N-Q 1 a10-1819_2nq.htm N-Q

 

 

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

OMB APPROVAL

 

OMB Number:    3235-0578
Expires:    April 30, 2010
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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:

12/31/09

 

 


 

Item 1.  Schedule of Investments.

 


 

H&Q LIFE SCIENCES INVESTORS

SCHEDULE OF INVESTMENTS

DECEMBER 31, 2009

(Unaudited)

 

SHARES

 

 

 

VALUE

 

 

 

CONVERTIBLE SECURITIES AND WARRANTS — 10.3% of Net Assets

 

 

 

 

 

Convertible Preferred (Restricted)(a) (b) — 10.0%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 1.0%

 

 

 

204,275

 

MacroGenics, Inc. Series D

 

$

133,208

 

50,145

 

MacroGenics, Inc. Series D 18 Month Lock-up

 

0

 

1,415,385

 

TargeGen, Inc. Series C

 

1,840,000

 

407,825

 

TargeGen, Inc. Series D

 

530,173

 

 

 

 

 

2,503,381

 

 

 

Drug Discovery Technologies — 1.3%

 

 

 

1,587,302

 

Agilix Corporation Series B (c)

 

94,540

 

250,000

 

Ceres, Inc. Series C

 

1,625,000

 

21,462

 

Ceres, Inc. Series C-1

 

139,503

 

175,540

 

Ceres, Inc. Series D

 

1,141,010

 

28,385

 

Ceres, Inc. Series F

 

184,502

 

5,677

 

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

 

0

 

 

 

 

 

3,184,555

 

 

 

Healthcare Services — 1.4%

 

 

 

3,589,744

 

PHT Corporation Series D (c)

 

2,800,000

 

802,996

 

PHT Corporation Series E (c)

 

626,337

 

99,455

 

PHT Corporation Series F (c)

 

77,575

 

 

 

 

 

3,503,912

 

 

 

Medical Devices and Diagnostics — 6.3%

 

 

 

2,379,916

 

CardioKinetix, Inc. Series C

 

1,640,000

 

N/A

 

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

 

0

 

3,235,293

 

Concentric Medical, Inc. Series B (c)

 

1,682,352

 

1,162,790

 

Concentric Medical, Inc. Series C (c)

 

604,651

 

455,333

 

Concentric Medical, Inc. Series D (c)

 

236,773

 

453,094

 

Concentric Medical, Inc. Series E (c)

 

235,609

 

1,198,193

 

Elemé Medical, Inc. Series C

 

644,628

 

1,592,852

 

FlowCardia, Inc. Series C

 

1,708,334

 

1,304,545

 

Interlace Medical, Inc. Series C

 

1,435,000

 

2,446,016

 

Labcyte Inc. Series C

 

1,280,000

 

2,161,090

 

Magellan Biosciences, Inc. Series A

 

2,161,090

 

98,824

 

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

 

0

 

7,877

 

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

 

0

 

1,031,992

 

OmniSonics Medical Technologies, Inc. Series A-1

 

1,031

 

877,747

 

OmniSonics Medical Technologies, Inc. Series B-1

 

877

 

9,606,373

 

Palyon Medical Corporation Series A (c)

 

2,050,000

 

43,478

 

TherOx, Inc. Series H

 

72,122

 

99,646

 

TherOx, Inc. Series I

 

165,293

 

2,813

 

TherOx, Inc. warrants (expiration 1/26/11)

 

0

 

5,427

 

TherOx, Inc. warrants (expiration 6/09/10)

 

0

 

640,625

 

Xoft, Inc. Series D

 

1,601,562

 

122,754

 

Xoft, Inc. Series E

 

306,885

 

 

1


 

SHARES

 

 

 

VALUE

 

 

 

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

 

 

 

N/A

 

Xoft, Inc. warrants (expiration 6/12/14) (d)

 

$

0

 

 

 

 

 

15,826,207

 

 

 

 

 

$

 25,018,055

 

 

 

 

 

 

 

PRINCIPAL
AMOUNT

 

 

 

 

 

 

 

Convertible Notes — 0.3%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 0.1%

 

 

 

$

152,404

 

TargeGen, Inc., Cvt. Promissory Note, 8.00% due 2010 (Restricted) (a)

 

152,404

 

 

 

Drug Discovery Technologies — 0.0%

 

 

 

700,000

 

deCODE Genetics, Inc., 3.50% due 2011

 

38,500

 

 

 

Medical Devices and Diagnostics — 0.2%

 

 

 

131,244

 

CardioKinetix, Inc., Cvt. Promissory Note, 4.25% due 2010 (Restricted) (a)

 

131,244

 

48,545

 

Elemé Medical, Inc., Subordinated Cvt. Promissory Note, 10.50% due 2012 (Restricted)(a)

 

48,545

 

410,000

 

Xoft, Inc., Cvt. Promissory Note, 10.00% due 2010 (Restricted) (a)

 

410,000

 

 

 

 

 

589,789

 

 

 

 

 

$

 780,693

 

 

 

TOTAL CONVERTIBLE SECURITIES AND WARRANTS

(Cost $35,613,109)

 

$

25,798,748

 

 

 

 

 

 

 

SHARES

 

 

 

 

 

 

 

COMMON STOCKS AND WARRANTS — 84.2%

 

 

 

 

 

Biotechnologies/Biopharmaceuticals — 42.8%

 

 

 

142,614

 

Acorda Therapeutics Inc. (b)

 

3,596,725

 

168,282

 

Affymax, Inc. (b)

 

4,163,297

 

8,200

 

Alexion Pharmaceuticals, Inc. (b)

 

400,324

 

191,758

 

Alnylam Pharmaceuticals, Inc. (b)

 

3,378,776

 

93,864

 

AMAG Pharmaceuticals, Inc. (b)

 

3,569,648

 

169,027

 

Amgen Inc. (b)

 

9,561,857

 

180,959

 

Amylin Pharmaceuticals, Inc. (b)

 

2,567,808

 

3,932,015

 

Antisoma plc (b) (e)

 

2,093,773

 

82,000

 

Athersys, Inc. warrants (Restricted, expiration 6/08/12) (a) (b)

 

17,220

 

131,000

 

BioMarin Pharmaceutical Inc. (b)

 

2,464,110

 

218,696

 

Celgene Corporation (b)

 

12,176,993

 

110,853

 

Cephalon, Inc. (b) (i)

 

6,918,336

 

174,224

 

Cornerstone Therapeutics Inc. (b)

 

1,062,766

 

15,967

 

Cornerstone Therapeutics Inc. warrants (Restricted, expiration 6/06/10) (a) (b)

 

0

 

 

2


 

SHARES

 

 

 

VALUE

 

 

 

Biotechnologies/Biopharmaceuticals — continued

 

 

 

238,322

 

Cubist Pharmaceuticals, Inc. (b)

 

$

4,520,968

 

127,457

 

Dendreon Corp (b)

 

3,349,570

 

175,521

 

Eurand N.V. (b) (e)

 

2,264,221

 

160,098

 

Genzyme Corporation (b)

 

7,846,403

 

169,930

 

Gilead Sciences, Inc. (b)

 

7,354,570

 

292,400

 

Isis Pharmaceuticals, Inc. (b)

 

3,245,640

 

157,476

 

Martek Biosciences Corporation (b)

 

2,982,596

 

132,850

 

Medicines Company (b)

 

1,107,969

 

175,880

 

MiddleBrook Pharmaceuticals, Inc. warrants (Restricted, expiration 4/29/10) (a) (b)

 

0

 

48,190

 

OSI Pharmaceuticals, Inc. (b)

 

1,495,336

 

133,086

 

Regeneron Pharmaceuticals, Inc. (b)

 

3,218,020

 

137,531

 

United Therapeutics Corporation (b)

 

7,241,007

 

196,400

 

Vertex Pharmaceuticals Inc. (b)

 

8,415,740

 

131,293

 

XenoPort, Inc. (b)

 

2,436,798

 

 

 

 

 

107,450,471

 

 

 

Drug Delivery — 2.4%

 

 

 

264,752

 

Alkermes, Inc. (b)

 

2,491,316

 

997,671

 

DURECT Corporation (b)

 

2,464,247

 

394,928

 

Penwest Pharmaceuticals Co. (b)

 

1,022,864

 

199,514

 

Penwest Pharmaceuticals Co. warrants (Restricted, expiration 3/11/13) (a) (b)

 

203,504

 

 

 

 

 

6,181,931

 

 

 

Drug Discovery Technologies — 0.1%

 

 

 

7,627

 

Clinical Data, Inc. (b)

 

139,269

 

162,288

 

Clinical Data, Inc. CVR (Restricted) (a) (b) (f)

 

27,856

 

1,601,039

 

MZT Holdings, Inc. (b) (c)

 

51,393

 

1,846,154

 

MZT Holdings, Inc. warrants (Restricted, expiration 1/17/11) (a) (b) (c)

 

0

 

952,381

 

MZT Holdings, Inc. warrants (Restricted, expiration 1/22/12) (a) (b) (c)

 

0

 

46

 

Zyomyx, Inc. (Restricted) (a) (b)

 

12

 

 

 

 

 

218,530

 

 

 

Generic Pharmaceuticals — 8.9%

 

 

 

1,492,833

 

Akorn, Inc. (b)

 

2,672,171

 

108,889

 

Akorn, Inc. warrants (Restricted, expiration 3/08/11) (a) (b)

 

26,133

 

313,503

 

Impax Laboratories, Inc. (b)

 

4,263,641

 

116,786

 

Mylan Inc. (b)

 

2,152,366

 

103,700

 

Perrigo Company

 

4,131,408

 

161,513

 

Teva Pharmaceutical Industries, Ltd. (g)

 

9,073,800

 

 

 

 

 

22,319,519

 

 

 

Healthcare Services — 8.0%

 

 

 

287,500

 

Addus HomeCare Corp. (b)

 

2,645,000

 

 

3


 

SHARES

 

 

 

VALUE

 

 

 

Healthcare Services — continued

 

 

 

55,910

 

Aetna Inc.

 

$

1,772,347

 

148,148

 

Aveta, Inc. (Restricted) (a) (b) (h)

 

1,481,480

 

208,000

 

CardioNet, Inc. (b)

 

1,235,520

 

25,323

 

Laboratory Corporation of America Holdings (b)

 

1,895,173

 

145,120

 

Pharmaceutical Product Development, Inc.

 

3,401,613

 

124,217

 

VCA Antech Inc. (b)

 

3,095,488

 

44,450

 

WellPoint, Inc. (b)

 

2,590,990

 

1,157,112

 

Zix Corporation (b)

 

1,978,662

 

 

 

 

 

20,096,273

 

 

 

Medical Devices and Diagnostics — 17.9%

 

 

 

284,302

 

Align Technology, Inc. (b)

 

5,066,262

 

85,809

 

Gen-Probe Inc. (b)

 

3,681,206

 

237,544

 

Hologic, Inc. (b)

 

3,444,388

 

81,790

 

IDEXX Laboratories, Inc. (b)

 

4,370,858

 

171,207

 

Illumina, Inc. (b)

 

5,247,495

 

8,815

 

Intuitive Surgical, Inc. (b)

 

2,673,766

 

123,159

 

Inverness Medical Innovations, Inc. (b)

 

5,112,330

 

61,014

 

Life Technologies Corporation (b)

 

3,186,761

 

130,000

 

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

 

83,047

 

447,080

 

Medwave, Inc. (b)

 

3,577

 

111,770

 

Medwave, Inc. warrants (Restricted, expiration 8/21/11) (a) (b)

 

0

 

137,833

 

Myriad Genetics, Inc. (b)

 

3,597,441

 

62,005

 

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

 

62

 

823,639

 

Sequenom, Inc. (b)

 

3,409,865

 

139

 

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

 

93

 

53,746

 

Stryker Corporation

 

2,707,186

 

89,800

 

Thoratec Corporation (b)

 

2,417,416

 

 

 

 

 

45,001,753

 

 

 

Pharmaceuticals — 4.1%

 

 

 

88,431

 

Forest Laboratories, Inc. (b)

 

2,839,519

 

30,248

 

Shire plc (g)

 

1,775,558

 

200,132

 

Warner Chilcott plc (b) (i)

 

5,697,758

 

 

 

 

 

10,312,835

 

 

 

TOTAL COMMON STOCKS AND WARRANTS

(Cost $218,811,796)

 

$

211,581,312

 

 

 

 

 

 

 

PRINCIPAL AMOUNT

 

 

 

 

 

 

 

SHORT-TERM INVESTMENTS — 6.5%

 

 

 

$

7,000,000

 

General Electric Capital Co., 0.12% due 01/04/10

 

6,999,930

 

8,000,000

 

General Electric Capital Co., 0.01% due 01/08/10

 

7,999,984

 

 

4


 

PRINCIPAL AMOUNT

 

 

 

VALUE

 

 

 

SHORT-TERM INVESTMENTS — continued

 

 

 

1,295,500

 

General Electric Capital Co., 0.02% due 01/15/10

 

1,295,490

 

 

 

TOTAL SHORT-TERM INVESTMENTS

(Cost $16,295,404)

 

$

16,295,404

 

 

 

TOTAL INVESTMENTS -101.0%

(Cost $270,720,309)

 

$

253,675,464

 

 

 

OTHER LIABILITIES IN EXCESS OF ASSETS - (1.0)%

 

$

(2,554,000

)

 

 

NET ASSETS - 100%

 

$

251,121,464

 

 

(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 $8,459,230).

(d)

Number of warrants to be determined at a future date.

(e)

Foreign security.

(f)

Contingent Value Rights

(g)

American Depositary Receipt

(h)

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.

(i)

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

 

5


 

SCHEDULE OF WRITTEN OPTIONS

 

NUMBER OF
CONTRACTS
(100 SHARES
EACH)

 

 

 

EXPIRATION
DATE

 

CURRENT
VALUE

 

 

 

CALL OPTIONS WRITTEN

 

 

 

 

 

107

 

Cephalon, Inc., strike @ 60

 

Jan - 2010

 

$

(36,380

)

26

 

Warner Chilcott plc, strike @ 30

 

Jan - 2010

 

(520

)

 

 

TOTAL CALL OPTIONS WRITTEN

(Premiums received $22,176)

 

 

 

$

(36,900

)

 

6


 

Other Information – Financial Accounting Standards Board Accounting Standards Codification No. 820, Fair Value Measurements and Disclosures, establishes 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 listed below:

 

·                  Level 1 – quoted prices in active markets for identical investments

 

·                  Level 2 – prices determined using other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)

 

·                  Level 3 – 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, 2009 to value the Fund’s net assets:

 


 

 

 

Level 1

 

Level 2

 

Level 3

 

Total

 

Assets at Value

 

 

 

 

 

 

 

 

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

—

 

—

 

$

2,655,785

 

$

2,655,785

 

Drug Discovery Technologies

 

—

 

$

38,500

 

3,184,555

 

3,223,055

 

Healthcare Services

 

—

 

—

 

3,503,912

 

3,503,912

 

Medical Devices and Diagnostics

 

—

 

—

 

16,415,996

 

16,415,996

 

Total Convertible Securities and Warrants

 

—

 

38,500

 

25,760,248

 

25,798,748

 

Common Stocks and Warrants

 

 

 

 

 

 

 

—

 

Biotechnologies/Biopharmaceuticals

 

$

107,433,251

 

—

 

17,220

 

107,450,471

 

Drug Delivery

 

5,978,427

 

—

 

203,504

 

6,181,931

 

Drug Discovery Technologies

 

190,662

 

—

 

27,868

 

218,530

 

Generic Pharmaceuticals

 

22,293,386

 

—

 

26,133

 

22,319,519

 

Healthcare Services

 

18,614,793

 

—

 

1,481,480

 

20,096,273

 

Medical Devices and Diagnostics

 

44,918,551

 

—

 

83,202

 

45,001,753

 

Pharmaceuticals

 

10,312,835

 

—

 

—

 

10,312,835

 

Total Common Stocks and Warrants

 

209,741,905

 

—

 

1,839,407

 

211,581,312

 

Short-Term Investments

 

—

 

16,295,404

 

—

 

16,295,404

 

Other Assets

 

—

 

—

 

358,620

 

358,620

 

Total Assets at Value

 

$

209,741,905

 

$

16,333,904

 

$

27,958,275

 

$

254,034,084

 

 

 

 

 

 

 

 

 

 

 

Liabilities at Value

 

 

 

 

 

 

 

 

 

Options Contracts Written

 

$

36,900

 

$

—

 

$

—

 

$

36,900

 

 

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, 2009

 

Accrued
discounts/
premiums

 

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

 

Net purchases/
sales

 

Net transfers in
(out of) Level 3

 

Balance as of
December 31, 2009

 

Convertible Securities and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

$

1,811,330

 

—

 

$

763,345

 

$

81,110

 

—

 

$

2,655,785

 

Drug Discovery Technologies

 

3,184,555

 

—

 

—

 

—

 

—

 

3,184,555

 

Healthcare Services

 

3,503,912

 

—

 

—

 

—

 

—

 

3,503,912

 

Medical Devices and Diagnostics

 

18,766,961

 

—

 

(2,536,454

)

185,489

 

—

 

16,415,996

 

Common Stocks and Warrants

 

 

 

 

 

 

 

 

 

 

 

 

 

Biotechnologies/Biopharmaceuticals

 

187,738

 

—

 

18,630

 

—

 

$

(189,148

)

17,220

 

Drug Delivery

 

185,548

 

—

 

17,956

 

—

 

—

 

203,504

 

Drug Discovery Technologies

 

25,442

 

—

 

2,426

 

—

 

—

 

27,868

 

Generic Pharmaceuticals

 

16,333

 

—

 

9,800

 

—

 

—

 

26,133

 

Healthcare Services

 

1,481,480

 

—

 

—

 

—

 

—

 

1,481,480

 

Medical Devices and Diagnostics

 

56,419

 

—

 

26,783

 

—

 

—

 

83,202

 

Other Assets

 

618,509

 

—

 

196,460

 

(456,349

)

—

 

358,620

 

Total

 

$

29,838,227

 

—

 

$

(1,501,054

)

$

(189,750

)

$

(189,148

)

$

27,958,275

 

 

Net change in unrealized appreciation (depreciation) from investments still held as of December 31, 2009

 

 

 

$

 (1,706,250

)

 


 

Investment Valuation — Investments traded on national securities exchanges or in the over-the-counter market that are National Market System securities are valued at the last sale price or, lacking any sales, at the mean between the last bid and asked prices.  Other over-the-counter securities are valued at the most recent bid prices as obtained from one or more dealers that make markets in the securities.   Publicly traded investments for which market quotations are not readily available or whose quoted price may otherwise not reflect fair value and the fair value of venture capital and other restricted securities are valued in good faith by the Adviser pursuant to valuation policies and procedures approved by the Trustees.  Such values are subject to regular oversight and ratification by the Trustees.  Because of the uncertainty of fair valuations, these estimated values may differ significantly from the values that would have been used had a ready market for these securities existed, and the differences could be material.  Each such 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 issuer, 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; and (iv) the price and extent of public trading in similar securities of the issuer or of comparable companies.  Short-term investments with maturity of 60 days or less are valued at amortized cost, which approximates fair value.

 

Venture Capital and Other Restricted Securities — The Fund may invest in venture capital and other restricted securities if these securities would currently comprise 40% or less of net assets.  The value of these securities represents 11% of the Fund’s net assets at December 31, 2009.  The following table details the acquisition date, cost, carrying value per unit, and value of the Fund’s venture capital and other restricted securities at December 31, 2009.  The Fund on its own does not have the right to demand that such securities be registered.

 


 

 

 

 

 

 

 

Carrying

 

 

 

 

 

Acquisition

 

 

 

Value

 

 

 

Security (j)

 

Date

 

Cost

 

per Unit

 

Value

 

Agilix Corporation

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

11/08/01

 

$

1,663,667

 

$

0.06

 

$

94,540

 

Akorn, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 3/08/11)

 

3/07/06

 

0.00

 

0.24

 

26,133

 

Athersys, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 6/08/12)

 

6/07/07

 

0.00

 

0.21

 

17,220

 

Aveta, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/21/05

 

2,003,155

 

10.00

 

1,481,480

 

CardioKinetix, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

5/22/08

 

1,645,087

 

0.69

 

1,640,000

 

Cvt. Promissory Note

 

12/10/09

 

131,244

 

1.00

 

131,244

 

Warrants (expiration 12/11/19)

 

12/10/09

 

66

 

0.00

 

0

 

Ceres, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

12/23/98

 

1,000,950

 

6.50

 

1,625,000

 

Series C-1 Cvt. Pfd.

 

3/31/01

 

74,339

 

6.50

 

139,503

 

Series D Cvt. Pfd.

 

3/14/01

 

1,046,887

 

6.50

 

1,141,010

 

Series F Cvt. Pfd.

 

9/05/07

 

186,335

 

6.50

 

184,502

 

Warrants (expiration 9/05/15)

 

9/05/07

 

0.00

 

0.00

 

0

 

Clinical Data, Inc.

 

 

 

 

 

 

 

 

 

Contingent Value Rights

 

5/28/09

 

0.00

 

0.17

 

27,856

 

Concentric Medical, Inc.

 

 

 

 

 

 

 

 

 

Series B Cvt. Pfd.

 

5/07/02, 1/24/03

 

2,220,659

 

0.52

 

1,682,352

 

Series C Cvt. Pfd.

 

12/19/03

 

1,000,545

 

0.52

 

604,651

 

Series D Cvt. Pfd.

 

9/30/05

 

638,671

 

0.52

 

236,773

 

Series E Cvt. Pfd.

 

12/18/08

 

455,177

 

0.52

 

235,609

 

Cornerstone Therapeutics Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 6/06/10)

 

6/20/05

 

0.00

 

0.00

 

0

 

Elemé Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

7/15/08

 

2,260,641

 

0.54

 

644,628

 

Subordinated Cvt. Promissory Note

 

12/18/09

 

49,479

 

1.00

 

48,545

 

FlowCardia, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

8/29/07

 

1,720,327

 

1.07

 

1,708,334

 

Interlace Medical, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

6/10/09

 

1,440,459

 

1.10

 

1,435,000

 

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

 

668,364

 

0.65

 

133,208

 

Series D Cvt. Pfd. 18 Month Lock-up

 

9/04/08

 

210,499

 

0.00

 

0

 

Magellan Biosciences, Inc.

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

11/28/06, 11/04/09

 

2,166,424

 

1.00

 

2,161,090

 

Warrants (expriation 4/01/19)

 

4/03/09

 

0.00

 

0.00

 

0

 

Warrants (expiration 5/06/19)

 

5/12/09

 

0.00

 

0.00

 

0

 

Masimo Laboratories, Inc.

 

 

 

 

 

 

 

 

 

Common

 

3/31/98

 

0.00

 

0.64

 

83,047

 

Medwave, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 8/21/11)

 

8/21/06

 

0.00

 

0.00

 

0

 

MiddleBrook Pharmaceuticals, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 4/29/10)

 

4/29/05

 

0.00

 

0.00

 

0

 

MZT Holdings, Inc.

 

 

 

 

 

 

 

 

 

Warrants (expiration 1/17/11)

 

1/17/06

 

0.00

 

0.00

 

0

 

Warrants (expiration 1/22/12)

 

1/21/06

 

0.00

 

0.00

 

0

 

 


 

 

 

 

 

 

 

Carrying

 

 

 

 

 

Acquisition

 

 

 

Value

 

 

 

Security (j)

 

Date

 

Cost

 

per Unit

 

Value

 

OmniSonics Medical Technologies, Inc.

 

 

 

 

 

 

 

 

 

Series A-1 Cvt. Pfd.

 

10/01/03

 

$

1,201,037

 

$

0.001

 

$

1,031

 

Series B-1 Cvt. Pfd.

 

6/04/07, 11/15/07

 

668,067

 

0.001

 

877

 

Common

 

5/24/01, 7/02/07

 

1,606,361

 

0.001

 

62

 

Palyon Medical Corporation

 

 

 

 

 

 

 

 

 

Series A Cvt. Pfd.

 

4/28/09

 

2,062,094

 

0.21

 

2,050,000

 

Penwest Pharmaceuticals Co.

 

 

 

 

 

 

 

 

 

Warrants (expiration 3/11/13)

 

3/11/08

 

0.00

 

1.02

 

203,504

 

PHT Corporation

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

7/23/01

 

2,803,841

 

0.78

 

2,800,000

 

Series E Cvt. Pfd.

 

9/12/03-10/14/04

 

627,472

 

0.78

 

626,337

 

Series F Cvt. Pfd.

 

7/21/08

 

81,720

 

0.78

 

77,575

 

Songbird Hearing, Inc.

 

 

 

 

 

 

 

 

 

Common

 

12/14/00

 

2,003,239

 

0.67

 

93

 

TargeGen, Inc.

 

 

 

 

 

 

 

 

 

Series C Cvt. Pfd.

 

8/30/05

 

1,842,330

 

1.30

 

1,840,000

 

Series D Cvt. Pfd.

 

5/08/07

 

531,198

 

1.30

 

530,173

 

Cvt. Promissory Note

 

9/08/09, 10/09/09

 

157,312

 

1.00

 

152,404

 

TherOx, Inc.

 

 

 

 

 

 

 

 

 

Series H Cvt. Pfd.

 

9/11/00

 

2,001,787

 

1.66

 

72,122

 

Series I Cvt. Pfd.

 

7/08/05

 

386,640

 

1.66

 

165,293

 

Warrants (expiration 1/26/11)

 

1/26/05

 

0.00

 

0.00

 

0

 

Warrants (expiration 6/09/10)

 

6/09/04

 

0.00

 

0.00

 

0

 

Xoft, Inc.

 

 

 

 

 

 

 

 

 

Series D Cvt. Pfd.

 

3/23/07

 

2,055,919

 

2.50

 

1,601,562

 

Series E Cvt. Pfd.

 

6/20/08

 

411,757

 

2.50

 

306,885

 

Cvt. Promissory Note

 

6/12/09

 

415,686

 

1.00

 

410,000

 

Warrants (expiration 6/12/14)

 

6/12/09

 

41

 

0.00

 

0

 

Zyomyx, Inc.

 

 

 

 

 

 

 

 

 

Common

 

2/19/99 - 7/22/04

 

2,601,013

 

0.25

 

12

 

 

 

 

 

$

43,323,751

 

 

 

$

27,599,655

 

 

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

 


 

Federal Income Tax Cost - At December 31, 2009, the total cost of securities for Federal income tax purposes was $270,720,309. The net unrealized loss on securities held by the Fund was $17,044,845, including gross unrealized gain of $21,295,852 and gross unrealized loss of $38,340,697.

 

Affiliate Transactions - An affiliate issuer 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, 2009 were as follows:

 

Issuer

 

Value on October 1,
2009

 

Purchases

 

Sales

 

Income

 

Value on December 31, 2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Agilix Corporation

 

$

94,540

 

$

—

 

$

—

 

$

—

 

$

94,540

 

Concentric Medical, Inc.

 

5,306,510

 

—

 

—

 

—

 

2,759,385

 

MZT Holdings, Inc.

 

48,031

 

—

 

—

 

—

 

51,393

 

Palyon Medical Corporation

 

2,050,000

 

—

 

—

 

—

 

2,050,000

 

PHT Corporation

 

3,503,912

 

—

 

—

 

—

 

3,503,912

 

 

 

$

11,002,993

 

$

—

 

$

—

 

$

—

 

$

8,459,230

 

 


 

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 Omstead

 

 

Daniel Omstead, President

 

 

 

Date

3/1/2010

 

 

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

3/1/2010