The trust, which focuses on long-term investments in UK healthcare and financial assets, posted NAV of 93.24p at the end of 2016, compared to 97.37p a year earlier. The share price of its portfolio fell to 91p from 101p.
Neil Woodford said: “I understand that some investors may be disappointed at the net asset value progress thus far and, although I would have preferred to have been writing this review having delivered a positive return, it must be remembered that the investment strategy was never designed to deliver significant short-term wins.
"It remains early days for this strategy, which is seeking to exploit very long-term investment opportunities.”
Circassia’s shares tank after failed allergy trials...
The company cited difficulties at some early-stage businesses, including biopharmaceutical company Circassia, which earlier this week abandoned its allergy portfolio after a failed second trial of its dust mite allergy treatment.
In June last year the company’s key cat allergy treatment also failed in final critical trials because of an "unprecedented" placebo effect.
Woodford said this development led to Circassia's share price falling by more than two-thirds during the period, making it a “significant negative contributor” to performance.
However, the company believes Circassia remains in a strong position as it continues to successfully develop the asthma and respiratory assets it bought in 2015.
Last month Circassia announced a commercial collaboration with AstraZeneca, which Woodford said “significantly strengthens the company's strategy as a speciality biopharma business”.
Struggles at Allied Minds and Northwest Biotherapeutics...
Shares in intellectual property group Allied Minds plc (LON:ALM) have tanked more than 59% in the past year. Earlier this month the company announced it was writing seven of its subsidiaries would be sold or wound down as part of a $146.6m (£118m) writedown of costs.
The Boston-based company plans to drop a tinnitus treatment firm, a food disease killing company and a business, which disinfects cashew kernels.
US pharmaceutical firm Northwest Biotherapeutics Inc has also been under pressure, down 88% in the past year. The company saw the phase three trial of its brain cancer treatment put on hold last year as it tackled talks with regulators. In February, Northwest said the Federal Drug Administration had lifted the clinical hold on the trial.
More promising - Prothena, Purplebricks and Immunocore...
Neil Woodford said: "Milestones have been met and progress in many holdings, including Prothena, Purplebricks and Immunocore, has exceeded expectations."
Woodford received a boost from a recovery in the share price of Prothena Corporation plc (NASDAQ:PRTA), a late-stage clinical company focused on immunotherapies for the treatment of diseases such as Parkinson’s and arthritis.
Prothena’s share price has improved following a decline in the first few weeks of 2016 as it made progress with its leading drug development candidate for AL amyloidosis, a rare organ disease.
“There are currently no approved drugs for AL amyloidosis and in 2018 we will learn the results of two late-stage trials, which, if positive, would result in a significant revaluation of the company,” Woodford said.
Meanwhile, Woodford said online real estate firm Purplebricks Group plc (LON:PURP) is fast becoming a household name as its well-placed to “significantly disrupt” the UK's traditional estate agency business model as an online service that operates 24/7 and charges no commission for selling properties.
Revenue in Purplebricks jumped 159% in the six months to October 2016 after selling £2.6bn worth of properties, making it the third largest operator in the market.
The group also reported a strong performance in UK biotech company Immunocore, which last year announced positive data from its first in-human trial for IMCgp100, a treatment for patients with advanced cutaneous and uveal melanomas.
A marathon, not a sprint, says Hargreaves Lansdown...
Laith Khalaf, senior analyst at Hargreaves Lansdown, said Woodford has started slowly for shareholders but “this is a marathon, not a sprint”.
“There have been some high profile casualties within the portfolio to date, notably Allied Minds, Circassia and Northwest Biotherapeutics, but part and parcel of investing in early stage companies is overcoming occasional setbacks,” the analyst said.
“Any portfolio, whether in large or small companies, will have winners and losers, and the performance of the fund comes down to the ability of the fund manager to tip the scales in favour of the former.”