Biotech Values

[DewDiligence]

Update on H&Q Healthcare Fund (HQH):

[HQH is a closed-end fund that (along with sister fund, HQL) is unique within the biotech arena in that it trades on the stock exchange and invests in private as well as public companies. The Fund’s style is “long-term buy and hold,” and hence some of the positions they buy as private companies end up being substantial portions of the portfolio after the companies go public. (CONR is a case in point.)

The Net Asset Value (NAV) and discount/premium of the market price to the NAV is furnished every day after the close at: http://www.hqcm.com/hqh.asp .

Tax note: HQH and HQL distribute about 2% of NAV each quarter in the form of capital gains; hence, these funds are best suited for a tax-exempt account such as an IRA.

The Fund’s top-10 holdings as of 6/30/06, in descending order, were: CONR GILD CBST GENZ TEVA MOGN MHS IDXX FRX and ALGN.]


SCHEDULE OF HQH HOLDINGS AS OF 6/30/06

(Items shown in bold face represent 2% or more of the Fund’s NAV.)


PRIVATE COMPANIES – 15.0% of NAV

Agensys, Inc. Series C 3,300,300
Agilix Corporation Series B 141,809
CardioNet warrants (expiration 5/01/11) 0
CardioNet, Inc. Cvt. Note, 8.00% due 2006 316,964
CardioNet, Inc. Series C 5,520,004
Ceres, Inc. Series C 2,250,000
Ceres, Inc. Series C-1 193,158
Ceres, Inc. Series D 1,680,630
Concentric Medical, Inc. Series B 6,794,116
Concentric Medical, Inc. Series C 2,441,860
Concentric Medical, Inc. Series D 956,200
Corus Pharma, Inc. Series C 1,500,000
Cougar Biotechnology Inc. Series A 1,462,493
CytoLogix Corporation Cvt. Note, 6.75% 168,337
CytoLogix Corporation Series A 399,984
CytoLogix Corporation Series B 187,382
EPR, Inc. Series A 2,222
Galileo Pharmaceuticals, Inc. Series F-1 140
I-trax, Inc. Series A 5,708,055
Labcyte, Inc. Series C 1,920,000
Masimo Corporation Series D 1,760,000
OmniSonics Medical Technologies, Inc. Series B 1,962,775
OmniSonics Medical Technologies, Inc. Series C 1,616,100
PHT Corporation Series D 4,200,000
PHT Corporation Series E 939,506
Raven biotechnologies, Inc. Series B 1,509,091
Raven biotechnologies, Inc. Series C 2,331,600
Raven biotechnologies, Inc. Series D 1,200,000
TargeGen, Inc. Series C 2,760,000
Therion Biologics Corp. warrants (expiration 8/18/08) 0
Therion Biologics Corp. warrants (expiration 9/26/06) 0
Therion Biologics Corporation Series A 474
Therion Biologics Corporation Series B 2,400
Therion Biologics Corporation Series C 4,077
Therion Biologics Corporation Series C-2 334
Therion Biologics Corporation Sinking Fund 361
Therox warrants (expiration 1/26/10) 0
Therox warrants (expiration 6/09/09) 0
TherOx, Inc. Series H 247,825
TherOx, Inc. Series I 577,100
Xanthus Life Sciences, Inc. Series B 2,555,000
Zyomyx, Inc. Series A New 30,000
Zyomyx, Inc. Series B New 30

TOTAL PRIVATE COMPANIES
(Cost $67,638,219) $56,640,327


PUBLIC COMPANIES – 78.0% of NAV

Pharmaceuticals – 41.8% of NAV
ACADIA Pharmaceuticals, Inc. 3,936,821
Akorn Inc. warrants (expiration 3/07/11) 0
Akorn, Inc. 2,299,556
Alexza Pharmaceuticals, Inc. 2,739,588
Amgen, Inc. 4,827,020
Ariad Pharmaceuticals, Inc. 4,387,513
Barrier Therapeutics, Inc. 3,535,472
Biogen Idec Inc. 2,316,500
Celgene Corp. 4,885,290
Corcept Therapeutics Inc. 1,460,511
Cubist Pharmaceuticals, Inc. 10,915,178
DOV Pharmaceutical, Inc. 349,652
Endo Pharmaceuticals Holdings 2,433,924
Exelixis, Inc. 4,673,752
Forest Laboratories, Inc. 6,751,405
Genentech, Inc. 5,276,100
Genzyme Corporation 9,723,311
Gilead Sciences, Inc. 14,616,957
Idenix Pharmaceuticals Inc. 4,231,645
Insmed Inc. 1,245,520
Inspire Pharmaceuticals, Inc. 4,876,715
Kosan Biosciences, Inc. 1,550,308
MedImmune, Inc. 4,300,499
MGI Pharma, Inc. 8,772,000
Momenta Pharmaceuticals, Inc. 1,520,751
Myogen, Inc. 1,800,117
Myogen, Inc. warrants (expiration 9/29/09) 2,166,131
Myriad Genetics Inc. 3,730,940
Neurogen Corporation 3,070,925
Nitromed, Inc. 2,276,273
PDL BioPharma Inc. 2,284,313
Pfizer, Inc. 4,811,350
Schering-Plough Corporation 5,296,049
Seattle Genetics, Inc. 2,882,268
Telik, Inc. 1,814,241
Tercica, Inc. 3,653,041
Theravance, Inc. 5,449,993
United Therapeutics Corp. 5,606,578

Drug Delivery – 2.2% of NAV
DepoMed, Inc. 4,828,269
Noven Pharmaceuticals, Inc. 3,543,126

Drug Discovery Technologies – 2.6% of NAV
Avalon Pharmaceuticals, Inc. 939,955
Cougar Biotechnology Inc. (Restricted) 162,501
Senomyx, Inc. 3,080,993
ZymoGenetics, Inc. 5,512,682
Zyomyx, Inc. (Restricted) 3,000

Generic Pharmaceuticals – 6.5% of NAV
Barr Pharmaceuticals, Inc. 5,231,593
Impax Laboratories, Inc. 5,178,275
K-V Pharmaceutical Co. 2,233,602
Taro Pharmaceuticals Industries Ltd. 2,519,875
Teva Pharmaceutical Industries, Ltd. 8,954,786

Healthcare Services – 9.3% of NAV
Allscripts Healthcare Solutions, Inc. 2,299,050
Aveta, Inc. (Restricted) 2,999,997
DakoCytomation, Inc. (Restricted) (f) 271,962
Eclipsys Corporation 3,632,000
Emageon, Inc. 5,899,233
Emdeon Corporation 5,168,765
Medco Health Solutions, Inc. 8,076,480
National Medical Health Card Systems, Inc. 2,744,889
Syntiro Healthcare Services (Restricted) 306
UnitedHealth Group Inc. 3,582,400

Medical Devices and Diagnostics – 15.6% of NAV
Adeza Biomedical Corporation 2,654,407
Align Technology, Inc. 6,297,388
American Medical Systems Holdings Inc 5,777,550
Conor Medsystems, Inc. 12,352,650
Conor Medsystems, Inc. (Restricted) 2,862,187
DJO Incorporated. 4,419,600
Gen-Probe, Inc. 3,940,540
Genomic Health Inc. 1,613,902
IDEXX Laboratories, Inc. 7,586,627
Masimo Corporation (Restricted) 1,600
Medwave, Inc. 2,100,639
Medwave Inc. warrants (expiration 8/21/11) 0
Orthovita, Inc. 3,934,369
Songbird Hearing, Inc. (Restricted) 2,085
VNUS Medical Technologies, Inc. 4,582,813

TOTAL PUBLIC COMPANIES
(Cost $261,284,050) $291,460,571

CASH AND SHORT-TERM SECURITIES $25,851,480 – 6.9% of NAV

TOTAL NET ASSETS $ 373,952,378
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