NPORT-EX 1 Tekla_Hlth_Inv_6309_EX.htm

 

TEKLA HEALTHCARE INVESTORS

SCHEDULE OF INVESTMENTS

JUNE 30, 2019

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

 

 

 

 

 

 

CONVERTIBLE PREFERRED AND WARRANTS(a) - 3.7% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

Biotechnology — 3.1%

 

 

 

 

 

 

 

 

 

326,667

 

Amphivena Therapeutics, Inc. Series B (Restricted) (b)

 

$

4,900,001

 

525,972

 

Amphivena Therapeutics, Inc. Series C, 6.00% (Restricted) (b)

 

1,887,315

 

802,477

 

Arkuda Therapeutics, Inc. Series A Preferred Stock. 6.00% (Restricted) (b)

 

1,909,093

 

968,073

 

Decipher Biosciences, Inc. Series II 8.00% (Restricted) (b)

 

1,251,718

 

962,412

 

Decipher Biosciences, Inc. Series III 8.00% (Restricted) (b)

 

2,090,360

 

1,043,219

 

Galera Therapeutics, Inc. Series C, 6.00% (Restricted) (b)

 

2,310,000

 

249,700

 

Oculis SA, Series B2 (Restricted) (b) (d)

 

2,129,689

 

2,692,309

 

Rainier Therapeutics, Inc. Series A, 6.00% (Restricted) (b)

 

1,750,001

 

1,559,715

 

Rainier Therapeutics, Inc. Series B, 6.00% (Restricted) (b)

 

1,166,667

 

875,000

 

Therachon Holding AG Series B (Restricted) (b)

 

9,740,325

 

210,000

 

Trillium Therapeutics, Inc. Series II (d)

 

68,922

 

 

 

 

 

29,204,091

 

 

 

Health Care Equipment & Supplies (Restricted)(b) — 0.2%

 

 

 

114,158

 

CardioKinetix, Inc. Series C, 8.00%

 

0

 

205,167

 

CardioKinetix, Inc. Series D, 8.00%

 

0

 

632,211

 

CardioKinetix, Inc. Series E, 8.00%

 

0

 

692,715

 

CardioKinetix, Inc. Series F, 8.00%

 

0

 

N/A

(e)

CardioKinetix, Inc. Warrants (expiration 12/11/19, exercise price $0.69)

 

0

 

N/A

(e)

CardioKinetix, Inc. Warrants (expiration 06/03/20, exercise price $0.69)

 

0

 

12,695

 

CardioKinetix, Inc. Warrants (expiration 08/15/24, exercise price $2.85)

 

0

 

951,000

 

IlluminOss Medical, Inc. Series AA, 8.00%

 

951,000

 

895,848

 

IlluminOss Medical, Inc. Junior Preferred, 8.00%

 

895,848

 

71,324

 

IlluminOss Medical, Inc. Warrants (expiration 03/31/27, exercise price $1.00)

 

0

 

59,426

 

IlluminOss Medical, Inc. Warrants (expiration 09/06/27, exercise price $1.00)

 

0

 

23,771

 

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

 

0

 

47,542

 

IlluminOss Medical, Inc. Warrants (expiration 01/11/28, exercise price $1.00)

 

0

 

46,462

 

IlluminOss Medical, Inc. Warrants (expiration 01/29/29, exercise price $1.00)

 

0

 

47,542

 

IlluminOss Medical, Inc. Warrants (expiration 02/06/28, exercise price $1.00)

 

0

 

12,964

 

IlluminOss Medical, Inc. Warrants (expiration 04/29/29, exercise price $1.00)

 

0

 

20,470

 

IlluminOss Medical, Inc. Warrants (expiration 05/13/29, exercise price $1.00)

 

0

 

 

 

 

 

1,846,848

 

 

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

 


 

SHARES

 

 

 

VALUE

 

 

 

Pharmaceuticals (Restricted)(b) — 0.4%

 

 

 

3,173,164

 

Curasen Therapeutics, Inc. Series A (c)

 

$

3,500,000

 

 

 

TOTAL CONVERTIBLE PREFERRED AND WARRANTS
(Cost $41,345,778)

 

34,550,939

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

CONVERTIBLE NOTES (Restricted)(b) - 0.2% of Net Assets

 

 

 

 

 

Biotechnology — 0.1%

 

 

 

$

442,570

 

Rainier Therapeutics, Inc. Promissory Note, 8.00% due 03/31/20

 

442,570

 

442,570

 

Rainier Therapeutics, Inc. Promissory Note, 8.00% due 03/31/20

 

442,570

 

 

 

 

 

885,140

 

 

 

Health Care Equipment & Supplies (b) — 0.1%

 

 

 

74,456

 

CardioKinetix, Inc. Promissory Note, 5.00% due 07/31/19

 

0

 

51,858

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

51,858

 

285,294

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

285,294

 

95,083

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

95,083

 

190,166

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

190,166

 

190,166

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

190,166

 

237,708

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

237,708

 

185,849

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

185,850

 

81,881

 

IlluminOss Medical, Inc. Promissory Note, 8.00% due 12/31/19

 

81,881

 

 

 

 

 

1,318,006

 

 

 

TOTAL CONVERTIBLE NOTES
(Cost $2,278,029)

 

2,203,146

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS - 93.7% of Net Assets

 

 

 

 

 

 

 

 

 

 

 

Biotechnology — 62.0%

 

 

 

11,814

 

AbbVie, Inc.

 

859,114

 

119,074

 

AC Immune SA (a) (d)

 

660,861

 

110,901

 

ACADIA Pharmaceuticals, Inc. (a)

 

2,964,384

 

17,325

 

Adynxx Inc.

 

50,329

 

72,892

 

Albireo Pharma, Inc. (a)

 

2,350,038

 

221,454

 

Alexion Pharmaceuticals, Inc. (a)

 

29,006,044

 

137,956

 

Alkermes plc (a)

 

3,109,528

 

24,414

 

Allakos Inc. (a)

 

1,057,859

 

107,976

 

Alnylam Pharmaceuticals, Inc. (a)

 

7,834,739

 

329,378

 

Amarin Corp. plc (a) (d) (f)

 

6,386,639

 

362,508

 

Amgen Inc.

 

66,802,974

 

202,068

 

Amicus Therapeutics, Inc. (a)

 

2,521,809

 

52,067

 

AnaptysBio, Inc. (a)

 

2,937,620

 

14,306

 

Arena Pharmaceuticals, Inc. (a)

 

838,761

 

18,519

 

Argenx SE (a) (d) (f)

 

2,621,920

 

220,867

 

Array Biopharma Inc. (a)

 

10,232,768

 

 

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

 


 

SHARES

 

 

 

VALUE

 

 

 

Biotechnology — continued

 

 

 

46,585

 

Ascendis Pharma A/S (a) (d) (f)

 

$

5,364,263

 

118,026

 

Atreca, Inc. (Restricted) (b)

 

2,001,243

 

57,750

 

Atreca, Inc.(a)

 

1,088,010

 

26,960

 

Audentes Therapeutics, Inc. (a)

 

1,020,706

 

54,497

 

BeiGene, Ltd. (a) (d) (f)

 

6,754,903

 

126,491

 

Biogen Inc. (a) (h)

 

29,582,450

 

152,146

 

BioMarin Pharmaceutical Inc. (a)

 

13,031,305

 

67,218

 

bluebird bio, Inc. (a)

 

8,550,130

 

68,342

 

Blueprint Medicines Corp. (a)

 

6,446,701

 

798,651

 

Celgene Corp. (a)

 

73,827,298

 

26,300

 

Clovis Oncology, Inc. (a)

 

391,081

 

226,978

 

Coherus BioSciences, Inc. (a)

 

5,016,214

 

123,392

 

CRISPR Therapeutics AG (a) (d)

 

5,811,763

 

55,466

 

CymaBay Therapeutics, Inc. (a)

 

397,137

 

26,806

 

Editas Medicine, Inc. (a)

 

663,180

 

265,969

 

Epizyme, Inc. (a)

 

3,337,911

 

108,846

 

Esperion Therapeutics, Inc. (a)

 

5,063,516

 

371,638

 

Exelixis, Inc. (a)

 

7,941,904

 

157,835

 

FibroGen, Inc. (a)

 

7,130,985

 

30,904

 

Galapagos NV (a) (d) (f)

 

3,984,453

 

936,113

 

Gilead Sciences, Inc.

 

63,243,794

 

44,553

 

Global Blood Therapeutics, Inc. (a)

 

2,343,488

 

280,578

 

Incyte Corp. (a)

 

23,837,907

 

101,896

 

Intellia Therapeutics, Inc. (a)

 

1,668,037

 

34,833

 

Intercept Pharmaceuticals, Inc. (a)

 

2,771,662

 

77,665

 

Ionis Pharmaceuticals, Inc. (a)

 

4,991,529

 

127,421

 

Iovance Biotherapeutics, Inc. (a)

 

3,124,363

 

21,371

 

Ligand Pharmaceuticals, Inc. (a)

 

2,439,500

 

172,605

 

Merus N.V. (a) (d)

 

2,528,663

 

81,916

 

Molecular Templates, Inc. (a)

 

683,999

 

14,228

 

Myriad Genetics, Inc. (a)

 

395,254

 

147,820

 

Nektar Therapeutics (a)

 

5,259,436

 

135,987

 

Neurocrine Biosciences, Inc. (a)

 

11,481,382

 

260,913

 

Ovid Therapeutics Inc. (a)

 

482,689

 

848,209

 

Pieris Pharmaceuticals, Inc. (a)

 

3,986,582

 

54,790

 

Pieris Pharmaceuticals, Inc., Series A Warrants (expiration 06/08/21, exercise price
$3.00) (a) (b)

 

91,499

 

27,394

 

Pieris Pharmaceuticals, Inc., Series B Warrants (expiration 06/08/21, exercise price
$2.00) (a) (b)

 

59,445

 

70,557

 

Portola Pharmaceuticals, Inc. (a)

 

1,914,211

 

77,794

 

Protagonist Therapeutics, Inc. (a)

 

942,085

 

90,472

 

PTC Therapeutics, Inc. (a)

 

4,071,240

 

35,515

 

Puma Biotechnology, Inc. (a)

 

451,396

 

87,029

 

Regeneron Pharmaceuticals, Inc. (a)

 

27,240,077

 

55,964

 

Sage Therapeutics, Inc. (a)

 

10,246,449

 

88,119

 

Sangamo Therapeutics, Inc. (a)

 

949,042

 

96,867

 

Sarepta Therapeutics, Inc. (a)

 

14,718,941

 

192,587

 

Seattle Genetics, Inc. (a)

 

13,328,946

 

 

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

 


 

SHARES

 

 

 

VALUE

 

 

 

Biotechnology — continued

 

 

 

447,797

 

Sutro Biopharma, Inc. (a)

 

$

5,095,930

 

317,526

 

Trillium Therapeutics, Inc. (a) (d)

 

104,212

 

26,710

 

Ultragenyx Pharmaceutical Inc. (a)

 

1,696,085

 

43,002

 

United Therapeutics Corp. (a)

 

3,356,736

 

258,177

 

Vertex Pharmaceuticals Inc. (a)

 

47,344,498

 

79,586

 

Viking Therapeutics, Inc. (a)

 

660,564

 

36,743

 

Xencor, Inc. (a)

 

1,503,891

 

 

 

 

 

590,654,072

 

 

 

Drug Discovery Technologies — 0.0%

 

 

 

117,030

 

ImmunoGen, Inc. (a)

 

253,955

 

 

 

 

 

 

 

 

 

Health Care Equipment & Supplies — 4.2%

 

 

 

64,992

 

Abbott Laboratories

 

5,465,827

 

9,421

 

ABIOMED, Inc. (a)

 

2,454,076

 

33,977

 

Baxter International, Inc.

 

2,782,716

 

2,140

 

Becton, Dickinson and Co.

 

539,301

 

160,000

 

Cercacor Laboratories, Inc. (Restricted) (a) (b)

 

853,805

 

25,327

 

DENTSPLY Sirona, Inc.

 

1,478,084

 

10,398

 

Edwards Lifesciences Corp. (a)

 

1,920,927

 

21,082

 

Hologic, Inc. (a)

 

1,012,358

 

19,960

 

IDEXX Laboratories, Inc. (a)

 

5,495,587

 

12,847

 

LivaNova plc (a)

 

924,470

 

7,188

 

Masimo Corp. (a)

 

1,069,718

 

70,363

 

Medtronic plc

 

6,852,653

 

23,124

 

Natus Medical, Inc. (a)

 

594,055

 

30,550

 

NovoCure Ltd. (a)

 

1,931,676

 

29,890

 

Stryker Corp.

 

6,144,786

 

7,713

 

Zimmer Biomet Holdings, Inc.

 

908,129

 

 

 

 

 

40,428,168

 

 

 

Health Care Providers & Services — 3.5%

 

 

 

69,045

 

Acadia Healthcare Co., Inc. (a)

 

2,413,123

 

23,992

 

Anthem, Inc.

 

6,770,782

 

3,527

 

Charles River Laboratories International, Inc. (a)

 

500,481

 

19,832

 

Cigna Corp. (a)

 

3,124,532

 

100,776

 

CVS Health Corp.

 

5,491,284

 

222,222

 

InnovaCare Health, Inc. (Restricted) (a) (b) (g)

 

735,555

 

41,535

 

Tenet Healthcare Corp. (a)

 

858,113

 

54,672

 

UnitedHealth Group, Inc.

 

13,340,515

 

 

 

 

 

33,234,385

 

 

 

Health Care Technology — 0.1%

 

 

 

174,270

 

Evolent Health, Inc. (a)

 

1,385,446

 

 

 

 

 

1,385,446

 

 

 

Healthcare Services — 0.2%

 

 

 

6,284

 

Laboratory Corporation of America Holdings (a)

 

1,086,504

 

20,101

 

Syneos Health, Inc. (a)

 

1,026,960

 

 

 

 

 

2,113,464

 

 

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

 


 

SHARES

 

 

 

VALUE

 

 

 

Life Sciences Tools & Services — 6.2%

 

 

 

13,464

 

Bio-Techne Corp.

 

$

2,807,109

 

111,451

 

Illumina, Inc. (a)

 

41,030,686

 

88,234

 

PRA Health Sciences, Inc. (a)

 

8,748,401

 

21,105

 

Thermo Fisher Scientific, Inc.

 

6,198,116

 

 

 

 

 

58,784,312

 

 

 

Medical Devices and Diagnostics — 2.1%

 

 

 

3,773

 

Align Technology, Inc. (a)

 

1,032,670

 

122,199

 

Boston Scientific Corp. (a)

 

5,252,113

 

32,315

 

Danaher Corp.

 

4,618,460

 

18,428

 

Genomic Health, Inc. (a)

 

1,071,957

 

10,551

 

Intuitive Surgical, Inc. (a)

 

5,534,002

 

22,100

 

ResMed, Inc.

 

2,696,863

 

 

 

 

 

20,206,065

 

 

 

Pharmaceuticals — 15.4%

 

 

 

124,692

 

Acceleron Pharma Inc. (a)

 

5,122,347

 

46,285

 

Aerie Pharmaceuticals, Inc. (a)

 

1,367,722

 

511,461

 

Aerpio Pharmaceuticals, Inc. (a)

 

465,429

 

94,317

 

Agios Pharmaceuticals, Inc. (a)

 

4,704,532

 

8,583

 

Allergan plc (d)

 

1,437,052

 

12,760

 

AmerisourceBergen Corp.

 

1,087,918

 

104,963

 

ArQule, Inc. (a)

 

1,155,643

 

124,219

 

Bristol-Myers Squibb Co.

 

5,633,332

 

76,914

 

Concert Pharmaceuticals, Inc. (a)

 

922,968

 

49,480

 

Eli Lilly & Co.

 

5,481,889

 

465,507

 

Endo International plc (a)

 

1,917,889

 

210,543

 

Foamix Pharmaceuticals Ltd. (a) (d)

 

501,092

 

42,848

 

GW Pharmaceuticals plc (a) (d) (f)

 

7,386,567

 

72,521

 

Horizon Therapeutics plc (a)

 

1,744,855

 

266,423

 

Immunomedics, Inc. (a)

 

3,695,287

 

38,440

 

Intra-Cellular Therapies, Inc. (a)

 

498,951

 

44,382

 

Jazz Pharmaceuticals plc (a)

 

6,327,098

 

110,428

 

Johnson & Johnson

 

15,380,412

 

9,280

 

Madrigal Pharmaceuticals, Inc. (a)

 

972,637

 

13,913

 

McKesson Corp.

 

1,869,768

 

132,804

 

Medicines Company (The) (a)

 

4,843,362

 

198,642

 

Merck & Co., Inc.

 

16,656,132

 

491,637

 

Milestone Pharmaceuticals Inc. (Restricted)

 

12,013,150

 

35,000

 

Milestone Pharmaceuticals Inc. (a)

 

950,250

 

9,460

 

Mirati Therapeutics, Inc. (a)

 

974,380

 

489,519

 

Mylan N.V. (a)

 

9,320,442

 

26,860

 

MyoKardia, Inc. (a)

 

1,346,760

 

302,493

 

Pfizer, Inc.

 

13,103,997

 

17,320

 

Rhythm Pharmaceuticals, Inc. (a)

 

381,040

 

79,790

 

Spectrum Pharmaceuticals, Inc. (a)

 

686,992

 

574,944

 

Tetraphase Pharmaceuticals, Inc. (a)

 

276,146

 

291,666

 

Teva Pharmaceutical Industries Ltd. (a) (d) (f)

 

2,692,077

 

321,637

 

TherapeuticsMD, Inc. (a)

 

836,256

 

42,329

 

WaVe Life Sciences Ltd. (a)

 

1,104,364

 

 

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

 


 

SHARES

 

 

 

VALUE

 

 

 

Pharmaceuticals — continued

 

 

 

84,565

 

Zoetis, Inc.

 

$

9,597,282

 

80,516

 

Zogenix, Inc. (a)

 

3,847,054

 

 

 

 

 

146,303,072

 

 

 

TOTAL COMMON STOCKS AND WARRANTS
(Cost $657,963,133)

 

893,362,939

 

 

 

 

 

 

 

 

 

EXCHANGE TRADED FUND - 0.7% of Net Assets

 

 

 

73,849

 

SPDR S&P Biotech ETF

 

6,477,296

 

 

 

TOTAL EXCHANGE TRADED FUND
(Cost $5,196,053)

 

6,477,296

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

SHORT-TERM INVESTMENT - 0.3% of Net Assets

 

 

 

$

2,861,000

 

Repurchase Agreement, Fixed Income Clearing Corp., repurchase value $2,861,000, 0.50%, dated 06/28/19, due 07/01/19 (collateralized by U.S. Treasury Note 1.875%, due 03/31/22, market value $2,920,192)

 

2,861,000

 

 

 

TOTAL SHORT-TERM INVESTMENT
(Cost $2,861,000)

 

2,861,000

 

 

INTEREST

 

 

 

 

 

 

 

MILESTONE INTERESTS (Restricted)(a) (b) - 0.9% of Net Assets

 

 

 

 

 

Pharmaceuticals — 0.9%

 

 

 

1

 

Afferent Milestone Interest

 

817,953

 

1

 

Ethismos Research, Inc. Milestone Interest

 

0

 

1

 

Neurovance Milestone Interest

 

2,683,575

 

1

 

TargeGen Milestone Interest

 

5,360,662

 

1

 

Therox Milestone Interest

 

9,360

 

 

 

TOTAL MILESTONE INTERESTS
(Cost $5,438,059)

 

8,871,550

 

 

NUMBER OF
CONTRACTS
(100 SHARES
EACH)/NOTIONAL
AMOUNT ($)

 

 

 

 

 

 

 

CALL OPTION CONTRACTS PURCHASED- 0.0%

 

 

 

110/3,850,000

 

Biogen Inc. Jun20 350 Call

 

51,700

 

 

 

CALL OPTION CONTRACTS PURCHASED
(Premiums paid $568,637)

 

51,700

 

 

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

 


 

 

 

 

 

VALUE

 

 

 

TOTAL INVESTMENTS - 99.5%
(Cost $715,650,689)

 

$

948,378,570

 

 

 

OTHER ASSETS IN EXCESS OF LIABILITIES - 0.5%

 

5,029,109

 

 

 

NET ASSETS - 100%

 

$

953,407,679

 

 


(a)         Non-income producing security.

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

(c)          Affiliated issuers in which the Fund holds 5% or more of the voting securities (total market value of $3,500,000).

(d)         Foreign security.

(e)          Number of warrants to be determined at a future date.

(f)           American Depository Receipt

(g)          Security exempt from registration under Rule 144A of the Securities Act of 1933, as amended. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers.

(h)         A portion of security is pledged as collateral for call option purchased.

 

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

 


 

TEKLA HEALTHCARE INVESTORS

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019

(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. 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 the 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, milestone interests, 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 June 30, 2019, the cost of securities for Federal income tax purposes was $ 715,652,100. The net unrealized gain on securities held by the Fund was $ 232,726,470, including gross unrealized gain of $ 330,125,847 and gross unrealized loss of $ 97,399,377.

 

Other Transactions with Affiliates

 

An affiliate company is a company in which the Fund holds 5% or more of the voting securities. Transactions involving such companies during the period ended June 30, 2019 were as follows:

 


 

TEKLA HEALTHCARE INVESTORS

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019

(continued)

 

Affiliated Companies

 

Beginning
Value as of
September
30, 2018

 

Purchases at
Cost

 

Proceeds
from Sales

 

Net Realized
Gain/(Loss)
on sale of
Affiliated
Companies

 

Change in
Unrealized
Appreciation/
Depreciation

 

Ending
Value
as of
June 30,
2019

 

Amphivena Therapeutics, Inc.

 

$

5,714,797

 

$

1,887,315

 

(816,284

)

 

1,487

 

$

6,787,315

*

IlluminOss Medical, Inc.

 

2,845,265

 

319,589

 

 

 

 

3,164,854

*

Curasen Therapeutics, Inc.

 

3,500,000

 

 

 

 

 

3,500,000

 

 

 

$

12,060,062

 

$

2,206,904

 

$

(816,284

)

$

 

$

1,487

 

13,452,169

 

 

 

 

Shares/
Principal
Amount as
of
June 30,
2019

 

Dividend/
Interest
Income
From
Affiliated
Companies

 

Capital Gain
Distributions
From
Affiliated
Companies

 

Amphivena Therapeutics, Inc.

 

852,639

 

8,725

 

 

IlluminOss Medical, Inc.

 

3,494,354

 

31,952

 

 

Curasen Therapeutics, Inc.

 

3,173,164

 

 

 

 

 

7,520,157

 

40,677

 

 

 


* Not an affiliate at June 30, 2019.

 

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.

 

The following is a summary of the levels used as of June 30, 2019 to value the Fund’s net assets.

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Convertible Preferred And Warrants

 

 

 

 

 

 

 

 

 

Biotechnology

 

$

68,922

 

$

 

$

29,135,169

 

$

29,204,091

 

Health Care Equipment & Supplies

 

 

 

1,846,848

 

1,846,848

 

Pharmaceuticals

 

 

 

3,500,000

 

3,500,000

 

Convertible Notes

 

 

 

 

 

 

 

 

 

Biotechnology

 

 

 

885,140

 

885,140

 

Health Care Equipment & Supplies

 

 

 

1,318,006

 

1,318,006

 

Common Stocks And Warrants

 

 

 

 

 

 

 

 

 

Biotechnology

 

588,501,885

 

2,001,243

 

150,944

 

590,654,072

 

Drug Discovery Technologies

 

253,955

 

 

 

253,955

 

Health Care Equipment & Supplies

 

39,574,363

 

 

853,805

 

40,428,168

 

Health Care Providers & Services

 

32,498,830

 

 

735,555

 

33,234,385

 

Health Care Technology

 

1,385,446

 

 

 

1,385,446

 

Healthcare Services

 

2,113,464

 

 

 

2,113,464

 

Life Sciences Tools & Services

 

58,784,312

 

 

 

58,784,312

 

Medical Devices And Diagnostics

 

20,206,065

 

 

 

20,206,065

 

Pharmaceuticals

 

134,289,922

 

12,013,150

 

 

146,303,072

 

Exchange Traded Fund

 

6,477,296

 

 

 

6,477,296

 

Short-term Investment

 

 

2,861,000

 

 

2,861,000

 

Milestone Interests

 

 

 

 

 

 

 

 

 

Pharmaceuticals

 

 

 

8,871,550

 

8,871,550

 

Other Assets

 

 

 

1,020,038

 

1,020,038

 

Total

 

$

884,154,460

 

$

16,875,393

 

$

48,317,055

 

$

949,346,908

 

 


 

TEKLA HEALTHCARE INVESTORS

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019

(continued)

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Other Financial Instruments

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Option Contracts Purchased

 

$

51,700

 

$

 

$

 

$

51,700

 

Total

 

$

51,700

 

$

 

$

 

$

51,700

 

 

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 June 30,
2019

 

Convertible Preferred and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnology

 

$

17,110,039

 

$

6,442,579

 

$

11,717,697

 

$

(4,485,147

)

$

(1,649,999

)

$

29,135,169

 

Health Care Equipment  & Supplies

 

1,846,848

 

0

 

0

 

0

 

0

 

1,846,848

 

Life Sciences Tools & Services

 

5,041,602

 

2,483,252

 

0

 

(7,524,854

)

0

 

0

 

Pharmaceuticals

 

5,599,998

 

2,923

 

0

 

0

 

(2,102,921

)

3,500,000

 

Convertible Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnology

 

814,796

 

297

 

884,843

 

(814,796

)

0

 

885,140

 

Health Care Equipment  & Supplies

 

998,417

 

0

 

319,589

 

0

 

0

 

1,318,006

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnology

 

219,979

 

(69,035

)

0

 

0

 

0

 

150,944

 

Health Care Equipment  & Supplies

 

677,075

 

190,154

 

0

 

(13,424

)

0

 

853,805

 

Health Care Providers & Services

 

602,222

 

133,333

 

0

 

0

 

0

 

735,555

 

Milestone Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

Health Care Equipment  & Supplies

 

4,538,871

 

881,182

 

1,254

 

(5,421,307

)

0

 

0

 

Pharmaceuticals

 

7,912,735

 

949,455

 

9,360

 

0

 

0

 

8,871,550

 

Other Assets

 

1,150,714

 

0

 

138,056

 

(268,732

)

0

 

1,020,038

 

 

 

$

 46,513,296

 

$

 11,014,140

 

$

 13,070,799

 

$

 (18,528,260

)

$

 (3,752,920

)

$

 48,317,055

 

 

 

 

 

 

Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2019

 

$

5,303,755

 

 


 

TEKLA HEALTHCARE INVESTORS

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019

(continued)

 

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

 

 

 

Fair Value at
June 30, 2019

 

Valuation Technique

 

Unobservable Input

 

Range
(Weighted Average)

 

Private Companies and
Other Restricted Securities

 

$

1,004,749

 

Income approach, Black-Scholes

 

Discount for lack of marketability

 

20.00% (20.00%)

 

 

 

 

 

 

 

 

 

 

 

 

 

13,753,978

 

Probability weighted expected return model

 

Discount rate
Price to sales multiple

 

24.39%-47.13% (38.72%)
3.02x-11.05x (7.16x)

 

 

 

 

 

 

 

 

 

 

 

 

 

19,589,207

 

Market approach, recent transaction

 

(a)

 

N/A

 

 

 

 

 

 

 

 

 

 

 

 

 

4,077,633

 

Market comparable

 

Discount for lack of marketability

 

15.00%-50.00% (21.31%)

 

 

 

 

 

 

 

Earnings ratio

 

5.55x-15.00x (7.25x)

 

 

 

 

 

 

 

 

 

 

 

 

 

9,891,488

 

Probability adjusted value

 

Probability of events
Timing of events

 

20.00%-100.00% (60.34%)
0.25-18.00 (3.25) years

 

 

 

 

 

 

 

 

 

 

 

 

 

$

48,317,055

 

 

 

 

 

 

 

 


(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 40% or less of net assets. The value of these securities represented 0% of the Fund’s net assets at June 30, 2019.

 

At June 30, 2019, the Fund had a commitment of 6,015,084 relating to additional investments in four 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 June 30, 2019. 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

 

 

 

 

 

 

 

 

 

 

 

Afferent Milestone Interest

 

07/27/16

 

$

377,701

 

$

817,953.00

 

$

817,953

 

Amphivena Therapeutics, Inc.

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd

 

07/17/17

 

4,902,852

 

15.00

 

4,900,001

 

Series C Cvt. Pfd

 

12/10/18

 

1,887,315

 

3.59

 

1,887,315

 

Arkuda Therapeutics,Inc.

 

 

 

 

 

 

 

 

 

Series A Preferred Stock. Cvt. Pfd

 

05/16/19

 

1,909,093

 

2.38

 

1,909,093

 

Atreca, Inc. Common

 

09/05/18

 

1,649,999

 

16.96

 

2,001,243

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd

 

05/22/08

 

2,379,300

 

0.00

 

0

 

Series D Cvt. Pfd

 

12/10/10

 

785,862

 

0.00

 

0

 

Series E Cvt. Pfd

 

09/14/11

 

1,805,145

 

0.00

 

0

 

Series F Cvt. Pfd

 

12/04/14

 

2,368,365

 

0.00

 

0

 

 


 

TEKLA HEALTHCARE INVESTORS

NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2019

(continued)

 

Security (#)

 

Acquisition
Date

 

Cost

 

Carrying Value
per Unit

 

Value

 

CardioKinetix, Inc.(continued)

 

 

 

 

 

 

 

 

 

Cvt. Promissory Note

 

6/20/17

 

$

74,505

 

$

0.00

 

$

0

 

Warrants (expiration 12/11/19)

 

12/10/09, 02/11/10

 

177

 

0.00

 

0

 

Warrants (expiration 06/03/20)

 

06/03/10, 09/01/10

 

177

 

0.00

 

0

 

Warrants (expiration 08/15/24)

 

08/15/14

 

204

 

0.00

 

0

 

Cercacor Laboratories, Inc. Common

 

03/31/98

 

0

 

5.34

 

853,805

 

Curasen Therapeutics, Inc. Series A Cvt. Pfd

 

09/18/18

 

3,500,000

 

1.10

 

3,500,000

 

Decipher Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series II Cvt. Pfd

 

03/29/19

 

4,485,147

 

1.29

 

1,251,718

 

Series III Cvt. Pfd

 

03/29/19

 

1,014,421

 

2.17

 

2,090,360

 

Ethismos Research, Inc. Milestone Interest

 

10/31/17

 

0

 

0.00

 

0

 

Galera Therapeutics, Inc. Series C Cvt. Pfd

 

08/30/18

 

2,310,060

 

2.21

 

2,310,000

 

IlluminOss Medical, Inc.

 

 

 

 

 

 

 

 

 

Series AA Cvt. Pfd

 

01/21/16

 

960,650

 

1.00

 

951,000

 

Junior Preferred

 

01/21/16

 

3,468,037

 

1.00

 

895,848

 

Cvt. Promissory Note

 

03/18/17

 

286,619

 

100.00

 

285,294

 

Cvt. Promissory Note

 

12/20/17

 

95,433

 

100.00

 

95,083

 

Cvt. Promissory Note

 

01/11/18

 

190,281

 

100.00

 

190,166

 

Cvt. Promissory Note

 

02/06/18

 

190,166

 

100.00

 

190,166

 

Cvt. Promissory Note

 

09/05/18

 

237,708

 

100.00

 

237,708

 

Cvt. Promissory Note

 

01/28/19

 

185,850

 

100.00

 

185,850

 

Cvt. Promissory Note

 

04/10/19

 

51,858

 

100.00

 

51,858

 

Cvt. Promissory Note

 

05/10/19

 

81,881

 

100.00

 

81,881

 

Warrants (expiration 03/31/27)

 

03/28/17

 

331

 

0.00

 

0

 

Warrants (expiration 09/06/27)

 

09/05/18

 

0

 

0.00

 

0

 

Warrants (expiration 11/20/27)

 

11/21/17

 

88

 

0.00

 

0

 

Warrants (expiration 01/11/28)

 

1/11/18

 

29

 

0.00

 

0

 

Warrants (expiration 02/06/28)

 

2/06/18

 

0

 

0.00

 

0

 

Warrants (expiration 01/29/29)

 

1/28/19

 

0

 

0.00

 

0

 

Warrants (expiration 04/29/29)

 

4/10/19

 

0

 

0.00

 

0

 

Warrants (expiration 05/13/29)

 

5/10/19

 

0

 

0

 

0

 

InnovaCare Health, Inc. Common

 

12/21/12

965,291

 

3.31

 

735,555

 

Milestone Pharmaceuticals Inc. Common

 

 

 

4,012,010

 

24.44

 

12,013,150

 

Neurovance Milestone Interest

 

03/20/17

 

4,917,881

 

2,683,575.00

 

2,683,575

 

Oculis SA Series B2 Cvt. Pfd

 

01/16/19

 

2,100,493

 

8.53

 

2,129,689

 

Rainier Therapeutics, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd

 

01/19/16, 10/24/16

 

1,751,288

 

0.65

 

1,750,001

 

Series B Cvt. Pfd

 

03/03/17

 

1,166,744

 

0.75

 

1,166,667

 

Cvt. Promissory Note

 

01/30/19

 

442,570

 

100.00

 

442,570

 

Cvt. Promissory Note

 

03/28/19

 

442,570

 

100.00

 

442,570

 

TargeGen Milestone Interest

 

07/20/10

 

133,117

 

5,360,662.00

 

5,360,662

 

Therachon Holding AG Series B Cvt. Pfd

 

07/17/18

 

3,500,000

 

11.13

 

9,740,325

 

Therox Milestone Interest

 

06/18/19

 

9,360

 

9,360.00

 

9,360

 

 

 

 

 

$

54,640,578

 

 

 

$

61,160,466

 

 


(#)    See Schedule of Investments and corresponding footnotes for more information on each issuer.

            Interest received as part of a corporate action for a previously owned security.