Cantillon

INSIDE THE WORLD OF BUSINESS

Aoife asked about valuable assets

The case where the children of the former billionaire Seán Quinn are being quizzed about the fullness of disclosures they have made to the Irish Bank Resolution Corporation/Anglo Irish Bank, are tedious in their detail but epic when the context is recalled.

Aoife Quinn, whose two days’ in the witness box ended yesterday, gave an impression of being more than capable of dealing with the probings of barrister Paul Gallagher SC. On occasion yesterday she protested that questions being pursued by Gallagher were going into areas where she could incriminate herself.

As most people know, the family was told in June 2011 to desist in its effort to put a foreign property group beyond the reach of the bank. Topics raised with Quinn yesterday included a payment of €500,000 by a Russian property company to the courts in Cyprus when the family was taking an action aimed at frustrating the bank’s effort to seize the property group. Aoife was in charge of the case. Likewise she was asked about payment by the group for trips taken by her and other members of the family to foreign parts as part of their battle with Anglo, as well as payments out of the companies into a Moscow bank account in her name.These are all areas, Quinn said, where the bank has already, in correspondence, indicated a view that these transactions constituted contempt .Her brother and father have already served time for contempt. Ciara, Brenda and Colette Quinn have yet to be quizzed, as have Ciara’s husband Niall McPartland, Aoife’s husband Stephen Kelly, and Seán junior’s wife, Karen Woods.

At one stage Mr Justice Peter Kelly quizzed her about company minutes recording the sale of valuable assets as per a formula which Aoife said she did not understand. She said the decisions were taken two weeks after the Quinn Group had been seized and had to be viewed in a context where the bank had taken from the family all that it had once owned and without making any approach to her or her siblings (the former owners of the Quinn Group).

Epic indeed.

Kinsale fund up for EuroHedge award

Kinsale Capital Management, the über-discreet hedge fund manager run by former Merrill Lynch bankers Gearóid Doyle and Seán Ó Flannagáin, has broken cover to trumpet the success of its Kinsale Compass Fund.

The fund, managed by Peter Kinney, reported 17 per cent growth after fees for 2012 and almost 19 per cent since November 2011 when it started.

"The fund's performance has earned it a nomination in the prestigious annual EuroHedge Awards, which recognise European hedge funds that have produced the best risk-adjusted returns, over the 12-month calendar year, across a range of strategy areas. It is the first time a new Irish fund has earned a nomination," according to Kinsale.

The Compass Fund invests in between 15 and 25 global stocks with around 30 per cent of its total value held in cash.

It follows the investment process of Acacia Capital, a US-based investment partnership Kinney has managed since inception in 2003 and has outperformed by almost three times the SP 500 which is up 92.5per cent over the same time period. This puts Acacia in the "top 1 per cent of all US mutual funds", according to Kinsale

How does he do it? Some of Kinney's investment secrets are revealed on Kinsale's website.

He typically will only invest in companies trading at discounts of 50 per cent or more to what he judges to be their intrinsic value .

"These discounts are typically only available in periods of extreme uncertainty in either the macroeconomic picture at large or when the company in question is facing uncertainty in its own business prospects," they explain.

"The portfolio manager actively engages with the management of target companies to assist in determining the company's intrinsic value."

He also forsakes leverage, derivatives and naked shorting and all that stuff.

It is an impressive performance and Kinsale's decision not to hide its light under a bushel on this occasion is understandable, even if it is a little coy on the size of the fund, saying it is "under €100 million" in size.

Innovative ideas on expensive drug use

The National Centre for Pharmaeconomics this week opened a new front in the battle over drug prices. A bit of a mouthful its name may be, but the centre is very familiar to all in the pharmaceuticals business in Ireland: it's the agency that conducts health technology assessment on new drugs looking to gain access to the Irish market.

As the recent protracted negotiations between the industry and the Government over the drugs budget illustrated, getting market access for new therapies is the lifeblood for the pharma sector. From the HSE viewpoint, these new drugs, while often useful, can be prohibitively expensive, undermining efforts to achieve budgetary balance. The Government has already come under attack over the extent to which the cost of new drugs – albeit ones determined to be "cost-effective" – will eat into savings on the existing drugs bill.

It was in that context the centre ruled cystic fibrosis (CF) therapy, ivacaftor, or Kalydeco, should not be sanctioned for use in the Irish market "at the submitted price of €234,804 per patient per annum". It's a very contentious issue. As journalist Orla Tinsley noted in this paper ahead of the ruling, Ireland has the highest prevalence of CF worldwide. And that community sees the drug as the closest thing to a cure since the CF gene was identified in 1989.

But the NCPE didn't close the door entirely. It suggested approving the drug could make sense if there was a significant cut in price and/or a risk-sharing scheme – ie only where it proved effective would the company be reimbursed. The decision is instructive. Kalydeco is one of a new generation of niche drugs, an area seen as the future for the sector. However, by definition, the price needed to recoup development costs will be eye-wateringly high.

With health budgets set to be under continuing pressure, the industry and the purchaser will need to look increasingly to such innovative proposals. It appears both sides are now engaged in talks to find a resolution. For the patients and the industry, it's important that they succeed.