cigna Corporation

 

9,637,424

 

109,035

 

Community Health Systems, Inc. (b)

 

307,479

 

293,916

 

CVS Health Corporation

 

19,257,376

 

344,460

 

Diplomat Pharmacy, Inc. (b)

 

4,636,431

 

65,635

 

HCA Healthcare, Inc.

 

8,168,276

 

41,000

 

Humana Inc.

 

11,745,680

 

59,870

 

McKesson Corporation

 

6,613,839

 

141,136

 

Tenet Healthcare Corporation (b)

 

2,419,071

 

232,106

 

UnitedHealth Group Incorporated (c)

 

57,822,247

 

8,500

 

WellCare Health Plans, Inc. (b)

 

2,006,765

 

 

 

 

 

165,867,248

 

 

 

Healthcare Services — 0.3%

 

 

 

19,100

 

Laboratory Corporation of America Holdings (b) 

 

2,413,476

 

 

 

 

 

 

 

 

 

Life Sciences Tools & Services — 4.9%

 

 

 

8,200

 

Agilent Technologies, Inc. (c)

 

553,172

 

38,383

 

Illumina, Inc. (b)

 

11,512,213

 

2,300

 

Mettler-Toledo International, Inc. (b) 

 

1,300,834

 

25,600

 

PRA Health Sciences, Inc. (b)

 

2,354,176

 

90,193

 

Thermo Fisher Scientific Inc.

 

20,184,291

 

7,100

 

Waters Corporation (b) 

 

1,339,415

 

 

 

 

 

37,244,101

 

 

 

Medical Devices and Diagnostics — 6.6%

 

 

 

19,237

 

Align Technology, Inc. (b) 

 

4,028,805

 

337,344

 

Boston Scientific Corporation (b) (c)

 

11,921,737

 

121,354

 

Danaher Corporation

 

12,514,025

 

16,091

 

Hologic, Inc. (b)

 

661,340

 

26,306

 

Intuitive Surgical, Inc. (b) 

 

12,598,470

 

12,231

 

Masimo Corporation (b)

 

1,313,242

 

43,600

 

Quest Diagnostics, Inc.

 

3,630,572

 

29,558

 

ResMed Inc.

 

3,365,769

 

 

 

 

 

50,033,960

 

 

 

Pharmaceuticals — 30.7%

 

 

 

124,692

 

Allergan plc

 

16,666,333

 

391,544

 

Bristol-Myers Squibb Company

 

20,352,457

 

169,069

 

Eli Lilly and Company

 

19,564,665

 

28,600

 

IQVIA Holdings, Inc. (b) 

 

3,322,462

 

596,014

 

Johnson & Johnson (c)

 

76,915,607

 

194,729

 

Medicines Company (The) (b) (c)

 

3,727,113

 

389,523

 

Merck & Co., Inc.

 

29,763,452

 

197,238

 

Mylan N.V. (b)

 

5,404,321

 

 

The accompanying notes are an integral part of this Schedule of Investments.

 


 

SHARES

 

 

 

VALUE

 

 

 

Pharmaceuticals — continued

 

 

 

50,300

 

Novo Nordisk A/S (d)

 

$

2,317,321

 

884,426

 

Pfizer Inc.

 

38,605,195

 

478,203

 

Teva Pharmaceutical Industries Limited (b) (d)

 

7,373,890

 

117,857

 

Zoetis Inc.

 

10,081,488

 

 

 

 

 

234,094,304

 

 

 

Real Estate Investment Trusts — 6.1%

 

 

 

159,324

 

LTC Properties, Inc.

 

6,640,624

 

345,855

 

Medical Properties Trust, Inc.

 

5,561,348

 

211,143

 

New Senior Investment Group Inc.

 

869,909

 

330,651

 

Omega Healthcare Investors, Inc.

 

11,622,383

 

335,716

 

Physicians Realty Trust

 

5,381,528

 

471,734

 

Sabra Health Care REIT, Inc.

 

7,774,176

 

293,879

 

Senior Housing Properties Trust

 

3,444,262

 

15,000

 

Ventas Realty, LP / Ventas Capital Corporation

 

363,000

 

76,246

 

Ventas, Inc.

 

4,467,253

 

 

 

 

 

46,124,483

 

 

 

TOTAL COMMON STOCKS AND WARRANTS
(Cost $816,335,416)

 

811,061,313

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

 

 

 

 

 

 

SHORT-TERM INVESTMENT - 4.2% of Net Assets

 

 

 

$

31,903,000

 

Repurchase Agreement, Fixed Income Clearing Corp., repurchase value $31,903,000, 0.50%, dated 12/31/18, due 01/02/19 (collateralized by U.S. Treasury Notes 2.625%, due 12/31/25, market value $32,545,000)

 

31,903,000

 

 

 

TOTAL SHORT-TERM INVESTMENT
(Cost $31,903,000)

 

31,903,000

 

 

 

TOTAL INVESTMENTS - 129.0%
(Cost $1,003,544,776)

 

$

982,968,446

 

 

The accompanying notes are an integral part of this Schedule of Investments.

 


 

NUMBER OF
CONTRACTS
(100 SHARES
EACH)/NOTIONAL
AMOUNT

 

 

 

VALUE

 

 

 

 

 

 

 

 

 

OPTION CONTRACTS PURCHASED - 0.0% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

CALL OPTION CONTRACTS PURCHASED- 0.0% of Net Assets

 

 

 

 

 

 

 

 

 

65/(6,500)

 

Biogen Inc. Jun20 360 Call

 

$

211,250

 

 

 

TOTAL OPTION CONTRACTS PURCHASED
(Premiums paid $300,473)

 

211,250

 

 

 

 

 

 

 

 

 

OPTION CONTRACTS WRITTEN - (0.1)% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

CALL OPTION CONTRACTS WRITTEN — (0.1)%

 

 

 

509/(50,900)

 

AbbVie Inc. Jan19 96 Call

 

(42,756

)

1,056/(105,600)

 

Boston Scientific Corporation Jan19 36.5 Call

 

(58,080

)

1,052/(105,200)

 

Gilead Sciences, Inc. Jan19 66 Call

 

(68,380

)

1,447/(144,700)

 

Johnson & Johnson Jan19 133 Call

 

(138,912

)

520/(52,000)

 

Medicines Company (The) Jan19 20 Call

 

(33,800

)

369/(36,900)

 

UnitedHealth Group Incorporated Jan19 262.5 Call

 

(84,501

)

 

 

TOTAL CALL OPTION CONTRACTS WRITTEN
(Premiums received $475,969)

 

(426,429

)

 

 

 

 

 

 

 

 

PUT OPTION CONTRACTS WRITTEN — 0.0%

 

 

 

535/(53,500)

 

Amgen Inc. Jan19 182.5 Put

 

(88,275

)

 

 

TOTAL PUT OPTION CONTRACTS WRITTEN
(Premiums received $86,797)

 

(88,275

)

 

 

TOTAL OPTION CONTRACTS WRITTEN
(Premiums received $562,766)

 

(514,704

)

 

 

TOTAL INVESTMENTS LESS OPTION CONTRACTS - 129.0%
(Cost $1,003,282,483)

 

982,664,992

 

 

 

OTHER LIABILITIES IN EXCESS OF ASSETS - (29.0)%

 

(220,902,277

)

 

 

NET ASSETS - 100%

 

$

761,762,715

 

 


(a)              Security fair valued using significant unobservable inputs. See Investment Valuation and Fair Value Measurements.

(b)              Non-income producing security.

(c)               A portion of security is pledged as collateral for call options written.

(d)              American Depository Receipt

(e)               Foreign security.

 

The accompanying notes are an integral part of this Schedule of Investments.

 


 

TEKLA HEALTHCARE OPPORTUNITIES FUND

NOTES TO SCHEDULE OF INVESTMENTS

DECEMBER 31, 2018

(Unaudited)

 

Investment Valuation

 

Shares of publicly traded companies listed on national securities exchanges or trading in the over-the-counter market are typically valued at the last sale price, as of the close of trading, generally 4 p.m., Eastern time. The Board of Trustees of the Fund (the Trustees) has established and approved fair valuation policies and procedures with respect to securities for which quoted prices may not be available or which do not reflect fair value. Convertible bonds, corporate and government bonds are valued using a third-party pricing service. Convertible bonds are valued using this pricing service only on days when there is no sale reported. Puts and calls generally are valued at the close of regular trading on the securities or commodities exchange on which they are primarily traded. Options on securities generally are valued at their last sale price in the case of exchange traded options or, in the case of OTC-traded options, the average of the last sale price as obtained from two or more dealers unless there is only one dealer, in which case that dealer’s price is used.  Forward foreign currency contracts are valued on the basis of the value of the underlying currencies at the prevailing currency exchange rate. Restricted securities of companies that are publicly traded are typically valued based on the closing market quote on the valuation date adjusted for the impact of the restriction as determined in good faith by Tekla Capital Management LLC (the Adviser) also using fair valuation policies and procedures approved by the Trustees described below. Non-exchange traded warrants of publicly traded companies are generally valued using the Black-Scholes model, which incorporates both observable and unobservable inputs. Short-term investments with a maturity of 60 days or less are generally valued at amortized cost, which approximates fair value.

 

Convertible preferred shares, warrants or convertible note interests in private companies and other restricted securities, as well as shares of publicly traded companies for which market quotations are not readily available, such as stocks for which trading has been halted or for which there are no current day sales, or which do not reflect fair value, are typically valued in good faith, based upon the recommendations made by the Adviser pursuant to fair valuation policies and procedures approved by the Trustees.

 

The Adviser has a Valuation Sub-Committee comprised of senior management which reports to the Valuation Committee of the Board at least quarterly. Each fair value determination is based on a consideration of relevant factors, including both observable and unobservable inputs. Observable and unobservable inputs the Adviser considers may include (i) the existence of any contractual restrictions on the disposition of securities; (ii) information obtained from the company, which may include an analysis of the company’s financial statements, the company’s products or intended markets or the company’s technologies; (iii) the price of the same or similar security negotiated at arm’s length in an issuer’s completed subsequent round of financing; (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies; or (v) a probability and time value adjusted analysis of contractual terms. Where available and appropriate, multiple valuation methodologies are applied to confirm fair value. Significant unobservable inputs identified by the Adviser are often used in the fair value determination. A significant change in any of these inputs may result in a significant change in the fair value measurement. Due to the uncertainty inherent in the valuation process, such estimates of fair value may differ significantly from the values that would have been used had a ready market for the investments existed, and differences could be material. Additionally, changes in the market environment and other events that may occur over the life of the investments may cause the gains or losses ultimately realized on these investments to be different from the valuations used at the date of this Schedule of Investments.

 

Federal Income Tax Cost

 

At December 31, 2018, the cost of securities for Federal income tax purposes was $1,004,782,502. The net unrealized loss on securities held by the Fund was $22,117,510, including gross unrealized gain of $106,100,377 and gross unrealized loss of $128,217,887.

 

Fair Value Measurements

 

The Fund uses a three-tier hierarchy to prioritize the assumptions, referred to as inputs, used in valuation techniques to measure fair value. The three-tier hierarchy of inputs is summarized in the three broad levels. Level 1 includes quoted prices in active markets for identical investments. Level 2 includes prices determined using other significant observable inputs (including quoted prices for similar investments, interest rates, credit risk, etc.). The independent pricing vendor may value bank loans and debt securities at an evaluated bid price by employing methodologies that utilize actual market transactions, broker-supplied valuations, and/or other methodologies designed to identify the market value for such securities and such securities are considered Level 2 in the fair value hierarchy. Level 3 includes prices determined using significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). These inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 


 

TEKLA HEALTHCARE OPPORTUNITIES FUND

NOTES TO SCHEDULE OF INVESTMENTS

DECEMBER 31, 2018

(Unaudited, continued)

 

The following is a summary of the levels used as of December 31, 2018 to value the Fund’s net assets.

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Convertible Preferred And Warrants

 

 

 

 

 

 

 

 

 

Biotechnology

 

 

 

 

 

$

8,975,053

 

$

8,975,053

 

Health Care Equipment & Supplies

 

 

 

 

 

790,548

 

790,548

 

Preferred Stock

 

$

12,630,000

 

 

 

 

12,630,000

 

Convertible Notes

 

 

 

 

 

 

 

 

 

Biotechnology

 

 

 

 

137,301

 

137,301

 

Health Care Equipment & Supplies

 

 

 

 

459,441

 

459,441

 

Pharmaceuticals

 

 

$

9,733,750

 

700,000

 

10,433,750

 

Non-convertible Notes

 

 

 

 

 

 

 

 

 

Biotechnology

 

 

19,378,468

 

 

19,378,468

 

Health Care Equipment & Supplies

 

 

10,385,483

 

 

10,385,483

 

Health Care Providers & Services

 

 

64,606,214

 

 

64,606,214

 

Pharmaceuticals

 

 

12,207,875

 

 

12,207,875

 

Common Stocks And Warrants

 

 

 

 

 

 

 

 

 

Biotechnology

 

161,336,411

 

 

47,380

 

161,383,791

 

Health Care Equipment & Supplies

 

113,899,950

 

 

 

113,899,950

 

Health Care Providers & Services

 

165,867,248

 

 

 

165,867,248

 

Healthcare Services

 

2,413,476

 

 

 

2,413,476

 

Life Sciences Tools & Services

 

37,244,101

 

 

 

37,244,101

 

Medical Devices And Diagnostics

 

50,033,960

 

 

 

50,033,960

 

Pharmaceuticals

 

234,094,304

 

 

 

234,094,304

 

Real Estate Investment Trusts

 

46,124,483

 

 

 

46,124,483

 

Short-term Investment

 

 

31,903,000

 

 

31,903,000

 

Total

 

$

823,643,933

 

$

148,214,790

 

$

11,109,723

 

$

982,968,446

 

 

 

 

 

 

 

 

 

 

 

Other Financial Instruments

 

 

 

 

 

 

 

 

 

Asset

 

 

 

 

 

 

 

 

 

Options Contracts Purchased

 

211,250

 

 

 

211,250

 

Liabilities

 

 

 

 

 

 

 

 

 

Options Contracts Written

 

(514,704

)

 

 

(514,704

)

Total

 

$

(303,454

)

$

 

$

 

$

(303,454

)

 

The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.

 

Investments in Securities

 

Balance as of
September 30,
2018

 

Net realized gain
(loss) and change
in unrealized
appreciation
(depreciation)

 

Cost of
purchases and
conversions

 

Proceeds from
sales and
conversions

 

Net
Transfers
in (out of)
Level 3

 

Balance as of
December 31,
2018

 

Convertible Preferred And Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnology

 

$

8,675,519

 

$

(3,129

)

$

302,663

 

$

0

 

$

0

 

$

8,975,053

 

Health Care Equipment & Supplies

 

$

790,548

 

$

0

 

$

0

 

$

0

 

$

0

 

$

790,548

 

Convertible Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnology

 

0

 

0

 

137,301

 

0

 

0

 

137,301

 

Health Care Equipment & Supplies

 

459,441

 

0

 

0

 

0

 

0

 

459,441

 

Pharmaceuticals

 

700,000

 

0

 

0

 

0

 

0

 

700,000

 

Common Stocks And Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnology

 

162,591

 

(115,211

)

0

 

0

 

0

 

47,380

 

Total

 

$

10,788,099

 

$

(118,340

)

$

439,964

 

$

0

 

$

0

 

$

11,109,723

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2018

 

$

(118,340

)

 

The following is a quantitative disclosure about significant unobservable inputs used in the determination of the fair value of Level 3 assets.

 


 

TEKLA HEALTHCARE OPPORTUNITIES FUND

NOTES TO SCHEDULE OF INVESTMENTS

DECEMBER 31, 2018

(Unaudited, continued)

 

 

 

Fair Value at
December 31,
2018

 

Valuation Technique

 

Unobservable Input

 

Range
(Weighted Average)

 

Private Companies and Other Restricted Securities

 

$

47,380

 

Income approach,
Black-Scholes

 

Discount for lack of marketability

 

20%(20%)

 

 

 

 

 

 

 

 

 

 

 

 

 

6,162,346

 

Probability - weighted

 

Discount rate

 

22.70%- 41.27%(32.06%)

 

 

 

 

 

expected return model

 

Price to sales multiple

 

3.57x - 4.21x (3.91x)

 

 

 

 

 

 

 

 

 

 

 

 

 

4,899,997

 

Market approach, recent transaction

 

(a)

 

N/A

 

 

 

$

11,109,723

 

 

 

 

 

 

 

 


(a) The valuation technique used as a basis to approximate fair value of these investments is based upon subsequent financing rounds. There is no quantitative information to provide as these methods of measure are investment specific.

 

Private Companies and Other Restricted Securities

 

The Fund may invest in private companies and other restricted securities if these securities would currently comprise 10% or less of Managed Assets. The value of these securities represented 1% of the Fund’s Managed Assets at December 31, 2018.

 

At December 31, 2018, the Fund had a commitment of $354,425 relating to additional investments in two private companies.

 

The following table details the acquisition date, cost, carrying value per unit, and value of the Fund’s private companies and other restricted securities at December 31, 2018. The Fund on its own does not have the right to demand that such securities be registered.

 

Security (#)

 

Acquisition
Date

 

Cost

 

Carrying Value
per Unit

 

Value

 

Atreca, Inc. Series C1 Cvt. Pfd

 

9/5/18

 

$

1,749,998

 

$

2.33

 

$

1,749,998

 

Galera Therapeutics, Inc. Series C Cvt. Pfd

 

8/30/18

 

2,450,063

 

2.21

 

2,449,999

 

GenomeDx Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd

 

2/22/16

 

3,207,509

 

3.33

 

710,400

 

Series D Cvt. Pfd

 

4/4/18

 

490,999

 

3.05

 

569,531

 

Series D Prime Cvt. Pfd

 

4/4/18

 

112,160

 

9.15

 

335,516

 

Series E Cvt. Pfd

 

7/20/18

 

409,884

 

2.34

 

409,609

 

Cvt. Promissory Note

 

12/28/18

 

137,301

 

100.00

 

137,301

 

Warrants (expiration 11/1/27)

 

4/4/18

 

225

 

0.00

 

0

 

IlluminOss Medical, Inc.

 

 

 

 

 

 

 

 

 

Series AA Cvt. Pfd

 

1/21/16

 

284,688

 

1.00

 

407,078

 

Junior Preferred

 

1/21/16

 

132,722

 

1.00

 

383,470

 

Cvt. Promissory Note

 

3/28/17

 

131,178

 

100.00

 

131,169

 

Cvt. Promissory Note

 

12/20/17

 

43,780

 

100.00

 

43,770

 

Cvt. Promissory Note

 

1/11/18

 

87,543

 

100.00

 

87,539

 

Cvt. Promissory Note

 

2/6/18

 

87,539

 

100.00

 

87,539

 

Cvt. Promissory Note

 

9/5/18

 

109,424

 

100.00

 

109,424

 

Warrants (expiration 1/11/28)

 

1/11/18

 

13

 

0.00

 

0

 

Warrants (expiration 11/20/27)

 

11/21/17

 

40

 

0.00

 

0

 

Warrants (expiration 2/6/28)

 

2/6/18

 

0

 

0.00

 

0

 

Warrants (expiration 3/31/27)

 

3/28/17

 

152

 

0.00

 

0

 

Warrants (expiration 9/6/27)

 

9/5/18

 

0

 

0.00

 

0

 

Rainier Therapeutics, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

1/19/16, 10/24/16

 

1,651,214

 

0.65

 

1,650,000

 

Series B Cvt. Pfd

 

3/3/17

 

1,100,073

 

0.75

 

1,100,000

 

 

 

 

 

$

12,186,505

 

 

 

$

10,362,343

 

 


 

Item 2.  Controls and Procedures.

 

(a.)                              The registrant’s principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant’s disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-Q is (i) accumulated and communicated to the investment company’s management, including its certifying officers, to allow timely decisions regarding required disclosure; and (ii) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms.

 

(b.)                              There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3.  Exhibits.

 

Separate certifications for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)).  Filed herewith.

 


 

SIGNATURES

 

Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant)

Tekla Healthcare Opportunities Fund

 

 

 

 

By (Signature and Title)

/s/ Daniel R. Omstead

 

 

Daniel R. Omstead, President

 

 

 

 

Date

2/26/19

 

 

Pursuant to the requirements of the Securities and Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)

/s/ Laura Woodward

 

 

Laura Woodward, Treasurer

 

 

 

 

Date

2/26/19