REG - RTW Biotech Opp. - Annual Financial Report
31/03/2025 07:15
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RNS Number : 7715C RTW Biotech Opportunities Ltd 31 March 2025
LEI: 549300Q7EXQQH6KF7Z84
31 March 2025
RTW Biotech Opportunities Ltd
Annual Report and Audited Consolidated Financial Statements for the Year Ended
31 December 2024
Significant progress made with near-term catalysts
RTW Biotech Opportunities Ltd (the "Group", "RTW Bio" or the "Company"), the
London Stock Exchange-listed investment company focused on identifying
transformative assets with high growth potential across the life sciences
sector, is pleased to announce its Annual Results for the year ended 31
December 2024.
Roderick Wong, MD, Managing Partner and Chief Investment Officer of RTW
Investments LP (the "Investment Manager") commented:
"We are pleased with the progress made by the Group during 2024 with a number
of material milestones achieved, both at portfolio and company level. During
the year, the NAV increased from US$399 million to US$607 million, we added 21
new core portfolio companies, saw five capital markets events and marked our
fifth anniversary since listing on the London Stock Exchange. In that time, we
have delivered NAV per share growth of +86.3%, materially ahead of both the
Nasdaq Biotech and Russell 2000 Biotech indices, which achieved +34.6% and
+6.5%, respectively.
"During this active period, Kyverna, Artiva and BioAge completed successful
IPOs whilst Lenz went public through a reverse merger. The average gross
multiple of invested capital on our initial investments in these companies to
the go-public event was approximately 1.3x. In addition, Numab sold its lead
drug candidate to Johnson & Johnson for US$1.25 billion in July. Our
holding value of this investment was increased by 2.6x as of year end to
reflect the deal.
"The standout performers for the period were Avidity Biosciences and Tarsus
Pharmaceuticals. Avidity's share price increased by +221% in 2024 following
the announcement of positive long-term data showing reversal of disease
progression in people living with myotonic dystrophy type 1, a condition for
which there is no current cure and leads to muscle weakness over time. Tarsus
also saw its share price rise materially in 2024 as its treatment for demodex
infection, an ocular disease, continued to exceed consensus revenue
expectations.
"The market environment for the biotech sector continues to show signs of
improvement and whilst the sector's recovery is still in its infancy, there
are a number of catalysts on the horizon that we expect will be rewarding both
for shareholders and the patients that our products and therapies treat.
Additionally, we are expecting the environment for M&A to improve
dramatically, thanks to remarkable innovation, depressed sector valuations,
impending patent cliffs for large pharma and a change in leadership at the
FTC. This is an important factor for the small and mid-cap biotech companies
we invest in as, in many cases, M&A is the endgame for these companies.
"We look ahead to 2025 with growing optimism and are excited by the prospects
of the biotech sector. The Company is in a strong position to deliver on its
targets with a number of near-term catalysts for its portfolio investments
that we look forward to reporting on as the year progresses."
Key highlights
• Transformational merger: The combination with Arix Bioscience completed on 13
February 2024, delivered a material increase in scale and liquidity, plus the
acquisition of six new portfolio positions.
• Five significant capital markets events: In the year to 31 December 2024, the
core portfolio saw three IPOs, one acquisition and one reverse merger. The
exit environment is improving and we expect an acceleration in this area,
particularly by way of M&A for our small and mid-cap positions.
• Outperformance versus benchmarks: The Company celebrated its fifth anniversary
since listing on the London Stock Exchange (LSE). From IPO to 31 December
2024, the NAV per Ordinary Share increased by +73.8%, materially outperforming
both the Russell 2000 Biotech index (+7.4%) and the Nasdaq Biotech index
(+27.6%). The NAV grew from US$153.0m at IPO to US$606.9m as at 31 December
2024.
As of 31 December 2024, 67% of NAV was invested in core portfolio companies
(2023: 67%), whilst 31% was invested in other public portfolio companies
(2023: 20%) and 2% was held in cash plus current assets and liabilities (2023:
13%).
Financial summary:
RTW Biotech Opportunities Ltd FY24 FY23 Since IPO
(01/01/2024-31/12/2024) (01/01/2023-31/12/2023) (30/10/2019-31/12/2024
Ordinary Share NAV - start of period US$399.3 million US$326.1 million US$168.0 million
Ordinary Share NAV - end of period US$606.9 million US$399.3 million US$606.9 million
NAV per Ordinary Share - start of period US$1.90 US$1.54 US$1.04
NAV per Ordinary Share - end of period US$1.81 US$1.90 US$1.81
NAV movement per Ordinary Share -4.6% +23.5% +73.8%
Price per Ordinary Share - start of period US$1.40 US$1.21 US$1.04
Price per Ordinary Share - end of period US$1.40 US$1.40 US$1.40
Share price return (i) -0.6% +16.0% +34.1%
Benchmark returns (ii)
Russell 2000 Biotech +2.5% +10.6% +7.4%
Nasdaq Biotech -1.4% +3.7% +27.6%
(i) Total shareholder return is an
alternative performance measure. Share price at 31 December 2023 was $1.403
and as at 31 December 2024 was $1.395.
(ii) Source: Capital IQ.
Core Portfolio:
● 21 new core portfolio companies added: As at 31 December 2024, 67%
of NAV was invested in core portfolio companies, in-line with 2023. 21 new
core portfolio companies were added over the year whilst three were exited.
New core portfolio companies include ten new privates, one RTW-incubated
company, six positions acquired from Arix Bioscience and four that were
previously classified as "other public".
● Focus on clinical programmes and commercial products: 30 out of 54
core portfolio companies have clinical programmes, eight have commercial
products and 13 are pre-clinical.
Core Public:
● Overall NAV performance driven by core public positions: 19 out of
54 core portfolio companies are public (34% of NAV) and performance was driven
by Avidity Biosciences, the Group's second largest portfolio holding, and
Tarsus Pharmaceuticals, the Group's third largest portfolio holding. The
change in exposure and number of investments mostly reflects underlying
performance, the graduation of Kyverna, Artiva, BioAge and Lenz to the public
markets and the addition of Akero, Urogen, 89Bio and Merus.
● Avidity Biosciences: In March, Avidity Biosciences announced
positive long-term data showing reversal of disease progression in people
living with myotonic dystrophy type 1 (DM1), across multiple endpoints. Having
been impressed by Avidity's initial patient data, the FDA supported using hand
opening time, a sensitive and early marker of change, as the primary endpoint
for a Phase 3 trial. RTW co-led an oversubscribed US$400m private placement in
March, where the Group added to its position.
● Tarsus Pharmaceuticals: Tarsus' share price rose materially
(+173%) in 2024 as its treatment for demodex infection, Xdemvy, continued to
exceed consensus revenue expectations.
Core Private:
● Core private made a small contribution, led by Numab: 33 out of 54
core portfolio companies are private (30% of NAV). During the year, Numab sold
its lead drug candidate to J&J for US$1.25bn and the Company's holding
value was increased by 2.6x to reflect the deal, which closed in July.
Kyverna, BioAge and Artiva completed IPOs whilst Lenz went public through a
reverse merger. The average gross multiple of invested capital (MOIC) on our
initial investments in these companies to the go-public event was
approximately 1.3x. The increase in exposure and number of investments in
the reporting period reflects the addition of several new private positions
from Arix (Ensoma, Evommune, Depixus, Sorriso and Amplyx), less the exit
activity described above for Kyverna, BioAge, Artiva and Lenz.
● 2024 was a strong and auspicious year for Corxel: The RTW
Investments-founded company changed its name from Ji Xing Pharmaceuticals to
reflect an expanding portfolio of global assets. During the year, it was
announced that Bayer AG invested in Corxel's Series D financing and a new
strategic collaboration between the two companies was launched, focused on
cardiovascular diseases in China. In December, after successfully completing
its Phase 3 trial, Corxel sold its China Aficamten rights to Sanofi. The asset
sale recognised the value created by the team and made it possible to
in-license ex-China rights to CX11, an oral small molecule GLP-1 for obesity.
In a China Phase 2 trial, CX11 showed competitive weight loss with Lilly's
Orforglipron, the leading small molecule in development.
● 69 core private investments since admission: As of 31 December
2024, thirty-one of these have since experienced liquidity events (i.e. by
going public or through acquisition). Since admission, the average holding
period as a private company was fourteen months and the average MOIC to the
liquidity event was 1.8x. Sixteen of these positions have either concurrently
or subsequently been exited in full at an average MOIC of 2.8x.
Royalty and Other Public:
● The Group's two royalty positions (3% of NAV) made a solid +2.4%
contribution in 2024: The Group's investment in the Investment Manager's 4010
Royalty Fund performed well. 4010 currently holds two investments with Avadel
Pharmaceuticals and Urogen Pharma (which is also the underlying asset of RTW
Royalty 2). In the third quarter, 4010 sold its Allurion royalty at a small
profit including royalties received to date, allowing us to redeploy the
capital into more attractive risk-reward opportunities.
● Avadel: This royalty agreement is associated with the sales of
Lumryz, the sole extended-release sodium oxybate medication approved by the
FDA as a once-at-bedtime treatment for cataplexy or excessive daytime
sleepiness (EDS) in adults with narcolepsy. Lumryz's sales ramp is
significantly outperforming 4010's underwriting target.
● Urogen: The Urogen royalty is connected to two oncology
franchises: Jelmyto and UGN-102, both of which are topical therapies in the
urinary tract for urothelial and bladder cancers, typically treated by
surgical interventions. The majority of the royalty returns are derived from
Jelmyto, which is an established and growing product. UGN-102 is nearing FDA
approval with Phase 3 data, and we expect it to be approved in June 2025.
● 31% of the Group's NAV is invested in "other publicly" listed
companies: The 50 "other public" holdings are carefully selected, mostly
matching, on a pro-rata basis, the long investments held in the Investment
Manager's private funds.
Post Period-End Events
● In January, Kailera announced positive topline data from the 8 mg
dose of Hengrui Pharmaceuticals' Phase 2 clinical trial (HRS9531-203) of
HRS9531, a GLP-1/GIP receptor dual agonist, in individuals living with obesity
or overweight. The clinical trial results showed that a once-weekly
subcutaneous injection demonstrated a statistically significant
placebo-adjusted mean weight loss, with no plateau. Additionally, 59% of
treated participants achieved a weight loss greater than 20%. The trial
results also demonstrated a favourable safety profile. These results increase
our confidence that Kailera is one of the leading players in next-generation
obesity management and bode well for Kailera's planned global Phase 3 trial.
● Also in January, Akero (Nasdaq: AKRO) released preliminary topline
results from its Phase 2b study evaluating the efficacy and safety of its lead
product candidate, efruxifermin (EFX), in patients with compensated cirrhosis
due to metabolic dysfunction-associated steatohepatitis MASH. Treated patients
demonstrated a statistically significant improvement in fibrosis with no
worsening of MASH, representing a 24% effect size over placebo at 15%. Upon
the news, shares in Akero, a 5.2% position at year end, rose 100%.
● Cargo Therapeutics announced it would seek a reverse
merger: After halting work on its lead candidate following a failed Phase 2
study, Cargo announced that it would discontinue its entire R&D pipeline,
lay off most of its staff and seek a reverse merger or other business
combination.Beta Bionics went public on 30 January: it issued 12 million
shares of common stock at $17.00 each, raising proceeds of US$204 million. The
shares now trade on the Nasdaq Global Market under the ticker symbol "BBNX".
Other Company highlights:
● The Investment Manager continues to demonstrate its commitment to
and alignment with the Group: RTW Investments' CIO, Rod Wong, bought
19,949,441 shares in 2024, increasing his stake to 14.8% at the period end. On
26 February 2025, Rod further increased his stake to 15.0%, bringing his total
holding to 50,356,880 shares.
● Specialist non-executive director appointed: The increased scale
of the Company following strong performance and the Arix transaction allowed
us to appoint a new Non-Executive Director, Baroness Nicola Blackwood, a
leader in science and entrepreneurship. She is a member of the House of Lords,
and Chair of Genomics England and Oxford University Innovation. She is also a
board member of the biotechnology company, BioNTech.
Enquiries:
RTW Investments, LP - Investment Manager +44 (0)20 7959 6361
Woody Stileman (Business Development) biotechopportunities@rtwfunds.com
Oliver Kenyon (Business & Corporate Development)
Krisha McCune (Investor Relations)
Cadarn Capital - PR & IR Partner
Lucy Clark (PR) +44 (0)7984 184 461 / lucy@cadarncapital.com
David Harris (Distribution) +44 (0)7368 883 211 / david@cadarncapital.com
Deutsche Numis - Joint Corporate Broker +44 (0)20 7260 1000
Freddie Barnfield
Nathan Brown
Euan Brown
BofA Securities - Joint Corporate Broker +44 (0)20 7628 1000
Edward Peel
Alex Penney
Altum (Guernsey) Limited +44 (0)1481 703 100
Joanna Duquemin Nicolle
Sadie Morrison
About Biotech Opportunities Ltd:
RTW Biotech Opportunities Ltd (LSE: RTW) is an investment fund focused on
identifying transformative assets with high growth potential across the
biopharmaceutical and medical technology sectors. Driven by a long-term
approach to support innovative businesses, RTW Biotech Opportunities Ltd
invests in companies developing next-generation therapies and technologies
that can significantly improve patients' lives. RTW Biotech Opportunities Ltd
is managed by RTW Investments, LP, a leading healthcare-focused
entrepreneurial investment firm with deep scientific expertise and a strong
track record of supporting companies developing life-changing therapies.
Visit the website at www.rtwfunds.com/rtw-biotech-opportunities-ltd
(https://www.rtwfunds.com/rtw-biotech-opportunities-ltd/) for more
information.
RTW Biotech Opportunities at a Glance
Our Purpose: Transforming the lives of millions
RTW Bio's long-term strategy is anchored in identifying sources of
transformational innovations with significant commercial potential by engaging
in deep scientific research and a rigorous idea generation process, which is
complemented by years of investment, company building, and both transactional
and legal expertise.
What we do goes beyond short term financial gain
We invest for the long term, powering the next generation of breakthroughs in
science and medicine to help transform lives. That's what drives us - the
greater impact we can help create.
Our global reach
RTW Investments headquarters
RTW Investments global offices
Netherlands: Merus, Alesta
Germany, Spain, Switzerland and the Nordic countries: Rocket Pharmaceuticals,
Numab
Ireland: GH Research
Israel: Urogen Pharma
China: Corxel, Nuance, Oricell
UK: Immunocore, Artios
THE US
We have a core focus on the US, with deep coverage of opportunities from
academia to mid-size public companies. We apply a full range of deal execution
and company building capabilities.
THE UK & EUROPE
We have identified and invested in exceptional British and European scientific
assets. We look to contribute to these biotech ecosystems by engaging in
creation or ongoing development of new companies around promising early-stage
assets by partnering with universities and in-licensing academic programmes,
and by providing financial and human capital to entrepreneurs to advance
scientific programmes.
What this means for investors:
· access to cutting edge research labs and academic knowledge
· access to greater breadth of science and opportunity
· participation in value creation in local biotech ecosystems
CHINA
We are capturing commercialisation opportunities in China by investing across
the venture capital life cycle: from new company formation to IPO, to bringing
successful, innovative drugs to patients in China and across the globe.
What this means for investors:
· access to a budding biotech market, innovation and expertise
· an opportunity to be established in a market with the scope for
significant growth
Members of the RTW Investments team
2024: 77
2023: 70
The RTW Investments culture
RTW Investments' priority is unlocking value by advancing early-stage
scientific development to deliver innovative therapies to patients in need.
At the core of our business is a set of guiding principles.
COLLABORATION
Leveraging collective genius
PROGRESS
From research, to innovation, to reality
HUMILITY
The hunger to learn and improve
TENACITY
Finding pathways to success while overcoming obstacles
RIGOUR
Poring over the data
LEADERSHIP
The courage to shape a better future
The RTW Investments Difference
RTW Investments connects data, experience, and talent to bring opportunities
into focus
We identify transformative assets with growth potential across the life
sciences sector. Our approach is driven by deep scientific expertise with a
long-term investment horizon.
RTW Investments' COMPETITIVE ADVANTAGES
DEEP RESEARCH
We dive into the data to spot opportunities that others miss. Opportunities,
potential, errors, and risks are all easily overlooked, so we analyse and
scrutinise, applying a unique, repeatable research approach, fine-tuned over
years of successful life sciences investment. We combine the best data,
technology, and scientific insight to unearth opportunity.
SELECTIVITY
We cast a wide net, but only assets with high probability of becoming
commercially viable products and those with the greatest potential to
revolutionise treatment outcomes for patients pass the test. We choose
partners who care less about quick wins and more about lasting change.
KNOWLEDGE
We are doctors, academics, and drug developers; venture capitalists and
investment bankers; lawyers, data scientists and company operators. We work as
a team, applying collective expertise to spark ideas, solve problems, avoid
pitfalls, and build successful companies.
FLEXIBLE SOLUTIONS
Drug development rarely follows a linear path. Whatever the twists and turns,
we have the skills in house to solve problems and accelerate progress, from
providing capital and infrastructure to advance promising academic programmes,
to forming new companies and taking those companies public. We carve new
pathways, allowing scientists and entrepreneurs to bring life-changing
therapies to patients.
PEOPLE
Healthcare innovation is hard work, and easy wins are few and far between.
Those who succeed don't lose sight of why it matters. These are the people we
love working with. We come from many different backgrounds but are united in a
mission to improve people's lives.
LONG-TERM PARTNERS
Bringing new therapies to patients is a long journey that comes with both
thrilling triumphs and inevitable setbacks. We are hands-on and fully invested
in the success of our partners because their success is our success. We choose
partners who are as passionate about revolutionising medicine as we are.
RTW Biotech Opportunities' Full Life Cycle portfolio has multiple,
differentiated return levers and horizons
Private 20-40% of Core Public 30-60% Royalties 5-15% Cash 0-30%
NAV Management
("Other Public")
5-20 most compelling private investment opportunities per year. The main portfolio driver over the medium and long term. Uncorrelated, cash generative life sciences exposure with limited scientific Innovative biotechs are generally cash flow negative, requiring investment for
risk. clinical trials and commercial launches. Therefore, a portion of the portfolio
is retained in cash and liquid investments, ready for future financing rounds.
Majority invested in mid-to-late-stage venture or crossover rounds Biotech companies tend to IPO at around $500m. As a result, much of the Royalty-backed launch financing for newly approved life sciences products. In Excess cash is invested in the "other public" portfolio, designed to mitigate
where we expect a go-public event within six to eighteen months. valuation realisation occurs in the public markets. To capture as much value exchange for an upfront payment, RTW Bio receives quarterly cash payments the drag of setting aside cash for future deployment into core positions.
as possible, it is expected that most private portfolio companies will be based on a negotiated percentage of the products' sales.
retained after going public.
As a leading US crossover firm, RTW Investments is sought out by the best Retention and subsequent investment decisions subject to constant risk-reward Downside protection through deal structuring The "other public" assets have been carefully selected, mostly matching, on a
private biotechs as they look towards the public markets. We expect to lead assessment. pro-rata basis, the long investments held in RTW Investments' private funds.
about half of these rounds, setting the terms and building the syndicates.
About one third is invested in early-stage venture and RTW Investments company Successful investments could be held for 3-5 years with multiple value Expect to have principal repaid within six years, then a harvest period. Ability to hedge individual positions and use modest leverage.
creations where we expect a go-public event in three to five years. inflection points along the way. Term/return can be capped or uncapped.
Initial position size: <2%. Typical position size: 1-10% Typical position size: 1-2% Typical position size: 0.1-5%
Investment Objective and Investment Policy
Applying deep scientific expertise with a long-term investment horizon
Investment Objective
The Group seeks to achieve positive absolute performance and superior
long-term capital appreciation, with a focus on forming, building, and
supporting world-class life sciences, biopharmaceutical and medical technology
companies. It intends to create a diversified portfolio of investments across
a range of businesses, each pursuing the development of superior
pharmacological or medical therapeutic assets to enhance the quality of life
and/or extend patient life.
Investment Policy
The Group seeks to achieve its investment objective by leveraging the
Investment Manager's data-driven proprietary pipeline of innovative assets to
invest in life sciences companies:
· across various geographies (globally);
· across various therapeutic categories and product types
(including but not limited to genetic medicines, biologics, traditional
modalities such as small molecule pharmaceuticals and antibodies, and medical
devices);
· in both a passive and active capacity and intends, from time to
time, to take a controlling or majority position with active involvement in a
Portfolio Company to assist and influence its management. In those
situations, it is expected that the Investment Manager's senior executives may
serve in temporary executive capacities; and
· by participation in opportunities created by the Investment
Manager's formation of companies de novo when a significant unmet need has
been identified and the Group is able to build a differentiated, sustainable
business to address said unmet need.
The Group expects to invest approximately 80 per cent of its gross assets in
the biopharmaceutical sector and approximately 20 per cent of its gross assets
in the medical technology sector.
The Group's portfolio will reflect its view of the most compelling
opportunities available to the Investment Manager, with an initial investment
in each privately held Portfolio Company ("Private Portfolio Company")
expected to start in a low single digit per cent of the Group's gross assets
and grow over time, as the Group may, if applicable, participate in follow-on
investments and/or continue holding the Portfolio Company as it becomes
publicly-traded. It is intended certain long-term holds will increase in size
and may represent between five and ten per cent or greater of the Group's
gross assets.
The Group anticipates deploying one-third of its capital designated for core
private investments toward early-stage and de novo company formations
(including newly formed entities around early-stage academic licenses and
commercial stage corporate assets) and two-thirds of its capital in mid- to
late-stage ventures.
The Company may choose to invest in Portfolio Companies listed on a public
stock exchange ("Public Portfolio Companies") depending on market conditions
and the availability of appropriate investment opportunities. Equally, as part
of a full-life cycle investment approach, it is expected that Private
Portfolio Companies may later become Public Portfolio Companies. Monetisation
events such as IPOs and reverse mergers will not necessarily be taken as exit
opportunities for the Group. Rather, the Group may decide to retain all or
some of or add to its investment in such Portfolio Companies or the acquiring
Company where they meet the standard of diligence set by the Investment
Manager. The Group is not required to allocate a specific percentage of its
assets to Private Portfolio Companies or Public Portfolio Companies.
The Group also intends, where appropriate, to invest further in its Portfolio
Companies, supporting existing investments throughout their lifecycle. The
Group may divest its interest in Portfolio Companies in part or in full when
the risk-reward trade-off is deemed to be less favourable.
From time to time, the Group may seek opportunities to optimise investing
conditions, and to allow for such circumstances, the Group will have the
ability to hedge or enter into securities or derivative structures in order to
enhance the risk-reward position of the portfolio and its underlying
securities.
Investment restrictions
The Group will be subject to the following restrictions when making
investments in accordance with its investment policy:
· the Group may not make an investment or a series of investments
in a Portfolio Company that result in the Group's aggregate investment in such
Portfolio Company exceeding 15 per cent (or, in the case of Rocket
Pharmaceuticals, Inc., 25 per cent) of the Group's gross assets at the time of
each such investment;
· the Group may not make any direct investment in any tobacco
company and not knowingly make or continue to hold any Public Portfolio
Company investments that would result in exposure to tobacco companies
exceeding one per cent of the aggregate value of the Public Portfolio
Companies from time to time.
Each of these investment restrictions will be calculated as at the time of
investment. In the event that any of the above limits are breached at any
point after the relevant investment has been made (for instance, upon
successful realisation of economic and/or scientific milestones or as a result
of any movements in the value of the Group's gross assets), there will be no
requirement to sell or otherwise dispose of any investment (in whole or in
part).
Leverage and borrowing limits
The Group may use conservative leverage in the future in order to enhance
returns and maximise the growth of its portfolio, as well as for working
capital purposes, up to a maximum of 50 per cent of the Group's net asset
value at the time of incurrence. Any other decision to incur indebtedness may
be taken by the Investment Manager for reasons and within such parameters as
are approved by the Board. There are no limitations placed on indebtedness
incurred in the Group's underlying investments.
Capital deployment
The Group anticipates that it will, upon any subsequent capital raises, invest
up to 80% of available cash in Public Portfolio Companies that have been
diligenced by the Investment Manager and represent holdings in other
portfolios managed by the Investment Manager, subsequently rebalancing the
portfolio between Public Portfolio Companies and Private Portfolio Companies
as opportunities to invest in the latter become available.
Cash management
The Group's uninvested capital may be invested in cash instruments or bank
deposits pending investment in Portfolio Companies or used for working capital
purposes.
Hedging
As described above, the Group may seek opportunities to optimise investing
conditions, and to allow for such circumstances, there will be no limitations
placed on the Group's ability to hedge or enter into securities or derivative
structures in order to enhance the risk-reward position of the portfolio and
its underlying securities.
On an ongoing basis, the Group does not intend to enter into any securities or
financially engineered products designed to hedge portfolio exposure or
mitigate portfolio risk as a core part of its investment strategy but may
enter into hedging transactions to hedge individual positions or reduce
volatility related to specific risks such as fluctuations in foreign exchange
rates, interest rates, and other market forces.
RTW Biotech Opportunities' 5th Anniversary
On 30(th) October 2024, RTW Biotech Opportunities Ltd celebrated its fifth
anniversary since listing on the London Stock Exchange (LSE). From listing
through to its fifth year, the Group grew its NAV from US$153.0m to US$650.6m
and NAV per share by +86.3%. Along the way, several key milestones marked the
journey:
· Market-beating and peer-leading performance: the Group's NAV per
share return of +86.3% over the five years marked RTW Bio as the best
performing biotech-focused listed investment company on a NAV per share basis
on the London Stock Exchange in that time. This compared to a +37.7% return
for the Nasdaq Biotech Index and +16.3% for the Russell 2000 Biotech Index
over the same period.
· A London IPO and subsequent move to the LSE's premium listing: London
was selected as the listing destination because of the benefits of the listed
investment company structure. It gives both flexibility and duration to invest
opportunistically across the full life cycle, avoiding the pitfalls and
structural constraints of venture-only or public-only vehicles. In August
2021, RTW Bio migrated from the Specialist Segment to the Premium Segment,
which was subsequently consolidated into the Main Market in 2024. In 2022, the
Investment Manager set up an office in London to be closer to the listing,
shareholders and investment opportunities in the UK.
· Prometheus Biosciences acquisition shows the value of full life cycle
approach: In April 2023, Prometheus, a clinical-stage biotechnology company
pioneering treatment of immune-mediated diseases, was acquired by Merck for
US$10.8 billion. The investment was a great example of the value of full life
cycle investing. RTW Bio co-led Prometheus' crossover financing round in 2020,
supported it through its IPO in 2021 and ultimately its sale, generating a
more than 12x total multiple on invested capital (MOIC) in just over three
years.
· Arix transaction added scale and capital to a best-in-class platform:
In November 2023, RTW Bio announced plans to acquire Arix Bioscience Plc
("Arix"), a venture capital company focused on investing in breakthrough
biotechnology companies. Completed in February 2024, the transaction made RTW
Bio one of the largest biotech-focused listed investment companies trading on
the LSE and provided additional capital at an opportune time in the biotech
market cycle.
Chair's Statement
Investing in tomorrow's most promising medicines
We are delighted to have celebrated, on 30 October, the passing of our fifth
anniversary since listing on the London Stock Exchange. In that time, the
Group's NAV per share delivered a five-year return of +86.3% marking it as the
best performing biotech-focused listed investment company on a NAV per share
basis on the London Stock Exchange. This compared to a +37.7% return for the
Nasdaq Biotech Index and +16.3% for the Russell 2000 Biotech Index over the
same period. We are pleased to mark the fifth Anniversary this year with
market-beating and peer-leading performance, despite most of the last three
years experiencing the sector's second worst bear market in history.
Encouragingly, the backdrop is now improving and we believe that we are still
in the early innings of a recovery for the sector.
2024 Overview and 2025 Outlook
The Group's NAV returned -4.6% per Ordinary Share over the twelve months to 31
December 2024, slightly underperforming the Russell 2000 Biotechnology Index
and the Nasdaq Biotech Index (NBI) which returned +2.5% and -1.4%,
respectively. This is the first year that the Group's NAV per share has
underperformed, but it remains markedly ahead of sector indices over three
years, five years and since admission. Like many listed investment companies,
particularly those with private exposure, the Company's share price has lagged
NAV per share growth, although the discount narrowed modestly in 2024.
As always, there was plenty of activity in the portfolio to report. One of the
benefits of having a full life cycle approach is that there are always
opportunities and events including private financing rounds, go-public events,
take-outs, clinical developments and royalty distributions.
There were four go-public events from core private positions in the first
half: Kyverna, Lenz, Artiva and BioAge. The average step up from holding value
to go-public in these four events was +9.7% and the average multiple on
invested capital was 1.3x. There was one M&A deal involving Numab, a core
private position, which sold its lead program to Johnson & Johnson for
US$1.25bn. Being a private position meant that the impact on the Group was
less than it might have been had it occurred after the company became public
when we normally take bigger positions, but it led to a near 2.6x uplift from
the holding value as at 31 December 2024. Combined, these transactions
continue to underline the embedded value of the portfolio's private holdings
and provide evidence of the robustness of the Group's valuation process. But
despite continued successes here, the market appears to discount the private
assets.
In the core public portfolio, two genetic medicine companies had the biggest
impacts on NAV. Avidity Biosciences announced several positive clinical events
for patients suffering from severe muscular diseases which in many cases have
no approved drugs. Avidity's share price increased by 221% in 2024, making it
a very rewarding investment from a shareholder perspective this year and from
our original investment in their 2019 crossover round, since when it has
returned a 4.5x multiple on invested capital. Should Avidity succeed through
subsequent trials and regulatory approval, it will also be a very rewarding
investment from a patient impact perspective too. Rocket Pharmaceuticals'
share price struggled in 2024. With no clinical readouts on the calendar, the
shares were buffeted by top-down factors whilst it also did not deliver on
clinical and regulatory timelines for its two lead programs. Despite the
volatility and setbacks, we continue to see value and transformational
potential for patients suffering from horrendous diseases like Danon.
Since admission, the Group has made 69 private investments. Thirty-one of
these have since experienced liquidity events (by going public or via
acquisition). The average holding period as a private investment was fourteen
months and the average MOIC to the liquidity event was 1.8x. This was despite
a very muted IPO market for most of the last three years. It is important to
note that, being a full life cycle investor, we view the IPO as another
funding round and a public mark, rather than an exit opportunity, but the step
up to the IPO is a nice way to start a public investment especially when one
considers the other advantages of investing in the private rounds, most
particularly, getting closer to the science to build conviction.
The Group's royalty investments are performing well and provide a
differentiated income stream that is uncorrelated to equity markets. The risk
adjusted returns are very attractive and highly complementary to the rest of
the portfolio. The ability to offer a full suite of financing solutions to
companies helps position RTW Investments as one of the preferred capital
providers in the space. Our exposure to royalties is expected to increase in
the years ahead as the 4010 Royalty Fund, in which we are invested, draws down
capital for new investments.
At the end of the period, the Group had fifty-four core portfolio holdings, a
material increase from the start of the year as several new private and public
positions were added on top of the new private positions from Arix.
Opportunities are abundant and capital is valuable. The core portfolio
represents 67.1% of NAV at year end. The "other public" portfolio (mostly
matching the long listed names held in the Investment Manager's private funds,
devised to mitigate the performance drag of setting aside cash for future
deployment into core positions) makes up the remainder. It is important to
note that this portion of the portfolio is also expected to generate solid
returns through the cycle and is made up of similarly innovative but slightly
larger, later stage biotech companies, many of which already have approved
drugs.
The market environment for the biotech sector is improving and the opportunity
set for stock picking is encouraging albeit the sector's recovery is still
early. Changes in interest rate expectations are adding periods of volatility,
but good data and good products are being rewarded. Medical science innovation
has never been better, financing activity is robust and M&A looks set to
rebound. President Trump's appointment for Secretary of Health and Human
Services, RFK Jr, has added a little uncertainty but that should lift as it
becomes clear that innovation is part of the solution in his pursuit of
"making America healthy again".
With a growing pipeline of interesting opportunities at attractive valuations,
our private investing activity has returned to normal after a couple of years
when it was more optimal to focus on public market opportunities. All parts of
our full life cycle portfolio are well positioned and competition for capital
within the portfolio is intense.
RTW Bio continues to provide investors with exposure to the most innovative
and exciting parts of the healthcare sector via a range of public, private and
royalty investments. This full life cycle approach gives our shareholders
access to a wide range of investment opportunities that would otherwise be
hard to exploit, thus making the Group an attractive holding alongside
passive, private equity fund or direct equity healthcare exposures. This
proposition is most stark in next-generation obesity drugs, which are mostly
still private at this point. With the addition to the portfolio of Kailera and
the acquisition by Corxel (formerly known as JiXing) of CX11, RTW Bio is
unique among listed investment companies for shareholders looking for
meaningful exposure on the private side to this exciting area.
Corporate Developments
We are delighted to have completed the acquisition of Arix Bioscience Plc's
assets and welcome new shareholders to our register. The combination added
capital and scale to our best-in-class platform. RTW Bio is now one of the
largest biotech investment companies quoted on the London Stock Exchange and
the increased scale, liquidity and awareness has attracted several new
potential buyers.
The increased scale that the Arix transaction has brought us has also allowed
us to appoint a Senior Independent Director with considerable life sciences
experience. Baroness Nicola Blackwood is a leader in science and
entrepreneurship. She is a member of the House of Lords, and Chair of Genomics
England and Oxford University Innovation. She is also Board Member of the
biotechnology company, BioNTech. Nicola is also a member of the Oxford
Harrington Rare Disease Centre Advisory Board and the Royal Society Science
Policy Expert Advisory Committee. Nicola served as a Minister in the
Department for Health and Social Care under two Prime Ministers. As Minister
for Innovation, she led on Life Sciences, NHS Data and Digital Transformation,
and Global Health Security. She was the first female Member of Parliament for
Oxford and was elected by MPs of all parties as the first female Chair of the
House of Commons Science and Technology Committee. She remains one of the
youngest committee chairs in British history. We are delighted to welcome
Nicola, believing that her contributions will help us further our mission to
harness innovation in biotech to the advantage of patients and shareholders.
Capital Allocation
Around the time of the Arix closing, the Board increased the previously
announced share buyback capacity to help manage any short-term changes in the
shareholder base around the deal. In total, the Group bought back 8,500,000
shares in 2024 for a total consideration of US$11,340,306. Buybacks are
considered through a capital allocation lens against multiple factors, most
importantly, our core objective to deliver long-term capital growth. With this
context it is important to recognise that our investments generally consume
cash to progress through clinical trials or early commercialisation, so
retaining capital and some liquidity is essential, especially in challenging
market environments where opportunities are available to those who can provide
a quantum of capital quickly. However, in recent times when the Group has
received a significant cash inflow (i.e. the sale of Prometheus to Merck and
the acquisition of Arix and its substantial cash position), we have returned a
portion through NAV-accretive buybacks. As with Prometheus, in the event of
cash realisations from public M&A in our portfolio, a proportion of the
profits may be used to buy back shares. However, we strongly believe that now
is a once-in-a-generation time to be making private and public investments in
biotech, so we must balance short term discount considerations that are
impacting the whole investment trust industry, and our healthcare peers within
it, against very significant medium to long term capital growth potential.
Manager Commitment and Alignment
I am pleased to note the expansion of the Investment Manager's wider team in
the UK in recent years, focussing amongst other things on servicing RTW Bio
shareholders, and am particularly pleased to note the continued alignment of
the Investment Manager with the Group. Since IPO, the Investment Manager has
not sold any of its shares in the Company and key principals, including CIO
Rod Wong, continue to increase their personal holdings. Last year Rod Wong
bought 19,949,441 shares bringing his total shareholding to 49,643,313 (14.8%
of ordinary shares in issue not held in treasury). Post period-end, he bought
additional shares increasing his position to 15.0%. Furthermore, since
admission the Investment Manager has only taken one distribution, in shares,
from the Performance Allocation share class, increasing its investment in the
Group. This further demonstrates both the value of the Group to the Investment
Manager and its long-term commitment.
Looking Forward
Whilst 2024 was a challenging year for the biotech sector and UK investment
companies, I am very pleased with the compelling long-term performance of RTW
Bio and look forward with confidence to the next five years. We enter this
period with significant assets under management, increasing public interest in
what we do and the skilled support of our manager and other stakeholders. We
anticipate many more opportunities to further medical innovations which
improve the lives of patients and provide attractive returns to our investors.
2025 AGM
The Company will hold its Annual General Meeting on 9 June 2025 to review the
annual results and provide portfolio updates. The meeting will take place at
Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey. We would like to
dedicate a part of the meeting to address questions from shareholders. We
encourage shareholders to submit questions at the following email, and we will
endeavour to answer as many as we can: biotechopportunities@rtwfunds.com
(mailto:biotechopportunities@rtwfunds.com) .
On behalf of the Board, I would like to express my gratitude for your
continued support and wish you all the best for 2025.
William Simpson
Chair of the Board of Directors
RTW Biotech Opportunities Ltd
28 March 2025
Report of the Investment Manager
A full life cycle approach to investing in innovative healthcare companies
Financial Highlights, Performance Drivers and Significant Events
Since its listing on the London Stock Exchange on 30 October 2019, the Group
has grown the NAV attributable to Ordinary Shareholders from US$168.0 million
to US$606.9 million as of 31 December 2024. The NAV per Ordinary Share has
grown +73.8% from US$1.04 to US$1.81 as of 31 December 2024. Disappointingly,
the share price has not kept pace with the NAV, returning +34.1% in the same
period, as the shares fell to a discount in early 2022 (as did many listed
investment trusts) and have remained there since, despite strong NAV per
Ordinary Share performance. In 2024, the NAV per Ordinary Share returned -4.6%
while the share price returned -0.6%. With continued NAV outperformance versus
the market and peers, in addition to an improving outlook for the biotech
sector, we would expect the discount to narrow.
Table 1. Financial Highlights
RTW Biotech Opportunities Ltd Year-end reporting period Previous year-end reporting period (01/01/2023-31/12/2023) Admission
(01/01/2024-31/12/2024)
(30/10/2019-31/12/2024
Ordinary NAV - start of period US$399.3 million US$326.1 million US$168.0 million
Ordinary NAV - end of period US$606.9 million US$399.3 million US$606.9 million
NAV per Ordinary Share - start of period US$1.90 US$1.54 US$1.04
NAV per Ordinary Share - end of period US$1.81 US$1.90 US$1.81
NAV movement per Ordinary Share -4.6% +23.5% +73.8%
Price per Ordinary Share - start of period US$1.40 US$1.21 US$1.04
Price per Ordinary Share - end of period US$1.40 US$1.40 US$1.40
Share price return (i) -0.6% +16.0% +34.1%
Benchmark returns (ii)
Russell 2000 Biotech +2.5% +10.6% +7.4%
Nasdaq Biotech -1.4% +3.7% +27.6%
(i) Total shareholder return is an
alternative performance measure. Share price at 31 Dec 2023 was $1.403 and
at 31 Dec 2024 was $1.395.
(ii) Source: Capital IQ
RTW Investments, LP, the "Investment Manager", a leading global
healthcare-focused investment firm with a strong track record of supporting
companies developing life-changing therapies, created the Group as an
investment fund focused on identifying transformative assets with high growth
potential across the biopharmaceutical and medical technology sectors. Driven
by deep scientific expertise and a long-term approach to building and
supporting innovative businesses, we invest in companies developing
transformative next-generation therapies and technologies that can
significantly improve patients' lives while creating significant value for our
shareholders.
NAV performance in 2024 has been driven by the core public positions. This is
how the portfolio is designed to function. As full life cycle investors, our
belief is that the majority of value creation in biotech happens in the public
market, however, it is valuable and important to position oneself and build
conviction before an IPO. Our core public position Avidity is a case in point.
We co-led the crossover round at the end of 2019 and supported the IPO in
2020. Since then, the company experienced some challenges until reporting
great data from several of its programs in 2024. We had significantly
increased our position in February 2024 by co-leading an oversubscribed
US$400m private placement, proving the value of the Investment Manager's
position as a preferred capital provider in the sector. The shares returned
+221% over the course of 2024 giving rise to a +12.4% contribution to NAV. The
other major contributor was Tarsus, which sits at the other end of the
development life cycle, being a commercial stage company. Tarsus' share price
rose materially in 2024 as its treatment for demodex infection, Xdemvy,
continued to exceed consensus revenue expectations.
Rocket, Immunocore and Cargo were the largest detractors amongst the core
public positions. After strong performance in 2023, Rocket's shares performed
poorly in 2024. Rocket raised US$165m in a follow-on offering in December
after a year in which it did not deliver on clinical and regulatory timelines
for its two lead programs. Despite the setbacks, we think both the Danon and
Fanconi anaemia programs continue to have transformative potential for
patients. Immunocore reported melanoma data at ASCO showing a disappointing
sub-20% response rate. It is important to note that both Rocket and Immunocore
are multi-pipeline companies, so even if one asset disappoints there are other
shots on goal. There was no material fundamental news during the year on
Cargo, but with the next catalyst not forecast until 2025, the share price
gave back much of the gains it made since its IPO in November 2023. Following
period end, Cargo announced it was halting work on its lead candidate after a
failed Phase 2 study, followed a couple months later by the discontinuation of
its entire pipeline, and the announcement that it would lay off most of its
staff and seek a reverse merger or other business combination.
The core private positions made a small contribution led by Numab. Kyverna,
Artiva and BioAge Labs completed successful IPOs while Lenz went public
through a reverse merger. The average gross multiple on invested capital
(MOIC) on our initial investments in these four companies to the go-public
event was approximately 1.3x. Numab sold its lead drug candidate to J&J
for US$1.25bn. The company's holding value was increased by approximately 2.6x
to reflect the deal, which closed in July.
2024 was an auspicious year for RTW Investments-founded Corxel, which changed
its name from Ji Xing Pharmaceuticals during the year to reflect an expanding
portfolio of global assets. Firstly, Ji Xing (as it was then called) announced
that Bayer AG had invested in its Series D financing, whilst concurrently
announcing a new strategic collaboration between the two companies focused on
cardiovascular diseases in China. Later in the year, Corxel announced two
significant transactions in December. First, after successfully completing its
Phase 3 trial, Corxel sold its China Aficamten rights to Sanofi. The asset
sale recognised the value created by the team and made it possible to
in-license ex-China rights to CX11, an oral small molecule GLP-1 for obesity.
In a China Phase 2 trial, CX11 showed competitive weight loss with Lilly's
Orforglipron, the leading small molecule in development. We believe orals are
one of the largest unmet needs in obesity and are excited for Corxel's
transformation into a global cardiometabolic company.
The Group's royalty positions, representing ~3% of NAV, made a solid
contribution this year, underlining the attractiveness of their uncorrelated,
income-oriented returns. The Group's investment in the Investment Manager's
4010 Royalty Fund performed well. 4010 currently holds two investments with
Avadel Pharmaceuticals and Urogen Pharma (which is also the underlying asset
of RTW Royalty 2). The royalty agreement with Avadel is associated with the
sales of Lumryz, which is an extended-release sodium oxybate medication
approved by the FDA on 1st May 2023 as the first and only once-at-bedtime
treatment for cataplexy or excessive daytime sleepiness (EDS) in adults with
narcolepsy. Lumryz's sales ramp is significantly outperforming 4010's
underwriting target. The Urogen royalty is connected to two oncology
franchises: Jelmyto and UGN-102. The products are topical therapies in the
urinary tract for urothelial and bladder cancers, which are typically treated
by surgical intervention. Most of the royalty returns are derived from
Jelmyto, which is an established and growing product. UGN-102 is nearing FDA
approval with Phase 3 data, and we expect it to be approved in early 2025. In
the third quarter, 4010 sold its Allurion royalty asset at a small profit
including royalties received to date. A sale within the investment period
allows us to redeploy the capital into the more attractive risk-reward
opportunities we see. 4010 will start distributing on a quarterly basis soon
after the final close, which is expected to be in the first half of 2025.
At the outset, the Arix transaction was expected to be accretive, as the
cancellation of shares previously owned by Acacia would offset the transaction
costs, while the share conversion ratio was set on a NAV-for-NAV basis.
However, the Group's NAV appreciated materially versus Arix's between the deal
announcement and closure, leading to a small NAV per share dilution on
closing, including the revaluation of Arix's private positions. Artios,
Evommune and Ensoma increased in value, while we wrote down the values of
Depixus, Sorriso and Amplyx. We believe the long-term benefits of the increase
in scale and potential future accretion of the acquired positions will far
outweigh the short-term costs. The increased cash position at an opportune
time allowed us to make investments in a handful of core public positions like
Akero that have subsequently been highly accretive to NAV.
Since admission, the Group has made sixty-nine core private investments. At 31
December 2024, thirty-one of these positions had had liquidity events (i.e.,
go-public or acquisition). The average holding period as private was fourteen
months and the average MOIC to the liquidity event was 1.8x. Nineteen of these
positions have either concurrently or subsequently been exited in full at an
average MOIC of 2.8x.
Table 2. Performance breakdown for the year ending 31 December 2024
NAV per share contribution %
Core private +0.7%
Core public +2.1%
Avidity Biosciences +12.4%
Tarsus Pharmaceuticals +3.8%
Rocket Pharmaceuticals -7.0%
Immunocore -3.1%
Cargo Therapeutics -1.5%
Royalties +2.4%
"Other public" -3.8%
Fees and other MTD P&L -1.1%
Arix transaction and share buybacks -5.0%
YTD return -4.6%
Following the Board's increase to the share buyback program in January, there
followed several intra-month share buybacks in the first half of the year. In
addition, the intra-month acquisition of Arix Bioscience significantly
increased shares outstanding in mid-February. Due to these fluctuations in
weighted average shares outstanding during the period, and because the Group's
NAV is calculated on a monthly basis, the above breakdown of NAV contributions
by portfolio segment is an estimate for the period 1 January to 31 December
2024.
Key updates for Core Portfolio companies during 2024:
Clinical & Commercial Milestones
· In March, Avidity Biosciences, the Group's largest portfolio holding
at the time, announced positive long-term data showing reversal of disease
progression in people living with myotonic dystrophy type 1 (DM1), across
multiple endpoints. Having been impressed by Avidity's initial patient data,
the FDA supported using hand opening time, a sensitive and early marker of
change, as the primary endpoint for a Phase 3 trial.
· In March, Apogee Therapeutics reported interim Phase 1 data
supportive of best-in-class convenience for its long-acting IL-13 antibody, a
target that Eli Lilly has validated for atopic dermatitis (AD).
· In March, Tarsus Pharmaceuticals reported in their results
announcement that they saw sales from Xdemvy (the first and only FDA-approved
treatment to directly target demodex mites, the root cause of demodex
blepharitis) more than double consensus expectations in its first full quarter
since launch.
· In April, Lenz Therapeutics announced positive topline data from its
Phase 3 presbyopia trial, following which the FDA accepted its New Drug
Application in October.
· In June, Avidity Biosciences announced "unprecedented" AOC 1020 data
from its Phase 1/2 clinical trial. AOC 1020 is an investigational therapy that
targets DUX4, the root cause of facioscapulohumeral muscular dystrophy (FSHD).
Avidity plans to accelerate initiation of registrational cohorts in its Phase
1/2 trial.
· In June, Rocket Pharmaceuticals' progress toward its first approval
for Kresladi, for the treatment of LAD-1, was delayed after the FDA issued a
Complete Response Letter requesting additional manufacturing information. In
our view, the delay should be modest and we are hopeful they will receive the
FDA's approval in 2025.
· In June, Immunocore's melanoma data showed a sub-20% response rate at
ASCO.
· In June, also at ASCO, Merus reported stunning proof-of-concept data
in combination with PD1 therapies for the treatment of head and neck cancer.
The data demonstrated a 60+% response rate, further evidencing the drug's
potential to redefine front-line standard of care.
· In November, Corxel Pharmaceuticals announced the acceptance
by China's National Medical Products Administration (NMPA) of the New Drug
Application (NDA) for Aficamten, an investigational, next-in-class selective
small molecule cardiac myosin inhibitor for the treatment of obstructive
hypertrophic cardiomyopathy (HCM).
Financial Milestones
· In January, Bayer AG and RTW Investments announced the US$162 million
initial closing of a Series D financing in Ji Xing. Bayer and Ji Xing
concurrently announced a new strategic collaboration focused on cardiovascular
diseases in China.
· In February, Kyverna Therapeutics priced its US$319 million IPO and
began trading on Nasdaq Global Select Market under the ticker "KYTX".
· In February, the Group participated in the US$170 million Series D
financing round of BioAge Labs. The capital will be used to fund Phase 2
trials for Azelaprag, an oral drug with the potential to increase weight loss
and prevent muscle loss when used together with a GLP.
· In March, Lenz Therapeutics went public through the completion of a
merger with Graphite Bio and now trades on the Nasdaq Global Market under the
ticker "LENZ".
· In March, the Group participated in the Series A financing round of
Mirador Therapeutics, raising over US$400 million for its launch. The Group
has worked with Mirador's team previously, when they led Prometheus
Biosciences to its acquisition by Merck for US$10.8 billion in 2023.
· In April, the Group participated in the US$160.5 million Series C
financing round of Obsidian Therapeutics, a clinical stage biotech pioneering
engineered cell and gene therapies.
· In May, the Group participated in Santa Ana Bio's Series A financing
round that raised $US168 million. Santa Ana is a biotech company developing a
pipeline of innovative therapeutics and leveraging its multi-omics platform to
unlock the full potential of precision medicines.
· In June, Numab Therapeutics announced that Johnson & Johnson
would acquire its wholly owned subsidiary, Yellow Jersey Therapeutics, for
$US1.25 billion in cash. Yellow Jersey Therapeutics holds the rights to
Numab's NM26, a first-in-class, bi-specific antibody targeting two clinically
proven pathways in atopic dermatitis, the most common inflammatory skin
disease. The transaction completed in July.
· In July Artiva Biotherapeutics priced its IPO at US$167 million and
began trading on Nasdaq Global Market under the ticker "ARTV".
· In August, the Company made a new investment in the seed round of
Jade Biosciences, Inc. that raised US$80 million for its launch. The funding
will be used to support Jade's plans to develop targeted therapies for
indications with high unmet need across inflammation and immunology.
· In September, BioAge Labs, Inc. ("BioAge") completed a US$198
million IPO and now trades on Nasdaq Global Select Market under the ticker
"BIOA".
· In September, the Company co-led Aktis Oncology's Series B round,
raising US$175 million in financing to further advance its proprietary
pipeline of novel targeted alpha radiopharmaceuticals to treat a broad range
of solid tumours.
· In October, the Company announced the launch of new portfolio
company, Kailera Therapeutics. The US$400 million Series A financing round
was co-led by RTW Investments alongside Atlas Venture and Bain Capital Life
Sciences, with participation from Lyra Capital. Kailera is developing a
broad, advanced, and differentiated portfolio of clinical-stage injectable and
oral therapies that have demonstrated potential as best-in-class
treatments for the treatment of chronic weight management.
· In October, the Company invested in the US$115 million Series C
financing round of Evommune, Inc. The Company received a legacy position in
Evommune earlier in 2024 when it acquired the assets of Arix Bioscience.
Evommune is a clinical-stage biotechnology company discovering and developing
new ways to treat immune-mediated inflammatory diseases.
· In November, the Company made a new investment in the seed round of
Mantle Therapeutics. Mantle is a biotech company targeting the treatment of
rare, fatal diseases across multiple modalities.
· In December, the Company made a new investment in Ottimo Pharma, a
company pioneering bifunctional medicines to extend the lives of people living
with cancer. The Series A financing round of over US$140 million will
accelerate the lead asset, Jankistomig, a first-in-class PD1/VEGFR2
bifunctional antibody for multiple solid tumour indications, and a pipeline of
follow-on bifunctional assets.
· In December the Company made a new investment in the Series A round
of Dutch biotech, Alesta Therapeutics, a company focused on developing
transformative small molecule therapies for rare diseases. Its lead asset is
an orally active therapeutic candidate for hypophosphatasia (HPP), a rare
genetic disorder caused by mutations in the ALPL gene.
· In December the Company made a new investment in the Series A round
of City Therapeutics, a biopharmaceutical company developing a pipeline of
next-generation RNAi-based medicines to make a significant impact for patients
across multiple therapeutic areas.
· In December Corxel announced that it had entered into a definitive
agreement whereby Sanofi would acquire its exclusive rights to develop and
commercialise Aficamten in Greater China for an undisclosed amount. The
transaction has since closed.
Portfolio breakdown and new investments
Core public positions are typically investments that were added to the
portfolio as private investments, reflecting the key focus of the Group's
strategy. Our investment approach is defined as full life cycle and,
therefore, involves retaining private investments beyond their IPOs; hence the
core portfolio consists of both privately-held and publicly-listed companies
and royalty investments.
As of 31 December 2024, the Group's core positions accounted for 67% of NAV
(2023: 67%) and included fifty-four companies (2023: 36) in private and public
biotech and medtech companies and royalty investments. We selected these
investments based upon our rigorous assessment of the science, commercial
potential and valuations. Table 3 shows the top ten portfolio investments at
the end of the reporting period.
Core private investments accounted for 30% of NAV at 31 December 2024 (2023:
18%) across thirty-three investments (2023: 22). The increase in exposure and
number of investments in the reporting period reflects the addition of several
new private positions (see Table 4 alongside the new private investments from
Arix (Ensoma, Evommune, Depixus, Sorriso and Amplyx) less Kyverna, BioAge and
Artiva which went public via IPOs and Lenz, which went public via a reverse
merger.
Core public investments accounted for 34% of NAV (2023: 39%) across nineteen
positions (2023: 12). The change in exposure and number of investments mostly
reflects underlying performance, the graduation of Kyverna and Lenz to the
public markets and the addition of Akero, Urogen, 89Bio and Merus.
Royalties accounted for 3% of NAV (2023: 10%) across two investments (2023:
2): RTW Investments' 4010 Royalty Fund (4010) and RTW Royalty 2. These
investments are cash generative, providing life sciences exposure that is
uncorrelated to the volatility of the equity markets, and have limited
scientific risk due to their being typically constructed around commercial
products. The reduction in exposure reflects a rebalanced exposure to 4010
after new investors came into the fund and the sale and transfer of a portion
of RTW Royalty 2's underlying assets.
"Other public" listed companies make up 31% of the Group's NAV at 31 December
2024 (2023: 20%). The "other public" portfolio segment is designed as a cash
management strategy to mitigate the drag of setting aside cash for future
deployment into core positions and to provide ready cash as needed for those
purchases. The 50 "other public" holdings are carefully selected, mostly
matching, on a pro-rata basis, the long investments held in our private funds
and generally rebalanced on a monthly basis. The investments represented in
this portfolio are similarly categorised as innovative biotechnology and
medical technology companies developing and commercialising potentially
disruptive and transformational products but are generally later stage (both
in terms of clinical development and duration as a public company), have
larger market capitalisations and have greater trading liquidity than our core
public positions. The average market capitalisation of the "other public"
holdings is $8.8b at 31 December 2024. Available cash at 31 December 2024 was
2%, significantly lower than at the same point last year (13%). The elevated
cash position at 31 December 2023 was in preparation for the purchase of a
stake in Arix Bioscience, which closed in January 2024. From time to time, we
may make use of derivatives and other instruments to manage individual
position sizing for the purpose of efficient portfolio management. In 2024,
the use of derivatives and hedging shorts increased for this reason.
Our "full life cycle" portfolio is diversified across clinical stages, capital
position (i.e., equity and royalty), treatment modalities, and therapeutic
focus giving it multiple, differentiated return levers and horizons. By
constructing the portfolio in such a way, investors get exposure to the most
innovative parts of a highly specialised sector with the explosive potential
of companies that successfully navigate clinical, regulatory or commercial
inflection points.
While the portfolio is still majority invested in US-based companies, we are
committed to adding UK and EU investments in an effort to support the best
assets across the globe and help foster local biotech ecosystems. When we
first came to market in October 2019, we had zero exposure to the UK, now two
of our top ten positions are based in the UK: Immunocore (public: "IMCR") and
Artios (private).
Looking forward, we expect the total portfolio sector allocation to remain
close to 80% biopharmaceutical assets and 20% medical technology assets. In
line with prospectus guidance, we anticipate two-thirds of new private
investments will be made in mid- to later-stage venture companies and
one-third focused on active company building around the discovery and
development or licensing and distribution of promising assets. Royalty
investments will be limited to approximately 15% of NAV.
Table 3. Top ten core portfolio positions as of 31 December 2024¹
Portfolio Company Description Ticker Therapeutic Area Clinical stage Expected upcoming catalyst % NAV
Corxel RTW Investments incubated biotech committed to bringing innovative therapies Private Cardiovascular Phase 3 CX11 global Ph2 trial begins Q2 2025 8.5%
to underserved patients with cardiometabolic diseases.
Avidity Antibody conjugated RNA medicines company. Lead program for myotonic RNA Rare Disease Phase 3 FSHD trial update in H1 2025 7.3%
dystrophy.
Tarsus Biotech developing first-in-class therapeutics for ophthalmic conditions. TARS Ophthalmology Commercial Q1 earnings in April 6.0%
Akero Clinical-stage company developing treatments for patients with serious AKRO Metabolic Phase 3 Ph3 SYNCHRONY data H1 2026 5.2%
metabolic diseases, including non-alcoholic steatohepatitis.
Rocket Gene therapy platform company for rare paediatric diseases. Four clinical RCKT Rare Disease Phase 3 Danon patient dosing and PKP2 data H1 2025 5.1%
programs for Fanconi anaemia, Danon, LAD, and PKD
Artios Developing breakthrough cancer treatments that target DNA Damage Response Private Oncology Phase 2 ART0380 Ph1 data in Q2 4.9%
pathways. RTW Bio position increased as part of Arix transaction.
Kailera RTW Investments new company creation based on a pipeline of injectable GLP-GIP Private Metabolic Phase 3 June 2025 - high dose KAI7535 China data 3.4%
and oral GLP drugs in-licensed from Jiangsu Hengrui Pharmaceuticals, one of
China's leading biopharma companies.
Ensoma Genomic medicines company developing one-time, in vivo treatments that Private Rare Disease Preclinical Chronic granulomatous disease Phase 1 Q2 2025 2.6%
precisely engineer any cell of the hematopoietic system for immuno-oncology,
genetic disease and other therapeutic applications.
Immunocore T-cell receptor therapy company focused on oncology and infectious disease. IMCR Oncology Commercial HIV MAD H125 2.3%
RTW Royalty Fund RTW Investments-created private fund aimed at generating returns from rights Private Neurology Commercial Quarterly earnings for underlying companies 2.0%
to royalty stream distributions from biopharma & medtech life sciences
companies.
1 Positions are shown on a net basis. Any differences with the Schedule of
Investments are due to short holdings.
Table 4. New core portfolio investments greater than 50bps in 2024¹
Company name Public/Private Description % NAV
Kailera Private RTW Investments new company creation based on a pipeline of injectable GLP-GIP 3.4%
and oral GLP drugs in-licensed from Jiangsu Hengrui Pharmaceuticals, one of
China's leading biopharma companies.
Ensoma² Private Genomic medicines company developing one-time, in vivo treatments that 2.6%
precisely engineer any cell of the hematopoietic system for immuno-oncology,
genetic disease and other therapeutic applications.
Evommune² Private Clinical stage biotechnology company developing novel therapies to treat 1.1%
immune-mediated chronic inflammatory diseases.
Aktis Private Developing a proprietary pipeline of novel targeted alpha radiopharmaceuticals 0.8%
to treat a broad range of solid tumours.
Jade Private Developing a pipeline of therapies aimed at transforming the standard of care 0.6%
for patients living with autoimmune diseases.
Ottimo Private Biotech company focused on the development of cancer therapies for solid 0.5%
tumours.
Akero Public Clinical-stage company developing treatments for patients with serious 5.2%
metabolic diseases, including metabolic dysfunction-associated
steatohepatitis (MASH).
89Bio Public Clinical-stage biopharmaceutical company developing innovative therapies to 1.2%
treat patients with liver and cardiometabolic diseases.
Merus Public Public, clinical-stage oncology company developing full-length human 0.8%
bispecific and trispecific antibody therapeutics with a broad application for
human disease, with a focus on head and neck cancer.
1 Includes new privates, re-designations from "other public" to core
public and Arix acquisition positions.
2 Arix-acquired position
Royalty Financing
What is royalty financing?
Financing based on royalty payments. In exchange for an upfront payment,
investors receive quarterly cash payments based on a pre-determined percentage
of the future revenues of a specified product or asset. Within healthcare,
royalty financing is a growing source of funding for small and medium-sized
companies launching new drugs. A bespoke solution that aligns the interest of
the provider/investor with the company through revenue participation, while
avoiding some of the negatives of debt (i.e. covenants, refinancing, warrant
coverage etc.) is an increasingly popular one.
How does RTW Bio gain exposure to royalty financing?
Historically, RTW Bio has made royalty investments directly alongside other
RTW Investments funds through individual vehicles such at RTW Royalty 1, which
held the Mavacamten royalty that was subsequently sold to Bristol Myers
Squibb. Since 2023, RTW Bio has gained exposure to royalties through the RTW
Investments-managed 4010 Royalty Fund ("4010") on a no fee basis. It is
expected that RTW Bio will continue to gain exposure to royalties through
successor vintages of 4010. Investing through a co-mingled drawdown fund has
several benefits from a cost and administration perspective.
The 4010 Royalty Fund
The 4010 Royalty Fund is looking to generate uncorrelated, income-oriented
returns for investors by targeting a gap in financing available to small and
medium-sized companies launching first-in-class or best-in-class products with
high unmet needs. RTW Investments' full life cycle investment platform
provides 4010 with several advantages by seeing more royalty opportunities
earlier and with greater underwriting insight. These advantages combined with
RTW Investments' in-house transactional capabilities allow it to offer
holistic financing solutions to companies and to structure innovative deals to
protect downside for investors.
Table 5. NAV capital breakdown as of 31 December 2024 and 31 December 2023
Portfolio grouping % of NAV at 31 Dec 2024 % of NAV at 31 Dec 2023
Core private 30.3% 17.6%
Core public 34.1% 39.3%
Royalties 2.7% 9.8%
Other public 30.5% 20.4%
Available Cash¹ 2.3% 12.9%
Total 100% 100%
(1) As defined in Alternative Performance Measures.
Figure 1. Core portfolio breakdown, by (A) Modality, (B) Therapeutic focus,
(C) Clinical stage and (D) Geography as of 31 December 2024. Except for
clinical stage, these breakdowns do not include royalty vehicles.
Table 6. Core portfolio positions greater than 50 bps, as of 31 December 2024
and 31 December 2023¹̛ ⁵
Portfolio Company Private or Public² % of Group's net assets at 31/12/2024 % of Group's net assets at 31/12/2023
Corxel Private 8.5% 7.9%
Avidity(3) Public 7.3% 1.4%
Tarsus Public 6.0% 1.5%
Akero Public 5.2% 0.0%
Rocket Public 5.1% 17.9%
Artios Private 4.9% 0.2%
Kailera Private 3.4% 0.0%
Ensoma Private 2.6% 0.0%
Immunocore Public 2.3% 7.4%
RTW Royalty Fund Private 2.0% 6.1%
Milestone(3) Public 1.7% 2.0%
Beta Bionics Private 1.5% 1.7%
Cargo Public 1.4% 4.0%
89Bio Inc. Public 1.2% 0.0%
Evommune Private 1.1% 0.0%
Lycia Private 1.0% 0.2%
Apogee Therapeutics Public 1.0% 1.8%
Ancora Private 0.9% 1.1%
Aktis Private 0.8% 0.0%
Merus Public 0.8% 0.0%
RTW Royalty 2 Private 0.7% 3.7%
NiKang Private 0.7% 1.4%
Magnolia Private 0.6% 0.7%
Orchestra⁴ Public 0.6% 2.1%
Jade Private 0.6% 0.0%
Ottimo Private 0.5% 0.0%
1 The aggregate exposure of names below 50 bps, consisting of 26 positions, is
4.8% of the Group's NAV.
2 Names in which the fund owns both private and public securities of a public
company are categorised as
public.
3 Includes pre-funded warrants.
4 Includes shares held in the initial SPAC vehicle (HSAC2) that merged with
Orchestra in January 2023.
5 Positions are shown on a net basis. Any differences with the Schedule of
Investments are due to short holdings.
Table 7. RTW Investments representation on portfolio company boards as of 31
December 2024
Portfolio company¹ RTW representative on the board
Corxel Rod Wong, Peter Fong, Gotham Makker
Magnolia Ovid Amadi
Nikang Chris Liu
Rocket Rod Wong, Gotham Makker, Naveen Yalamanchi
Yarrow Rod Wong, Peter Fong, Gotham Makker
RTW Royalty 2 Matthew Bieret
Kailera Gotham Makker
Ensoma Piratip Pratumsuwan
Artios Chris Liu
1 In aggregate these represented 26.7% of the Group's NAV at 31 December 2024.
Table 8. Top 5 "Other Public" portfolio segment holdings as of 31 December
2024¹
Position Ticker % of NAV Description
Madrigal Pharmaceuticals Inc. MDGL 5.9% Commercial-stage biopharmaceutical company focused on improving care for
patients with non-alcoholic steatohepatitis (NASH) and metabolic dysfunction
associated steatohepatitis (MASH).
Dyne Therapeutics Inc. DYNE 4.1% Biotechnology company developing oligonucleotide therapies for rare diseases
that affect muscle tissue.
Stoke Therapeutics Inc. STOK 2.3% Clinical stage biotech developing RNA treatments for severe genetic diseases.
PTC Therapeutics Inc. PTCT 2.0% Commercial-stage global biopharma developing therapies for people living with
rare neurological and metabolic diseases.
Argenx SE ARGX 2.0% Commercial-stage global immunology company developing treatments for severe
autoimmune diseases.
Total 16.3%
1 Positions are shown on a net basis. Any differences with the Schedule of
Investments are due to short holdings.
Private Portfolio Valuations and Cash Runway Analysis
The core private positions are the foundation of the Group's strategy. They
are built on our rigorous assessment of the best investment opportunities we
can find. We have always been highly selective in this area, focusing only on
companies with both well-founded science and attractive commercial
opportunities. We have benefited from this discipline as we continue to emerge
from a challenging capital markets environment. We have a private portfolio
that is well-sized and well-funded.
As of 31 December 2024, the average cash runway of our core private companies
was slightly over two years, which provides them with sufficient time to focus
on clinical development plans. About a fifth have less than six months of
runway, one of which is an RTW Investments company creation, which is by
design, as the Investment Manager's funds have the flexibility to inject cash
when necessary. The remainder are working on various capital raising
solutions.
We hold our private company investments at 'fair value' i.e., the price that
would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. This is assessed in
accordance with US GAAP, utilising valuation techniques consistent with the
International Private Equity and Venture Capital Guidelines including, but not
limited to, the income approach and the market approach. Valuations are
adjusted both during regular valuation cycles and on an ad hoc basis in
response to 'trigger events', which may include changes in fundamentals, an
intention to carry out an IPO, or changes to the valuations of comparable
public companies. Our valuation process ensures that private companies are
valued in both a fair and timely manner.
The Board delegates valuation of the private investments to the Investment
Manager while the Board's Audit Committee oversees the integrity of the
valuation process and conducts an independent review of the Investment
Manager's valuation policies and procedures twice a year when the interim and
annual statements are produced and also on an ad hoc basis when appropriate.
The process is overseen at the Investment Manager by the RTW Investments
Valuation Committee. The Committee is supported by RTW Investments' valuation
team that is independent from the investment team and receives advice from two
independent third-party valuation firms. The Valuation Committee approves
valuations of private company investments on a monthly basis and utilises the
analysis of an independent third-party valuation firm no less frequently than
twice a year in helping to determine the fair value of each material private
investment.
Thirty core private and royalty positions saw a total of seventy-one valuation
adjustments in 2024 with an average of two adjustments per position. Fourteen
positions (not including the Arix positions) were marked up by an average of
38.3% (excluding Numab, which was marked up by 264% to reflect the deal with
Johnson & Johnson, the average was 21.0%); 11 positions (not including
Arix positions) were marked lower by an average of -20.1%. The balance
remained unchanged. 29% of the markdowns were primarily driven by changes to
relative comparables or market-based inputs. 38% of the markups were primarily
driven by comparables, and 62% were primarily driven by idiosyncratic company
performance, a financing round or transaction. At year end, the average time
since the last third-party valuation was seven weeks and an average of twelve
months had elapsed since the last financing round.
Of the positions acquired from Arix, we wrote up the values of Artios,
Evommune and Ensoma and we look forward to seeing them develop further in the
future. We wrote down the values of Depixus, Sorriso and Amplyx which are
immaterial in the context of the whole portfolio.
We believe that the value of the private portfolio is best demonstrated by
go-public events or transactions. The five such go-public events in 2024
(including the Numab acquisition) saw an average step up from our holding
value to the event of 8%. The average MOIC to the event was 1.7x. This is
consistent with our historical averages (Figure 2).
Figure 2. New private investments, private liquidity events¹ and private
MOIC²
1 Liquidity event = IPO, SPAC merger, reverse merger, acquisition from
private.
2 Multiple of Invested Capital ("MOIC") represents the ratio of total value to
the corresponding amount of total capital invested, expressed
as a multiple. Gross MOIC is utilised, which is calculated before giving
effect to management fees, carried interest, taxes and other
expenses, which would reduce performance and the rate of return.
Figure 3. Core private portfolio - approximate cash runway as of 31 December
2024
Table 9. Private Valuation Statistics for 2024
Statistic 2024
Number of revaluations in 2024 71
Average revaluations per investment 2
Average time since last third-party valuation (weeks) 7
Average time since last financing round (years) 1.0
Average valuation change¹ +10.9%
Average mark-up¹ +38.3%
Average mark-down¹ -20.1%
Average step-up to realisation event +7.9%
Average MOIC to realisation event 1.7x
1 Does not include positions acquired in the Arix transaction
Sector review and outlook
The Russell 2000 Biotech Index and the Nasdaq Biotech Index (NBI) returned
+2.5% and -1.4%, respectively, in 2024. The Russell 2000 Biotech Index remains
below levels first reached in 2018. Interest rate worries dominated for much
of the year and continued to after the US Federal Reserve's latest shift in
December. While the results of the first round of Inflation Reduction Act
(IRA) drug negotiations were on the better end of expectations, the
uncertainty surrounding RFK Jr's nomination and subsequent appointment as
Trump's Secretary of Health and Human Services became a new reason for some to
stay on the sidelines. Coming into 2024, the biotech sector had already
underperformed the S&P 500 by a record amount and this continued through
the year with -26% and -22% relative performance for the NBI and the Russell
2000 Biotech Index, respectively. Eli Lilly basically carried biopharma,
generating ~US$200B in market cap while the rest of pharma (-US$180B) and
biotech (+US$20B) combined, lost value. The total market cap of small and
midcap biotech is only US$700bn, less than Lilly alone and about the same
value as the market cap that Nvidia lost on "DeepSeek Monday" (i.e. 27(th)
January 2025). If some flows are diverted from AI-tech to biotech, the impact
on biotech could be significant given the relative market caps we see these
days.
Figure 4. Russell 2000 Biotechnology index value
M&A was too small to get things going. While
five-hundred-million-dollar-plus acquisition volumes remain near record highs
(27 vs last year's record 26), dollar value dropped to US$44 billion vs US$140
billion in 2023. This was the first year in twenty that we did not see an
M&A deal over US$5 billion in value as there was a shift towards earlier
stage assets as some buyers (namely Lilly, Novo, AbbVie, and AstraZeneca) are
focused on revenues beyond 2030. To compound matters, China's bear market has
increased the supply of early-stage assets looking for capital, giving buyers
more options. Despite this dynamic, we don't think this spells the end for
larger late-stage deals. Merck, Bristol, Roche, Novartis, and Sanofi are still
on the hunt for revenues this decade and Lilly and Novo are sure to get more
aggressive as their obesity revenues grow. Several large pharma companies face
losses of exclusivity patent cliffs totalling approximately US$500bn over the
next decade and currently have approximate US$1 trillion of dry powder (cash
plus debt capacity) to make acquisitions. Only western biotech companies have
the late-stage assets needed to fill their needs and a more friendly Federal
Trade Commission (FTC) in the US should lower the barriers that have
discouraged bigger deals in recent times.
Figure 5. US biotech M&A deal volumes and value
Source: Jefferies Biotech M&A Report 2008-2004 as of 31 December 2024
IPOs made incremental progress towards normalisation. 17 companies made it out
this year versus 12 last year. This is consistent with a slow transition from
a bear market (less than 10) to a healthy one (more than 30). Consolidation
also continued. After peaking in 2021 at 590 publicly traded small and
mid-caps, the number is now 547. Most small and mid-cap companies have been
disciplined around spending, with cash burn trending lower to extend runways.
Public follow-on financing activity returned to near record levels as
companies with good data were able to raise the capital they needed. Venture
financing is extremely robust. Every category from Series A to D surged in
2024 supported by many "mega-rounds" (i.e. more than US$250m) in the As and
Bs, the fuel for future waves of innovation.
Figure 6. US Biopharma Financing Market - IPOs and Follow-Ons
Source: Bloomberg and Lazard 2024 Life Sciences US Equity Issuance Recap
report as of 31 December 2024.
The FDA approved 56 novel drugs this year, shy of last year's record-setting
61, but still one of the highest in history. Novel modalities made up 10 vs 14
last year, including two gene therapies, four cell therapies, one RNA
medicine, and three bispecifics. 2024 saw notable breakthroughs across
therapeutic areas with the first approval for NASH (the most severe form of
nonalcoholic fatty liver disease), the first cell therapy approved for solid
tumours, bispecific data that could potentially challenge Keytruda's dominance
in solid tumours and compelling CD19 CAR-T data demonstrating the possibility
of drug-free remission in autoimmunity, not to mention the significant
advances in obesity (more below). It's worth noting that 56% of last year's
approvals came from biotech companies under $5bn in market capitalisation.
This is where the innovation is. 2025 holds the potential to be on par with
record-setting 2023 with many highly probably PDUFA dates set.
Figure 7. The FDA approved 56 novel drugs in 2024
Source: FDA.gov website (CDERS and CBER)
NME = new molecular entity
GtX = gene therapy
We are tracking how the Department of Human and Health Services (HHS) could
look under RFK Jr's leadership. Considering the scope of the job, guardrails,
and players surrounding him, we currently don't expect a change in direction
when it comes to FDA's pro-innovation trend. Innovation momentum could go
either way, depending more on Dr Marty Makary and other staff. Separately, we
are optimistic we could see pharmacy benefit manager (PBM) and insurance
reform. If and when RFK Jr uncertainty declines, we would note that the sector
outperformed the S&P 500 in two of the past three Republican first terms,
and we would expect no different an outcome today, given the promising science
our team is evaluating daily.
From a modality or therapeutic area perspective, oncology, immunology, rare
disease and obesity remain a focus with next generation obesity drugs probably
offering the most exciting opportunities. We call it "the $1 trillion GLP-1
revolution" because it is the first innovation in healthcare - not just drugs,
all of healthcare - to create about US$1 trillion in value. Obesity is the
most common disease in Western society with over 100m obese people in America
alone. It is highly linked to three of the top ten causes of death:
cardiovascular, stroke and diabetes. It is also strongly associated with other
diseases like cancer, kidney disease and maybe even dementia. Recent outcome
studies from some of the GLP-1s are showing 20-30% improvements in these other
associated diseases and conditions. It is probably the most significant
medical advance in terms of the sheer impact that we have seen in recent
history (more below in the Impact section). If you want to learn more about
the science, impact, evolving competitive landscape, and the opportunities we
see, please check out The RTW Podcast: "The $1 Trillion GLP-1 Revolution"
(https://www.rtwfunds.com/news-events/insights/the-1-trillion-glp-1-revolution-with-rod-wong/)
. You can find it on all the main podcast platforms.
In the here and now of policy speculation and public share prices, it is easy
to lose sight of the drastic longer-term need for a healthy, innovative
healthcare system. Globally, senior populations (i.e. over 65 years old) are
expected to double from 800m in 2024 to 1.6bn in 2050. In the US, people over
65 represent 18% of the current population but 36% of the health spending.
Innovation is part of the solution.
Figure 8: Percentage of US small- and midcap biotech companies trading at less
than cash on their balance sheets at 31 December 2024
Post period-end updates and other key portfolio company events
The following events all occurred in January 2025:
Kailera announced positive topline data from the 8 mg dose of Hengrui
Pharmaceuticals' Phase 2 clinical trial (HRS9531-203) of HRS9531, a GLP-1/GIP
receptor dual agonist, in individuals living with obesity or who are
overweight. The clinical trial results showed that a once-weekly subcutaneous
injection of the 8 mg dose demonstrated a statistically significant
placebo-adjusted mean weight loss, with no plateau. Additionally, 59% of
treated participants achieved a weight loss greater than 20%. The trial
results also demonstrated a favourable safety profile. These results increase
our confidence that Kailera is one of the leading players in next-generation
obesity management and bode well for Kailera's planned global Phase 3 trial.
Akero (Nasdaq: AKRO) released preliminary topline results from its Phase 2b
study evaluating the efficacy and safety of its lead product candidate
efruxifermin (EFX) in patients with compensated cirrhosis due to metabolic
dysfunction-associated steatohepatitis MASH. Treated patients demonstrated a
statistically significant improvement in fibrosis with no worsening of MASH,
representing a 24% effect size over placebo at 15%. Upon the news, shares in
Akero, a 5.2% position at year end, rose 100%.
Cargo Therapeutics announced it was halting work on its lead candidate after
a failed Phase 2 study, followed a couple months later by the discontinuation
of its entire pipeline, and the announcement that it would lay off most of its
staff and seek a reverse merger or other business combination.
Beta Bionics went public on 30 January, issuing 12 million shares of common
stock at US$17.00 each, raising proceeds of US$204 million. The shares now
trade on the Nasdaq Global Market under the ticker symbol "BBNX".
RTW Investments, LP
28 March 2025
RTW Bio's Long-Term Strategy
Transforming the lives of millions
RTW Bio's long-term strategy is anchored in identifying sources of
transformational innovations with significant commercial potential by engaging
in deep scientific research and a rigorous idea generation process,
complemented by years of investment, company building, and both transactional
and legal expertise.
Identify
Identify transformational innovations
The Investment Manager has developed expertise through a comprehensive study
of industry and academic efforts in targeted areas of significant innovation.
Thanks to the decoding of the human genome, there is more clarity around the
causes of disease. Coupled with exciting new modalities that can address
genetic diseases in a targeted way, drug innovation is accelerating.
Engage
Engage in deep research to unlock value
The Investment Manager has developed repeatable internal processes, combining
technology and manpower to comprehensively cover critical drivers of
innovation across the globe. We seek to identify, through rigorous scientific
analysis, biopharmaceutical and medical technology assets that have a high
probability of becoming commercially viable products, dramatically changing
the course of treatment, and bringing effective, or in some cases, even fully
curative outcomes to patients.
Build
Build new companies around promising academic licences
The Investment Manager has capabilities to partner with universities and
in-license academic programmes, by providing capital and infrastructure to
entrepreneurs to advance scientific programmes. Particularly in rare disease,
there is often little existing research and few treatment options, so forming
a rare disease-focused company is a way of shining a light on this space and
creating a roadmap to developing potentially curative treatments.
Support
Support investments through the full life cycle
A key part of the Investment Manager's competitive advantage is the ability to
determine at which point in a company's life cycle we should support the
target asset or pipeline. As a full life cycle investor, RTW Investments
provides growth capital, creative financing solutions, capital markets
expertise, and guidance. Taking a long-term, full life cycle approach and
having an evergreen structure enables us to avoid the pitfalls and structural
constraints of venture-only or public-only vehicles. RTW Investments' focus is
on becoming the best investors and company builders we can be, delivering
exceptional results to shareholders and making a positive impact on patients'
lives.
Strategy in Action
Impact Focus: Treating Obesity and Related Conditions
Obesity is the most common disease in Western society
Obesity affects more than 100 million US adults, more than 764 million people
globally and is the most common disease in Western society.
What are GLP-1 drugs?
GLP-1 drugs, also known as GLP-1 receptor agonists or incretin mimetics, mimic
the action of a naturally occurring hormone called glucagon-like peptide-1
(GLP-1), which is produced in the intestines. GLP-1 plays a crucial role in
regulating blood sugar levels by stimulating insulin release, slowing stomach
emptying and reducing appetite. GLP-1 drugs work by binding to the same
receptors as the natural GLP-1 hormone, triggering these same actions. This
can help improve blood sugar control in people with type 2 diabetes and
promote weight loss in people with obesity or who are overweight. The term
"GLP-1 drugs" has become shorthand for a broader category of (incretin
mimetics) drugs that are used to treat obesity, so are informally known as
"obesity drugs".
Note: * BMI ≥30kg/m2; ** BMI ≥40kg/m2
Source: World Obesity Atlas, March 2023 report; Stierman 2021 National Health
Statistics Report; Prospective Studies Collaboration 2009 Lancet
Obesity Drugs: the most significant medical advance in terms of the sheer
impact that we have seen in recent history
GLP-1 drugs like Wegovy and Mounjaro have gained significant popularity for
weight loss since 2021 when the FDA approved semaglutide (Wegovy) for chronic
weight management in adults with obesity or who are overweight with
weight-related conditions. GLP-1 drugs were initially developed to treat type
2 diabetes. In fact, Wegovy is a higher-dose formulation of Ozempic, a drug
that was already marketed for diabetes. The first GLP-1 agonist, exenatide
(Byetta), was approved by the FDA in 2005 and iterative innovation over the
subsequent twenty years has brought us to where we are today.
Obesity is a major risk factor for a number of chronic diseases like diabetes,
hypertension and liver disease, as well as cardiovascular diseases such as
heart disease and stroke, which are the leading causes of death worldwide. So,
the health impacts of the obesity drugs go well beyond diabetes and weight
loss. In fact, recent outcome studies from some of the GLP-1s are showing
20-30% improvements in some of these diseases.
Groundbreaking data from SELECT trial: GLP-1s shown to improve MACE¹ outcomes
in overweight or obese adults
Source: Lincoff AM, Brown-Frandsen K, Colhoun HM, et al. Semaglutide and
cardiovascular outcomes in obesity without diabetes. N Engl J Med
2023;389:2221-32. DOI: 10.1056/NEJMoa2307563
1 MACE, or major adverse cardiovascular events, refers to cardiovascular
death, myocardial infarction (heart attack), stent thrombosis (blood clot in a
coronary artery stent), repeat revascularisation (bypass surgery), ischemic
stroke.
RTW Bio and obesity drugs / GLP-1s
Currently, Eli Lilly and Novo Nordisk are leading the way with their GLP-1
drugs with the only currently approved drugs. However, their rates of adverse
side effects are not optimal, and there are a lot of ways in which these drugs
can be improved. We are still early in the current cycle of obesity drug
development and the next generation of drugs are targeting many of the
shortcomings of the incumbents.
Obesity (and its related conditions) is a large and growing focus for RTW Bio,
and we are at forefront of the second wave of the obesity revolution,
leveraging cutting-edge science and strategic partnerships to invest in
exciting assets. With a portfolio of private obesity investments, RTW Bio is
unique among listed investment companies for shareholders looking for exposure
on the private side to the area.
https://www.corxelbio.com/ (https://www.corxelbio.com/)
Corxel Pharmaceuticals
8.5% of NAV (2023: 7.9%)
Corxel is a leading biotech company headquartered in the US and China, focused
on developing innovative cardiometabolic therapies globally. Backed by RTW
Investments, LP, Corxel (formerly Ji Xing) was founded in 2019 and has been
committed to bringing innovative science and medicines to underserved patients
around the world. With a strong and further developing asset pipeline,
industry leading talent, and patient-centric focus, Corxel is dedicated to
delivering meaningful and lasting impact on patients.
In December, Corxel announced the acquisition of CX11, an oral small molecule
glucagon-like peptide-1 receptor agonist (GLP-1 RA), for worldwide
(excluding Greater China) development and commercialisation, from Vincentage.
CX11 is an investigational, oral small molecule GLP-1 RA for the treatment of
cardiometabolic diseases, including obesity and type 2 diabetes. GLP-1 RAs
have been shown to lower body weight, improve insulin sensitivity, and reduce
glucose and overall appetite. CX11, in a once daily, orally available
formulation, could offer convenience and accessibility to patients, and lower
the cost of manufacturing compared to injectables. In a Phase 2 clinical trial
conducted in China, CX11 demonstrated competitive weight loss with Lilly's
Orforglipron, the leading small molecule in development. The registrational
Phase 3 study in obese and overweight patients in China was initiated
in November 2024. Corxel plans to initiate a global (excluding Greater
China) Phase 2 study in 2025.
We are excited about the potential of CX11, which has shown impressive
efficacy in weight reduction, making it a potential best-in-class oral small
molecule GLP-1 RA. There are currently no oral small molecule GLP1's
available. The oral peptide Rybelsus has limited efficacy and is cumbersome to
take, requiring 30 minutes of fasting, no drinking, and no other medications
taken at the same time. Lilly is likely to be the first to bring one to market
and we would expect CX11 to be second or third. We believe this is not a
"winner takes all market", and there is room for several players given the
very large market potential.
https://www.kailera.com/ (https://www.kailera.com/)
Kailera Therapeutics
3.4% of NAV (2023: N/A)
Kailera is a clinical-stage biopharmaceutical company developing a broad and
advanced therapeutic pipeline that is poised to deliver differentiated
treatment options for obesity and related conditions. Kailera is committed to
developing therapies that give people the power to transform their lives and
elevate their overall health. The company was founded in 2024 and backed by
RTW Investments along with Atlas Venture and Bain Capital Life Sciences with
participation from Lyra Capital.
In January 2025, Kailera's injected GLP-1/GIP dual agonist KAI-9531
demonstrated potentially best-in-class obesity data in a Phase 2 trial in
China conducted by Jiangsu Hengrui Pharmaceuticals. KAI-9531 was one of three
assets Kailera licensed from Hengrui at its launch, acquiring the worldwide
rights (excluding Greater China) to develop the drugs. With 22.8% additional
weight loss compared to placebo treatments at 36 weeks, it beats the 21% shown
by Eli Lilly's Retatrutide. Kailera is preparing for its upcoming global Phase
3 study of the same asset. These data increase our confidence that Kailera is
one of the leading players in next-generation obesity management.
Kailera's KAI-9531 is competing for best-in-class injectable efficacy with a
favourable gastro-intestinal adverse effects profile.
(1) With placebo adjustment.
Amycretin and Semaglutide are Novo Nordisk drugs; Retatrutide and Tirzepatide
are Eli Lilly drugs.
Sources: KAI9531 and Amycretin data from company press releases; Retratrutide
data from ADA 2023 meeting; Tirzepatide and Semaglutide data from DOI:
10.1056/NEJMoa2206038 and DOI: 10.1056/NEJMoa2032183.
Operational and Financial Review for the Year
Innovative asset growth
MARKET CAPITALISATION
The Company's market capitalisation increased from U$295 million at 31
December 2023 to US$470 million at 31 December 2024. The Company issued
181,901,165 shares in 2024 in conjunction with the Arix acquisition and
repurchased 8,500,000 shares, so the 59% increase in market capitalisation was
due to the increase in the shares outstanding since the share price was
marginally down from 2023 to 2024.
ORDINARY NAV
The Ordinary NAV increased from US$399 million to US$607 million during the
year, which was due largely to the acquisition of the assets of Arix
Bioscience.
NAV PER ORDINARY SHARE
The NAV per share decreased from US$1.90 per share to US$1.81 per share. The
main driver of this decrease was the share price performance of Rocket
Pharmaceuticals (-7.0%), Immunocore (-3.1%) and Cargo (-1.5%) as well as the
other public portfolio (-3.4%) and the dilution from the Arix transaction
(-5.0%).
PREMIUM / DISCOUNT
The Company's shares traded on average at a c.24% discount to NAV due to
reduced market demand for growth and venture capital assets during the
reporting period. At year end, the Company's Ordinary Shares were trading at a
23% discount to NAV (2023: 26% discount to NAV). The modest reduction in US
and UK interest rates during the period was offset by rising US treasury and
gilt yields resulting in only a modest improvement in the rating of the
company's shares.
TOTAL RETURN TO SHAREHOLDERS BASED ON ORDINARY NAV
As the Company has not paid dividends, the total return for the year of -4.6%
(2023: +23.5%) equates to the decrease in NAV per Ordinary Share.
TOTAL RETURN TO SHAREHOLDERS BASED ON SHARE PRICE
The share price return of -0.6% was the result of the decline in the company's
NAV per share being offset by a modest re-rating of its discount. The shares
remained at a discount during the year although the discount modestly
narrowed.
ONGOING CHARGES
The Group's ongoing charges ratio is 1.75% (2023: 1.87%), calculated in
accordance with the AIC recommended methodology, which excludes non-recurring
costs and uses the average NAV in its calculation.
Highlights
Market Capitalisation as of 31 Dec 2024
2024: US$470m
2023: US$295m
2022: US$257m
Ordinary NAV as of 31 Dec 2024
2024: US$607m
2023: US$399m
2022: US$326m
Discount to NAV as of 31 Dec 2024
2024: -22.8%
2023: -26.0%
2022: -21.2%
Ongoing charges as of 31 Dec 2024
2024: 1.8%
2023: 1.9%
2022: 1.9%
Key Performance Indicators
Measuring our performance
The Board has identified the following indicators for assessing the Group's
annual performance in meeting its objectives:
Financial KPIs
NAV Growth
PERFORMANCE
Performance of the portfolio companies and cash management strategy net of all
fees and costs
KEY FACTORS
· Portfolio performance and progression through clinical trials
· Cash management
· Capital pool and deployment
· Scientific and financial risks
· Market context including interest rates and bond yields
PROGRESS
Ordinary NAV
2024: -4.6%
2023: +23.5%
During the reporting period this was largely driven by public companies' share
price performance. After strong performance in 2023, Rocket's shares performed
poorly in 2024. The company did not deliver on clinical and regulatory
timelines for its two lead programs, but despite the setbacks, we think both
the Danon and Fanconi anaemia programs continue to have transformative
potential for patients. Immunocore reported melanoma data at ASCO showing a
disappointing sub-20% response rate. There was no material fundamental news on
Cargo during the financial year, but with the next catalyst not forecast until
2025, the share price gave back much of the gains it made since its IPO in
November 2023. After period end, Cargo announced it would discontinue its
entire pipeline, lay off most of its staff and seek a reverse merger or other
business combination.
FUTURE INTENT
Achieve superior long-term capital appreciation; target an annualised total
return of 20% over the medium term
LINK TO STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO PRINCIPAL RISKS
Failure to achieve investment objective
Exposure to global political and economic risks
Clinical Development & Regulatory Risks
Total shareholder return
PERFORMANCE
Delivering value to the shareholders
KEY FACTORS
· Portfolio performance
· Liquidity of RTW Bio shares
· General market sentiment
PROGRESS
Share Price Return
2024: -0.6%
2023: +16.0%
The company's share price recorded a smaller decline than its NAV as falling
interest rates led to an increase in demand for early stage and venture
capital investments despite muted returns from the Biotech sector.
FUTURE INTENT
Achieve superior long-term capital appreciation; target an annualised total
return of 20% over the medium term.
LINK TO STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO PRINCIPAL RISKS
Failure to achieve investment objective
Exposure to global political and economic risks
Clinical Development & Regulatory Risks
Premium/Discount to NAV
PERFORMANCE
The level of supply and demand for the Company's shares
KEY FACTORS (in order of impact at year end)
· The percentage of private growth assets within the Group's
portfolio
· Portfolio performance
· Liquidity of the Company's shares
· Increased visibility with key UK shareholder audience (London
office, UK distribution partner)
PROGRESS
Premium/discount to NAV (average during the year)
2024: -24%
2023: -25%
The discount moderately narrowed during the year. US and UK interest rates
moved in the right direction, but unfortunately this was offset by rising US
treasury and gilt yields.
FUTURE INTENT
Return to a premium to NAV such that total shareholder returns match or exceed
NAV performance
LINK TO STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO PRINCIPAL RISKS
Failure to achieve investment objective
Exposure to global political and economic risks
Percent of NAV invested in core portfolio companies
PERFORMANCE
Level of capital deployment into core portfolio companies
KEY FACTORS
· Level of capital deployment and investment pace, as well as
availability of funds to be deployed into new portfolio companies and
follow-on investments
PROGRESS
NAV invested in core portfolio
2024: 67%
2023: 67%
Deployed into core portfolio companies
FUTURE INTENT
Identify transformative assets with high growth potential across the
biopharmaceutical and medical technology sectors
LINK TO STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO PRINCIPAL RISKS
Clinical Development & Regulatory Risks
The Investment Manager relies on key personnel
Exposure to global political and economic risks
Non-financial KPIs
Geographically & therapeutically diversified portfolio
PERFORMANCE
Measures the Group's commitment to invest in best-in-class science and
innovative assets worldwide
KEY FACTORS
· Continue to diversify within the life sciences sector and support
local biotech ecosystems across the globe
PROGRESS
Therapeutic areas addressed
2024: 11
2023: 10
Core portfolio companies' focus spans multiple therapeutic areas, treatment
modalities and geographies. In 2024, metabolic diseases were added as a core
therapeutic area, as the Group pivoted toward a strong focus on obesity.
FUTURE INTENT
Continue investing in and supporting companies developing next generation
therapies and technologies that can significantly improve patients' lives
LINK TO STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO PRINCIPAL RISKS
Clinical Development & Regulatory Risks
Exposure to global political and economic risks
Active and robust pipeline
PERFORMANCE
Delivers transformational new treatments to patients in need.
KEY FACTORS
· Balance and breadth of the pipeline across all clinical stages
· Data readouts and progress through multiple clinical stages
· Commercial opportunity and competitive landscape
PROGRESS
Core portfolio companies that have leading programs in a clinical stage
2024: 30 of 54
2023: 22 of 36
Capturing a spectrum of early-stage Phase 1 to late stage Pivotal
FUTURE INTENT
Progress towards delivering transformational treatments to patients in areas
of high unmet need.
LINK TO STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO PRINCIPAL RISKS
Clinical Development & Regulatory Risks
Exposure to global political and economic risks
Imposition of pricing controls
Risk Management
Applying deep scientific expertise with a long-term investment horizon
RTW Bio's long-term strategy is anchored in identifying transformative assets
with high growth potential across the biopharmaceutical and medical technology
sectors. Driven by a deep scientific understanding and a long-term approach to
supporting innovative businesses, we invest in companies developing
next-generation therapies and technologies that have the potential to
significantly improve patients' lives. With this significant opportunity also
comes risk.
RTW Bio's risk framework is overseen by the Audit Committee under delegation
from the Board. Multiple parties contribute to managing risk, including the
Board, the RTW Investments team, and the Group's advisers.
Risk framework
The risk framework begins with the Board who oversee the process to ensure a
robust assessment of principal risks, consider current and potential risks,
and receive an update from the Investment Manager at each Board meeting. A
risk register is maintained that sets out principal risks, their probabilities
and an impact assessment. The RTW Investments team is responsible for
day-to-day operations and oversight of the risk framework. The Investment
Manager has a culture of transparency, ensuring that developments are shared
and addressed timely, with the benefit of input from multiple team members,
and reported to the Board as appropriate. The Group relies on having highly
experienced personnel at the Investment Manager to support and manage issues
as they arise.
The Audit Committee oversees and monitors the risk framework, including
reviewing the risk register regularly to ensure it properly captures principal
risks, continuously identifying potential risks, reviewing the ongoing
operation and effectiveness of the control environment, and ensuring that
proposed actions are implemented by the RTW Investments team. This process
drives continuous improvement in risk identification and monitoring.
Identifying principal risks
The Board uses both top-down and bottom-up inputs to evaluate principal risks.
Over the past year, the Board and the Investment Manager had ongoing
discussions to consider the Group's risks. The discussions generated insights
into potential emerging risks and have helped to focus attention on additional
areas for monitoring.
The RTW Investments team carries out a bottom-up review, considering each
portfolio company, as well as internal operations, both as a specific exercise
and on an ongoing basis. The team also draws on assessments made by management
teams of portfolio companies. These inputs are brought together in the risk
register, which is reviewed by the Audit Committee in detail each quarter The
principal risks identified by the Board are set out below. These have not
substantially changed in the last year. The Board also monitors future risks
that may arise, including the longer-term risks of changes to US
pharmaceutical drug pricing and US FDA productivity.
Risk management structure
Board of Directors
Risk management leadership; risk appetite
Audit Committee
Reviews and monitors the risk framework
RTW Investments Team
Risk management is integral to the investment process and financial management
Implementing and monitoring risk controls; risk reporting
Other advisers
Risk identification; risk reporting
Portfolio companies' management teams
Risk identification and mitigation
Risk appetite
The Board is willing to accept a certain level of risk in order to achieve
strategic goals. Where a risk is approaching or moves beyond its target, the
Board will consider the actions being taken to manage it. This year the Audit
Committee carried out a detailed review of the defined risk types, to ensure
that they continue to reflect the understanding of the Board and accurately
reflect relevant risks. Following that review, the Audit Committee advised the
Board that the risk appetite remained appropriate, and the Board has accepted
that assessment.
Principal and Emerging Risks and Uncertainties
Principal risks and how we mitigate them
Under the FCA's Disclosure Guidance and Transparency Rules, the Directors are
required to identify the material risks to which the Group is exposed and the
steps taken to mitigate those risks.
The Group has five categories of risk in its risk register, namely:
· Investment Risks
· Operational Risks
· Governance/Reputational Risks
· External Risks
· Emerging Risks
Investment Risks
1. FAILURE TO ACHIEVE THE INVESTMENT OBJECTIVE
RISK DESCRIPTION
The Group's target return on net assets is not guaranteed and may not be
achieved.
RISK CONTROL MEASURES
The Board will monitor and supervise the Group's performance compared to the
target return, similar investment funds and broader market conditions. Where
performance is unsatisfactory, the Board will discuss the appropriate response
with the Investment Manager.
STABLE
STRATEGIC LINK
Identify
Engage
Support
Operational Risks
2. UNFAVOURABLE TAX EXPOSURE
RISK DESCRIPTION
With the prior year acquisition of Arix Bioscience, the Group's structure
became more complex, and along with this complexity came the potential for new
tax-related risk. As of year-end, subsidiaries acquired or created for the
transaction were either in liquidation or in the process of winding up.
RISK CONTROL MEASURES
The Group consulted throughout the planning and execution of the acquisition
with legal counsel having expertise in corporate structure and tax matters.
The Investment Manager's team dedicated to the transaction, along with the
Board, received advice and evaluated structural options at every step, and
continues to do so as the structure evolves.
STABLE
STRATEGIC LINK
Identify
Engage
3. COUNTERPARTY RISK
RISK DESCRIPTION
The Group has the potential to be exposed to the creditworthiness of trading
counterparties in OTC derivatives contracts, its prime broker in the event of
re-hypothecation of its investments, and any counterparty where collateral or
cash margin is provided or where cash is deposited in the normal course of
business.
RISK CONTROL MEASURES
The Group uses Goldman Sachs, Morgan Stanley, Bank of America Merrill Lynch,
JP Morgan and Jefferies as prime brokers and Cowen, UBS, Bank of America
Merrill Lynch, Goldman Sachs, Jefferies, and Morgan Stanley as ISDA
counterparties. To monitor counterparty risk, the Investment Manager monitors
fluctuations in share prices, percentage changes in daily, monthly, and annual
5-year CDS spreads and S&P credit ratings. If a counterparty group share
price moves up or down in excess of 20%, the trader at the Investment Manager
is alerted immediately. In case of an alert, the trader notifies RTW
Investments' Chief Compliance Officer. There has been no disruption in
operations with the Group's counterparties to date. The Group's bankers are an
offshore branch of Barclays Bank PLC and are also included in the Investment
Manager's CDS monitoring program.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
Governance/Reputational Risks
4. THE INVESTMENT MANAGER RELIES ON KEY PERSONNEL
RISK DESCRIPTION
The Investment Manager relies on its founder, Roderick Wong M.D. Roderick Wong
is a key figure at the Investment Manager and is extensively involved in
investment decisions.
RISK CONTROL MEASURES
In the event that Roderick Wong was to no longer work for the Investment
Manager or was incapacitated, the Board is able to terminate the Investment
Management Agreement within 180 days if a suitable replacement has not been
found and would consider whether it would be appropriate to wind up the Group
and return capital to shareholders, or to appoint a new Investment Manager.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
5. PORTFOLIO COMPANIES AND INVESTMENT MANAGER MAY BE SUBJECT TO LITIGATION
RISK DESCRIPTION
Portfolio Companies may be subject to product liability claims. Such liability
claims would have a direct financial impact and may impact market acceptance
even if ultimately rebutted. The Investment Manager may be swept up in class
action suits against companies that include major shareholders.
RISK CONTROL MEASURES
The Investment Manager's due diligence process includes considering the risk
that innovative therapies may have unforeseen side effects, based on the
Investment Manager's extensive sector knowledge and experience, published
research, and publicly available information. The Investment Manager maintains
Directors & Officers as well as Errors & Omissions insurance policies.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
External Risks
6. EXPOSURE TO GLOBAL POLITICAL AND ECONOMIC RISKS
RISK DESCRIPTION
It is anticipated that approximately 75% on average of investments will be in
US companies or licensing agreements with US institutions, and 25% of
investments will be made outside of the US. The Group's investments will be
exposed to foreign exchange, and global political, economic, and regulatory
risks, including those associated with current conflicts in Ukraine,
Israel/Palestine, and the Middle East more broadly. The core portfolio
currently has approximately 64% exposure to the US and Canada, 21% to the UK
and Europe, and 15% to the rest of the world, including 3.7% to Israel and
none to other Middle Eastern countries, Ukraine or Russia. Israel exposure
derives from Urogen Pharma, which has R&D in Israel but is headquartered
and maintains its broader team in Princeton, New Jersey.
RISK CONTROL MEASURES
The Investment Manager has extensive experience transacting across the global
healthcare marketplace and will be responsible for identifying relevant events
and updating investment plans appropriately.
INCREASING
STRATEGIC LINK
Identify
Engage
Build
Support
7. CLINICAL DEVELOPMENT & REGULATORY RISKS
RISK DESCRIPTION
New drugs, medical devices and procedures are subject to extensive regulatory
scrutiny before approval, and approvals can be revoked.
RISK CONTROL MEASURES
The Investment Manager's due diligence process includes a rigorous process of
assessing preclinical and clinical assets and their probabilities of success,
utilising scientific, clinical, commercial and regulatory benchmarks.
Additionally, the Investment Manager's process includes assessing the likely
attitudes of regulators towards a potential new therapy. The due diligence
will also consider the unmet need of the disease and whether the therapy
offers advantages over the current standard of care.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
8. IMPOSITION OF PRICING CONTROLS FOR CLINICAL PRODUCTS AND SERVICES
RISK DESCRIPTION
Portfolio company products may be subject to price controls, price gouging
claims, and other pricing regulation in the US and other major markets.
Government healthcare systems may be major purchasers of the products.
RISK CONTROL MEASURES
While future political developments cannot be reliably forecast, the
Investment Manager's due diligence process includes an assessment of political
risk and the likely acceptability of the investee's pricing intentions.
STABLE
STRATEGIC LINK
Build
Support
9. INFLATION
RISK DESCRIPTION
Global inflation is generally trending downwards; however, it remains a
complex and somewhat volatile situation with differing regional experiences.
While headline inflation (which includes volatile food and energy prices) is
moderating, core inflation (which excludes them) is proving more stubborn in
some regions, particularly due to service sector inflation and wage growth.
Uncertainty about the inflation outlook and central bank actions is likely to
contribute to market volatility.
RISK CONTROL MEASURES
The creation of value through innovation in the biotechnology sector outweighs
the singular and/or short-term adjustment to valuation levels arising from
changes in discount rates as a result of rising inflation. The Investment
Manager holds investments that have current earnings and cash-flows and has
significant exposure to Phase 3 products which have a high probability of
achieving cash-flows in the near-term. Whilst interest rates have been reduced
in the US and UK in reaction to reductions in inflation, it is not possible to
say that this risk is reducing yet, as inflationary risks such as tariffs and
restrictions on global trade are beginning to emerge following the election of
a new administration in the US.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
Emerging Risks
10. AVAILABILITY OF CAPITAL
RISK DESCRIPTION
IPOs made incremental progress towards normalisation this year (17 in 2024 vs
12 last year). This is consistent with a slow transition from a bear market
(less than 10) to a healthy one (more than 30). Public follow-on financing
activity returned to near record levels as companies with good data were able
to raise the capital they needed.
RISK CONTROL MEASURES
The Investment Manager is experienced in identifying potential in companies
that have strong fundamentals at attractive valuations that create an
asymmetric and attractive risk/reward profile. The Board reviews the financing
status of the Group's private portfolio with the Investment Manager at least
twice each year. Approximately 10% of the Group's NAV is exposed to companies
that will need refinancing within the next 12 months. Most of these companies
have re-financing plans in place.
REDUCING
STRATEGIC LINK
Identify
Engage
Build
Support
11. SUSTAINABILITY REPORTING
RISK DESCRIPTION
Sustainability reporting standards are evolving rapidly and investors may
require more detailed sustainability disclosures to maintain or add new
positions in our shares.
RISK CONTROL MEASURES
The Board monitors sustainability reporting standards and is advised by the
Group's service providers, including an external sustainability consultant.
The Group has adopted a responsible investment policy also appointed a
Sustainability Committee to provide oversight and advice in relation to the
Company's responsible investment strategy.
STABLE
STRATEGIC LINK
Identify
Engage
Build
Support
Longer Term Viability Statement
Realising a robust and resilient company
ASSESSING THE PROSPECTS OF THE GROUP
The corporate planning process is underpinned by scenarios that encompass a
wide spectrum of potential outcomes. These scenarios are designed to explore
the resilience of the Group to the potential impact of significant risks set
out below.
The scenarios are designed to be severe but plausible and take full account of
the availability and likely effectiveness of the mitigating actions that could
be taken to avoid or reduce the impact or occurrence of the underlying risks
and which would realistically be open to management in the circumstances. In
considering the likely effectiveness of such actions, the conclusions of the
Board's regular monitoring and review of risk and the Investment Manager's
internal control systems, is taken into account.
The Board reviewed the impact of stress testing the quantifiable risks to the
Group's cash flows as detailed in risk factors 1-5 and concluded that the
Group, would have sufficient working capital to fund its operations in the
following extreme scenario:
(1) The Group incurred NAV losses of 39% of NAV over a three-year period
ending 28 February 2028.
(2) No new capital was raised.
(3) US$152 million of private investments were funded from cash and by selling
public portfolio investments over the three-year period ending 28 February
2028.
To provide some context for this scenario the worst-case annual losses for the
NASDAQ Biotech Index (NBI) in the last 10 years were 10.9% in 2022 and 21.4%
in 2016 respectively. The Group's three-year loss scenario exceeds the
cumulative impact of both of these worst-case years of 32.3% spread over three
years. The annualised volatility of the NBI Index for the last 10 years is
24.5% and the index has an annualised return of 3.7% for this period, so an
annual loss of 40% or more is only likely to occur every twenty years if the
index returns are normally distributed. Considering this context, a cumulative
loss of between 32.3% and 40% is therefore assumed to be a reasonable stress
test.
The Board considers that this stress testing-based assessment of the Group's
prospects is reasonable in the circumstances of the inherent uncertainty
involved.
THE PERIOD OVER WHICH WE CONFIRM LONGER TERM VIABILITY
Within the context of the corporate planning framework discussed above, the
Board has assessed the prospects of the Group over a three-year period ending
28 February 2028. Whilst the Board has no reason to believe the Group will not
be viable over a longer period, given the inherent uncertainty involved, the
period over which the Board considers it possible to form a reasonable
expectation as to the Group's longer-term viability, based on the stress
testing scenario planning discussed above, is the three-year period to March
2028. This period is used for the Investment Manager's business plans and has
been selected because it presents the Board and therefore readers of the
Annual Report with a reasonable degree of confidence whilst still providing an
appropriate longer-term outlook.
CONFIRMATION OF LONGER-TERM VIABILITY
The Board confirms that it has carried out a robust assessment of the emerging
and principal risks facing the Group, including those that would threaten its
business model, future performance, solvency or liquidity. Based upon the
robust assessment of the principal and emerging risks facing the Group and its
stress testing-based assessment of the Group's prospects, the Board confirms
that it has a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period to
February 2028.
On behalf of the Board
William Simpson
Chair
28 March 2025
Engaging with Stakeholders (Section 172)
Close collaborators and committed partners
The AIC Code requires that the matters set out in Section 172 of the Companies
Act 2006 are reported on by all companies, irrespective of domicile, provided
this does not conflict with local company law.
Section 172 recognises that directors are responsible for acting in a way
that they consider, in good faith, to be most likely to promote the success of
the Group for the benefit of all shareholders. In doing so, they are also
required to consider the broader implications of their decisions and the
Group's operations on key stakeholders, the wider community, and the
environment. Key decisions are those that are either material to the Group or
are significant to any of the Group's key stakeholders. The Group's engagement
with key stakeholders and the key decisions that were made or approved by the
Directors during the year are described below.
Stakeholder group Methods of engagement Benefits of engagement
Shareholders
Continued access to capital is vital to the Group's longer term growth The Group engages with its shareholders through the issuance of regular The Group enjoys a supportive shareholder base that understands the investment
objectives, and therefore, in line with its objectives, the Group seeks to portfolio updates and monthly NAV and factsheet releases in the form of RNS strategy as a result of our active programme of events and meetings.
maintain shareholder satisfaction through: announcements.
The Group has built a large pool of potential investors to support its future
- Positive risk-adjusted returns The Investment Manager hosts mid-year and year end webinars and Q&A growth.
sessions and in 2024 hosted its second Investor Day in London.
- Continuous communication of portfolio updates
- Regular access to Investment Manager commentary on portfolio
decisions and outlook The Group provides in-depth commentary on the investment portfolio, corporate
governance and corporate outlook in its Annual and Interim Reports and
financial statements.
The Board receives quarterly feedback from its brokers and distribution
partner in respect of investor engagement and investor sentiment.
In 2024 the Group's distribution and investor relations partner, Cadarn
Capital, was also engaged as its PR and Communications partner to improve the
flow of information to current and potential shareholders.
Service providers
The Group works closely with a number of service providers (the Investment The Group has identified its key service providers and on an annual basis Feedback given by service providers is used to review the Group's policies and
Manager, Administrator, Sub-Administrator, Corporate Secretary, auditor, third undertakes a review of performance based on a questionnaire through which it procedures, to ensure open lines of communication, and operational efficiency.
party valuation agents, corporate brokers, distribution partner, and other also seeks feedback.
professional advisers).
Performance reviews ensure the Board's confidence that the Group is being
Furthermore, the Board and its sub-committees engage regularly with service serviced and advised by high quality service providers.
The independence, quality and timeliness of their service provision is providers on a formal and informal basis.
critical to the success of the Group.
The Group regularly reviews all material contracts for service quality and
value.
Portfolio Companies
The Group is currently invested in 54 Core Portfolio Companies. The Investment Manager engages on a regular basis with its portfolio companies Honesty, fairness and integrity of the management teams of the portfolio
in order to conduct on-going due diligence and to meet obligations if the companies are vital to the long-term success of the Group's investments.
Investment Manager holds a board seat.
HM Government The Group funds assets developed in UK academic and private sector By supporting the local biotech ecosystem in the country where the Group is
laboratories, from conception to commercialisation. listed, UK government policy initiatives are supported and promoted.
Community & Environment
The Group does not have direct employees and does not anticipate any material
impact to its business model from climate change but aims to be a good
steward, in line with its socially-aligned investment objective. The Group and the Directors minimise air travel by making maximum use of video
conferencing for Company related matters.
RTW Charitable Foundation was created by the Investment Manager with the
vision to work towards a world free of ultra-rare disease. The foundation
funds research of rare conditions that do not attract significant outside
investment due to limited commercial opportunity.
Acting and investing responsibly provides the necessary foundation for the
long-term sustainability of investment success.
To research grant recipients, RTW Charitable Foundation offers financial
support and guidance gleaned from the Investment Manager's experience in drug
RTW Charitable Foundation represents an extension of the Investment Manager's development and company building. The Foundation also offers support to
mission. Its research process helps the Investment Manager identify important humanitarian causes, initiatives that raise disease awareness, and programs
causes of human suffering and introduces the firm to individuals and with direct local community impact, including days of action and youth
organisations trying to make a difference. mentorship.
Responsible Investment
The Group aims to achieve superior long-term capital appreciation, focusing on
forming, building, and supporting world-class life sciences,
biopharmaceutical, and medical technology companies. The Group's primary
consideration is to support companies that promote health and well-being by
bringing drugs and devices to market that are expected to save or extend life,
improve quality of life, or revolutionise the course of treatment for diseases
and conditions that afflict people. The Investment Manager's team of
scientists and researchers work tirelessly to evaluate the science behind
thousands of treatments and potential cures for diseases and conditions in
order to improve quality of life across the globe. As a guiding principle,
they prioritise overall positive impact on patients and long-term meaningful
outcomes to society and believe this is the foundation of the Group's success.
As a long-term investor, the Group (via the Investment Manager) seeks to meet
regularly with the management teams of portfolio companies. This approach
fosters long-term relationships with company management teams. This ongoing
dialogue enables open discussions on issues that could affect long-term
returns. The decision to engage with a portfolio company depends on both the
materiality of the issue and the size of the holding.
Pre-investment, the Group adopts a positive screening methodology. Potential
investments are screened to ensure alignment with investment objectives.
The Group's Board of Directors has established a Sustainability Committee
which meets with the Investment Manager bi-annually where they are briefed on
updates to process, policy, and portfolio engagement. The Sustainability
Committee provides oversight on behalf of and advice to the Board in relation
to the Company's Responsible Investment strategy and ensures that all
stakeholders receive appropriate related information. The Committee assists
the Board in overseeing the development of the Responsible Investment Policy
and reviews relevant matters to be presented in this annual report,
maintaining oversight of and making recommendations to the Board regarding
upcoming reporting requirements.
The Investment Manager espouses a strong culture of compliance, risk
management and ethical behaviour. It aims always to act in the best interests
of shareholders, employees and stakeholders. Its corporate code of ethics
addresses the largest areas of risk pertaining to the alternative asset
management industry, including but not limited to conflicts of interest,
anti-bribery, employee investing, insider trading and political contributions.
Furthermore, it seeks to ensure that investments do not lead to negative
impacts on public health or well-being or contribute to human or labour rights
violations, corruption, serious environmental harm or other actions which may
be perceived to be unethical. It seeks long-term investment partners that
evidence equivalent professional and ethical rigour.
Consolidated Statement of Assets and Liabilities
as at 31 December 2024 and 31 December 2023
(Expressed in United States Dollars)
2024 2023
ASSETS:
Investments in securities, at fair value (cost at 31 December 2024:
$529,516,651; 31 December 2023:
$244,056,637) 611,011,096 367,611,231
Derivative contracts, at fair value (cost at 31 December 2024: $60,427,785; 31
December 2023: $6,271,193)
110,177,172 15,463,820
Cash and cash equivalents 5,360,022 2,721,553
Due from brokers 27,990,478 57,887,214
Receivable from unsettled trades 4,237,674 -
Other assets 1,239,967 2,550,609
TOTAL ASSETS 760,016,409 446,234,427
LIABILITIES:
Securities sold short, at fair value (proceeds at
31 December 2024: $102,512,585; 31 December 2023: $1,399,242) 95,151,493 1,197,921
Derivative contracts, at fair value (proceeds at
31 December 2024: $nil; 31 December 2023: $nil) 7,799,422 8,390,327
Due to brokers 23,570,906 5,329,681
Accrued expenses 850,903 2,293,541
TOTAL LIABILITIES 127,372,724 17,211,470
TOTAL NET ASSETS 632,643,685 429,022,957
NET ASSETS attributable to Ordinary Shares (shares at 606,921,161 399,283,811
31 December 2024: 335,713,649; 31 December 2023: 210,635,347)
NET ASSETS attributable to Non-Controlling Interest 25,722,524 29,739,146
1.8079 1.8956
NAV per Ordinary Share
The audited consolidated financial statements of the Group were approved and
authorised for issue by the Board of Directors on 28 March 2025 and signed on
its behalf by:
William Simpson
Paul Le Page
Chair
Director
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December 2024
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value
Common stocks
United States
Healthcare
Madrigal Pharmaceuticals, Inc. 214,826 49,317,124 66,288,859 10.48
Akero Pharmaceuticals, Inc. 1,191,010 26,909,569 33,133,898 5.24
Rocket Pharmaceuticals, Inc. 2,400,755 8,188,796 30,177,490 4.77
Tarsus Pharmaceuticals, Inc. 401,308 8,874,464 22,220,424 3.51
Avidity Biosciences, Inc. 369,865 6,102,773 10,755,674 1.70
Others* 190,069,145 174,522,722 27.58
Total United States 289,461,871 337,099,067 53.28
Netherlands
Healthcare 12,693,165 16,077,163 2.55
Ireland
Healthcare 10,013,472 8,557,542 1.36
China
Healthcare
Corxel Pharmaceuticals Ltd. (formerly Ji Xing Pharmaceuticals Ltd.) 541,205 216,482 835,037 0.13
Canada
Healthcare 2,879,914 518,365 0.08
Denmark
Healthcare 301,757 305,536 0.05
Singapore
Healthcare 191,496 296,101 0.05
France
Healthcare 3,930,888 79,772 0.01
Cayman Islands
Healthcare 77,953 73,384 0.01
Japan
Healthcare 64,326 70,334 0.01
Switzerland
Healthcare 2,496 17,811 0.00
United Kingdom
Healthcare 4,992 17,413 0.00
Total common stocks 319,838,812 363,947,525 57.53
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2024
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value (continued)
Convertible preferred stocks
United States
Healthcare* 81,802,284 89,628,561 14.17
China
Healthcare
Corxel Pharmaceuticals Ltd. (formerly Ji Xing Pharmaceuticals Ltd.) 14,177,776 25,664,114 34,445,874 5.44
Others* 4,110,584 3,952,898 0.63
Total China 29,774,698 38,398,772 6.07
United Kingdom
Healthcare* 16,347,749 34,368,669 5.44
Netherlands
Healthcare 1,166,079 1,165,404 0.18
Switzerland
Healthcare 90,748 763,629 0.12
Belgium
Healthcare 0 0 0.00
Total convertible preferred stocks 129,181,558 164,325,035 25.98
Convertible Notes
China
Healthcare
Corxel Pharmaceuticals Ltd. (formerly Ji Xing Pharmaceuticals Ltd.) 1,803,339 18,033,384 18,381,736 2.91
Canada
Healthcare 7,512,664 8,050,255 1.27
United States
Healthcare 8,679,051 6,312,757 1.00
Total convertible notes 34,225,099 32,744,748 5.18
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2024
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value (continued)
American depository receipts
United Kingdom
Healthcare 16,687,163 17,163,590 2.72
Netherlands
Healthcare 9,685,018 11,905,170 1.88
China
Healthcare 1,616,703 1,602,514 0.25
Cayman Islands
Healthcare 102,795 53,101 0.01
Total American depository receipts 28,091,679 30,724,375 4.86
Investment in private investment companies
Cayman Islands
Healthcare 10,348,706 12,571,857 1.99
Ireland
Healthcare 3,221,986 4,602,256 0.73
United Kingdom
Healthcare 4,444,220 1,920,687 0.30
Total investment in private investment companies 18,014,912 19,094,800
3.02
Revenue based financing agreement
United States
Healthcare 160,732 174,613 0.01
Corporate bonds
Bermuda
Healthcare 3,859 0.00 0.00
Total investments in securities, at fair value 529,516,651 611,011,096 96.58
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2024
(Expressed in United States Dollars)
Descriptions Number of contracts Cost Fair Value Percentage of Net Assets
Derivative contracts - assets, at fair value
Warrants
United States
Healthcare
Avidity Biosciences, Inc. 2,208,114 36,431,673 64,209,747 10.15
Tarsus Pharmaceuticals, Inc. 150,000 4,799,985 8,305,485 1.31
Rocket Pharmaceuticals, Inc. 170,764 2,565,561 2,010,658 0.32
Others* 11,528,056 9,877,117 1.56
Total United States 55,325,275 84,403,007 13.34
Canada
Healthcare 3,121,272 2,283,707 0.36
British Virgin Islands
Healthcare 1,349,970 1,360,602 0.22
Total warrants 59,796,517 88,047,316 13.92
Equity swaps
United States
Healthcare
Tarsus Pharmaceuticals, Inc. 215,335 7,603,492 1.20
Others* 12,594,491 1.99
Total United States 20,197,983 3.19
British Virgin Islands
Healthcare 328,499 0.05
Total equity swaps 20,526,482 3.24
Contingent value rights
United States
Healthcare 466,420 1,023,626 0.17
Switzerland
Healthcare 164,848 579,748 0.09
Total contingent value rights 631,268 1,603,374 0.26
Total derivative contracts - assets, at fair value 60,427,785 110,177,172 17.42
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2024
(Expressed in United States Dollars)
Descriptions Proceeds Fair Value Percentage of Net Assets
Securities sold short, at fair value
Common stocks
United States
Healthcare* 100,739,418 93,400,032 14.76
British Virgin Islands
Healthcare 1,164,515 1,141,154 0.18
Singapore
Healthcare 200,738 296,101 0.05
Total common stocks 102,104,671 94,837,287 14.99
American depository receipts
United Kingdom
Healthcare 304,734 261,105 0.04
Cayman Islands
Healthcare 103,180 53,101 0.01
Total American depository receipts 407,914 314,206 0.05
Total securities sold short, at fair value 102,512,585 95,151,493 15.04
Descriptions Fair Value Percentage of Net Assets
Derivative contracts - liabilities, at fair value
Equity swaps
United States
Healthcare 7,799,422 1.23
Total derivative contracts - liabilities, at fair value 7,799,422 1.23
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December 2023
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value
Common stocks
United States
Healthcare
Rocket Pharmaceuticals, Inc. 2,400,755 8,188,796 71,950,627 16.77
Others* 87,817,542 121,224,790 28.26
Total United States 96,006,338 193,175,417 45.03
Netherlands
Healthcare 5,570,915 6,878,343 1.60
Ireland
Healthcare 6,090,973 3,974,203 0.93
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 541,205 216,482 798,382 0.19
Others* 402,213 677,342 0.16
Total China 618,695 1,475,724 0.35
Canada
Healthcare 2,953,012 646,323 0.15
British Virgin Islands
Healthcare 776,929 477,179 0.11
Cayman Islands
Financials 46,790 51,001 0.01
Total common stocks 112,063,652 206,678,190 48.18
Convertible preferred stocks
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 14,177,776 25,664,114 33,052,656 7.70
Others* 4,110,584 4,168,056 0.97
Total China 29,774,698 37,220,712 8.67
United States
Healthcare* 40,654,612 36,321,860 8.47
Ireland
Healthcare 1,093,042 1,854,238 0.43
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value (continued)
Convertible preferred stocks
Switzerland
Healthcare 1,729,518 1,723,249 0.40
United Kingdom
Healthcare 774,317 760,071 0.18
Total convertible preferred stocks 74,026,187 77,880,130 18.15
Investment in private investment companies
Cayman Islands
Healthcare
4010 Royalty Offshore FNT Fund, LP 23,892,852 25,982,258 6.06
Ireland
Healthcare 11,814,933 15,873,635 3.70
Total investment in private investment companies 35,707,785 41,855,893 9.76
American depository receipts
United Kingdom
Healthcare
Immunocore Holdings plc 462,249 11,872,691 31,580,852 7.36
Netherlands
Healthcare 1,331,626 1,434,221 0.33
Ireland
Healthcare 161,953 198,555 0.05
Total American depository receipts 13,366,270 33,213,628 7.74
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value (continued)
Convertible notes
Canada
Healthcare 7,512,664 7,566,259 1.76
United States
Healthcare 1,380,079 417,131 0.10
Total convertible notes 8,892,743 7,983,390 1.86
Total investments in securities, at fair value 244,056,637 367,611,231 85.69
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
Descriptions Number of Contracts Cost Fair Value Percentage of Net Assets
Derivative contracts - assets, at fair value
Equity swaps
United States
Healthcare 7,185,030 1.67
United Kingdom
Healthcare
Immunocore Holdings plc 12,498 280,979 0.07
British Virgin Islands
Healthcare 9,793 0.00
Total equity swaps 7,475,802 1.74
Warrants
United States
Healthcare
Rocket Pharmaceuticals, Inc. 170,764 2,565,561 4,800,495 1.12
Others* 1,242,926 1,764,580 0.41
Total United States 3,808,487 6,565,075 1.53
Canada
Healthcare 2,462,706 881,237 0.21
Total warrants 6,271,193 7,446,312 1.74
Contingent value rights
United States
Healthcare 541,706 0.13
Total contingent value rights 541,706 0.13
Total derivative contracts - assets, at fair value 6,271,193 15,463,820 3.61
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December 2023
(Expressed in United States Dollars)
Descriptions Proceeds Fair Value Percentage of Net Assets
Securities sold short, at fair value
Common stocks
United States
Healthcare 1,353,107 1,146,920 0.28
Cayman Islands
Financials 46,135 51,001 0.01
Total common stocks 1,399,242 1,197,921 0.29
Total securities sold short, at fair value 1,399,242 1,197,921 0.29
Descriptions Fair Value Percentage of Net Assets
Derivative contracts - liabilities, at fair value
Equity swaps
United States
Healthcare 8,390,327 1.96
Total United States 8,390,327 1.96
Total derivative contracts - liabilities, at fair value 8,390,327 1.96
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Operations
For the year ended 31 December 2024 and 31 December 2023
(Expressed in United States Dollars)
2024 2023
Investment income
Interest income
(net of withholding taxes of $nil; 31 December 2023: $nil)
6,347,583 2,419,117
Dividends (net of withholding taxes of $82,087;
31 December 2023: $2,537) 390,961 571,473
Other income 1,451,293 1,179,964
Total investment income 8,189,837 4,170,554
Expenses
Management fees 7,611,701 4,269,757
Interest expense 4,772,375 1,560,429
Professional fees 1,432,954 749,328
Research costs 849,452 474,511
Administrative fees 749,649 673,422
Audit fees 366,984 341,500
Directors' fees 262,477 177,011
Other expenses 887,540 687,805
Total expenses 16,933,132 8,933,763
Net investment income/(loss) (8,743,295) (4,763,209)
Realised and change in unrealised gain/(loss) on investments, derivatives and
foreign currency transactions
Net realised gain/(loss) on securities and foreign currency transactions
28,021,357 69,546,080
Net change in unrealised gain/(loss) on securities and foreign currency
translation
(34,485,235) 29,962,442
Net realised gain/(loss) on derivative contracts 8,239,477 (2,428,987)
Net change in unrealised gain/(loss) on derivative contracts
41,147,665 (9,123,947)
Net realised and unrealised gain/(loss) on investments, derivatives and 42,923,264 87,955,588
foreign currency transactions
Net increase/(decrease) in net assets resulting from operations 34,179,969 83,192,379
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
For the year ended 31 December 2024
(Expressed in United States Dollars)
Ordinary Non-Controlling Interest
Share Class
Net assets, beginning of year 399,283,811 29,739,146
Operations
Net investment income/(loss) (8,743,295) -
Net realised gain/(loss) on securities and foreign currency transactions 28,021,357 -
Net change in unrealised gain/(loss) on securities and foreign currency (34,485,235) -
translation
Net realised gain/(loss) on derivative contracts 8,239,477 -
Net change in unrealised gain/(loss) on derivative contracts 41,147,665 -
Income/(loss) attributable to Non-Controlling Interest 4,016,622 (4,016,622)
Net change in net assets resulting from operations 38,196,591 (4,016,622)
Capital transactions
Issuance of Ordinary Shares (net of issuance cost of $6,473,897) 180,781,065 -
Share buyback (Gross of $22,681 transaction costs; 31 December 2023: $4,178) (11,340,306) -
(Note 9)
Net change in net assets resulting from capital transactions 169,440,759 -
Net assets, end of year 606,921,161 25,722,524
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Changes in Net Assets
For the year ended 31 December 2023
(Expressed in United States Dollars)
Ordinary Non-Controlling Interest
Share Class
Net assets, beginning of year 326,079,521 21,844,468
Operations
Net investment income/(loss) (4,763,209) -
Net realised gain/(loss) on securities and foreign currency transactions 69,546,080 -
Net change in unrealised gain/(loss) on securities and foreign currency 29,962,442 -
translation
Net realised gain/(loss) on derivative contracts (2,428,987) -
Net change in unrealised gain/(loss) on derivative contracts (9,123,947) -
Income/(loss) attributable to Non-Controlling Interest (7,894,678) 7,894,678
Net change in net assets resulting from operations 75,297,701 7,894,678
Share buyback (Gross of $4,178 transaction costs) (Note 9) (2,093,411) -
Net assets, end of year 399,283,811 29,739,146
See accompanying notes to the consolidated financial statements.
Consolidated Statement of Cash Flows
For the year ended 31 December 2024 and 31 December 2023
(Expressed in United States Dollars)
2024 2023
Cash flows from operating activities
Net increase/(decrease) in net assets resulting from operations 34,179,969 83,192,379
Adjustments to reconcile net change in net assets resulting from operations to
net cash provided by/(used in) operating activities:
Net realised (gain)/loss on securities and foreign currency transactions (28,021,357) (69,546,080)
Net change in unrealised (gain)/loss on securities and foreign currency
translation
34,485,235 (29,962,442)
Net realised (gain)/loss on derivative contracts (8,239,477) 2,428,987
Net change in unrealised (gain)/loss on derivative contracts (41,147,665) 9,123,947
Effect of exchange rate changes on cash and cash equivalents 99,291 (80,371)
Purchases of investments in securities (530,568,570) (147,986,641)
Proceeds from sales of investments in securities 321,657,762 203,554,346
Proceeds from securities sold short 174,423,104 27,233,184
Payments for securities sold short (51,329,764) (11,938,063)
Proceeds from derivative contracts 31,242,577 15,512,690
Payments for derivative contracts (75,360,177) (21,598,211)
Accretion of bond discount (3,847) -
Changes in operating assets and liabilities:
Other assets 1,684,089 (2,204,859)
(Receivable from)/payable for unsettled trades (4,237,674) (5,121,762)
Due to brokers 18,241,225 (20,493,335)
Accrued expenses (1,442,638) 1,426,785
Net cash provided by/(used in) operating activities (124,337,917) 33,540,554
Cash flows from financing activities
Net proceeds from issuance of shares 108,419,956 -
Share buyback (11,340,306) (2,093,411)
Net cash provided by/(used in) financing activities 97,079,650 (2,093,411)
Net change in cash and cash equivalents (27,258,267) 31,447,143
Cash, cash equivalents, and restricted cash, beginning of the year 60,608,767 29,161,624
Cash, cash equivalents, and restricted cash, end of the year 33,350,500 60,608,767
At 31 December, the amounts categorised in cash, cash equivalents, and
restricted cash include the following:
Cash and cash equivalents 5,360,022 2,721,553
Due from brokers 27,990,478 57,887,214
Total 33,350,500 60,608,767
Supplemental disclosure of cash flow information
Cash paid during the year for interest 4,356,455 1,620,709
Cancellation of shares in RTW Biotech Opportunities Ltd received in Arix 59,221,117 -
acquisition
* In kind financing activities:
Non-cash assets received from Arix acquisition, comprised of:
Investments in securities 129,409,264 -
Derivative contracts 1,799,515 -
Other assets 373,447 -
Refer to notes 1 and 9 for further details regarding the Arix acquisition.
See accompanying notes to the consolidated financial statements.
Notes to the Consolidated Financial Statements
For the year ended 31 December 2024
(Expressed in United States Dollars)
1. Nature of operations and summary of significant accounting policies
RTW Biotech Opportunities Ltd (the "Company") is a publicly listed Guernsey
non-cellular company limited by shares. The Company was originally
incorporated in the State of Delaware, United States of America, and
re-domiciled into Guernsey under the Companies Law on 2 October 2019 with
registration number 66847 on the Guernsey Register of Companies. On 30 October
2019, all of the issued Ordinary Shares of the Company were listed and
admitted to trading on the Specialist Fund Segment of the London Stock
Exchange under the ticker symbol: RTW. Subsequently, on 6 August 2021, the
Company's Ordinary Shares were admitted to trading on the Premium Segment of
the London Stock Exchange (the former standard and premium listing segments of
the London Stock Exchange Main Market were consolidated into a single segment
on 29 July 2024) with the additional ticker symbol: RTWG denoting the Sterling
price. The RTWG ticker was consolidated into the USD line effective October
2024 and the Company ceased trading the GBP quote. The original ticker, RTW,
continues to denote the US Dollar price.
In 2022, the Company transferred its right to the profits and losses
attributable to the Group's portfolio of assets to its wholly owned
subsidiary, RTW Biotech Opportunities Operating Ltd (the "Subsidiary"). All
the income and expenses of the Subsidiary are consolidated with the income and
expenses of the Group.
On 13 February 2024, the Group completed the acquisition of the assets of Arix
Bioscience plc. To facilitate the acquisition, the Subsidiary formed RTW
Biotech UK Limited (the "UK Subsidiary") as a wholly owned subsidiary of the
Subsidiary to manage and integrate the Arix Bioscience plc acquired entities
and assets, based on the regulatory and operational landscape in the UK. The
transaction was announced on 1 November 2023 and was effected through a scheme
of reconstruction and the voluntary winding‐up of Arix under section 110 of
the Insolvency Act 1986. The details around this transaction are further
disclosed within the consolidated statement of cash flows and within Note 9.
The Group seeks to use equity capital (from the net proceeds of any share
issuance or, where appropriate, from the net proceeds of investment
divestments or other related profits) to provide seed and additional growth
capital to the private investments. To mitigate cash-drag, the uninvested
portion is invested across public stocks largely replicating the public stock
portfolios of RTW's existing US-based funds. The Group focuses on creating,
building, and supporting world-class life sciences, biopharmaceutical and
medical technology companies. The Group's investment objective is to generate
attractive risk-adjusted returns through investments in securities, both
equity and debt, long and short, of companies with a focus on the
pharmaceutical sector.
Pursuant to an investment management agreement, the Group is managed by RTW
Investments, LP, a Delaware limited partnership, to provide the Group with
discretionary portfolio management, risk management services and certain other
services. The Investment Manager is an investment adviser registered with the
U.S. Securities and Exchange Commission under the Investment Advisers Act of
1940.
Basis of presentation
The consolidated financial statements are expressed in United States Dollars.
The consolidated financial statements which give a true and fair view and have
been prepared in accordance with US generally accepted accounting principles
("US GAAP") and are in compliance with the Companies (Guernsey) Law, 2008. The
entities comprised within the Group are investment companies and follow the
accounting and reporting guidance in Financial Accounting Standards Board's
("FASB") Accounting Standards Codification Topic 946, Financial Services -
Investment Companies.
The Directors consider that it is appropriate to adopt a going concern basis
of accounting in preparing the consolidated financial statements. In reaching
this assessment, the Directors have considered a wide range of information
relating to present and future conditions including the balance sheets, future
projections, cash flows and the longer-term strategy of the business.
Principles of consolidation
The consolidated financial statements include accounts of the Company
consolidated with the accounts of the Subsidiary and the UK Subsidiary. All
inter-group balances have been eliminated upon consolidation. The Subsidiary
is incorporated in Guernsey and the UK Subsidiary is incorporated in the
United Kingdom
Non-Controlling Interest
An affiliate of the Investment Manager, RTW Venture Performance LLC, holds an
interest in the Subsidiary. The Non-Controlling Interest captures both
Performance Allocation and mark to market movements on the New Performance
Allocation Share held by RTW Venture Performance LLC in the Subsidiary. For
the year ended 31 December 2024, $1,259,780 of the total loss of $4,016,622
attributable to the Non-Controlling Interest was comprised of mark to market
movements of Notional Ordinary Shares (31 December 2023: $5,137,836), with
$2,756,842 of the loss related to a reversal of uncrystallized performance
allocation from Ordinary Shareholders to the Performance Allocation Share
Class (31 December 2023: allocation of $2,756,842).
Cash, cash equivalents, and restricted cash
Cash represents cash deposits held at financial institutions. Cash equivalents
include short-term highly liquid investments of sufficient credit quality that
are readily convertible to known amounts of cash and have original maturities
of three months or less. Cash equivalents are carried at cost plus accrued
interest, which approximates fair value. Cash equivalents are held for the
purpose of meeting short-term liquidity requirements, rather than for
investment purposes. As at 31 December 2024 and 31 December 2023, the Group
had no cash equivalents.
Restricted cash is subject to a legal or contractual restriction by third
parties as well as a restriction as to withdrawal or use, including
restrictions that require the funds to be used for a specified purpose and
restrictions that limit the purpose for which the funds can be used. The Group
considers cash pledged as collateral for securities sold short, cash
collateral posted with counterparties for derivative contracts and further
amounts due from brokers to be restricted cash, as outlined in Note 3.
Fair value - definition and hierarchy
Fair value is defined as the price that would be received to sell an asset or
paid to transfer a liability (i.e. the 'exit price') in an orderly transaction
between market participants at the measurement date.
In determining fair value, the Group uses various valuation techniques. A fair
value hierarchy for inputs is used in measuring fair value that maximizes the
use of observable inputs and minimizes the use of unobservable inputs by
requiring that the most observable inputs are to be used when available.
Observable inputs are those that market participants would use in pricing the
asset or liability based on market data obtained from sources independent of
the Group.
Unobservable inputs reflect the Group's assumptions about the inputs market
participants would use in pricing the asset or liability based on the best
information available in the circumstances. The fair value hierarchy is
categorised into three levels based on the inputs as follows:
Level 1 - Valuations based on unadjusted quoted prices in active markets for
identical assets or liabilities that the Group has the ability to access.
Valuation adjustments are not applied to Level 1 investments. Since valuations
are based on quoted prices that are readily and regularly available in an
active market, valuation of these investments does not entail a significant
degree of judgement.
Level 2 - Valuations based on inputs, other than quoted prices included in
Level 1, that are observable, either directly or indirectly.
Level 3 - Valuations based on inputs that are unobservable and significant to
the overall fair value measurement.
Investments in private investment companies measured using net asset value as
a practical expedient are not categorised in the fair value hierarchy.
The availability of valuation techniques and observable inputs can vary from
investment to investment and is affected by a wide variety of factors,
including the type of investment, whether the investment is new and not yet
established in the marketplace, and other characteristics particular to the
transaction. To the extent that valuation is based on models or inputs that
are less observable or unobservable in the market, the determination of fair
value requires more judgement. Those estimated values do not necessarily
represent the amounts that may be ultimately realised due to the occurrence of
future circumstances that cannot be reasonably determined. Because of the
inherent uncertainty of valuation, those estimated values may be materially
higher or lower than the values that would have been used had a ready market
for the investments existed. Accordingly, the degree of judgement exercised by
the Group in determining fair value is greatest for investments categorised in
Level 3. In certain cases, the inputs used to measure fair value may fall into
different levels of the fair value hierarchy. In such cases, for disclosure
purposes, the level in the fair value hierarchy within which the fair value
measurement falls in its entirety is determined based on the lowest level
input that is significant to the fair value measurement.
Fair value is a market-based measure considered from the perspective of a
market participant rather than an entity-specific measure. Therefore, even
when market assumptions are not readily available, the Group's own assumptions
are set to reflect those that market participants would use in pricing the
asset or liability at the measurement date. The Group uses prices and inputs
that are current as of the measurement date, including periods of market
dislocation. In periods of market dislocation, the observability of prices and
inputs may be reduced for many investments. This condition could cause an
investment to be reclassified to a lower level within the fair value
hierarchy.
Fair value - valuation techniques and inputs
Investments in securities and securities sold short
Listed investments
The Group values investments in securities including exchange traded funds and
securities sold short that are freely tradable and are listed on a national
securities exchange or reported on the NASDAQ national market at their closing
sales price as of the valuation date. To the extent these securities are
actively traded and valuation adjustments are not applied, they are
categorised in Level 1 of the fair value hierarchy. Securities traded on
inactive markets or valued by reference to similar instruments or where a
discount may be applied are categorised in Level 2 or 3 of the fair value
hierarchy.
Unlisted investments
Unlisted investments are valued at fair value by the Directors following a
detailed review and appropriate challenge of the valuations proposed by the
Investment Manager. As part of their valuation process, the Investment Manager
engages Independent Valuers to challenge their assessed fair value on certain
unlisted investments. The Investment Manager's unlisted investment valuation
policy applies techniques consistent with the IPEV Guidelines.
The valuation techniques applied are either a market-based approach, an income
approach such as discounted cash flows, or where available, a net asset value
practical expedient approach. A combination of the valuation techniques
mentioned may also be utilised. The IPEV Guidelines recognise that the price
of a recent transaction, if resulting from an orderly transaction, generally
represents fair value as at the transaction date and may be an appropriate
starting point for estimating fair value at subsequent measurement dates.
Consideration is given to the facts and circumstances as at the subsequent
measurement date including changes in the market and/or performance of the
investee company. Milestone analysis is used where appropriate to incorporate
operational progress at the investee company level. In addition, a trigger
event such as a subsequent round of financing by the investee company would
influence the market technique used to calibrate fair value at the measurement
date. Where appropriate, a probability-weighted expected return method
("PWERM") may be employed when different potential outcomes (e.g. IPO, round
of financing, stay private, dissolution, etc.) are utilised to derive the
value of investments held.
The market approach utilises guideline public companies relying on projected
revenues and/or earnings metrics to derive an indicative enterprise value. Due
to the nature of the investments, being in the early stages of development,
the projected revenues are typically used as a proxy for stable state revenue.
A selected multiple is then applied based on the observed market multiples of
the guideline public companies. To reflect the risk associated with the
achievement of the projected financial metrics and the early development stage
of each of the investments, the indicative enterprise value is discounted at
an appropriate rate.
The income approach utilises the discounted cash flow method. Projected cash
flows for each investment are discounted to determine the enterprise value.
Where applicable, the indicative enterprise value has been determined using a
back-solve model based on the pricing of the most recent round of financing.
The internal rate of return for each investment is compared to the selected
venture capital rate applied in the market approach to assess the
reasonableness of the indicated value implied by each financing round. The
derived enterprise value is allocated to the equity class on either a fully
diluted basis or using an option pricing model. The resulting indicative value
on a per share basis is then multiplied by the number of shares to derive the
fair market value.
American depository receipts
The Group values investments in American depositary receipts that are freely
tradable and are listed on a national securities exchange or reported on the
NASDAQ national market at their last reported sales price as of the valuation
date. These investments are categorised in Level 1 of the fair value
hierarchy.
Convertible notes
The Group values investments in convertible notes in accordance with the
unlisted investments section above. As of 31 December 2024, these investments
are all categorised in Level 3 of the fair value hierarchy.
Convertible preferred stock
The Group values Level 1 investments in convertible preferred stock that are
listed on a national securities exchange at their closing sales price as of
the valuation date. Level 2 investments in convertible preferred stock are
valued with certain adjustments to the underlying public stocks closing sales
price that is listed on a national securities exchange. Level 3 investments in
convertible preferred stock are valued in accordance with the unlisted
investments section above. As of 31 December 2024, these investments are
categorised in Level 3 of the fair value hierarchy.
Corporate bonds
The fair value of corporate bonds is estimated using recently executed
transactions, market price quotations (where observable), bond spreads, or
credit default swap spreads. The spread data used is for the same maturity as
the bond. If the spread data does not reference the issuer, then data that
references a comparable issuer is used. When observable price quotations are
not available, fair value is determined based on cash flow models using yield
curves, bond or single name credit default swap spreads, and recovery rates
based on collateral values as key inputs. As of 31 December 2024, these
investments are categorised in Level 2 of the fair value hierarchy.
Investment in private investment companies
The Group values investment in private investment companies using the net
asset values provided by the underlying private investment companies as a
practical expedient. The Group applies the practical expedient to its private
investment companies on an investment-by-investment basis and consistently
with the Group's entire position in a particular investment, unless it is
probable that the Group will sell a portion of an investment at an amount
different from the net asset value of the investment.
Private investment in public equity
Private investment in public equity ("PIPE") cannot be offered for sale to the
public until the issuer complies with certain statutory or contractual
requirements. Such securities traded on inactive markets or valued by
reference to similar instruments or where a discount may be applied are
generally categorised in Level 2. However, to the extent that significant
inputs used to determine liquidity discounts are unobservable, PIPE may be
categorized in Level 3 of the fair value hierarchy. As of 31 December 2024,
these investments are categorised in Level 1 of the fair value hierarchy.
Revenue-Based Financing Agreement
These represent structured, non-dilutive financing alternatives for businesses
seeking to raise capital in lieu typically of issuing equity. The Group may
enter into a contract with an undertaking that owns the revenue interest in
one or more healthcare products and such undertaking also typically plays the
principal role in commercialization, marketing and sales of such product or
products. This contract entitles the Group to receive a share of revenue from
a stream of cash flow payments based on the sales of such product or products.
The valuation is based on an income approach utilizing management's internal
projections or sell-side equity research analysts' consensus estimates in the
absence of adequate brokerage analyst coverage. The projections take into
account contractual terms specific to each revenue-based financing investment
and are present valued based on a discount rate based on the prime rate
adjusted for additional investment-specific risk that aligns to the debt-like
nature of the projected cash flows specific to the Group. As of 31 December
2024, these investments are categorised in Level 3 of the fair value
hierarchy.
Derivative contracts
Equity swaps
Equity swaps may be centrally cleared or traded on the over-the-counter
market. The fair value of equity swaps is calculated based on the terms of the
contract and current market data, such as changes in fair value of the
reference asset. The fair value of equity swaps is generally categorised in
Level 2 of the fair value hierarchy.
Warrants
Warrants that are listed on major securities exchanges are valued at their
last reported sales price as of the valuation date. The fair value of
over-the-counter ("OTC") warrants is determined using the Black-Scholes option
pricing model, a valuation technique that follows the income approach. This
pricing model takes into account the contract terms (including maturity) as
well as multiple inputs, including time value, implied volatility, equity
prices, interest rates and currency rates. Warrants are categorised in all
levels of the fair value hierarchy.
Contingent value rights
Contingent value rights that are not traded on an organized facility are
valued using a market approach or such other analysis and information as the
Group may determine. As of 31 December 2024, these investments are categorised
in Level 3 of the fair value hierarchy.
Fair value - valuation processes
The Group establishes valuation processes and procedures to ensure that the
valuation techniques are fair and consistent, and valuation inputs are
supportable. The Group designates the Investment Manager's Valuation Committee
to oversee the entire valuation process of the Group's investments. The
Valuation Committee comprises various members of the Investment Manager,
including those separate from the Group's portfolio management and trading
functions, and reports to the Board.
The Valuation Committee is responsible for developing the Group's written
valuation processes and procedures, conducting periodic reviews of the
valuation policies, and evaluating the overall fairness and consistent
application of the valuation policies.
The Investment Manager's Valuation Committee meets on a monthly basis or more
frequently, as needed, to determine the valuations of the Group's Level 3
investments. Valuations determined by the Valuation Committee are required to
be supported by market data, third-party pricing sources, industry-accepted
pricing models, counterparty prices or other methods they deem to be
appropriate, including the use of internal proprietary pricing models.
The Group periodically tests its valuations of Level 3 investments by
performing back-testing. Back-testing involves the comparison of sales
proceeds of those investments to the most recent fair values reported and, if
necessary, uses the findings to recalibrate its valuation procedures.
On a regular basis, the Group engages the services of third-party valuation
firms, the Independent Valuers, to perform an independent review of the
valuation of the Group's Level 3 investments and the Group may adjust its
valuations based on the recommendations from the Investment Manager's
Valuation Committee.
Translation of foreign currency
Assets and liabilities denominated in foreign currencies are translated into
United States Dollar amounts at the year end exchange rates. Transactions
denominated in foreign currencies, including purchases and sales of
investments, and income and expenses, are translated into United States Dollar
amounts on the transaction date. Adjustments arising from foreign currency
transactions are reflected in the consolidated statement of operations.
The Group does not isolate that portion of the results of operations arising
from the effect of changes in foreign exchange rates on investments from
fluctuations arising from changes in market prices of investments held. Such
fluctuations are included in net realised and change in unrealised gain/(loss)
on securities, derivatives and foreign currency transactions in the
consolidated statement of operations.
Reported net realised gain/(loss) from foreign currency transactions arise
from sales of foreign currencies; currency gains or losses realised between
the trade and settlement dates on securities transactions; and the difference
between the amounts of dividends, interest, and foreign withholding taxes
recorded on the Group's books and the United States Dollar equivalent of the
amounts actually received or paid.
Net change in unrealised gain/(loss) from foreign currency translation of
assets and liabilities arises from changes in the fair values of assets and
liabilities, other than investments in securities at the end of the period,
resulting from changes in exchange rates.
Investment transactions and related investment income
Investment transactions are accounted for on a trade date basis. Realised
gains and losses on investment transactions have been calculated on a specific
identification method.
Dividends are recorded on the ex-dividend date and interest is recognised on
the accrual basis.
Withholding taxes on foreign dividends have been provided for in accordance
with the Group's understanding of the applicable country's rules and rates.
Offsetting of amounts related to certain contracts
Amounts due from and to brokers are presented on a net basis, by counterparty,
to the extent the Group has the legal right to offset the recognised amounts
and intends to settle on a net basis.
The Group has elected not to offset fair value amounts recognised for cash
collateral receivables and payables against fair value amounts recognised for
derivative positions executed with the same counterparty under the same master
netting arrangement. At 31 December 2024, the Group had cash collateral
receivables of $23,390,565 (31 December 2023: $23,793,429) (see Note 3) with
derivative counterparties under the same master netting arrangement.
Income taxes
The Company and Subsidiary are exempt from taxation in Guernsey and were each
charged an annual exemption fee of GBP 1,600 (2023: GBP 1,200). The Group will
only be liable to tax in Guernsey in respect of income arising or accruing
from a Guernsey source, other than from a relevant bank deposit. It is not
anticipated that such Guernsey source taxable income will arise. The Group is
managed so as not to be resident in the UK for UK tax purposes.
The Group recognises tax benefits of uncertain tax positions only where the
position is more likely than not to be sustained assuming examination by a tax
authority based on the technical merits of the position. In evaluating whether
a tax position has met the recognition threshold, the Group must presume the
position will be examined by the appropriate taxing authority and that taxing
authority has full knowledge of all relevant information. A tax position
meeting the more likely than not recognition threshold is measured to
determine the amount of benefit to recognise in the Group's consolidated
financial statements. Income tax and related interest and penalties would be
recognised as a tax expense in the consolidated statement of operations if the
tax position was deemed to meet the more likely than not threshold.
The Investment Manager has analysed the Group's tax positions and has
concluded no liability for unrecognised tax benefits should be recorded
related to uncertain tax positions. Further, management is not aware of any
tax positions for which it is reasonably possible the total amounts of
unrecognised tax benefits will significantly change in the next twelve months.
The Company, UK Subsidiary and the Subsidiary each file income tax returns in
the US federal jurisdiction and, as applicable, in US state or local
jurisdictions, or non-US jurisdictions. Generally, the Group was subject to
income tax examinations by major taxing authorities for each tax period since
inception. Based on its analysis, the Group determined that it had not
incurred any liability for unrecognised tax benefits as of 31 December 2024 or
31 December 2023.
Use of estimates
Preparing consolidated financial statements in accordance with US GAAP
requires management to make estimates and assumptions in determining the
reported amounts of assets and liabilities, including the fair value of
investments, and disclosure of contingent assets and liabilities as of the
date of the consolidated financial statements and the reported amounts of
income and expenses during the reporting period. Actual results could differ
from those estimates.
2. Fair value measurements
The Group's assets and liabilities recorded at fair value have been
categorised based upon a fair value hierarchy as described in the Group's
significant accounting policies in Note 1.
The following table presents information about the Group's assets and
liabilities measured at fair value as of 31 December 2024:
Level 1 Level 2 Level 3 Investments measured at net asset value* Total
Assets (at fair value)
Investments in securities
Common stocks 362,223,884 266,171 1,457,470 - 363,947,525
Convertible preferred stocks - - 164,325,035 - 164,325,035
Convertible notes - - 32,744,748 - 32,744,748
American depository receipts 30,724,375 - - - 30,724,375
Investment in private
investment companies - - - 19,094,800 19,094,800
Revenue based financing
agreement - - 174,613 - 174,613
Corporate bonds - - - - -
Total investments in securities 392,948,259 266,171 198,701,866 19,094,800
611,011,096
Derivative contracts
Warrants 367 87,127,278 919,671 - 88,047,316
Equity swaps - 20,526,482 - - 20,526,482
Contingent value rights - - 1,603,374 - 1,603,374
Total derivative contracts 367 107,653,760 2,523,045 - 110,177,172
392,948,626 107,919,931 201,224,911 19,094,800 721,188,268
Liabilities (at fair value)
Securities sold short
Common stocks 94,837,287 - - - 94,837,287
American depository receipts 314,206 - - - 314,206
Total securities sold short 95,151,493 - - - 95,151,493
Derivative contracts
Equity swaps - 7,799,422 - - 7,799,422
Total derivative contracts - 7,799,422 - - 7,799,422
95,151,493 7,799,422 - - 102,950,915
* The Group's investment in private investment companies that are valued at
their net asset value are not categorised within the fair value hierarchy.
The following table presents information about the Group's assets and
liabilities measured at fair value as of 31 December 2023:
Level 1 Level 2 Level 3 Investments measured at net asset value* Total
Assets (at fair value)
Investments in securities
Common stocks 204,773,131 1,000,720 904,339 - 206,678,190
Convertible preferred stocks 1,854,238 2,836,628 73,189,264 - 77,880,130
Investment in private - 41,855,893 41,855,893
investment companies - -
American depository receipts 33,213,628 - - - 33,213,628
Convertible notes - - 7,983,390 - 7,983,390
Total investments in securities 239,840,997 3,837,348 82,076,993 41,855,893
367,611,231
Derivative contracts
Equity swaps - 7,475,802 - - 7,475,802
Warrants 5,247 6,743,593 697,472 - 7,446,312
Contingent value rights - - 541,706 - 541,706
Total derivative contracts 5,247 14,219,395 1,239,178 - 15,463,820
239,846,244 18,056,743 83,316,171 41,855,893 383,075,051
Liabilities (at fair value)
Securities sold short
Common stocks 1,146,920 51,001 - - 1,197,921
Total securities sold short 1,146,920 51,001 - - 1,197,921
Derivative contracts
Equity swaps - 8,390,327 - - 8,390,327
Total derivative contracts - 8,390,327 - - 8,390,327
1,146,920 8,441,328 - - 9,588,248
* The Group's investment in private investment companies that are valued at
their net asset value are not categorised within the fair value hierarchy.
The following tables summarise the valuation techniques and significant
unobservable inputs used for the Group's investments that are categorised
within Level 3 of the fair value hierarchy as of 31 December 2024 and 31
December 2023:
Fair value at 31 December 2024 Valuation techniques Significant unobservable inputs Range of inputs
Assets (at fair value)
Investments in securities
Convertible preferred stocks 56,837,402 Recent transaction price n/a n/a
37,870,153 Discounted cash flow WACC 10% - 31%
and/or market approach Revenue multiples 2.0x - 4.0x
Market rate of returns (13%) - 15%
69,559,998 Probability-weighted expected return method ("PWERM") WACC 10% - 20%
Revenue multiples 4.0x
Market step-up multiple 0.8x - 2.1x
Market rate of returns (5%) - 5%
57,482 Liquidation value n/a n/a
Convertible notes 32,156,487 PWERM Discount rate 6% -12%
Market step-up multiple 0.9x - 1.2x
Market rate of returns (5%) - 5%
Expected volatility 60%
588,261 Recent transaction price n/a n/a
Common stocks 246,828 Recent transaction price n/a n/a
375,605 Liquidation value n/a n/a
835,037 Probability-weighted expected return method ("PWERM") Market step-up multiple Market Rate of Returns 0.9x - 1.2x
5% - 5%
Revenue interest financing 174,613 Discounted cash flow WACC 28% - 28%
and/or market approach
Total investments in securities 198,701,866
Derivative contracts
Contingent value rights 1,603,374 Recent transaction price n/a n/a
Warrants 919,671 Discounted cash flow Expected volatility 40%
and/or market approach
and option pricing model
Total derivative contracts 2,523,045
Fair value at 31 December 2023 Valuation techniques Significant unobservable inputs Range of inputs
Assets (at fair value)
Investments in securities
Convertible preferred stocks 44,732,084 Recent transaction price n/a n/a
19,614,346 Discounted cash flow WACC 13% - 30%
and/or market approach Revenue multiples 2.8x - 4.0x
Market rate of returns (18%) - 10%
8,727,481 Probability-weighted expected return method ("PWERM") WACC 12% - 20%
Revenue multiples 4.0x
Market step-up multiple 0.7x - 1.8x
Market rate of returns (23)% - 10%
Recovery rate 50%
115,353 Liquidation value n/a n/a
Convertible notes 7,566,258 PWERM Discount rate 5% -7%
Expected volatility 60%
352,904 Discounted cash flow WACC 26%
and/or market approach Revenue multiples 4.0x
Market rate of returns (3%)
64,228 Recent transaction price n/a n/a
Common stocks 798,531 Recent transaction price n/a n/a
105,808 Market approach Revenue multiples 0.5x -0.6x
Total investments in securities 82,076,993
Derivative contracts
Warrants 697,472 Recent transaction price Expected volatility 38% - 43%
and option pricing model
Contingent value rights 541,706 Recent transaction price n/a n/a
Total derivative contracts 1,239,178
The significant unobservable inputs used in the fair value measurements of
Level 3 common stock, convertible preferred stocks, convertible notes, and
warrants include, but are not limited to, WACC, revenue and/or earnings
multiple, market rate of return, and expected volatility. Increases in the
WACC in isolation would result in a lower fair value for the security, and
vice versa. Increases in multiples and/or market rate of returns in isolation
would result in a higher fair value of the security, and vice versa. A change
in volatility in isolation could result in a higher or lower fair value for
the security.
The below table presents additional information about Level 3 assets and
liabilities measured at fair value. Both observable and unobservable inputs
may be used to determine the fair value of positions that the Group has
classified within the Level 3 category. As a result, the unrealised gains and
losses for assets and liabilities within the Level 3 category may include
changes in fair value that were attributable to both observable and
unobservable inputs.
Changes in Level 3 assets and liabilities measured at fair value for the year
ended 31 December 2024 were as follows:
Balance beginning 1 January 2024 Realised gains/ (losses)((a)) Change in Unrealised gains/ (losses)((a)) Purchases Sales Transfers into/(from) Level 3((b)) Ending balance 31 December 2024
Assets (at fair value)
Investments in securities
Common stocks 904,339 3,423,828 (8,477,436) 9,030,018 (4,897,750) 1,474,471 1,457,470
Convertible preferred stocks
73,189,264 - 32,032,300 67,196,769 - (8,093,298) 164,325,035
Convertible notes 7,983,390 83,537 (570,999) 27,016,689 (1,768,682) 813 32,744,748
Revenue based financing agreement
- - 13,882 160,731 - - 174,613
Total investments in securities 82,076,993 3,507,365 22,997,747 103,404,207 (6,666,432) (6,618,014) 198,701,866
Derivative contracts
Warrants 697,472 - 221,386 - - 813 919,671
Contingent value rights
541,706 812,225 430,401 466,419 (812,225) 164,848 1,603,374
Total derivative contracts 1,239,178 812,225 651,787 466,419 (812,225) 165,661 2,523,045
Changes in Level 3 assets and liabilities measured at fair value for the year
ended 31 December 2023 were as follows:
Balance beginning 1 January 2023 Realised gains/ (losses)((a)) Change in Unrealised gains/ (losses)((a)) Purchases Sales Transfers into/(from) Level 3((c)) Ending balance 31 December 2023
Assets (at fair value)
Investments in securities
Common stocks 3,364,557 - (304,109) - - (2,156,109) 904,339
Convertible preferred stocks 57,932,949 - -
6,114,014 7,595,169 1,547,132 73,189,264
Convertible notes 10,052,833 - (1,329,981) 11,536,901 - (12,276,363) 7,983,390
Total investments in securities 71,350,339 - 4,479,924 19,132,070 - (12,885,340) 82,076,993
Derivative contracts
Warrants 476,911 - 21,813 321,257 - (122,509) 697,472
Contingent value rights - -
541,706 - - - 541,706
Total derivative contracts 476,911 - 563,519 321,257 - (122,509) 1,239,178
( )
((a)) Realised and unrealised gains and losses are included in net realised
and change in unrealised gain/(loss) on investments, derivatives and foreign
currency transactions in the consolidated statement of operations.
((b)) Conversions of preferred stock into common stock.
((c)) Includes conversion of convertible bonds into convertible preferred
stock and convertible notes.
Changes in Level 3 unrealised gains and losses during the year for assets
still held at year end were as follows:
2024 2023
Common stocks (8,477,436) 116,949
Convertible notes (570,999) (919,115)
Convertible preferred stocks 32,081,173 6,199,338
Revenue Based Financing Agreement 13,882 -
Contingent value rights 430,401 541,706
Warrants 221,386 21,813
Change in unrealised gains and losses during the year for assets still held at 23,698,407 5,960,691
year end
Total realised gains and losses and unrealised gains and losses in the Group's
investment in securities, derivative contracts and securities sold short are
made up of the following gain and loss elements:
2024 2023
Realised gains 96,931,839 127,739,248
Realised losses (60,671,005) (60,622,155)
Net realised gain on securities, derivative contracts and securities sold 36,260,834 67,117,093
short
2024 2023
Change in unrealised gains 190,826,387 132,672,225
Change in unrealised losses (184,163,957) (111,833,730)
Net change in unrealised gain/(loss) on securities, derivative contracts and 6,662,430 20,838,495
securities sold short
As at 31 December 2024, the Group had commitments (subject to completion of
certain parameters) to certain investments totalling $22,390,694 (31 December
2023: $59,732,160), which was mainly comprised of a $14,651,294 commitment to
the 4010 Royalty Fund.
3. Due to/from brokers
Due to/from brokers includes cash balances held with brokers and collateral on
derivative transactions. Amounts due from brokers may be restricted to the
extent that they serve as deposits for securities sold short or cash posted as
collateral for derivative contracts.
As at 31 December 2024, due from brokers totalled $27,990,478 (31 December
2023: $57,887,214). Included within due from brokers is $4,599,913 (31
December 2023: $34,093,785) which can be used for investment. The Group
pledged cash collateral to counterparties to over-the-counter derivative
contracts of $23,390,565 (31 December 2023: $23,793,429) which is included in
due from brokers.
In the normal course of business, substantially all of the Group's securities
transactions, money balances, and security positions are transacted with the
Group's prime brokers and counterparties, Goldman Sachs & Co. LLC, Cowen
Financial Products, LLC, UBS AG, Bank of America Merrill Lynch, Morgan Stanley
& Co. LLC, Jefferies & Co. and J.P. Morgan Securities, LLC. The Group
is subject to credit risk to the extent any broker with which it conducts
business is unable to fulfil contractual obligations on its behalf. The
Group's management monitors the financial condition of such brokers and does
not anticipate any losses from these counterparties.
4. Derivative contracts
In the normal course of business, the Group utilises derivative contracts in
connection with its proprietary trading activities. Investments in derivative
contracts are subject to additional risks that can result in a loss of all or
part of an investment. The Group's derivative activities and exposure to
derivative contracts are classified by the primary underlying risk, equity
price risk and foreign currency exchange rate risk. In addition to its primary
underlying risk, the Group is also subject to additional counterparty risk due
to the inability of its counterparties to meet the terms of their contracts.
Warrants
The Group may receive warrants from its portfolio companies upon an investment
in the debt or equity of a portfolio company. The warrants provide the Group
with exposure and potential gains upon equity appreciation of the portfolio
company's share price.
The value of a warrant has two components: time value and intrinsic value. A
warrant has a limited life and expires on a certain date. As time to the
expiration date of a warrant approaches, the time value of a warrant will
decline. In addition, if the stock underlying the warrant declines in price,
the intrinsic value of an "in the money" warrant will decline. Further, if the
price of the stock underlying the warrant does not exceed the strike price of
the warrant on the expiration date, the warrant will expire worthless. As a
result, there is the potential for the Group to lose its entire investment in
a warrant.
The Group is exposed to counterparty risk from the potential failure of an
issuer of warrants to settle its exercised warrants. The maximum risk of loss
from counterparty risk to the Group is the fair value of the contracts and the
purchase price of the warrants. The Group considers the effects of
counterparty risk when determining the fair value of its investments in
warrants.
Equity swap contracts
The Group is subject to equity price risk in the normal course of pursuing its
investment objectives. The Group may enter into equity swap contracts either
to manage its exposure to the market or certain sectors of the market, or to
create exposure to certain equities to which it is otherwise not exposed.
Equity swap contracts involve the exchange by the Group and a counterparty of
their respective commitments to pay or receive a net amount based on the
change in the fair value of a particular security or index and a specified
notional amount.
Contingent value rights
The Group may receive contingent value rights during mergers, acquisitions, or
divestitures. Contingent value rights are designed to provide the Group with
additional compensation or benefits contingent upon the occurrence of specific
future events, such as regulatory approvals, milestones related to product
development or commercialization, or the achievement of certain financial
targets. Contingent value rights are subject to the uncertainty of payout, as
their value hinges on the occurrence of specific events. The Group considers
the uncertainty when determining the fair value of its investments in
contingent value rights.
Volume of derivative activities
The Group considers the average month-end notional amounts during the year,
categorised by primary underlying risk, to be representative of the volume of
its derivative activities during the year ended 31 December 2024:
2024 2023
Long exposure Short exposure Long exposure Short exposure
Primary underlying risk Notional amounts Notional amounts Notional amounts Notional amounts
Equity price
Equity swaps 60,394,443 30,266,515 64,032,939 56,046,951
Warrants((a)) 92,282,619 - 3,963,562 -
Contingent value rights 2,070,315 - 541,706 -
154,747,377 30,266,515 68,538,207 56,046,951
((a)) Notional amounts presented for warrants are based on the fair value of
the underlying shares as if the warrants were exercised at each respective
month end date.
Impact of derivatives on the consolidated statement of assets and liabilities
and consolidated statement of operations
The following tables identify the fair value amounts of derivative instruments
included in the consolidated statement of assets and liabilities as derivative
contracts, categorised by primary underlying risk, at 31 December 2024 and 31
December 2023. The following table also identifies the gain and loss amounts
included in the consolidated statement of operations as net realised
gain/(loss) on derivative contracts and net change in unrealised gain/(loss)
on derivative contracts, categorised by primary underlying risk, for the year
ended 31 December 2024 and 31 December 2023.
2024
Primary underlying risk Derivative assets Derivative liabilities Realised gain/(loss) Change in unrealised gain/(loss)
Equity price
Warrants 88,047,316 - (19,829) 27,075,679
Equity swaps 20,526,482 7,799,422 7,447,081 13,641,585
Contingent value rights 1,603,374 - 812,225 430,401
110,177,172 7,799,422 8,239,477 41,147,665
2023
Primary underlying risk Derivative assets Derivative liabilities Realised gain/(loss) Change in unrealised gain/(loss)
Equity price
Equity swaps 7,475,802 8,390,327 (2,428,614) (11,074,111)
Warrants 7,446,312 - (373) 1,408,458
Contingent value rights 541,706 - - 541,706
15,463,820 8,390,327 (2,428,987) (9,123,947)
5. Securities lending agreements
The Group has entered into securities lending agreements with its prime
brokers. From time to time, the prime brokers lend securities on the Group's
behalf. As of 31 December 2024 and 31 December 2023, no securities were loaned
and no collateral was received.
6. Offsetting assets and liabilities
The Group is required to disclose the impact of offsetting assets and
liabilities represented in the consolidated statement of assets and
liabilities to enable users of the consolidated financial statements to
evaluate the effect or potential effect of netting arrangements on its
financial position for recognised assets and liabilities. These recognised
assets and liabilities are financial instruments and derivative instruments
that are either subject to an enforceable master netting arrangement or
similar agreement or meet the following right of setoff criteria: the amounts
owed by the Group to another party are determinable, the Group has the right
to offset the amounts owed with the amounts owed by the other party, the Group
intends to offset and the Group's right of setoff is enforceable by law.
As of 31 December 2024 and 31 December 2023, the Group held financial
instruments and derivative instruments that were eligible for offset in the
consolidated statement of assets and liabilities and are subject to a master
netting arrangement. The master netting arrangement allows the counterparty to
net applicable collateral held on behalf of the Group against applicable
liabilities or payment obligations of the Group to the counterparty. These
arrangements also allow the counterparty to net any of its applicable
liabilities or payment obligations they have to the Group against any
collateral sent to the Group.
As discussed in Note 1, the Group has elected not to offset assets and
liabilities in the consolidated statement of assets and liabilities. The
following table presents the potential effect of netting arrangements for
asset derivative contracts presented in the consolidated statement of assets
and liabilities:
Gross amounts of recognised assets Gross amounts offset in the consolidated statement of assets and liabilities Gross amounts of recognised assets 31 December 2024
Gross amounts not offset in the consolidated statement of
assets and liabilities
Description
Financial instruments((a)) Cash collateral received((b)) Net amount
Equity swaps
Cowen Financial Products, LLC - - 7,337,474
11,004,397 11,004,397 (3,666,923)
Morgan Stanley & Co. LLC 5,639,240 - 5,639,240 (2,056,637) - 3,582,603
Bank of America Merrill Lynch - - 3,411,296
3,411,345 3,411,345 (49)
Jefferies & Co. 471,500 - 471,500 (471,500) - -
20,526,482 - 20,526,482 (6,195,109) - 14,331,373
Gross amounts of recognised assets Gross amounts offset in the consolidated statement of assets and liabilities Gross amounts of recognised assets 31 December 2023
Gross amounts not offset in the consolidated statement of
assets and liabilities
Description
Financial instruments((a)) Cash collateral received((b)) Net amount
Equity swaps
Cowen Financial Products, LLC - 6,235,319 (286,396) - 5,948,923
6,235,319
Jefferies & Co. 1,058,293 - 1,058,293 (758,677) - 299,616
Morgan Stanley & Co. LLC 129,527 - 129,527 (129,527) - -
Bank of America Merrill Lynch 52,663 - 52,663 (52,663) - -
7,475,802 - 7,475,802 (1,227,263) - 6,248,539
((a)) Amounts related to master netting agreements (e.g. ISDA), determined by
the Group to be legally enforceable in the event of default and if certain
other criteria are met in accordance with applicable offsetting accounting
guidance but were not offset due to management's accounting policy election.
( )
((b)) Amounts related to master netting agreements and collateral agreements
determined by the Group to be legally enforceable in the event of default, but
certain other criteria are not met in accordance with applicable offsetting
accounting guidance. The collateral amounts may exceed the related net amounts
of financial assets and liabilities presented in the consolidated statement of
assets and liabilities. If this is the case, the total amount reported is
limited to the net amounts of financial assets and liabilities with that
counterparty.
The following tables present the potential effect of netting arrangements for
liability derivative contracts presented in the consolidated statement of
assets and liabilities as of 31 December 2024 and 31 December 2023:
Gross amounts of recognised liabilities Gross amounts offset in the consolidated statement of assets and liabilities Gross amounts of recognised liabilities 31 December 2024 Net amount
Gross amounts not offset in the consolidated statement of
assets and liabilities
Description
Financial instruments((a)) Cash collateral pledged((b))
Equity swaps
Cowen Financial Products, LLC - - -
3,666,923 3,666,923 (3,666,923)
Jefferies & Co. 2,069,804 - 2,069,804 (471,500) (1,598,304) -
Morgan Stanley & Co. LLC 2,056,637 - 2,056,637 (2,056,637) - -
J.P. Morgan Securities, LLC - - 6,009
6,009 6,009 -
Bank of America Merrill Lynch - - -
49 49 (49)
7,799,422 - 7,799,422 (6,195,109) (1,598,304) 6,009
Gross amounts of recognised liabilities Gross amounts offset in the consolidated statement of assets and liabilities Gross amounts of recognised liabilities 31 December 2023 Net amount
Gross amounts not offset in the consolidated statement of
assets and liabilities
Description
Financial instruments((a)) Cash collateral pledged((b))
Equity swaps
Bank of America Merrill Lynch 4,382,764 - 4,382,764 (52,663) (4,320,957) 9,144
Morgan Stanley & Co. LLC 2,962,490 - 2,962,490 (129,527) (2,832,963) -
Jefferies & Co. 758,677 - 758,677 (758,677) - -
Cowen Financial Products, LLC 286,396 - 286,396 (286,396) - -
8,390,327 - 8,390,327 (1,227,263) (7,153,920) 9,144
((a)) Amounts related to master netting agreements (e.g. ISDA), determined by
the Group to be legally enforceable in the event of default and if certain
other criteria are met in accordance with applicable offsetting accounting
guidance but were not offset due to management's accounting policy election.
((b)) Amounts related to master netting agreements and collateral agreements
determined by the Group to be legally enforceable in the event of default, but
certain other criteria are not met in accordance with applicable offsetting
accounting guidance. The collateral amounts may exceed the related net amounts
of financial assets and liabilities presented in the consolidated statement of
assets and liabilities. If this is the case, the total amount reported is
limited to the net amounts of financial assets and liabilities with that
counterparty.
7. Securities sold short
The Group is subject to certain inherent risks arising from its investing
activities of selling securities short. The ultimate cost to the Group to
acquire these securities may exceed the liability reflected in these
consolidated financial statements.
8. Risk factors
Some underlying investments may be deemed to be highly speculative investments
and are not intended as a complete investment program. The Company is designed
only for sophisticated persons who are able to bear the economic risk of the
loss of their entire investment in the Company and who have a limited need for
liquidity in their investment. The following risks are applicable to the
Company:
Market risk
Certain events particular to each market in which Portfolio Companies conduct
operations, as well as general economic and political conditions, may have a
significant negative impact on the operations and profitability of the Group's
investments and/or on the fair value of the Group's investments. Such events
are beyond the Group's control, and the likelihood they may occur and the
effect on the Group cannot be predicted. The Group intends to mitigate market
risk generally by investing in Medtech and Biotech Companies in various
geographies.
Portfolio Company products are subject to regulatory approvals and actions
with new drugs, medical devices and procedures being subject to extensive
regulatory scrutiny before approval, and approvals can be revoked.
The market value of the Group's holdings in public Portfolio Companies could
be affected by a number of factors, including, but not limited to: a change in
sentiment in the market regarding the public Portfolio Companies, the market's
appetite for specific asset classes; and the financial or operational
performance of the public Portfolio Companies.
The size of investments in public Portfolio Companies or involvement in
management may trigger restrictions on buying or selling securities. Laws and
regulations relating to takeovers and inside information may restrict the
ability of the Group to carry out transactions, or there may be delays or
disclosure requirements before transactions can be completed.
Equity prices and returns from investing in equity markets are sensitive to
various factors, including but not limited to: expectations of future
dividends and profits; economic growth; exchange rates; interest rates; and
inflation.
Biotech/healthcare companies
The Portfolio Companies are biotechnology and medical technology companies,
which are generally subject to greater governmental regulation than other
industries at both the state and federal levels. Changes in governmental
policies may have a material effect on the demand for or costs of certain
products and services.
Any failure by a Portfolio Company to develop new technologies or to
accurately evaluate the technical or commercial prospects of new technologies
could result in it failing to achieve a growth in value and this could have a
material adverse effect on the Group's financial condition.
Portfolio Companies may not successfully translate promising scientific theory
into a commercially viable business opportunity. Further, the Portfolio
Companies' therapies in development may fail clinical trials and therefore no
longer be viable.
Portfolio Company products are subject to intense competition and there are
many factors that will affect whether the new therapies released by the
Portfolio Companies gain market share against competitors and existing
therapies.
Portfolio Companies may be newer small and mid-size Medtech and Biotech
Companies. These companies may be more volatile and have less experience and
fewer resources than more established companies.
Concentration risk
The Group may not make an investment or a series of investments in a Portfolio
Company that result in the Group's aggregate investment in such Portfolio
Company exceeding 15 per cent. of the Group's gross assets, save for Rocket
for which the limit is 25 per cent. as stated in the Company's Prospectus.
Each of these investment restrictions will be calculated as at the time of
investment. As such, it is possible that the Group's portfolio may be
concentrated at any given point in time, potentially with more than 15 per
cent. of gross assets held in one Portfolio Company as Portfolio Companies
increase or decrease in value following such initial investment. The Group's
portfolio of investments may also lack diversification among Medtech and
Biotech Companies and related investments.
Concentration of credit risk
In the normal course of business, the Group maintains its cash balances in
financial institutions, which at times may exceed US federal, Guernsey or UK
insured limits, as applicable. The Group is subject to credit risk to the
extent any financial institution with which it conducts business is unable to
fulfil contractual obligations on its behalf. Management monitors the
financial condition of such financial institutions and does not anticipate any
losses from these counterparties.
Counterparty risk
The Group invests in equity swaps and takes the risk of non-performance by the
other party to the contract. This risk may include credit risk of the
counterparty, the risk of settlement default, and generally, the risk of the
inability of counterparties to perform with respect to transactions, whether
due to insolvency, bankruptcy or other causes.
In an effort to mitigate such risks, the Group will attempt to limit its
transactions to counterparties which are established, well capitalised and
creditworthy.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its financial
commitments as they fall due. The Group's unquoted investments may have
limited or no secondary market liquidity so the Investment Manager maintains a
sufficient balance of cash and market quoted securities which can be sold if
needed to meet its commitments.
The Group's investments in quoted securities may also be subject to sale
restrictions on listing and when the Investment Manager is subject to close
periods or privy to confidential information by virtue of their active
involvement in the management of portfolio companies.
Derivative transactions may not be liquid in all circumstances, such that in
volatile markets it may not be possible to close out a position without
incurring a loss. The illiquidity of the derivatives markets may be due to
various factors, including congestion, disorderly markets, limitations on
deliverable supplies, the participation of speculators, government regulation
and intervention, and technical and operational or system failures.
Foreign exchange risk
The Group will make investments in various jurisdictions in a number of
currencies and will be exposed to the risk of currency fluctuations that may
materially adversely affect, amongst other things, the value of the Portfolio
Company or the Group's investment in such Portfolio Company, or any
distributions received from the Portfolio Company. Under its investment
policy, the Group does not intend to enter into any securities or financially
engineered products designed to hedge portfolio exposure or mitigate portfolio
risk as a core part of its investment strategy.
9. Share capital
During the year ended 31 December 2024 the Company share activity was as
follows:
2024 2024 2023 2023
Number of Number of
Number of Number of Ordinary Shares Treasury Shares
Ordinary Shares Treasury Shares
As at 1 January 210,635,347 1,753,791 212,389,138 -
Share issuance 133,578,302 - - -
Share buyback (8,500,000) 8,500,000 (1,753,791) 1,753,791
As at 31 December 335,713,649 10,253,791 210,635,347 1,753,791
During the year ended 31 December 2024, the Company bought back 8,500,000 (31
December 2023: 1,753,791) Ordinary Shares at an average price of US$1.33 (31
December 2023: $1.19) for a total cost of US$11,340,306 (31 December 2023:
$2,093,411), including transaction costs of $22,681 (31 December 2023:
$4,178). At the date of approval of these consolidated financial statements,
10,253,791 repurchased Ordinary Shares were held as treasury shares (31
December 2023: 1,753,791).
During the year ended 31 December 2024, the Company issued 181,901,165
Ordinary Shares to facilitate the acquisition of Arix Bioscience plc in an
all-share transaction for $246,476,079 with associated issuance costs of
$6,473,897. Of the 181,901,165 Ordinary Shares, 48,322,863, with a value of
$59,221,117, were issued to the Group as existing shareholders of Arix
Bioscience plc, and were subsequently cancelled. The details around this
transaction are further disclosed within the consolidated statement of cash
flows and within Note 1.
Ordinary Shares carry the right to receive all income of the Company
attributable to the Ordinary Shares and to participate in any distribution of
such income made by the Company. Such income shall be divided pari passu among
the holders of Ordinary Shares in proportion to the number of Ordinary Shares
held by them.
Ordinary Shares shall carry the right to receive notice of and attend and vote
at any general meeting of the Company, and at any such meeting on a show of
hands, every holder of Ordinary Shares present in person (includes present by
attorney or by proxy or, in the case of a corporate member, by duly authorised
corporate representative) and entitled to vote shall have one vote, and on a
poll, subject to any special voting powers or restrictions, every holder of
Ordinary Shares present in person or by proxy shall be entitled to one vote
for each Ordinary Share, or fraction of an Ordinary Share, held.
On 1 December 2022, the Performance Allocation Share held by RTW Venture
Performance LLC was surrendered in exchange for a New Performance Allocation
Share issued by the Subsidiary. The New Performance Allocation Share issued by
the Subsidiary has identical terms to the original Performance Allocation
Share issued by the Company. From 1 December 2022, the Performance Allocation
Amount is now allocated at the Subsidiary level, and is presented in the
Group's financial statements as part of the Non-Controlling Interest. The sole
New Performance Allocation Share is held by RTW Venture Performance LLC. As at
31 December 2024, there were no Performance Allocation Shares of the Company
in issue (31 December 2023: nil) and one New Performance Allocation Share of
the Subsidiary in issue (31 December 2023: one).
New Performance Allocation Shares of the Subsidiary carry the right to
receive, and participate in, any dividends or other distributions of the
Subsidiary available for dividend or distribution. New Performance Allocation
Shares are not entitled to receive notice of, to attend or to vote at general
meetings of the Company or the Subsidiary.
For all share classes, subject to compliance with the solvency test set out in
the Companies Law, the Board may declare and pay such annual or interim
dividends and distributions as appear to be justified by the position of the
Group. The Board may, in relation to any dividend or distribution, direct that
the dividend or distribution shall be satisfied wholly or partly by the
distribution of assets, and in particular of paid-up shares or reserves of any
nature as approved by the Group.
10. Related party transactions
Management Fee
The Investment Manager receives a monthly management fee, in advance, as of
the beginning of each month in an amount equal to 0.104% (1.25% per annum) of
the net assets of the Group (the "Management Fee"). For purposes of
determining the Management Fee, private investments will be valued at the fair
value. The Management Fee will be prorated for any period that is less than a
full month. The Management Fees charged for the year ended 31 December 2024
amounted to $7,611,701 (year ended 31 December 2023: $4,269,757) of which $nil
(31 December 2023: $nil) was outstanding at the year end.
Performance Allocation
The Performance Allocation Share held by RTW Venture Performance LLC was
surrendered in exchange for a New Performance Allocation Share issued by the
Subsidiary. The New Performance Allocation Share issued by the Subsidiary has
identical terms to the original Performance Allocation Share issued by the
Company.
In respect of each Performance Allocation Period, the Performance Allocation
Amount shall be allocated at the Subsidiary level and disclosed on the Group's
financial statements within the Non-Controlling Interest, subject to the
satisfaction of a hurdle condition.
The Performance Allocation Amount relating to the Performance Allocation
Period, which is calculated solely at the Subsidiary, is an amount equal to:
((A-B) x C) x 20 per cent.
where:
A is the Adjusted Net Asset Value per Ordinary Share on the Calculation Date,
adjusted by:
adding back (i) the total net Distributions (if any) per Ordinary Share
(whether paid, or declared but not yet
paid) during the Performance Allocation Period; and (ii) any accrual
for the Performance Allocation for the
current Performance Allocation Period reflected in the Net Asset Value
per Ordinary Share; and deducting any
accretion in the Net Asset Value per Ordinary Share resulting from
either the issuance of Ordinary Shares at a
premium or the repurchase or redemption of Ordinary Shares at a
discount during the Performance Allocation
Period;
B is the Adjusted Net Asset Value per Ordinary Share at the start of the
Performance Allocation Period; and
C is the time weighted average number of Ordinary Shares in issue during the
Performance Allocation Period.
The Hurdle Amount represents an 8 per cent. annualised compounded rate of
return in respect of the Adjusted Net Asset Value per Ordinary Share from the
start of the initial Performance Allocation Period through the then current
Performance Allocation Period.
The Performance Allocation Share Class can elect to receive the Performance
Allocation Amount in Ordinary Shares, cash, or a mixture of the two, subject
to a minimum 50% as Ordinary Shares. The Performance Allocation Share Class
entered into a letter agreement dated 21 April 2020, pursuant to which the
Performance Allocation Share Class agreed to defer distributions of Ordinary
Shares that would otherwise be distributed to the Performance Allocation Share
Class no later than 30 business days after the publication of the Group's
audited annual consolidated financial statements. Under that letter agreement,
such Ordinary Shares shall be distributed to the Performance Allocation Share
Class at such time or times as determined by the Boards of Directors of the
Group.
The Group will increase or decrease the amount owed to the Performance
Allocation Share Class based on its investment exposure to the Group's
performance had such Performance Ordinary Shares been so issued. The
Performance Allocation Amount for the year ended 31 December 2024 includes the
residual, undistributed Performance Allocation Amounts from prior years that
were previously converted into a total of 14,228,208 Notional Ordinary Shares.
These Notional Ordinary Shares are subject to market risk alongside the
Ordinary Shares and incurred a mark to market loss of $1,259,780 in 2024 (31
December 2023: mark to market gain of $5,137,836), which is included in
Performance Allocation within the consolidated statement of changes in net
assets. There was a reversal of uncrystallized performance allocation from
Ordinary Shareholders to the Performance Allocation Share Class of $2,756,842
related to the Group's performance in the period (31 December 2023: allocation
of $2,756,842). The Performance Allocation Amount was not adjusted in relation
to the Ordinary Shares issued related to the Arix transaction (as set out
within Note 9).
Until the Group makes a distribution of Ordinary Shares to the Performance
Allocation Share Class, the Group will have an unsecured discretionary
obligation to make such distribution at such time or times as the Board of
Directors of the Group determines. RTW Venture Performance LLC has agreed to
the deferral of the distributions of the Subsidiary's Ordinary Shares in
connection with its own tax planning. The Group does not believe that the
deferral of such distributions to the Performance Allocation Share Class will
have any negative effects on holders of Ordinary Shares.
RTW Venture Performance LLC, an affiliate of the Investment Manager is a
member of the Performance Allocation Share Class and will therefore receive a
proportion of the Performance Allocation Amount. For the year ended 31
December 2024, the Board did not approve a cash distribution to the
Performance Allocation Share Class (year ended 31 December 2023: $nil). At the
year end the Performance Allocation Share Class of the Subsidiary is reflected
within the Non-Controlling Interest balance of $25,722,524 (31 December 2023:
$29,739,146).
The Investment Manager is also refunded any research costs incurred on behalf
of the Group.
On 6 July 2023, the Group signed a $25,000,000 commitment to 4010 Royalty
Fund, a private fund created and managed by RTW Investments, LP. The Group
subsequently funded $23,892,852 of this commitment on 20 July 2023, had
$13,544,146 of capital returned on 1 October 2024 and had a remaining
commitment of $14,651,294 at 31 December 2024 (31 December 2023: $1,107,148).
No management or performance fees are charged to the Group at the 4010 Royalty
Fund.
Director fees and interests
One of the Directors of the Group, Stephanie Sirota, is also a partner and the
Chief Business Officer of the Investment Manager.
As at 31 December 2024, the number of Ordinary Shares held by each Director
was as follows:
2024 2023
Number of Ordinary Shares Number of Ordinary Shares
William Simpson 200,000 200,000
Paul Le Page 128,000 128,000
William Scott 400,000 350,000
Nicola Blackwood - N/A
Stephanie Sirota 1,010,000 1,010,000
Roderick Wong is a major shareholder and a member of the Investment Manager.
Roderick Wong serves on the boards of the following investments: Rocket,
Corxel Pharmaceuticals (formerly Ji Xing Pharmaceuticals Ltd.), HSA2 Holdings,
LLC and Yarrow Biotechnology. As at 31 December 2024, he held 49,643,313
Ordinary Shares in the Group (14.79% of the Ordinary Shares in issue) (31
December 2023: 29,593,872, 14.10% of the Ordinary Shares in issue).
The total Directors' fees expense for the year amounted to $262,477 (31
December 2023: $177,011) of which $71,029 was outstanding at 31 December 2024
(31 December 2023: $50,369) and is included within accrued expenses.
All of the Directors of the Company are also directors of the Subsidiary. Each
has served since the Subsidiary's incorporation on 23 November 2022, except
Baroness Blackwood, who was appointed a director of the Subsidiary alongside
her appointment as director of the Company on 11 July 2024. Stephanie Sirota
is also a director of the UK Subsidiary.
Incubated Companies
The Group invests in RTW incubated companies. Incubated companies are those
portfolio companies that are formed and supported by RTW ("Incubated
Companies"). Incubated Companies generally are small, emerging companies that
are unseasoned, unprofitable and/or have no established operating history or
earnings. These companies may also lack technical, marketing, financial and
other resources or may be dependent upon the success of one product or service
or the effectiveness of RTW and its management team.
Employees of RTW and employees of certain RTW affiliates are expected to serve
as executives, officers, directors, members, consultants or employees of such
companies. These individuals are eligible for compensation in the Incubated
Companies in the form of founder shares or other forms of company securities.
Certain RTW employees who perform specific executive functions for such
Incubated Companies may also receive cash compensation directly or indirectly
from those companies. For the avoidance of doubt, these employees do not
receive such compensation from both RTW and the Incubated Company. These
employees receive 100% of their compensation from RTW and RTW charges back to
the Incubated Company for the applicable percentage of their time spent on
executive functions at the Incubated Company. Employees of RTW and employees
of certain RTW affiliates may also receive compensation in the form of stock
options or other securities from certain Incubated Companies in connection
with their delivery of specified products, research and consulting services.
RTW believes this is an effective way to align incentives and motivate
employees, while reducing the financial burden on the newly Incubated
Companies by minimizing the need to hire external employees.
11. Administrative services
Altum (Guernsey) Limited (previously named Elysium Fund Management Limited
("Altum")) serves as Administrator to the Group, providing administration,
corporate secretarial, corporate governance and compliance services. Morgan
Stanley Fund Services USA LLC ("MSFS") serves as the Group's
Sub-Administrator.
During the year ended 31 December 2024, Altum and MSFS charged administration
fees of $388,732 and $360,917 respectively (31 December 2023: Altum charged
$421,468 (including $212,000 (GBP165,000) in respect of one-off work and
compensation for work performed in prior years) and MSFS charged $251,954), of
which a prepayment of $5,693 and an accrual of $105,860 (31 December 2023:
Altum $18,465, MSFS $94,250) were outstanding at 31 December 2024, and were
included within accrued expenses.
12. Financial highlights
Financial highlights for the year ended 31 December 2024 and 31 December 2023
are as follows:
2024 2023
Per Ordinary Share operating performance
Net Asset Value, beginning of year $ 1.90 $ 1.54
Cost of issuance of Ordinary Shares (0.23) -
Share buybacks 0.03 -
Income from investments
Net investment income/(loss) (0.03) (0.02)
Net realised and unrealised gain/(loss) on securities, derivatives and foreign 0.42
currency transactions
0.13
Income/(loss) attributable to Non-Controlling Interest 0.01 (0.04)
Total from investment operations 0.11 0.36
Net Asset Value, end of year $1.81 $1.90
Total return
Total return before Performance Allocation (5.25) % 24.27 %
Performance Allocation (excluding mark to market) 0.62 % (0.80) %
Total return after Performance Allocation (4.63) % 23.47 %
Ratios to average net assets*
Expenses 2.78 % 2.58 %
Performance Allocation (including mark to market) (0.66) % 2.28 %
Expenses and Performance Allocation 2.12 % 4.86 %
Net investment income/(loss) (1.44) % (1.38) %
NAV total return for the year (4.63) % 23.47 %
* Ratios are not annualised.
Financial highlights are calculated for Ordinary Shares. An individual
shareholder's financial highlights may vary based on the timing of capital
share transactions. Net investment income/loss does not reflect the effects of
the Performance Allocation.
13. Subsequent events
From 31 December 2024 to the date of approval of these consolidated financial
statements, the Company bought back 950,000 Ordinary Shares at an average
price of $1.26 for a total cost of $1,199,347, including transaction costs of
$1,811. At the point of signing these consolidated financial statements, all
950,000 of the Ordinary Shares were held as treasury shares.
On 14 February 2025, William Simpson purchased an additional 40,000 Ordinary
Shares taking his total holding to 240,000 Ordinary Shares, representing 0.07%
of issued share capital. On 24 February 2025, Rod Wong further increased his
shareholding to 50,356,880, representing 15.04% of issued share capital.
These consolidated financial statements were approved by the Board of
Directors on 28 March 2025. Subsequent events have been evaluated through this
date.
General Company Information
Structure Closed-end Investment Fund
Domicile Guernsey
Listing London Stock Exchange
Launch date 30 October 2019
Dividend policy To be reinvested
Management fee 1.25%
Performance fee 20% with an 8.0% annualised and compounded- since-inception hurdle
ISIN GG00BKTRRM22
SEDOL BKTRRM2
Ticker RTW
LEI 549300Q7EXQQH6KF7Z84
Website www.rtwfunds.com/rtw-biotech-opportunities-ltd
Glossary (unaudited)
Defined Terms
"Adjusted Net Asset Value" the Net Asset Value adjusted by deducting the unrealised gains and unrealised
losses in respect of private Portfolio Companies;
"Administrator" refers to Altum (Guernsey) Limited (previously named Elysium Fund Management
Limited);
"Admission" means admission of the Ordinary Shares to trading on the Main Market of the
London Stock Exchange on 30 October 2019;
"AIC" the Association of Investment Companies;
"AIC Code" the AIC Code of Corporate Governance dated February 2019;
"AIFM" means Alternative Investment Fund Manager;
"AIFMD" the Alternative Investment Fund Managers Directive;
"Annual Report" the Annual Report and audited financial statements;
"Antibody" a large Y-shaped blood protein that can stick to the surface of a virus,
bacteria, or receptor on a cell;
"Antibody-Oligonucleotide Conjugates" or "AOC" molecules that combine structures of an antibody and an oligo;
"Arix" Arix Bioscience plc, the company whose assets the Company acquired in February
2024;
"ASCO" American Society of Clinical Oncology, also the name of the Society's annual
oncology conference;
"Autoimmune diseases" conditions, where the immune system mistakenly attacks a body tissue;
"Bispecifics" bispecific antibodies (BsAbs) have two distinct binding domains that can bind
to two antigens or two epitopes (an antigen part) of the same antigen
simultaneously;
"Calculation Date" 31 December or, if such date is not a business day, the previous business day;
"Cardiometabolic diseases" a group of common but often preventable conditions including heart attack,
stroke, diabetes, insulin resistance and non-alcoholic fatty liver disease;
"Cardiovascular disease" conditions affecting heart and vascular system;
"Clinical stage" or "clinical trial" a therapy in development goes through a number of clinical trials to ensure
its safety and efficacy. Trials in human subjects range from Phase 1 to Phase
3;
"Companies Law" the Companies (Guernsey) Law, 2008 (as amended);
"the Company" RTW Biotech Opportunities Ltd (or RTW Bio) is a company incorporated in
Guernsey as a closed-ended Investment Company;
"Core portfolio" includes private companies and public companies that were initially added to
the portfolio as private investments and any other position deemed by the
Investment Manager to be in the core portfolio;
"Corporate Brokers" Bank of America and Deutsche Numis;
"CRS" Common Reporting Standard;
"Danon Disease" a rare genetic heart condition in children, predominantly boys;
"Directors" or "Board" the directors of the Company and the Subsidiary as at the date of this
document and "Director" means any one of them;
"DTR" Disclosure Guidance and Transparency Rules of the UK's FCA;
"Fanconi Anaemia" a rare genetic blood condition in young children;
"FATCA" the Foreign Account Tax Compliance Act;
"FCA" the Financial Conduct Authority;
"FDA" the United States Food and Drug Administration;
"FRC" the Financial Reporting Council;
"FTC" the Federal Trade Commission;
"Gene therapy" a biotechnology that uses gene delivery systems to treat or prevent a disease;
"Genetic Medicine" an approach to treat or prevent a disease using gene therapy or RNA medicines;
"GFSC" the Guernsey Financial Services Commission;
"GFSC Code" the GFSC Finance Sector Code of Corporate Governance as amended in June 2021;
"GLP-1" drugs that mimic the action of naturally occurring hormone glucagon-like
peptide-1, which is produced in the intestines. Plays a crucial role in
regulating blood sugar levels by stimulating insulin release, slowing stomach
emptying and reducing appetite;
"Greater China" encompasses mainland China, Macau, Hong Kong and Taiwan;
"the Group" the Company and its subsidiaries, RTW Biotech Opportunities Operating Ltd RTW
Biotech UK Ltd;
"HCM" or "Hypertrophic cardiomyopathy" a cardiovascular disease characterised by an abnormally thick heart muscle;
"Investment Manager" RTW Investments, LP, also called RTW Investments;
"IPEV" the International Private Equity and Venture Capital Valuation
(IPEV) Guidelines set out recommendations, intended to represent current
best practice, on the valuation of Private Capital Investments;
"IPO" an initial public offering;
"IRA" Inflation Reduction Act of 2022;
"ISDA" International Swaps and Derivatives Association;
"LAD-I" Leukocyte adhesion deficiency, a rare genetic disorder of immunodeficiency in
young children;
"Listing Rules" the listing rules made under section 73A of the Financial Services and Markets
Act 2000 (as set out in the FCA Handbook), as amended;
"London Stock Exchange" London Stock Exchange plc;
"LSE" London Stock Exchange's main market for listed securities;
"MASH" metabolic dysfunction-associated steatohepatitis;
"Medtech" medical technology subsector of healthcare;
Merck & Co., Inc.;
"Merck"
"Multi-omics" a biological analysis approach in which the data sets are multiple "omes",
such as the genome, proteome, transcriptome, epigenome, metabolome, and
microbiome;
"Myotonic Dystrophy" a genetic condition that affects muscle function;
"Nasdaq Biotech" or "NBI" a stock market index made up of securities of NASDAQ-listed companies
classified according to the Industry Classification Benchmark as either the
Biotechnology or the Pharmaceutical industry;
"Net Asset Value" or "NAV" the value of the assets of the Group less its liabilities, calculated in
accordance with the valuation guidelines established by the Board;
"New Performance Allocation Shares" performance allocation shares of no-par value in the capital of the
Subsidiary;
"Notional Ordinary Shares" Performance Ordinary Shares, in which receipt of such shares has been
deferred;
"Official List" the official list of the UK Listing Authority;
"Oligonucleotides" or "Oligos" short DNA or RNA molecules that have a wide range of applications in genetic
testing and research;
"Omics" any of several areas of biological study defined by the investigation of the
entire complement of a specific type of biomolecule or the totality of a
molecular process within an organism.
In biology the word omics refers to the sum of constituents within
a cell. The omics sciences share the overarching aim of identifying,
describing, and quantifying the biomolecules and molecular processes that
contribute to the form and function of cells and tissues
(https://www.britannica.com/science/tissue) ;
"Oncology" a therapeutic area focused on diagnosis, prevention, and treatment of cancer;
"Ophthalmic conditions" conditions affecting the eye;
"Ordinary Shares" the Ordinary Shares of the Company;
"Other public portfolio" the portion of the portfolio mostly matching, on a pro-rata basis, the long
investments held in our private funds and designed to mitigate the drag of
setting aside cash for future deployment into core positions;
"Performance Allocation Shares" performance allocation shares of no-par value in the capital of the Company
(prior to the 1 December 2022 reorganisation), or performance allocation
shares of no-par value in the capital of the Subsidiary (with effect from the
1 December 2022 reorganisation);
"Performance Allocation Period" each period ending on a Calculation Date and beginning on the business day
immediately following the last Performance Allocation Period in respect of
which a Performance Allocation has been allocated;
"PIPE" private investment in a public equity;
"Portfolio Companies" private and public companies in the Group's portfolio;
"Premium Segment" Premium Segment of the Main Market of the London Stock Exchange, which was
consolidated into the Main Market and ceased to exist as of July 2024;
"Prospectus" the prospectus of the Company, most recently updated on 5 January 2024 and
available on the Company's website
(www.rtwfunds.com/rtw-biotech-opportunities-ltd);
"Pyruvate Kinase Deficiency" or "PKD" a rare genetic disorder affecting red blood cells;
"Radiopharmaceuticals" pharmaceutical consisting of a radioactive compound used in radiation therapy;
"Rare disease" a disease that affects a small percentage of the population;
"Registrar" MUFG Pension & Market Services (formerly Link Group);
"RFK Jr" Robert F. Kennedy, Junior;
"RNA medicines" a type of biotechnology that uses RNA to treat a disease;
"Russell 2000 Biotechnology Index" or "RGUSHSBT" a stock index of small cap biotechnology and pharmaceutical companies;
"Small molecule" a compound that can regulate a biologic activity;
"SPAC" Special Purpose Acquisition Company;
"Sub-Administrator" Morgan Stanley Fund Services USA LLC;
"the Subsidiary" or "OpCo" RTW Biotech Opportunities Operating Ltd;
"Type 1 Diabetes" or "TD1" a type of insulin resistance;
"Total shareholder return" a measure of shareholders' investment in a company with reference to movements
in share price and dividends paid over time;
refers to a domestic regime of laws regulating the management and marketing of
alternative investment funds and fund managers in the UK, which generally
"UK AIFMD" maintains the rules set out in the European Union's AIFMD as implemented at
the end of the transition period following Brexit;
"UK Code" the UK Corporate Governance Code 2018 published by the Financial Reporting
Council in July 2018;
"UK-Guernsey IGA" The UK-Guernsey Intergovernmental Agreement for the Automatic Exchange of
Information;
"the UK Subsidiary" RTW Biotech UK Ltd;
"US GAAP" United States Generally Accepted Accounting Principles;
"Valuation Committee" Valuation Committee of the Investment Manager;
"WACC" weighted average cost of capital;
Listing of portfolio company abbreviations used throughout this report
Shorthand Company Name Legal Company Name
89Bio 89Bio Inc.
Abdera Abdera Therapeutics, Inc.
Acelyrin Acelyrin, Inc.
Alcyone Alcyone Therapeutics, Inc.
Akero Akero Therapeutics
Aktis Aktis Oncology
Alesta Alesta Therapeutics
Allurion Allurion Technologies, Inc.
Amplyx Amplyx Pharmaceuticals
Ancora Ancora Heart, Inc.
Apogee Apogee Therapeutics, Inc.
Artios Artios Pharma, Inc.
Artiva Artiva Biotherapeutics, Inc.
Athira Athira Pharma, Inc.
Avidity Avidity Biosciences, Inc.
Basking Basking Biosciences, Inc.
BioAge Labs BioAge Labs, Inc.
Biomea Biomea Fusion, Inc.
C4 Therapeutics C4 Therapeutics, Inc.
Cargo Cargo Therapeutics, Inc.
CinCor CinCor Pharma, Inc.
City Therapeutics City Therapeutics, Inc.
Corxel Corxel Pharmaceuticals
Depixus Depixus SAS
Encoded Encoded Therapeutics, Inc.
Ensoma Ensoma, Inc.
Evommune Evommune, Inc.
Frequency Frequency Therapeutics, Inc.
GH Research GH Research PLC
Harpoon Harpoon Therapeutics
HSAC2 Health Sciences Acquisition Corporation 2
Immunocore Immunocore Limited
Iteos iTeos Therapeutics, Inc.
Jade Jade Biosciences
Ji Xing or JIXING Ji Xing Pharmaceuticals Limited
Kailera Kailera Therapeutics
Kyverna Kyverna Therapeutics, Inc.
Landos Landos Biopharma, Inc.
Lenz Lenz Therapeutics
Lycia Lycia Therapeutics, Inc.
Magnolia Magnolia Medical Technologies, Inc.
Mantle Mantle Therapeutics
Merus Merus N.V.
Milestone Milestone Pharmaceuticals, Inc.
Mineralys Mineralys Therapeutics, LLC
Mirador Mirado Therapeutics
Monte Rosa Monte Rosa Therapeutics, Inc.
Neurogastrx Neurogastrx, Inc.
Nikang Nikang Therapeutics, Inc.
Nuance Nuance Pharma
Numab Numab Therapeutics, Inc.
Obsidian Obsidian Therapeutics, Inc.
Orchestra Orchestra BioMed, Inc.
OriCell OriCell Therapeutics (Shanghai) Co., Ltd
Ottimo Ottimo Pharma
Prometheus Prometheus Biosciences, Inc.
Prometheus Labs Prometheus Laboratories, Inc.
Pulmonx Pulmonx Corporation
Pyxis Pyxis Oncology, Inc.
Rocket Rocket Pharmaceuticals, Inc.
RTW Royalty 1 RTW Royalty Holdings LLC (royalty deal for Mavacamten)
RTW Royalty 2 RTW Fund 2 (royalty deal for Jelmyto)
RTW Royalty Fund 4010 Royalty Fund, a private fund created and managed by RTW Investments,
LP.
InBrace or Swift Health Swift Health, Inc.
Santa Ana Santa Ana Bio, Inc.
Sorriso Sorriso Pharmaceuticals
Tarsus Tarsus, Pharmaceuticals, Inc.
Tenaya Tenaya Therapeutics, Inc.
Third Harmonic Third Harmonic Bio, Inc.
Tourmaline Tourmaline Bio, Inc.
Umoja Umoja Biopharma, Inc.
Ventyx Ventyx Biosciences, Inc.
Visus Visus Therapeutics, Inc.
Yarrow RTW Holdings LLC
Yellow Jersey Yellow Jersey Therapeutics
( )
( )
Alternative Performance Measures (unaudited)
( )
APM Definition Purpose Calculation
Available Cash Cash held by the Group's Bankers, Prime Broker and an ISDA counterparty. A measure of the Group's liquidity, working capital and investment level. Cash and cash equivalents, Due from brokers, Receivable from unsettled trades
and other miscellaneous current assets, less Due to brokers, Payable for
unsettled trades and other miscellaneous current liabilities on the Statement
of Assets & Liabilities.
NAV per Ordinary Share The Group's NAV divided by the number of Ordinary Shares. A measure of the value of one Ordinary Share. The net assets attributable to Ordinary Shares on the statement of financial
position divided by the number of Ordinary Shares in issue as at the
calculation date.
Price per share The Company's closing share price on the London Stock Exchange for a specified A measure of the supply and demand for the Company's shares. Extracted from the official list of the London Stock Exchange.
date.
NAV Growth The percentage increase or decrease in the NAV per Ordinary share during the A key measure of the success of the Investment Manager's investment strategy. The quotient of the NAV per share at the end of the period and the NAV per
reporting period. share at the beginning of the period minus one expressed as a percentage.
Share price growth/Total Shareholder Return The percentage increase or decrease in the price per share during the A measure of the return that could have been obtained by holding a share over The quotient of the price per share at the end of the period and the price per
reporting period. the reporting period. share at the beginning of the period minus one, expressed as a percentage. The
measure excludes transaction costs.
Share Price Premium/ (Discount) The amount by which the Ordinary Share price is higher/lower than the NAV per A key measure of supply and demand for the Company's shares. A premium implies The quotient of the price per share at the end of the period and the NAV per
Ordinary Share, expressed as a percentage of the NAV per ordinary share. excess demand versus supply and vice versa. share at the end of the period minus one, expressed as a percentage.
Multiple on Invested Capital (MOIC or MOC) The multiple that measures value that an investment has generated. A measure to evaluate performance of the realised and unrealised investments. The ratio between initial capital invested in a portfolio company and current
value of the investment. It is a gross metric and calculation is performed
before fees and incentive.
Extended Internal Rate of Return (XIRR) The percentage or single rate of return when applied to all transactions in a A measure of return which is used when multiple investments have been made The rate also expressed as a percentage that calculates the returns on the
portfolio company. over time into a portfolio company. total investment made with increments through a given period.
Ongoing Charges Ratio The recurring costs that the Group has incurred during the period excluding A measure of the minimum gross profit that the Group needs to produce to make Calculated in accordance with the AIC methodology detailed at the web link
performance fees and one-off legal and professional fees, expressed as a a positive return for shareholders. below:
percentage of the Group's average NAV for the period. https://www.theaic.co.uk/sites/default/files/documents/AICOngoingChargesCalculationMay12.pdf
(https://www.theaic.co.uk/sites/default/files/documents/AICOngoingChargesCalculationMay12.pdf)
Leverage As defined by the AIFMD, any method by which the AIFM increases the exposure A measure of the excess of the Group's investments exposure over its total net Calculated in accordance with the AIFMD's gross and commitment methodologies
of an AIF it manages, whether through borrowing of cash securities, or assets. as outlined in Articles 7 and 8 of the Delegated Regulation 231/2013:
leverage embedded in derivative positions or by any other means. https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32013R0231
(https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32013R0231)
Ongoing Charges 2024 2023
US$ US$
Fees to Investment Manager 7,611,701 4,269,757
Legal and professional fees 1,432,954 749,328
Research costs 849,452 474,511
Administration fees ( 1 ) 749,649 673,422
Audit fees 366,984 341,500
Directors' remuneration 262,477 177,011
Other expenses 887,540 687,805
Total expenses 12,160,757 7,373,334
Non-recurring expenses (955,871) (453,231)
Total ongoing expenses 11,204,886 6,920,103
Average NAV 638,541,373 369,419,055
Annualised ongoing charges (using AIC methodology) 1.75% 1.87%
( 1 ) The Administration fees in 2023 include US$212,000 (GBP 165,000) in respect of
one-off work and compensation for work performed in prior years (see note 11),
which is included in the non-recurring expenses.
-- ENDS --
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