Arix Bioscience sees sharp uplift in net asset value in 2020

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Arix Bioscience PLC (LON:ARIX), the biotech backer, saw a sharp increase in its net asset value (NAV) per share in 2020.

The company’s NAV stood at £328mln at the end of December, up from £202mln a year earlier. The NAV per share rose 62% to 242p from 149p at the end of 2019.

The gross value of the portfolio at the end of the year stood at £314mln versus a cost of £162mln.

The venture capital firm booked a £135.3mln uplift in the fair value of its investments, resulting in a profit before tax of £126.3mln in 2020, versus a loss of £75.6mln in 2019.

The group ended 2020 with cash of £174mln, up from £55mln a year earlier, having realised £158mln (2019: £4.6mln) from its investments in the year, the vast majority of which – £139mln – came from US pharmaceutical giant Merck & Co buying VelosBio for US$2.75bn in cash in December. Arix expects the gains it made from the sale of its VelosBio stake will be exempt from tax.

“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 Naseem Amin, the executive chairman of Arix Bioscience.

“We enter 2021 with strong momentum in our portfolio and with multiple clinical data readouts expected. In addition to clinical milestones, there is potential for M&A, strategic partnerships and other financing events across the portfolio, which could significantly increase the value of our companies, and in turn our NAV,” he added.

The company also announced it has founded a new portfolio company, Twelve Bio, in which it has a 49% stake.

Twelve Bio, a spin-out from the Novo Nordisk Foundation Centre for Protein Research at the University of Copenhagen and Creation House programme at BioInnovation Institute (BII), is developing novel engineered Cas12a nucleases for therapeutic gene editing.

The seed financing will allow the company to expand the scientific team and to continue the development of its technology. Arix holds two seats on Twelve Bio’s board, with Arix’s managing director, Christian Schetter, taking the role of chairman.

“The ability to edit genes has enormous potential both in terms of its range of therapeutic applications and its curative capacity. 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,” Schetter said.

“Company creation is a core part of our strategy and we are looking forward to building Twelve Bio with the two founders, Guillermo Montoya and Stefano Stella, into a successful player in a rapidly growing and exciting space,” he added.

Peel Hunt, which has a ‘buy’ rating on the shares and a price target of 256p, said “the real stand-out in the results today is the execution/value creation from FY20 (which belies Arix’s current 23% discount to NAV)”.

Boasting an “impressive” internal rate of return of 32% since 2016, “Arix is excellently positioned to deploy its capital pool (>£175m available) behind the next wave of opportunities, with a focus on shareholder returns”, the broker said.

“In fact, if you discount the cash, investors gain access to Arix’s portfolio (gross value now at £152m vs £149m FY19) at a >50% discount, and this rich pipeline includes numerous upcoming clinical milestones: Autolus’ PhI (1.6% ownership), Aura PhII (7.9%), Amplyx PhII (3%), Harpoon PhI/II (7%), and Imara PhII (6%),” Peel Hunt said.

Shares in Arix were up 4.3% at 193p in late morning trading.

 

— adds broker comment and share price reaction —

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