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

OMB APPROVAL

 

OMB Number:    3235-0578
Expires:    April 30, 2013
Estimated average burden hours per response........5.6

 

 

 

 

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:

6/30/12

 

 



 

Item 1.  Schedule of Investments.

 



 

H&Q LIFE SCIENCES INVESTORS

SCHEDULE OF INVESTMENTS

JUNE 30, 2012

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

CONVERTIBLE SECURITIES AND WARRANTS — 9.0% of Net Assets

 

 

 

 

 

Convertible Preferred and Warrants (Restricted)(a) — 8.8%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 2.0%

 

 

 

1,587,302

 

Agilix Corporation Series B (c)

 

$

0

 

3,324,401

 

Celladon Corporation Series A-1

 

1,492,656

 

2,568,939

 

EBI Life Sciences, Inc. Series A (c)

 

11,303

 

2,568,939

 

Euthymics Biosciences, Inc. Series A (c)

 

2,357,515

 

239,236

 

MacroGenics, Inc. Series D

 

156,006

 

2,568,939

 

Neurovance, Inc. Series A (c)

 

199,864

 

 

 

 

 

4,217,344

 

 

 

Healthcare Services — 1.9%

 

 

 

3,589,744

 

PHT Corporation Series D (c)

 

3,338,462

 

802,996

 

PHT Corporation Series E (c)

 

746,786

 

99,455

 

PHT Corporation Series F (c)

 

92,493

 

 

 

 

 

4,177,741

 

 

 

Medical Devices and Diagnostics — 4.9%

 

 

 

2,379,916

 

CardioKinetix, Inc. Series C

 

618,778

 

4,277,223

 

CardioKinetix, Inc. Series D

 

470,495

 

8,462,336

 

CardioKinetix, Inc. Series E

 

846,234

 

N/A

 

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

 

0

 

N/A

 

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

 

0

 

N/A

 

CardioKinetix, Inc. warrants (expiration 7/07/21) (d)

 

0

 

2,161,090

 

Dynex Technologies, Inc. Series A

 

388,996

 

98,824

 

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

 

0

 

7,877

 

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

 

0

 

2,446,016

 

Labcyte, Inc. Series C

 

1,280,000

 

2,161,090

 

Magellan Diagnostics, Inc. Series A

 

1,275,043

 

98,824

 

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

 

0

 

7,877

 

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

 

0

 

1,031,992

 

OmniSonics Medical Technologies, Inc. Series A-1

 

1,032

 

877,747

 

OmniSonics Medical Technologies, Inc. Series B-1

 

878

 

9,606,373

 

Palyon Medical Corporation Series A (c)

 

1,537,020

 

N/A

 

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

 

0

 

43,478

 

TherOx, Inc. Series H

 

49,739

 

99,646

 

TherOx, Inc. Series I

 

113,995

 

3,280,000

 

Tibion Corporation Series B

 

1,640,000

 

2,606,033

 

Veniti, Inc. Series A (c)

 

2,255,000

 

 

 

 

 

10,477,210

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

Convertible Notes — 0.2%(a)

 

 

 

 

 

Drug Discovery Technologies — 0.0%

 

 

 

$

700,000

 

deCode Genetics, Inc., 3.50% due 4/15/11

 

0

 

 

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

 



 

PRINCIPAL
AMOUNT

 

 

 

VALUE

 

 

 

Convertible Notes — continued

 

 

 

 

 

Medical Devices and Diagnostics — 0.2%

 

 

 

$

512,500

 

Palyon Medical Corporation Cvt. Promissory Note, 8.00% due 4/26/13 (c)

 

$

512,500

 

 

 

TOTAL CONVERTIBLE NOTES

 

512,500

 

 

 

TOTAL CONVERTIBLE SECURITIES AND WARRANTS
(Cost $26,997,571)

 

19,384,795

 

 

 

 

 

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS — 83.0%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 45.2%

 

 

 

25,950

 

Acorda Therapeutics, Inc. (b)

 

611,382

 

101,100

 

Aegerion Pharmaceuticals, Inc. (b)

 

1,500,324

 

99,214

 

Alexion Pharmaceuticals, Inc. (b)

 

9,851,950

 

104,752

 

Alkermes plc (b)

 

1,777,642

 

306,603

 

Amarin Corporation plc (b) (f)

 

4,433,479

 

3,201

 

Amgen, Inc.

 

233,801

 

3,939,544

 

Antisoma plc (b) (e)

 

107,823

 

99,795

 

ARIAD Pharmaceuticals, Inc. (b)

 

1,717,472

 

54,590

 

Biogen Idec, Inc. (b)

 

7,881,704

 

170,200

 

Celgene Corporation (b)

 

10,920,032

 

168,851

 

Ceres, Inc. (Restricted) (a) (b)

 

1,375,291

 

1,892

 

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

 

1,173

 

174,224

 

Cornerstone Therapeutics, Inc. (b)

 

1,102,838

 

60,751

 

Cubist Pharmaceuticals, Inc. (b)

 

2,303,070

 

224,080

 

Curis, Inc. (b)

 

1,210,032

 

144,694

 

Dendreon Corporation (b)

 

1,070,736

 

229,826

 

Elan Corporation plc (b) (f)

 

3,353,161

 

267,485

 

Gilead Sciences, Inc. (b)

 

13,716,631

 

369,488

 

Keryx Biopharmaceuticals, Inc. (b)

 

665,078

 

222,727

 

Nektar Therapeutics (b)

 

1,797,407

 

420,747

 

Neurocrine Biosciences, Inc. (b)

 

3,328,109

 

364,730

 

NPS Pharmaceuticals, Inc. (b)

 

3,140,325

 

113,100

 

OncoGenex Pharmaceutical, Inc. (b)

 

1,520,064

 

37,500

 

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

 

98,625

 

343,067

 

Puma Biotechnology, Inc (b)

 

3,859,504

 

66,083

 

Regeneron Pharmaceuticals, Inc. (b)

 

7,548,000

 

193,750

 

Synta Pharmaceuticals Corporation (b)

 

1,059,813

 

195,000

 

Targacept, Inc. (b)

 

838,500

 

58,123

 

United Therapeutics Corporation (b)

 

2,870,114

 

274,325

 

Verastem, Inc. (Restricted) (b)

 

2,518,304

 

49,600

 

Vertex Pharmaceuticals, Inc. (b)

 

2,773,632

 

 

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

 



 

SHARES

 

 

 

VALUE

 

 

 

COMMON STOCKS AND WARRANTS — continued

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — continued

 

 

 

73,941

 

VIVUS, Inc. (b)

 

$

2,110,276

 

 

 

 

 

97,296,292

 

 

 

Drug Delivery — 3.0%

 

 

 

4,125,584

 

A.P. Pharma, Inc. (b)

 

2,826,025

 

2,066,667

 

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

 

843,200

 

711,350

 

IntelliPharmaCeutics International, Inc. (b) (c)

 

2,290,547

 

319,800

 

IntelliPharmaCeutics International, Inc. warrants (Restricted, expiration 2/01/13) (a) (b) (c)

 

166,296

 

319,800

 

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

 

211,068

 

 

 

 

 

6,337,136

 

 

 

Drug Discovery Technologies — 0.3%

 

 

 

140,000

 

Celldex Therapeutics, Inc. (b)

 

726,600

 

46

 

Zyomyx, Inc. (Restricted) (a) (b)

 

11

 

 

 

 

 

726,611

 

 

 

Generic Pharmaceuticals — 15.3%

 

 

 

493,148

 

Akorn, Inc. (b)

 

7,776,944

 

104,765

 

Impax Laboratories, Inc. (b)

 

2,123,587

 

279,254

 

Mylan, Inc. (b)

 

5,967,658

 

73,587

 

Perrigo Company

 

8,678,115

 

157,441

 

Teva Pharmaceutical Industries Ltd. (f)

 

6,209,473

 

28,365

 

Watson Pharmaceuticals, Inc. (b)

 

2,098,726

 

 

 

 

 

32,854,503

 

 

 

Healthcare Services — 2.1%

 

 

 

177,125

 

Addus HomeCare Corporation (b)

 

869,684

 

148,148

 

Aveta, Inc. (Restricted) (a) (g)

 

1,666,665

 

43,400

 

Covance, Inc. (b)

 

2,076,690

 

 

 

 

 

4,613,039

 

 

 

Medical Devices and Diagnostics — 9.7%

 

 

 

208,296

 

Accuray, Inc. (b)

 

1,424,745

 

158,022

 

Alere, Inc. (b)

 

3,071,948

 

114,671

 

Bruker Corporation (b)

 

1,526,271

 

130,000

 

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

 

62,584

 

42,028

 

Gen-Probe, Inc. (b)

 

3,454,701

 

181,939

 

Hologic, Inc. (b)

 

3,282,179

 

35,561

 

iCAD, Inc. (b)

 

16,358

 

119,389

 

iCAD, Inc. (Locked-up until 6/30/12) (Restricted) (a)

 

52,173

 

26,533

 

iCAD, Inc. (Locked-up until 12/31/12) (Restricted) (a)

 

10,985

 

17,668

 

IDEXX Laboratories, Inc. (b)

 

1,698,425

 

53,171

 

Illumina, Inc. (b)

 

2,147,577

 

33,500

 

Life Technologies Corporation (b)

 

1,507,165

 

447,080

 

Medwave, Inc. (b)

 

0

 

62,005

 

OmniSonics Medical Technologies, Inc. (Restricted) (a) (b)

 

62

 

 

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

 



 

SHARES

 

 

 

VALUE

 

 

 

COMMON STOCKS AND WARRANTS — continued

 

 

 

 

 

Medical Devices and Diagnostics — continued

 

 

 

21,531

 

Palomar Medical Technologies, Inc. (b)

 

$

183,013

 

139

 

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

 

93

 

46,406

 

Thermo Fisher Scientific, Inc.

 

2,408,935

 

 

 

 

 

20,847,214

 

 

 

Pharmaceuticals — 7.4%

 

 

 

42,653

 

Endo Pharmaceuticals Holdings, Inc. (b)

 

1,321,390

 

111,135

 

Ironwood Pharmaceuticals, Inc. (b)

 

1,531,440

 

51,377

 

Medivation, Inc. (b)

 

4,695,858

 

47,597

 

Sanofi, CVR (expiration 12/31/20) (b) (h)

 

67,112

 

40,213

 

Shire plc (f)

 

3,474,001

 

184,315

 

Warner Chilcott plc (b)

 

3,302,925

 

625,000

 

Zogenix, Inc. (b)

 

1,550,000

 

 

 

 

 

15,942,726

 

 

 

TOTAL COMMON STOCKS AND WARRANTS
(Cost $150,418,598)

 

178,617,521

 

 

 

 

 

 

 

 

 

EXCHANGE TRADED FUND — 1.0%

 

 

 

16,860

 

iShares Nasdaq Biotechnology Index Fund

 

2,191,041

 

 

 

TOTAL EXCHANGE TRADED FUND
(Cost $2,050,784)

 

2,191,041

 

 

 

 

 

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

SHORT-TERM INVESTMENT — 3.8%

 

 

 

$

8,176,000

 

Repurchase Agreement, State Street Bank and Trust Co., repurchase value $13,822,012, 0.01%, dated, due 07/02/12 (collateralized by U.S. Treasury Note 4.23%, 06/30/16, market value $14,102,344)

 

8,176,000

 

 

 

TOTAL SHORT-TERM INVESTMENT
(Cost $8,176,000)

 

8,176,000

 

 

 

TOTAL INVESTMENTS BEFORE MILESTONE INTERESTS - 96.8%
(Cost $187,642,953)

 

208,369,357

 

 

 

 

 

 

 

INTEREST

 

 

 

 

 

 

 

MILESTONE INTERESTS (Restricted)(a) — 2.9%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 1.6%

 

 

 

1

 

Targegen Milestone Interest

 

3,491,464

 

 

 

 

 

 

 

 

 

Medical Devices and Diagnostics — 1.3%

 

 

 

1

 

Interlace Medical Milestone Interest

 

2,145,228

 

1

 

Xoft Milestone Interest

 

618,946

 

 

 

 

 

2,764,174

 

 

 

TOTAL MILESTONE INTERESTS
(Cost $4,297,338)

 

 

6,255,638

 

 

 

TOTAL INVESTMENTS - 99.7%
(Cost $191,940,291)

 

214,624,995

 

 

 

OTHER ASSETS IN EXCESS OF LIABILITIES - 0.3%

 

560,689

 

 

 

NET ASSETS - 100%

 

$

215,185,684

 

 

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 $13,718,854).

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

(e)                    Foreign Security.

(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)                   Contingent Value Rights

 

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

 



 

H&Q LIFE SCIENCES INVESTORS

NOTES TO SCHEDULE OF INVESTMENTS

June 30, 2012

(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 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 June 30, 2012 to value the Fund’s net assets.  For the period ended June 30, 2012, there were no transfers between Levels 1 and 2.

 

Assets at Value

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

 

 

 

 

$

4,217,344

 

$

4,217,344

 

Healthcare Services

 

 

 

 

 

4,177,741

 

4,177,741

 

Medical Devices and Diagnostics

 

 

 

 

 

10,989,710

 

10,989,710

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

93,302,899

 

 

 

3,993,393

 

97,296,292

 

Drug Delivery

 

5,116,572

 

 

 

1,220,564

 

6,337,136

 

Drug Discovery Technologies

 

726,600

 

 

 

11

 

726,611

 

Generic Pharmaceuticals

 

32,854,503

 

 

 

 

32,854,503

 

Healthcare Services

 

2,946,374

 

 

 

1,666,665

 

4,613,039

 

Medical Devices and Diagnostics

 

20,721,317

 

 

 

125,897

 

20,847,214

 

Pharmaceuticals

 

15,942,726

 

 

 

 

15,942,726

 

Exchange Traded Fund

 

2,191,041

 

 

 

 

2,191,041

 

Short-Term Investment

 

 

$

8,176,000

 

 

8,176,000

 

Milestone Interests

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

 

 

3,491,464

 

3,491,464

 

Medical Devices and Diagnostics

 

 

 

2,764,174

 

2,764,174

 

Other Assets

 

 

 

1,369,383

 

1,369,383

 

Total

 

$

173,802,032

 

$

8,176,000

 

$

34,016,346

 

$

215,994,378

 

 

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, 2011

 

Realized gain/loss and
change in unrealized
appreciation
(depreciation)

 

Cost of
purchases

 

Proceeds
from sales

 

Net transfers in
(out of) Level 3

 

Balance as of
June 30, 2012

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

2,123,763

 

$

(12,663

)

$

2,338,811

 

$

(232,567

)

$

 

$

4,217,344

 

Drug Discovery Technologies

 

3,200,737

 

(779,945

)

28

 

(2,420,820

)

 

0

 

Healthcare Services

 

3,503,912

 

673,829

 

 

 

 

4,177,741

 

Medical Devices and Diagnostics

 

17,269,542

 

(574,613

)

1,272,020

 

(6,977,239

)

 

10,989,710

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

61,875

 

(812,508

)

4,752,654

 

(8,628

)

 

3,993,393

 

Drug Delivery

 

890,798

 

329,536

 

230

 

 

 

1,220,564

 

Drug Discovery Technologies

 

11

 

 

 

 

 

11

 

Healthcare Services

 

1,333,332

 

333,333

 

 

 

 

1,666,665

 

Medical Devices and Diagnostics

 

150,808

 

22,672

 

 

(47,583

)

 

125,897

 

Milestone Interests

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

4,627,443

 

(22,119

)

 

(1,113,860

)

 

3,491,464

 

Medical Devices and Diagnostics

 

3,424,284

 

1,274,812

 

620

 

(1,935,542

)

 

2,764,174

 

Other Assets

 

746,232

 

 

1,100,188

 

(477,037

)

 

1,369,383

 

Total

 

$

37,332,737

 

$

432,334

 

$

9,464,551

 

$

(13,213,276

)

$

 

$

34,016,346

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2012

 

 

 

$

1,194,698

 

 



 

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

 

 

 

Fair Value at
6/30/12

 

Valuation Technique

 

Unobservable Input

 

Range

Private Companies and Other Restricted Securities

 

$

 7,006,364

 

Public market price based

 

Estimate of time to liquidity

 

3-9 months

 

 

 

 

 

 

Discount for lack of marketability

 

5%-10%

 

 

9,925,995

 

Capital asset pricing model based

 

Revenue growth rate

 

17%-117%

 

 

 

 

 

 

Price to sales multiple

 

1.7-8.0

 

 

 

 

 

 

 

 

 

 

 

9,300,885

 

Independent valuation based

 

(1)

 

(1)

 

 

7,783,102

 

Probability adjusted value based

 

Probability of events

 

10%-50%

 

 

 

 

 

 

Timing of events

 

0.5-6 years

 

 

 

 

 

 

 

 

 

 

 

$

 34,016,346

 

 

 

 

 

 

 


(1)   Valuation prepared by an independent third party.  ASC 820-10-50-2(bbb) states that entities are not required to create “quantitative unobservable inputs [that] are not developed by the reporting entity.”

 

Investment Valuation

 

Shares of publicly traded investments listed on national securities exchanges or 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 Trustees have established and approved fair valuation policies and procedures with respect to securities for which effective quoted prices may not be available. Shares of publicly traded investments 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 valuation process described below. Restricted securities of companies that are publicly traded are valued typically 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 the fair valuation process described below. Non-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. Factors 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 a 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 appropriate, multiple valuation methodologies are applied to confirm fair value. Significant unobservable inputs are identified by the Adviser and 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, despite the Adviser’s good faith effort, 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 June 30, 2012, the cost of securities for Federal income tax purposes was $191,940,291. The net unrealized gain on securities held by the Fund was $22,684,704 including gross unrealized gain of $51,499,926 and gross unrealized loss of $28,815,222.

 

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 June 30, 2012 were as follows:

 

Issuer

 

Value on
September 30, 2011

 

Purchases

 

Sales

 

Income

 

Value on
June 30, 2012

 

 

 

 

 

 

 

 

 

 

 

 

 

Agilix Corporation

 

$

2,635

 

 

 

$

2,644

 

$

 

$

0

 

Concentric Medical, Inc.

 

6,792,332

 

 

 

6,778,583

 

 

 

EBI Life Sciences, Inc.

 

 

$

44,395

 

30,798

 

 

11,303

 

Euthymics Biosciences, Inc.

 

1,967,757

 

589,490

 

197,425

 

 

2,357,515

 

IntelliPharmaCeutics International, Inc.

 

2,785,458

 

197,313

 

 

 

2,667,911

 

MZT Holdings, Inc.

 

45,630

 

 

 

 

 

Neurovance, Inc.

 

 

206,971

 

4,343

 

 

199,864

 

Palyon Medical Corporation

 

1,537,020

 

512,500

 

 

 

2,049,520

 

PHT Corporation

 

3,503,912

 

 

 

 

4,177,741

 

Veniti, Inc.

 

2,255,000

 

 

 

 

2,255,000

 

 

 

$

18,889,744

 

$

1,550,669

 

$

7,013,793

 

$

 

$

13,718,854

 

 



 

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 15% of the Fund’s net assets at June 30, 2012.

 

At June 30, 2012, the Fund had commitments of $672,089 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, 2012. 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

 

Agilix Corporation

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

11/08/01

 

$

1,565,151

 

$

0.00

 

$

0

 

A.P. Pharma, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 7/01/16)

 

6/30/11

 

555

 

0.41

 

843,200

 

Aveta, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/21/05

 

2,003,155

 

11.25

 

1,666,665

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

5/22/08

 

1,652,787

 

0.26

 

618,778

 

Series D Cvt. Pfd.

 

12/10/10

 

544,972

 

0.11

 

470,495

 

Series E Cvt. Pfd.

 

9/14/11

 

803,495

 

0.10

 

846,234

 

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

 

Warrants (expiration 7/07/21)

 

7/07/11

 

48

 

0.00

 

0

 

Celladon Corporation

 

 

 

 

 

 

 

 

 

Series A-1 Cvt. Pfd.

 

1/27/12

 

1,497,955

 

0.45

 

1,492,656

 

Ceracor Laboratories, Inc.

 

 

 

 

 

 

 

 

 

Common

 

3/31/98

 

0

 

0.48

 

62,584

 

Ceres, Inc.

 

 

 

 

 

 

 

 

 

Common

 

2/24/12

††

2,418,559

 

8.15

 

1,375,291

 

Warrants (expiration 9/05/15)

 

9/05/07

 

20

 

0.62

 

1,173

 

Dynex Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

1/03/12

††

199,963

 

0.18

 

388,996

 

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

 

0.00

11,303

 

Euthymics Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

7/14/10 - 2/28/12

 

2,366,314

 

0.92

 

2,357,515

 

iCAD, Inc.

 

 

 

 

 

 

 

 

 

Common (Locked-up until 6/30/12)

 

1/05/11

††

180,321

 

0.44

 

52,173

 

Common (Locked-up until 12/31/12)

 

1/05/11

††

0

 

0.41

 

10,985

 

IntelliPharmaCeutics International, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 2/01/13)

 

1/31/11

 

115

 

0.52

 

166,296

 

Warrants (expiration 2/01/16)

 

1/31/11

 

115

 

0.66

 

211,068

 

Interlace Medical

 

 

 

 

 

 

 

 

 

Milestone Interest

 

1/14/11

 

750,766

 

2,145,228

 

2,145,228

 

Labcyte, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/18/05

 

1,283,262

 

0.52

 

1,280,000

 

MacroGenics, Inc.

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

9/04/08

 

878,863

 

0.65

 

156,006

 

Magellan Diagnostics, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

11/28/06 - 10/01/09

 

1,225,113

 

0.59

 

1,275,043

 

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

††

202,628

 

0.08

 

199,864

 

OmniSonics Medical Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A-1 Cvt. Pfd.

 

10/01/03

 

1,201,037

 

0.00

1,032

 

Series B-1 Cvt. Pfd.

 

6/04/07, 11/15/07

 

668,067

 

0.00

878

 

Common

 

5/24/01, 7/02/07

 

1,606,361

 

0.00

62

 

OncoGenex Pharmaceuticals, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 10/22/15)

 

10/22/10

 

0

 

2.63

 

98,625

 

Palyon Medical Corporation

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

4/28/09

 

2,062,094

 

0.16

 

1,537,020

 

Warrants (expiration 4/26/19)

 

4/25/12

 

0

 

0.00

 

0

 

Cvt. Promissory Note

 

4/25/12

 

512,500

 

1.00

 

512,500

 

PHT Corporation

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

7/23/01

 

2,804,181

 

0.93

 

3,338,462

 

Series E Cvt. Pfd.

 

9/12/03 - 10/14/04

 

627,548

 

0.93

 

746,786

 

Series F Cvt. Pfd.

 

7/21/08

 

81,729

 

0.93

 

92,493

 

Songbird Hearing, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/14/00

 

2,003,239

 

0.67

 

93

 

Targegen

 

 

 

 

 

 

 

 

 

Milestone Interest

 

7/20/10

 

2,960,669

 

3,491,464

 

3,491,464

 

TherOx, Inc.

 

 

 

 

 

 

 

 

 

Series H Cvt. Pfd.

 

9/11/00

 

2,001,787

 

1.14

 

49,739

 

Series I Cvt. Pfd.

 

7/08/05

 

386,639

 

1.14

 

113,995

 

Tibion Corporation

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

2/23/11

 

1,644,674

 

0.50

 

1,640,000

 

Veniti, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

2/28/11

 

2,266,050

 

0.87

 

2,255,000

 

Verastem, Inc.

 

 

 

 

 

 

 

 

 

Common

 

1/27/12

††

2,325,424

 

9.18

 

2,518,304

 

Xoft

 

 

 

 

 

 

 

 

 

Milestone Interest

 

1/05/11

 

585,903

 

618,946

 

618,946

 

Zyomyx, Inc.

 

 

 

 

 

 

 

 

 

Common

 

2/19/99 - 7/22/04

 

2,601,013

 

0.25

 

11

 

 

 

 

 

$

43,927,367

 

 

 

$

32,646,963

 

 


(#) 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 sccurity.

 



 

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

8/28/2012

 

 

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

8/28/2012