UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

OMB APPROVAL

 

OMB Number:    3235-0578
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FORM N-Q

 

 

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED
MANAGEMENT INVESTMENT COMPANY

 

Investment Company Act file number

811-06565

 

 

H&Q Life Sciences Investors

(Exact name of registrant as specified in charter)

 

2 Liberty Square, 9th Floor, Boston, MA

 

02109

(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:

12/31/13

 

 



 

Item 1.  Schedule of Investments.

 



 

H&Q LIFE SCIENCES INVESTORS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2013

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

CONVERTIBLE AND NON-CONVERTIBLE SECURITIES AND WARRANTS — 8.3% of Net Assets

 

 

 

 

 

Convertible Preferred and Warrants (Restricted)(a) (b) — 7.2%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 1.1%

 

 

 

3,324,401

 

Celladon Corporation Series A-1

 

$

1,492,656

 

61,707

 

Celladon Corporation warrants (expiration 10/10/18)

 

0

 

2,568,939

 

EBI Life Sciences, Inc. Series A (c)

 

13,102

 

2,862,324

 

Euthymics Biosciences, Inc. Series A (c)

 

1,099,991

 

2,568,939

 

Neurovance, Inc. Series A (c)

 

199,863

 

8,647,438

 

Neurovance, Inc. Series A-1 (c)

 

672,771

 

 

 

 

 

3,478,383

 

 

 

Healthcare Services — 1.3%

 

 

 

3,589,744

 

PHT Corporation Series D (c)

 

2,800,000

 

802,996

 

PHT Corporation Series E (c)

 

1,244,403

 

99,455

 

PHT Corporation Series F (c)

 

263,685

 

 

 

 

 

4,308,088

 

 

 

Medical Devices and Diagnostics — 4.8%

 

 

 

2,338,198

 

AlterG, Inc. Series C

 

958,661

 

79,330

 

CardioKinetix, Inc. Series C

 

1,116,094

 

142,574

 

CardioKinetix, Inc. Series D

 

542,779

 

439,333

 

CardioKinetix, Inc. Series E

 

1,250,781

 

N/A

 

CardioKinetix, Inc. warrants (expiration 12/11/19) (d)

 

0

 

N/A

 

CardioKinetix, Inc. warrants (expiration 6/03/20) (d)

 

0

 

2,161,090

 

Dynex Technologies, Inc. Series A

 

641,844

 

98,824

 

Dynex Technologies, Inc. warrants (expiration 4/01/19)

 

0

 

7,877

 

Dynex Technologies, Inc. warrants (expiration 5/06/19)

 

0

 

2,021,388

 

IlluminOss Medical, Inc. Series C-1

 

775,000

 

3,661,706

 

Insightra Medical, Inc. Series C

 

1,550,000

 

2,446,016

 

Labcyte, Inc. Series C

 

1,743,765

 

107,178

 

Labcyte, Inc. Series D

 

88,915

 

2,161,090

 

Magellan Diagnostics, Inc. Series A

 

1,480,995

 

98,824

 

Magellan Diagnostics, Inc. warrants (expiration 4/01/19)

 

0

 

7,877

 

Magellan Diagnostics, Inc. warrants (expiration 5/06/19)

 

0

 

9,606,373

 

Palyon Medical Corporation Series A (c)

 

9,606

 

18,832,814

 

Palyon Medical Corporation Series B (c)

 

1,306,997

 

N/A

 

Palyon Medical Corporation warrants (expiration 4/26/19) (c) (d)

 

0

 

43,478

 

TherOx, Inc. Series H

 

435

 

99,646

 

TherOx, Inc. Series I

 

997

 

3,280,000

 

Tibion Corporation Series B

 

258,136

 

N/A

 

Tibion Corporation warrants (expiration 07/12/17) (d)

 

0

 

N/A

 

Tibion Corporation warrants (expiration 10/30/17) (d)

 

0

 

N/A

 

Tibion Corporation warrants (expiration 11/28/17) (d)

 

0

 

2,606,033

 

Veniti, Inc. Series A (c)

 

2,385,302

 

 

The accompanying notes are an integral part of this schedule of investments.

 



 

SHARES

 

 

 

VALUE

 

 

 

Convertible Preferred and Warrants (Restricted)(a) (b) — continued

 

 

 

1,307,169

 

Veniti, Inc. Series B (c)

 

$

1,196,452

 

 

 

 

 

15,306,759

 

 

 

TOTAL CONVERTIBLE PREFERRED AND WARRANTS (RESTRICTED)

 

23,093,230

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

Convertible Notes — 1.0%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 0.0%

 

 

 

$

25,187

 

Celladon Corporation Convertible Promissory Note, 6.00%, due 3/31/14 (Restricted)

 

25,187

 

 

 

Drug Discovery Technologies — 0.0%

 

 

 

700,000

 

deCode Genetics, Inc. 3.50%, due 4/15/11 (a) (b)

 

0

 

 

 

Pharmaceuticals — 1.0%

 

 

 

2,000,000

 

Supernus Pharmaceuticals, Inc., 7.50% due 5/1/19(g)

 

3,245,000

 

 

 

TOTAL CONVERTIBLE NOTES

 

3,270,187

 

 

SHARES

 

 

 

 

 

 

 

Non-Convertible Notes (Restricted)(a) (b) — 0.1%

 

 

 

 

 

Medical Devices and Diagnostics — 0.1%

 

 

 

238,286

 

Tibion Corporation Non-Cvt. Promissory Note, 0.00%, due 12/31/18

 

238,286

 

28,211

 

Tibion Corporation Non-Cvt. Promissory Note, 0.00%, due 12/31/18

 

28,211

 

 

 

 

 

266,497

 

 

 

TOTAL CONVERTIBLE AND NON-CONVERTIBLE SECURITIES AND WARRANTS
(Cost $31,394,608)

 

26,629,914

 

 

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS — 86.7%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 59.1%

 

 

 

34,546

 

Acorda Therapeutics, Inc. (b)

 

1,008,743

 

111,924

 

Alexion Pharmaceuticals, Inc. (b)

 

14,892,607

 

58,923

 

Alkermes plc (b)

 

2,395,809

 

48,695

 

Alnylam Pharmaceuticals, Inc. (b)

 

3,132,549

 

125,374

 

Amgen, Inc.

 

14,312,696

 

173,020

 

Auxilium Pharmaceuticals, Inc. (b)

 

3,588,435

 

581,860

 

BioDelivery Sciences International, Inc. (b)

 

3,427,155

 

59,788

 

Biogen Idec, Inc. (b)

 

16,725,693

 

45,411

 

BioMarin Pharmaceutical Inc. (b)

 

3,191,031

 

156,955

 

Celgene Corporation (b)

 

26,519,117

 

1,892

 

Ceres, Inc. warrants (Restricted, expiration 9/05/15) (a) (b)

 

0

 

 

The accompanying notes are an integral part of this schedule of investments.

 



 

SHARES

 

 

 

VALUE

 

 

 

Biotechnologies/Biopharmaceuticals — continued

 

 

 

32,658

 

Clovis Oncology, Inc. (b)

 

$

1,968,298

 

75,914

 

Cubist Pharmaceuticals, Inc. (b)

 

5,228,197

 

464,770

 

Gilead Sciences, Inc. (b)

 

34,927,466

 

107,776

 

Infinity Pharmaceuticals, Inc. (b)

 

1,488,387

 

12,743

 

MacroGenics, Inc. (Restricted) (b)

 

314,587

 

243,920

 

MEI Pharma, Inc. (b)

 

1,953,799

 

757,050

 

Merrimack Pharmaceuticals, Inc. (b)

 

4,042,647

 

57,912

 

Neurocrine Biosciences, Inc. (b)

 

540,898

 

62,800

 

NPS Pharmaceuticals, Inc. (b)

 

1,906,608

 

113,100

 

OncoGenex Pharmaceuticals, Inc. (b)

 

943,254

 

37,500

 

OncoGenex Pharmaceuticals, Inc. warrants (Restricted, expiration 10/22/15) (a) (b)

 

4,875

 

29,400

 

Pharmacyclics, Inc. (b)

 

3,109,932

 

57,604

 

Puma Biotechnology, Inc. (b)

 

5,963,742

 

81,959

 

Regeneron Pharmaceuticals, Inc. (b)

 

22,558,395

 

314,497

 

Verastem, Inc. (b)

 

3,585,266

 

153,029

 

Vertex Pharmaceuticals, Inc. (b)

 

11,370,055

 

 

 

 

 

189,100,241

 

 

 

Drug Delivery — 1.5%

 

 

 

4,266,000

 

A.P. Pharma, Inc. (b)

 

1,898,370

 

2,066,667

 

A.P. Pharma, Inc. warrants (Restricted, expiration 7/01/16) (a) (b)

 

411,266

 

575,640

 

IntelliPharmaceutics International Inc. (b) (c)

 

2,129,868

 

319,800

 

IntelliPharmaceutics International Inc. warrants (Restricted, expiration 2/01/16) (a) (b) (c)

 

466,908

 

 

 

 

 

4,906,412

 

 

 

Drug Discovery Technologies — 3.6%

 

 

 

227,088

 

Incyte Corporation (b)

 

11,497,466

 

46

 

Zyomyx, Inc. (Restricted) (a) (b)

 

11

 

 

 

 

 

11,497,477

 

 

 

Financial Services — 0.0%

 

 

 

3,939,544

 

Sarossa Captial plc (b) (f)

 

78,298

 

 

 

Generic Pharmaceuticals — 13.1%

 

 

 

46,815

 

Actavis plc (b)

 

7,864,920

 

326,448

 

Akorn, Inc. (b)

 

8,040,414

 

99,469

 

Impax Laboratories, Inc. (b)

 

2,500,651

 

147,916

 

Mylan, Inc. (b)

 

6,419,554

 

66,228

 

Perrigo Company plc (f)

 

10,163,349

 

97,180

 

Sagent Pharmaceuticals, Inc. (b)

 

2,466,428

 

115,118

 

Teva Pharmaceutical Industries Ltd. (e)

 

4,613,930

 

 

 

 

 

42,069,246

 

 

 

Healthcare Services — 0.3%

 

 

 

148,148

 

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

 

777,777

 

 

 

 

 

 

 

 

 

Medical Devices and Diagnostics — 4.8%

 

 

 

226,902

 

Accuray, Inc. (b)

 

1,976,316

 

130,000

 

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

 

94,032

 

 

The accompanying notes are an integral part of this schedule of investments.

 



 

SHARES

 

 

 

VALUE

 

 

 

Medical Devices and Diagnostics — continued

 

 

 

137,556

 

Hologic, Inc. (b)

 

$

3,074,377

 

17,668

 

IDEXX Laboratories, Inc. (b)

 

1,879,345

 

47,854

 

Illumina, Inc. (b)

 

5,293,610

 

26,300

 

PerkinElmer, Inc.

 

1,084,349

 

139

 

Songbird Hearing, Inc. (Restricted) (a) (b)

 

93

 

9,980

 

Thermo Fisher Scientific Inc.

 

1,111,273

 

9,700

 

Waters Corporation (b)

 

970,000

 

 

 

 

 

15,483,395

 

 

 

Pharmaceuticals — 4.3%

 

 

 

121,800

 

Avanir Pharmaceuticals, Inc. (b)

 

409,248

 

41,773

 

Endo Health Solutions, Inc. (b)

 

2,818,007

 

232,784

 

Ironwood Pharmaceuticals, Inc. (b)

 

2,702,622

 

46,724

 

Shire plc (e)

 

6,601,634

 

140,800

 

Supernus Pharmaceuticals, Inc. (b)

 

1,061,632

 

 

 

 

 

13,593,143

 

 

 

TOTAL COMMON STOCKS AND WARRANTS
(Cost $157,940,575)

 

277,505,989

 

 

 

 

 

 

 

 

 

EXCHANGE TRADED FUND — 2.7%

 

 

 

38,280

 

iShares Nasdaq Biotechnology ETF

 

8,691,857

 

 

 

TOTAL EXCHANGE TRADED FUND
(Cost $7,734,748)

 

8,691,857

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

SHORT-TERM INVESTMENT — 2.1%

 

 

 

$

6,624,000

 

Repurchase Agreement, State Street Bank and Trust Co., repurchase value $6,624,000, 0.00%, dated 12/31/13, due 01/02/14 (collateralized by U.S. Treasury Note 0.250%, due 01/31/15, market value $6,758,438)

 

6,624,000

 

 

 

TOTAL SHORT-TERM INVESTMENTS
(Cost $6,624,000)

 

6,624,000

 

 

 

TOTAL INVESTMENTS BEFORE MILESTONE INTERESTS - 99.8%
(Cost $203,693,931)

 

319,451,760

 

 

INTEREST

 

 

 

 

 

 

 

MILESTONE INTERESTS (Restricted)(a) (b) — 0.0%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 0.0%

 

 

 

1

 

Targegen Milestone Interest

 

68,452

 

 

 

Medical Devices and Diagnostics — 0.0%

 

 

 

1

 

Xoft Milestone Interest

 

10,749

 

 

 

TOTAL MILESTONE INTERESTS
(Cost $3,546,572)

 

79,201

 

 

 

TOTAL INVESTMENTS - 99.8%
(Cost $207,240,503)

 

319,530,961

 

 

 

OTHER ASSETS IN EXCESS OF LIABILITIES - 0.2%

 

653,517

 

 

 

NET ASSETS - 100%

 

$

320,184,478

 

 

The accompanying notes are an integral part of this schedule of investments.

 



 


(a)

Security fair valued.

(b)

Non-income producing security.

(c)

Affiliated issuers in which the Fund holds 5% or more of the voting securities (total market value of $13,788,948).

(d)

Number of warrants to be determined at a future date.

(e)

American Depository Receipt

(f)

Foreign security.

(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.

 

The accompanying notes are an integral part of this schedule of investments.

 



 

H&Q LIFE SCIENCES INVESTORS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2013

(Unaudited)

 

Other Information

 

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.). 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 inputs used as of December 31, 2013 to value the Fund’s net assets. For the period ended December 31, 2013, there were no transfers between Levels 1 and 2. The Fund accounts for transfers between levels at the beginning of the period.

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Convertible and Non-Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

 

 

 

 

$

3,503,570

 

$

3,503,570

 

Drug Discovery Technologies

 

 

 

 

 

0

 

0

 

Healthcare Services

 

 

 

 

 

4,308,088

 

4,308,088

 

Medical Devices and Diagnostics

 

 

 

 

 

15,573,256

 

15,573,256

 

Pharmaceuticals

 

 

 

$

3,245,000

 

 

3,245,000

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

188,780,779

 

 

319,462

 

189,100,241

 

Drug Delivery

 

4,028,238

 

 

878,174

 

4,906,412

 

Drug Discovery Technologies

 

11,497,466

 

 

11

 

11,497,477

 

Financial Services

 

78,298

 

 

 

78,298

 

Generic Pharmaceuticals

 

42,069,246

 

 

 

42,069,246

 

Healthcare Services

 

 

 

777,777

 

777,777

 

Medical Devices and Diagnostics

 

15,389,270

 

 

94,125

 

15,483,395

 

Pharmaceuticals

 

13,593,143

 

 

 

13,593,143

 

Exchange Traded Fund

 

8,691,857

 

 

 

8,691,857

 

Short-term Investment

 

 

6,624,000

 

 

6,624,000

 

Milestone Interest

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

 

 

68,452

 

68,452

 

Medical Devices and Diagnostics

 

 

 

10,749

 

10,749

 

Other Assets

 

 

 

327,879

 

327,879

 

Total

 

$

284,128,297

 

$

9,869,000

 

$

25,861,543

 

$

319,858,840

 

 

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

 

Level 3 Assets

 

Balance as
of
September
30, 2013

 

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
Decenber
31, 2013

 

Convertible, Non-Convertibe Securities and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

4,912,705

 

$

(698,740

)

$

168,468

 

$

(878,863

)

$

 

$

3,503,570

 

Drug Discovery Technologies

 

0

 

 

 

 

 

0

 

Healthcare Services

 

4,308,088

 

 

 

 

 

4,308,088

 

Medical Devices and Diagnostics

 

15,587,351

 

(18,892

)

4,797

 

 

 

15,573,256

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

4,125

 

(564,221

)

879,558

 

 

 

319,462

 

Drug Delivery

 

544,434

 

333,740

 

 

 

 

878,174

 

Drug Discovery Technologies

 

11

 

 

 

 

 

11

 

Healthcare Services

 

777,777

 

 

 

 

 

777,777

 

Medical Devices and Diagnostics

 

86,150

 

7,975

 

 

 

 

94,125

 

Milestone Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

4,291,294

 

(4,222,842

)

 

 

 

68,452

 

Medical Devices and Diagnostics

 

10,690

 

59

 

 

 

 

10,749

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Assets

 

327,115

 

 

956

 

(192

)

 

327,879

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

30,849,740

 

$

(5,162,921

)

$

1,053,779

 

$

(879,055

)

$

 

$

25,861,543

 

 



 

Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2013

 

$

5,884,999

 

 

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
12/31/2013

 

Valuation Technique

 

Unobservable Input

 

Range
(Weighted Average)

 

Private Companies and Other Restricted Securities

 

977,081

 

Public market price

 

None

 

N/A

 

 

 

16,210,684

 

Capital asset pricing model

 

Discount Rate

 

12%-37% (17.13%)

 

 

 

 

 

 

 

Price to sales multiple

 

0.2-16.8 (2.76)

 

 

 

 

 

 

 

Revenue growth rate

 

10%-300% (52.88%)

 

 

 

7,427,374

 

Independent valuation

 

Discount Rate

 

20%

 

 

 

1,246,404

 

Probability adjusted value

 

Probability of events

 

10%-99% (32.04%)

 

 

 

 

 

 

 

Timing of events

 

0-5.08 (3.5) years

 

 

 

$

25,861,543

 

 

 

 

 

 

 

 

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”) have 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. 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 whose quoted price may otherwise not reflect fair value, are valued in good faith by the Adviser using a fair value process pursuant to policies and procedures approved by the Trustees described below. 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 Adviser also using fair valuation policies and procedures approved by the Trustees described below. Non-exchange traded warrants of publicly traded companies are typically 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 valued at amortized cost, which approximates fair value.

 



 

Convertible preferred shares, warrants or convertible note interests in private companies, milestone interests, other restricted securities, as well as shares of publicly traded companies for which market quotations are not available 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 term. 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 currently assigned.

 

Federal Income Tax Cost

 

At December 31, 2013, the cost of securities for Federal income tax purposes was $207,240,503. The net unrealized gain on securities held by the Fund was $112,290,458, including gross unrealized gain of $134,615,843 and gross unrealized loss of $22,325,385.

 

Other Transactions with Affiliates

 

An affiliate company is a company in which the Fund holds 5% or more of the voting securities. Transactions with such companies during the period ended December 31, 2013 were as follows:

 

Issuer

 

Value on
September 30,
2013

 

Purchases

 

Sales

 

Income

 

Value on
December
31, 2013

 

 

 

 

 

 

 

 

 

 

 

 

 

EBI Life Sciences, Inc.

 

$

13,102

 

 

 

 

 

 

 

$

13,102

 

Euthymics Biosciences, Inc.

 

1,099,991

 

 

 

 

 

 

 

1,099,991

 

IntelliPharmaceutics International Inc.

 

1,659,680

 

 

 

$

624,297

 

 

 

2,596,776

 

Neurovance, Inc.

 

738,080

 

$

134,622

 

 

 

 

872,634

 

Palyon Medical Corporation

 

1,319,874

 

 

 

 

 

1,316,603

 

PHT Corporation

 

4,308,088

 

 

 

 

 

4,308,088

 

Veniti, Inc.

 

3,581,754

 

 

 

 

 

3,581,754

 

 

 

$

12,720,569

 

$

134,622

 

$

624,297

 

$

 

$

13,788,948

 

 

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 represents 8% of the Fund’s net assets at December 31, 2013.

 



 

At December 31, 2013, the Fund had commitments of $1,336,880 relating to additional investments in three 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, 2013. The Fund on its own does not have the right to demand that such securities be registered.

 



 

 

 

Acquisition

 

 

 

Carrying Value

 

 

 

Security (#)

 

Date

 

Cost

 

per Unit

 

Value

 

A.P. Pharma, Inc. Warrants (expiration 7/01/16)

 

6/30/11

 

$

555

 

$

0.20

 

$

411,266

 

AlterG, Inc. Series C

 

4/12/13

 

1,427,152

 

0.41

 

958,661

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

5/22/08

 

1,653,315

 

14.07

 

1,116,094

 

Series D Cvt. Pfd.

 

12/10/10

 

545,940

 

3.81

 

542,779

 

Series E Cvt. Pfd.

 

9/14/11

 

1,253,611

 

2.85

 

1,250,781

 

Warrants (expiration 12/11/19)

 

12/10/09, 2/11/10

 

123

 

0.00

 

0

 

Warrants (expiration 6/03/20)

 

6/03/10, 9/01/10

 

123

 

0.00

 

0

 

Celladon Corporation

 

 

 

 

 

 

 

 

 

Series A-1 Cvt. Pfd.

 

1/27/12

 

1,505,300

 

0.45

 

1,492,656

 

Warrants (expiration 10/10/18)

 

10/10/13

 

56

 

0.00

 

0

 

Cvt. Promissory Note

 

10/10/13

 

25,208

 

100.00

 

25,187

 

Cercacor Laboratories, Inc. Common

 

3/31/98

 

0

 

0.72

 

94,032

 

Ceres, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 9/05/15)

 

9/05/07

 

20

 

0.00

 

0

 

Dynex Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

1/03/12

††

199,963

 

0.30

 

641,844

 

Warrants (expiration 4/01/19)

 

1/03/12

††

60

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

1/03/12

††

5

 

0.00

 

0

 

EBI Life Sciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

12/29/11

††

13,597

 

0.01

 

13,102

 

Euthymics Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

7/14/10 - 5/21/12

 

2,635,558

 

0.38

 

1,099,991

 

IlluminOss Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C-1 Cvt. Pfd.

 

9/26/12

 

775,482

 

0.38

 

775,000

 

InnovaCare Health, Inc. Common

 

12/21/12

††

643,296

 

5.25

 

777,777

 

Insightra Medical, Inc. Series C Cvt. Pfd.

 

4/29/13

 

1,553,253

 

0.42

 

1,550,000

 

IntelliPharmaceutics International Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 2/01/16)

 

1/31/11

 

115

 

1.46

 

466,908

 

Labcyte, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/18/05

 

1,283,959

 

0.71

 

1,743,765

 

Series D Cvt. Pfd.

 

12/21/12

 

68,608

 

0.83

 

88,915

 

MacroGenics, Inc. Common

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

10/10/13

 

879,558

 

24.68

 

314,587

 

Magellan Diagnostics, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

11/28/06 - 10/01/09

 

1,225,113

 

0.69

 

1,480,995

 

Warrants (expiration 4/01/19)

 

4/03/09

 

358

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

5/12/09

 

29

 

0.00

 

0

 

Neurovance, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

12/29/11

††

202,963

 

0.08

 

199,863

 

Series A-1 Cvt. Pfd.

 

10/11/12

 

674,013

 

0.08

 

672,771

 

OncoGenex Pharmaceuticals, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 10/22/15)

 

10/22/10

 

0

 

0.13

 

4,875

 

Palyon Medical Corporation

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

4/28/09

 

2,068,781

 

0.00

9,606

 

Series B Cvt. Pfd.

 

6/28/13

 

1,312,161

 

0.07

 

1,306,997

 

Warrants (expiration 4/26/19)

 

4/25/12

 

0

 

0.00

 

0

 

PHT Corporation

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

7/23/01

 

2,804,181

 

0.78

 

2,800,000

 

Series E Cvt. Pfd.

 

9/12/03 - 10/19/04

 

627,548

 

1.55

 

1,244,403

 

Series F Cvt. Pfd.

 

7/21/08

 

81,729

 

2.65

 

263,685

 

Songbird Hearing, Inc. Common

 

12/14/00

 

2,003,239

 

0.67

 

93

 

Targegen Milestone Interest

 

7/20/10

 

2,960,669

 

68,452

 

68,452

 

TherOx, Inc.

 

 

 

 

 

 

 

 

 

Series H Cvt. Pfd.

 

9/11/00 - 8/21/07

 

2,001,787

 

0.01

 

435

 

Series I Cvt. Pfd.

 

7/08/05

 

386,639

 

0.01

 

997

 

Tibion Corporation

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

2/23/11

 

905,158

 

0.08

 

258,136

 

Warrants (expiration 7/12/17)

 

7/12/12

 

0

 

0.00

 

0

 

Warrants (expiration 10/30/17)

 

10/30/12

 

0

 

0.00

 

0

 

Warrants (expiration 11/28/17)

 

11/28/12

 

0

 

0.00

 

0

 

Non Cvt. Promissory Note

 

7/12/12

 

239,081

 

100.00

 

238,286

 

Non Cvt. Promissory Note

 

4/12/13

 

28,216

 

100.00

 

28,211

 

Veniti, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

2/28/11

 

2,271,713

 

0.92

 

2,385,302

 

Series B Cvt. Pfd.

 

5/24/13

 

1,197,289

 

0.92

 

1,196,452

 

Xoft Milestone Interest

 

1/05/11

 

585,903

 

10,749

 

10,749

 

Zyomyx, Inc. Common

 

2/19/99 - 1/12/04

 

2,601,013

 

0.25

 

11

 

 

 

 

 

$

38,642,440

 

 

 

$

25,533,664

 

 



 


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

† Carrying value per unit is greater than $0.00 but less than $0.01.

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

 



 

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)

H&Q Life Sciences Investors

 

 

 

By (Signature and Title)

/s/ Daniel R. Omstead

 

 

Daniel R. Omstead, President

 

 

 

Date

2/24/2014

 

 

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

2/24/2014