Arix Bioscience reports FY20NAV up 62%
(ARIX ) has described the year ended 31 December 2020 as “a period of outstanding achievement” after witnessing a sharp rise in net asset value (NAV) in 2020.
The biotech-focused global venture capital company saw a 62% increase in NAV over the period to £328m (FY19: £202m) with NAV per share rising to 242p from 149p.
By the end of the period, Arix’s gross portfolio value stood at £314m versus a cost of £162m. The Company highlighted that the vast majority of this value is attributable to the US pharmaceutical firm, Merck & Co purchase of VelosBio for $2.75bn in cash in December.
The group noted that the acquisition of VelosBio was ‘hugely positive for Arix’, returning $187m (£138.7m) to the balance sheet, representing a 11.8x return on $15m capital invested after allowing for foreign exchange movements, generating an IRR of 320%.
Outside of VelosBio, Arix told investors that it has continued to witness “positive progress” across its portfolio throughout the year, with the Group making further investments across several companies.
Profit after tax was £126.1m (FY19: a loss of £69.9m, while cash and deposits rose by 219% to £174.4m (FY19: £54.6m), following net realisations from Arix’s investments of £132.9m.
Despite seeing an impact on the portfolio, Arix said this has been less severe than originally anticipated with most being in the form of slightly increased timescales for clinical trials.
"This has been a period of outstanding achievement for our company. We have begun the journey of turning our promises to shareholders into delivery - realising £158m during the year while at the same time refocusing the portfolio, restructuring and reducing our costs and laying the foundation for the next wave of investments,” said Dr Naseem Amin, Executive Chairman of Arix Bioscience.
Outlook
Amin said the Company has entered 2021 with “strong momentum” across its portfolio, In particular, several of Arix’s portfolio companies are approaching key milestones over the next 12 months with multiple clinical catalysts and data readouts expected in 2021.
In addition to these clinical milestones, Arix said it expects a number of financing events across the portfolio in 2021. It added that this, alongside potential M&A and strategic partnerships could significantly increase the value of Arix’s companies, and in turn its NAV.
Post Balance Sheet - New portfolio company
In a separate announcement, Arix told investors that it has formed a new portfolio company named Twelve Bio, which is developing novel engineered Cas12a nucleases for therapeutic gene editing. Arix is the sole investor in the company, holding a 49% ownership stake.
Twelve Bio is a spinout from the Novo Nordisk Foundation Centre for Protein Research at the University of Copenhagen and Creation House programme at BioInnovation Institute (“BII”), an independent biotech incubator aimed at accelerating world-class life science research.
Twelve Bio's aim is to build a gene editing toolbox to target a wide range of genetic disorders and to provide tailored and safe molecules to help patients suffering from incurable diseases.
Specifically, the novel engineered Cas12a nuclease is a unique CRISPR nuclease that has several advantages over other gene editing tools, including its small size, high specificity and ability to target sections of DNA not amenable to other Cas nucleases, such as Cas9.
Arix said Twelve Bio has engineered Cas12a variants with ‘unique properties that improve upon the naturally occurring version and enable genetic editing in a broad range of situations.’
"Arix's decision to invest in Twelve Bio underscores the potential of our technology to target DNA sequences linked to genetic disorders that are not accessible with other gene-editing methods,” said Stefano Stella, PhD, Founder & Chief Technology Officer of Twelve Bio.
Christian Schetter, PhD, Managing Director at Arix and Chairman of Twelve Bio, said, "This new era of transformational therapeutics is still nascent which means there remains a huge opportunity for biotechs with differentiated technology and the right support to develop it.”
Today’s results are testament to the expertise of the investment and scientific team at ARIX and the delivery of the 62% increase in NAV per share will be welcomed by investors. Looking forward, investors will be interested to hear how Arix, which realised £158m during the year, will refocus its portfolio and restructure to reduce costs, laying the foundation for the Company’s next wave of investments. Alongside this, Arix expects to reach a string of clinical milestones over the next 12 months.
Shares in Arix Bioscience have increased by nearly 80% in value since the beginning of November 2020. The stock was trading 4.05% higher this morning at 192.5p on the back of strong FY20 results, still offering new investors 25% discount to the reported NAV per share.
Reasons to ARIX
Arix Bioscience plc is a global venture capital company focused on investing in and building breakthrough biotech companies around cutting-edge advances in life sciences.
Hardman and Co. research said that last year’s “strong interim results, which saw the NAV rise 24% to £251.0m, highlighted the enormous disconnect between this and its share price. ARIX has prioritised 11 portfolio companies on which to focus its resources and expertise.”
The investment research firm highlighted that these portfolio companies have “a number of important value inflection points - mostly clinical events - over the next 12-18 months.”
Not only did results for 1H20 exceed market expectations, but as at 30 June 2020, ARIX had £44m of cash to support existing portfolio companies, early-stage companies, and operations.
Arix refocused and streamlined the business by significantly reducing net operating costs by over 35% to an annual run rate of around £5m by the end of 2021 down from £8m in 2019. Pre-tax profit therefore turned positive to £48.96m compared to a loss in 1H19 of £44.81m.
During the 1H20 period, Arix’s portfolio companies raised $392m of working capital, while since its inception, ARIX has deployed £149m into its portfolio, realised £13m through opportunistic divestments, and generated an IRR of 20% (realised and unrealised).
Arix’s portfolio continues to make ‘strong progress’, with a number of companies reaching important clinical milestones and completing further financing rounds at higher valuations.
‘With a number of upcoming clinical events, ARIX has set an aspirational target to make an annual IRR of 15%-25%, and produce an NAV of £500m by the end of 2023,’ said Hardman.
Looking ahead, Arix cited potential for M&A, strategic partnerships and other financing events which could significantly increase the value of its companies, and in turn its NAV.
‘Whilst the development of important new medicines always carries risk, over the next three years we expect to see at least two additional IPOs across the portfolio and at least two exits.’
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