Arix Bioscience

32% IRR since inception in 2016

15 Mar 2021 / Corporate research

Arix Bioscience (ARIX) is a listed global venture capital (VC) company that presents an opportunity for institutional and retail investors to participate in the high risk-return profile of early-stage biotech investing. ARIX minimises risk through a combination of an expert investment team and portfolio diversification. During 2020, the new management team set itself some ambitious targets for the next three years, which would see the NAV double to ca.£500m. The performance in 2020 was strong, boosted by the acquisition of VelosBio by Merck & Co for $2.75bn, which delivered £139m to ARIX, representing 11.8x return and an IRR of 320%.

  • Strategy: ARIX sources investments from an established network and a strong scientific reputation. The portfolio is diversified by therapeutic area, treatment modality, stage of discovery/development and geography to balance the risk-reward profile. Value is realised when ARIX successfully exits its investments.
  • NAV development: During 2020, NAV increased 62% to £328m (£202m), equivalent to 242p (149p) per share, with a net positive portfolio revaluation of £136m. The gross portfolio, including both realised and unrealised gains/losses, was £314m at 31 December 2020, compared with investment of £162m. Gross cash at the end of the period was £174.4m, up from £54.6m a year ago.
  • Proof of strategy: 2020 proved to be an important year for ARIX with clear establishment of a track record. Of note, there was a NASDAQ listing, a trade exit and a significant licensing deal within its portfolio companies. Two major deals in 4Q’20 demonstrated that ARIX has invested in interesting technologies that are attracting keen interest from the pharmaceutical majors. Since inception in 2016, ARIX has generated an IRR of 32% on its gross portfolio.
  • Portfolio management: Given that the five portfolio companies are publicly listed, the management team has been strengthened to provide greater attention to active portfolio management, trading shares in these listed assets to take advantage of peaks and troughs. During 2020, ARIX made investments totalling £24.6m and realisations of £18.8m (excluding VelosBio).
  • Investment summary: 2020 was transformational, with significant activity in its portfolio companies and a refocused management team that has made great strides in the development of a track record through more active management of the portfolio. This has continued into 2021 with a number of realisations since the period-end. Proceeds from VelosBio have left the company in a strong position to support the current portfolio and to invest in new opportunities.
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