REG - RTW Biotech Opp. - Half-year Report
13/09/2024 07:00
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RNS Number : 0307E RTW Biotech Opportunities Ltd 13 September 2024
LEI: 549300Q7EXQQH6KF7Z84
13 September 2024
RTW Biotech Opportunities Ltd
Interim Report for the period ended 30 June 2024
Achieving solid performance in challenging markets with clear catalysts on the
near horizon
RTW Biotech Opportunities Ltd (the "Group", "RTW Bio" or the "Company"), a
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 Interim Report for the period ended 30 June
2024.
Financial highlights
The Group continued to achieve a solid performance in challenging markets,
with the NAV returning +3.0% over the six-month period, demonstrating the
strength of the investment manager, the investment strategy and the portfolio.
Key highlights include:
RTW Biotech Opportunities Ltd Interim reporting period Previous Interim reporting period (01/01/2023-30/06/2023) Admission (30/10/2019)
(01/01/2024-30/06/2024) to 30/06/2024
Ordinary NAV US$655.4 million US$356.5 million US$655.4 million
NAV per Ordinary Share US$1.95 US$1.68 US$1.95
NAV movement per Ordinary Share +3.0% +9.3% +87.7%
Price per Ordinary Share US$1.55 US$1.25 US$1.55
Share price return (i) +10.1% +2.9% +48.6%
Benchmark returns (ii)
Russell 2000 Biotech +1.7% +5.3% +6.5%
Nasdaq Biotech +4.0% -3.2% +34.6%
Portfolio highlights:
· Portfolio Breakdown: As of 30 June 2024, 77.9% of NAV was invested
in core portfolio companies (H1 2023: 50.7%), whilst 22.1% was invested in
other public portfolio companies (H1 2023: 30.8%) and 0% was held in cash plus
assets and current liabilities (H1 2023: 18%).
· Two significant capital markets events: In the period to 30 June
2024, there were two capital markets events in the core portfolio: one IPO,
one reverse merger.
Core Portfolio:
· 14 new core portfolio companies added: As of 30 June 2024, 14 new
core portfolio companies have been added and no core public portfolio exited
in the period. New core portfolio companies include five new privates, five
positions acquired from Arix Bioscience and four that were previously
classified 'other public'.
· 78% of NAV invested in core portfolio companies: 78% of NAV has
been invested in core portfolio companies compared to 51% in the same period
last year. This relates to 50 core portfolio companies in total - 30 private,
two royalty and 18 public.
· Core company status: Nine out of 50 core companies have commercial
products. Eight out of 50 core companies are pre-clinical. And 30 out of 50
core companies have clinical programmes.
Core Public:
· NAV performance in the first half of 2024 driven by the core public
positions: Performance was driven by Avidity Biosciences, the Group's largest
portfolio holding. In the period, its share price was up +351% after it
reported great data from two of its programs.
· 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.
· New investment and strategic collaboration for Bayer and JIXING
announced: In January, Bayer AG and RTW Investments announced the US$162
million initial closing of a Series D financing in JIXING. Bayer and JIXING
concurrently announced a new strategic collaboration focused on cardiovascular
diseases and ophthalmology in China.
· Core public investments accounted for 47% of NAV across eighteen
positions: The slight increase in exposure reflects performance, the
graduation of Kyverna and Lenz to the public markets and the addition of
Akero, Urogen, 89Bio and Merus.
Core Private:
· The core private positions made a small contribution led by Numab:
Kyverna completed a successful IPO in February. The gross multiple on invested
capital (MOIC) on our initial investment in Kyverna in November 2021 to the
IPO was approximately 2.6x. Numab announced in May that Johnson & Johnson
will acquire its lead drug candidate for US$1.25bn. The Company's holding
value was increased by approximately 2.9x to reflect the deal, which is
expected to close in the second half.
· Core private investments accounted for 24% of NAV: 30 core private
investments accounted for 24% of NAV as of 30 June 2024. The increase in
exposure and number of investments in the reporting period reflects the
addition of five new private positions (Obsidian, Santa Ana, Mirador, Hercules
and BioAge) alongside five new private investments from Arix (Ensoma,
Evommune, Depixus, Sorriso and Amplyx), less Kyverna, which went public via an
IPO and Lenz, which went public via a reverse merger with Graphite Bio.
· 65 core private investments since admission: On 30 June 2024,
thirty of these positions had had liquidity events (i.e. go-public or
acquisition). The average holding period as private was twelve months and the
average MOIC to the liquidity event was 2.0x. Sixteen of these positions have
either concurrently or subsequently been exited in full at an average MOIC of
3.0x
Royalty and Other Public:
· The royalty positions and 'other public' positions both made small
positive contributions: Royalties accounted for 7% of NAV across two
investments: RTW's 4010 Royalty Fund and RTW Royalty 2, which is a royalty
deal based on the revenues of Urogen's Jelmyto and UGN‐102. The Company's
royalty investments are performing well and provide a differentiated income
stream that is uncorrelated to equity markets. Further, in the current yield
environment and with the capital available to biotech companies still
relatively constrained, the risk adjusted returns are very attractive and
highly complementary to the rest of the portfolio.
· 22% of the Group's NAV is invested in "other publicly" listed
companies, which is approximately the same level as the start of the reporting
period.
Post Period-End Highlights
· Artiva Biotherapeutics IPO: On 19th July 2024, Artiva
Biotherapeutics (0.13% of NAV as of 30 June), a clinical-stage biotechnology
company focused on developing natural killer (NK) cell-based therapies whose
mission is to develop effective, safe, and accessible cell therapies for
patients with devastating autoimmune diseases and cancers, had its initial
public offering (IPO), raising US$167 million. The company started trading on
the Nasdaq Global Market under the ticker symbol 'ARTV'.
Company highlights:
· Improved share price rating: The RTW share price discount to NAV
narrowed in the first half of the year, particularly after the closing of the
Arix transaction, as the increased scale and liquidity attracted new buyers on
top of the considerable shareholder efforts made last year.
· Share buyback programme: In the reporting period, the Company's
share buyback programme bought back 10,253,791 shares for a consideration of
US$13,434,904. to help manage any short-term changes in the shareholder base
around the deal.
· New Non-Executive Director appointed: The increased scale of the
Company following strong performance and the Arix transaction has also allowed
us to appoint a new Non-Executive Director, Baroness Nicola Blackwood, with
considerable life sciences experience.
· Investor Day 2024: After the success of last year's event, RTW will
host another Investor Day this year on Monday 18(th) November at the offices
of Deutsche Numis, 45 Gresham Street, London, EC2V 7BF. The event is for
professional investors only.
Roderick Wong, MD, Managing Partner and Chief Investment Officer of RTW
Investments LP, the 'Investment Manager' commented:
"We are very pleased to report the Group achieved positive performance for the
six months to 30 June 2024, with RTW's NAV up +3.0% compared with +1.7% for
the Russell 2000 Biotech Index and +4.0% for the Nasdaq Biotech Index.
"Performance since inception remained significantly ahead of both the Nasdaq
Biotech and Russell 2000 Biotech indices with RTW achieving a +87.7% NAV
performance since inception compared with +34.6% for the Nasdaq Biotech index
and +6.5% for the Russell 2000 Biotech index, over the same periods.
"In addition, the discount narrowed in the first six months of the year,
particularly after the closing of the Arix deal with the share price +10.1%
and the NAV +3.0%. With continued NAV outperformance versus the market and our
peers, and with the sector continuing its recovery, we expect the discount to
narrow further from here.
"This has been an intense period of activity for the group, with 14 new core
positions initiated, an IPO for Kyverna Therapeutics and a reverse merger
involving Lenz Therapeutics and Graphite Bio. We have also seen some very
encouraging scientific data from the Group's largest holding, Avidity
Biosciences and other core positions including Apogee Therapeutics and Tarsus
Pharmaceuticals. Elsewhere, the Group has participated in a number of
financings including JIXING which also saw the concurrent announcement of a
new strategic collaboration with Bayer.
"The market environment for the biotech sector is improving and the
opportunity set for stock picking is encouraging. The sector's recovery is
still early and changes in interest rate expectations are adding periods of
volatility, but good data and good products are being rewarded. The regulatory
environment appears relatively sanguine. Drug pricing reform is seemingly not
at the top of the political agenda heading into the US presidential election
in November. Medical science innovation is accelerating, and the FDA appears
willing to support it. Financing and M&A activities are improving overall,
and valuations are attractive. Lilly's US$3.2 billion acquisition of Morphic
just after the end of the reporting period could be a harbinger of things to
come.
"As we look out to the second half of 2024, we are excited by prospects for
the biotech sector and opportunities that the Group's scale, post-Arix
acquisition, presents."
For Further Information
RTW Investments, LP +44 (0)20 7959 6361
Woody Stileman, Managing Director
Krisha McCune, Director, Investor Relations
Elysium Fund Management Limited +44 (0)14 8181 0100
Joanna Duquemin Nicolle, Chief Executive Officer
Sadie Morrison, Managing Director
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
Buchanan (PR & Communications Adviser) +44 (0)20 7466 5107
Charles Ryland
Henry Wilson
George Beale
Cadarn Capital (Distribution & IR Partner) +44 (0)73 6888 3211
David Harris
Morgan Stanley Fund Services USA LLC +1 (914) 225 8885
About RTW Biotech Opportunities Ltd: RTW Biotech Opportunities Ltd (LSE: RTW
& RTWG) 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 Ltd ("RTW Bio") is a life sciences and investment
innovation fund focused on identifying transformative assets with high growth
potential across the biopharma and medtech sectors. With the Group's capital
and the Investment Manager's expertise, we're powering medical breakthroughs
that will transform the wellbeing of people around the world.
Highlights
30 June 2024 Financial Highlights
US$1.95 NAV per Ordinary Share
US$655.4 million Ordinary NAV 30 June 2023: US$1.68
30 June 2023: US$356.5 million
+87.7% Ordinary NAV growth since inception +48.6% total shareholder return since admission
30 June 2023: +61.5% 30 June 2023: +19.7%
+3.0% Ordinary NAV per share growth YTD +10.1% total shareholder return YTD
30 June 2023: +9.3% 30 June 2023: +2.9%
1.04 Leverage US$1.55 price per Ordinary Share ¹
30 June 2023: 0.88 30 June 2023: US$1.25
(1) The share price was US$1.52 at 11 September 2024.
Portfolio Highlights in the period
14 new core portfolio companies added,
2 significant capital markets events in the core portfolio¹: 1 IPO, 1 reverse no core public portfolio exited in the period ²
merger
30 June 2023: 5 added, 5 exited
30 June 2023: 2 take-outs, 2 IPOs, 1 SPAC merger, 1 reverse merger, 2
announced strategic financings
9/50 core companies have commercial products ³
78% of NAV invested in core portfolio companies
30 June 2023: 51% 8/50 core companies are pre-clinical ³
50 core portfolio companies in total: 30/50 core companies have clinical programs ⁴
30 private, 2 royalty, 18 public 30 June 2023: 24/37
30 June 2023: 37 total; 27 private, 10 public
1 Core portfolio generally consists of companies that were initially added to
the portfolio as private investments, reflecting the key focus of the Group's
strategy. As initially private investments continue to be held beyond IPO, the
core portfolio consists of both privately-held and publicly-listed companies.
2 New core portfolio companies include five new privates, five positions
acquired from Arix Bioscience and four that were previously classified "other
public".
3 Statistic was not measured at the previous interim reporting period end.
4 One core company is a specialty clinical laboratory offering testing
services, and another is a device company whose technology is based on
magnetic force spectroscopy that reveals biomolecular interactions; clinical
programs are not applicable.
Our Purpose and Long-Term Strategy
Transforming the lives of millions
RTW'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.
Identify
Identify transformational innovations
RTW 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
RTW 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
RTW has capabilities to partner with universities and in-license academic
programs, by providing capital and infrastructure to entrepreneurs to advance
scientific programs. 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 RTW'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 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's 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.
Chair's Statement
Once again, I am pleased to report that the Investment Manager ("RTW") has
achieved a solid performance for the Group. The Group's NAV returned +3.0%
over the six-month period, outperforming the Russell 2000 Biotech Index
("RGUSHSBT") and only narrowly underperforming the Nasdaq Biotech Index
("NBI") which returned +1.7% and +4.0%, respectively. The Group's NAV has
beaten the returns of its biotech benchmarks over one year and three years
and, since admission in October 2019, the Group's NAV has significantly
outperformed them both, returning +87.7% vs. +6.5% and +34.6% for the RGUSHSBT
and the NBI. The Company's share price has lagged NAV growth, however. With a
+48.6% return, it too has outpaced the benchmarks, but the shares fell to a
discount to NAV in 2022, alongside many of our peers, after having traded at a
small premium for most of the prior years since admission. Pleasingly, the
discount has narrowed in the first half of the year, particularly after the
closing of the Arix transaction. The increased scale and liquidity has
attracted new buyers on top of the considerable shareholder efforts made last
year, which included a rebranding, a name change, the initiation of a capital
allocation plan, our first Capital Markets Day and the addition of new joint
corporate broker and an investor relations and distribution partner.
H1 2024 Overview and Outlook
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 two
go-public events from core private positions in the first half: Kyverna and
Lenz. The average step up from holding value in these two events was 1.4x and
the average multiple on invested capital was 1.8x. There was one take-out:
Numab, a core private position. A core private take-out is somewhat unusual,
as biotech M&A normally occurs in the more advanced public domain, but it
shows that large pharma companies are still active and keen to acquire high
quality assets wherever they are. It still being a private position meant that
the impact on the Group was less than it might have been had it occurred after
the company was public when we normally take bigger positions, but it was a
more than 2.6x uplift from the holding value, which underlines the value of
the portfolio's private holdings.
There are always a handful of material clinical events from our core public
investments every quarter that have the potential to drive the Group's
returns. This semi-annual period saw two such events from Avidity Biosciences
alone. Firstly, Avidity announced positive long-term data showing reversal of
disease progression in people living with myotonic dystrophy type 1 (DM1), a
progressive, and often fatal, disease. On the back of this data, the FDA
supported using a novel regulatory endpoint for a Phase 3 trial, which could
speed up the delivery of this much needed therapy to patients, and Avidity
completed an oversubscribed private placement, which RTW co-led. This
financing and Avidity's share price performance elevated the position to the
top of the portfolio. Later in the period under review, Avidity then announced
"unprecedented" data from its facioscapulohumeral muscular dystrophy (FSHD)
program, another muscular dystrophy with no approved drugs that ends with
patients in wheelchairs. Avidity's share price was +351% in the first half,
making it a very rewarding investment from a shareholder perspective, all the
way from our original investment in their 2019 crossover round. Should Avidity
succeed through subsequent trials and regulatory approval, it will also be a
very rewarding investment from a patient impact perspective.
The Company's royalty investments are performing well and provide a
differentiated income stream that is uncorrelated to equity markets. Further,
in the current yield environment and with the capital available to biotech
companies still relatively constrained, the risk adjusted returns are very
attractive and highly complementary to the rest of the portfolio.
At the end of the period, the Group had fifty 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. The core
portfolio now represents 78% of NAV, compared to 51% at the previous interim
period. The "other public" portfolio (a replica of the long names held in
RTW's private funds, devised to mitigate the performance drag of setting aside
cash for future deployment into core positions) made up the remainder.
The market environment for the biotech sector is improving and the opportunity
set for stock picking is encouraging. The sector's recovery is still early,
though. Changes in interest rate expectations are adding periods of
volatility, but good data and good products are being rewarded. Medical
science innovation is accelerating, and the FDA appears willing to support it.
Financing and M&A activities are improving overall, and valuations are
attractive. Despite this, sector fund flows remain negative, as they have for
several years, although the pace has slowed considerably. Perhaps generalist
investors are waiting for the US presidential election to pass before
returning. Either way, the setup is good, so only a small pivot away from Big
Tech or the first obesity drug winners could mean outsized flows into the
small and mid-cap biotech sector.
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. With market
conditions improving, all parts of our full life cycle portfolio are well
positioned.
RTW Biotech Opportunities Ltd 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 wider range of investment opportunities that
would otherwise be hard to exploit, thus making the Company a valuable core
satellite holding alongside more mainstream passive, fund or direct equity
healthcare exposures.
Arix Bioscience Integration, New Board Member & Shareholder Activity
We are delighted to have completed the acquisition of Arix Bioscience Plc's
assets and welcome new shareholders to our register. 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 Company's NAV
appreciated materially versus Arix's between the deal announcement and
closure, leading to a small dilution on closing, including the revaluation of
Arix's private positions. Despite this, we firmly believe that the deal
rationale has been vindicated and will continue to be so. The combination has
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
buyers and helped narrow the discount.
The increased scale of the Company following strong performance and the Arix
transaction has also allowed us to appoint a new Non-Executive 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. Since 2023, she
has been a Supervisory Board member of the biotechnology company, BioNTech.
Nicola served as Minister for Innovation in the Department for Health and
Social Care under two Prime Ministers where she led on Lifesciences, NHS Data
and Digital Transformation, and Global Health Security. She was the first
female MP for Oxford and was elected by MPs of all parties to Chair the
Commons Science and Tech Committee. She remains one of the youngest committee
chairs in British history and the only woman to have chaired the Commons
Science & Tech Committee. We are delighted to welcome Nicola, believing
that her contribution will help us further develop our mission to harness
innovation in biotech to the advantage of patients and shareholders.
Around the time of the Arix closing, the Board increased the previously
announced share buyback capacity by up to US$20 million, to help manage any
short-term changes in the shareholder base around the deal. Any buybacks are
considered against multiple factors, most importantly, our core objective to
deliver long-term capital growth for shareholders. In total, to the end of the
reporting period, the Group had bought back 10,253,791 shares for a
consideration of US$13,433,717.
On behalf of the Board, I would like to express our gratitude for your
continued support and wish you all the best for the remainder of 2024.
William Simpson
Chair of the Board of Directors
RTW Biotech Opportunities Ltd
12 September 2024
Report of the Investment Manager
Executive Summary
Since listing on the London Stock Exchange in October 2019, the Group has
grown the NAV attributable to Ordinary Shareholders from US$168.0 million to
US$655.4 million as of 30 June 2024 and the NAV per Ordinary Share has
increased by 87.7% from US$1.04 to US$1.95. Disappointingly, the share price
has not kept pace with NAV, returning +48.6%, as the shares fell to a discount
in early 2022 with both the Biotech and Investment Companies sectors falling
into bear markets. The discount narrowed in the first six months of the year,
particularly after the closing of the Arix deal with the share price +10.1%
and the NAV +3.0%. With continued NAV outperformance versus the market and our
peers, and with the sector continuing its recovery, we would expect the
discount to narrow further.
Financial Highlights, Performance Drivers and Significant Events
Table 1. Financial Highlights
RTW Biotech Opportunities Ltd Interim reporting period Previous Interim reporting period (01/01/2023-30/06/2023) Admission (30/10/2019)-
(01/01/2024-30/06/2024)
30/06/2024
Ordinary NAV - start of period US$399.3 million US$326.1 million US$168.0 million
Ordinary NAV - end of period US$655.4 million US$356.5 million US$655.4 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$1.95 US$1.68 US$1.95
NAV movement per Ordinary Share +3.0% +9.3% +87.7%
Price per Ordinary Share - start of period US$1.40 US$1.21 US$1.04
Price per Ordinary Share - end of period US$1.55 US$1.25 US$1.55
Share price return (i) +10.1% +2.9% +48.6%
Benchmark returns (ii)
Russell 2000 Biotech +1.7% +5.3% +6.5%
Nasdaq Biotech +4.0% -3.2% +34.6%
(i) Total shareholder return is an alternative
performance measure
(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 the first half of 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 value creation in biotech
happens in the public market, however, it is valuable and important to
position oneself and build conviction before an IPO. Core public position
Avidity Biosciences is a case in point this reporting period. 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 two of
its programs this year. The share price was +351% in the first half and we
co-led an oversubscribed US$400m private placement in March where we added to
our position.
Rocket, Immunocore and Cargo were the largest detractors amongst the core
public positions. Rocket's progress towards 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. The delay
should only be modest, and investors consider the program to be financially
immaterial. 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 on Cargo, but with the
next catalyst not until 2025, the share price gave back much of the gains it
made since its IPO in November 2023.
The core private positions made a small contribution led by Numab. Kyverna
completed a successful IPO in February. The gross multiple on invested capital
(MOIC) on our initial investment in Kyverna in November 2021 to the IPO was
approximately 2.6x. Numab announced in May that Johnson & Johnson will
acquire its lead drug candidate for US$1.25bn. The Company's holding value was
increased by approximately 2.9x to reflect the deal, which is expected to
close in the second half.
The royalty positions and "other public" positions both made small positive
contributions. 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 Company'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, which was finalised in the second quarter. Artios, Evoimmune 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.
Since admission, the Group has made sixty-five core private investments. On 30
June 2024, thirty of these positions had had liquidity events (i.e., go-public
or acquisition). The average holding period as private was twelve months and
the average MOIC to the liquidity event was 2.0x. Sixteen of these positions
have either concurrently or subsequently been exited in full at an average
MOIC of 3.0x
Table 2. Performance breakdown in H1 2024
NAV contribution %
Core private +0.5%
Core public +6.6%
Avidity Biosciences +15.6%
Kyverna Therapeutics +0.7%
Rocket Pharmaceuticals -3.6%
Immunocore -3.0%
Cargo Therapeutics -1.5%
Royalties +0.6%
"Other public" +0.9%
Fees and other MTD P&L -1.1%
Arix transaction and share buybacks -4.5%
YTD return 3.0%
Following the Board's increase to the share buyback program in January, there
followed several intra-month share buybacks throughout the period. 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
Company'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
30 June.
Key updates for Core Portfolio companies during H1 2024:
Clinical & Commercial Milestones
§ In March, Avidity Biosciences, the Group's largest portfolio holding,
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, which is expected to support a New Drug Application
submission later in 2024.
§ 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 the subsequent share price recovery
suggests that the market shares this view.
§ June: Immunocore's melanoma data showed a sub-20% response rate at ASCO.
§ In June at ASCO, the premier oncology conference, 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.
Financial Milestones
§ In January, Bayer AG and RTW Investments announced the US$162 million
initial closing of a Series D financing in JIXING. Bayer and JIXING
concurrently announced a new strategic collaboration focused on cardiovascular
diseases and ophthalmology in China.
§ In February, Kyverna Therapeutics priced its $US319 million IPO and began
trading on Nasdaq Global Select Market under the ticker "KYTX". On the first
day of trading, Kyverna's share price traded up by 36.4% to close at $30.00
per share. The gross multiple on invested capital (MOIC) on the initial
investment in November 2021 to the IPO was approximately 2.6x.
§ 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, the Group invested in its newest company creation, nicknamed
Hercules, one of the largest biotech company creations of the year. Its
clinical stage pipeline includes an injectable GLP-GIP and an oral GLP
in-licensed from Hengrui, one of China's leading biopharma companies.
§ In June, Numab Therapeutics announced that Johnson & Johnson will
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.
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 30 June 2024, the Group's core positions accounted for 78% of NAV (H1
2023: 51%) and included fifty investments (H1 2023: 37) in private and public
biotech and medtech companies and royalty investments. We selected these
investments based upon our rigorous assessment of scientific, commercial
potential and valuations. Table 6 shows the top ten portfolio investments at
the end of the reporting period.
Core private investments accounted for 24% of NAV at 30 June 2024 across
thirty investments. The increase in exposure and number of investments in the
reporting period reflects the addition of five new private positions
(Obsidian, Santa Ana, Mirador, Hercules and BioAge) alongside five new private
investments from Arix (Ensoma, Evommune, Depixus, Sorriso and Amplyx), less
Kyverna, which went public via an IPO and Lenz, which went public via a
reverse merger with Graphite Bio.
Core public investments accounted for 47% of NAV across eighteen positions.
The slight increase in exposure reflects performance, the graduation of
Kyverna and Lenz to the public markets and the addition of Akero, Urogen,
89Bio and Merus.
Royalties accounted for 7% of NAV across two investments: RTW's 4010 Royalty
Fund and RTW Royalty 2, which is a royalty deal based on the revenues of
Urogen's Jelmyto and UGN‐102. The 4010 Royalty Fund is currently invested in
two royalty deals with Allurion Technologies and Avadel Pharmaceuticals. 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.
22% of the Group's NAV is invested in "other public" listed companies, which
is approximately the same level as the start of the reporting period. 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. This
portfolio segment has been 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.
As of 30 June 2024, our "full life cycle" portfolio (see table 3) was
diversified across treatment modalities, therapeutic focus, clinical stage,
and capital position (i.e., equity and royalty) 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: A 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 receives quarterly cash payments based on the drag of setting aside cash for future deployment into core positions.
as possible, it is expected that most private portfolio companies will be a negotiated percentage of the products' sales.
retained after going public.
As a leading US crossover firm, RTW is sought out by the best private biotechs Retention and subsequent investment decisions subject to constant risk-reward Downside protection through deal structuring The "other public" assets have been carefully selected, matching, on a
as they look towards the public markets. We expect to lead about half of these assessment. pro-rata basis, the long investments held in RTW's private funds.
rounds, setting the terms and building the syndicates.
About one third is invested in early-stage venture and RTW company creations 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.
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%
Table 4. NAV capital breakdown as of 30 June 2024 compared to 30 June 2023
Portfolio grouping % of NAV % of NAV
30 June 2024 30 June 2023
Core Private 24.3% 21.2%¹
Core Public 47.1% 29.5%
Royalties 6.5% 0.5%¹
"Other Public" 22.1% 30.8%
Available Cash -0.1% 18.0%
Total 100.0% 100.0%
1 At 30 June 2023, Royalties exposure was included within Core Private.
Table 5. Investments added to the core portfolio in the first half of 2024¹
Company name Description % NAV
Public/Private
BioAge Labs Harnessing the biology of human aging to develop new therapies for obesity 0.3%
and other metabolic diseases
Private
Hercules RTW new company creation based on a pipeline of injectable GLP-GIP and oral 2.1%
GLP drugs in-licensed from Hengrui Pharmaceuticals, one of China's leading
Private biopharma companies.
Ensoma Inc.² Genomic medicines company developing one-time, in vivo treatments that 2.5%
precisely engineer any cell of the hematopoietic system for immuno-oncology,
Private genetic disease and other therapeutic applications.
Evommune² Clinical stage biotechnology company developing novel therapies to treat 1.3%
immune-mediated chronic inflammatory diseases.
Private
Mirador Therapeutics Next-generation precision medicine company focused on immunology and 0.2%
inflammation.
Private
Obsidian Therapeutics Clinical-stage biotech pioneering engineered cell and gene therapies to 0.3%
deliver transformative outcomes for patients with intractable diseases.
Private
Santa Ana Bio Biotech company developing innovative therapeutics and leveraging a 0.1%
multi-omics platform to unlock the full potential of precision medicines.
Private
6.8%
Total Private
89Bio Inc. Clinical-stage biopharmaceutical company developing innovative therapies to 1.5%
treat patients with liver and cardiometabolic diseases.
Public
Akero Therapeutics Clinical-stage company developing treatments for patients with serious 3.2%
metabolic diseases, including metabolic dysfunction-associated
Public steatohepatitis (MASH).
Merus Pharma Public, clinical-stage oncology company developing full-length human 0.4%
bispecific and trispecific antibody therapeutics with a broad application for
Public human disease, with a focus on head and neck cancer.
Urogen Pharma Biopharmaceutical company developing treatments for people living with 1.5%
urological cancers.
Public
6.6%
Total Public
1 Includes new privates, re-designations from "other public" to core public
and material Arix acquisition positions.
2 Arix-acquired position.
Figure 1. Core Portfolio exposure breakdown as a percentage of NAV, adjusted
to be out of 100%, by (A) Therapeutic Focus, (B) Modality, (C) Clinical Stage
and (D) Geography as of 30 June 2024. Therapeutic Focus, Modality and
Geography do not include royalty vehicles.
Table 6. Top ten core portfolio positions as of 30 June 2024
Portfolio Company Description Ticker Therapeutic Area Clinical stage of Expected catalysts % NAV
lead program
Avidity Biosciences Antibody conjugated RNA medicines company. Lead program for myotonic RNA Rare Disease Phase 3 Data in Q3 19.2%(1)
dystrophy.
Rocket Pharmaceuticals Gene therapy platform company for rare paediatric diseases. Four clinical RCKT Rare Disease Phase 3 BLA filing in H2 8.1%
programs for Fanconi anaemia, Danon, LAD, and PKD
Artios Developing breakthrough cancer treatments that target DNA Damage Response private Oncology Phase 2 Data in Q3 5.3%
pathways. RTW Bio position increased as part of Arix transaction.
JIXING RTW incubated company focused on acquiring rights from innovative therapies private Cardiovascular Phase 3 Series D 2024 5.0%
for development and commercialisation in China.
RTW Royalty Fund RTW created private fund aimed at generating returns from rights to royalty private Neurology Commercial Refile MIST NDA Q3 2024 4.2%
stream distributions from biopharma & medtech life sciences companies.
Akero Clinical-stage company developing treatments for patients with serious AKRO Metabolic Phase 3 Data Q1 2025 3.3%
metabolic diseases, including non-alcoholic steatohepatitis.
Ensoma Genomic medicines company developing one-time, in vivo treatments that private Oncology Preclinical Data Q3 2025 2.5%
precisely engineer any cell of the hematopoietic system for immuno-oncology,
genetic disease and other therapeutic applications.
Tarsus Pharma Biotech developing first-in-class therapeutics for ophthalmic conditions. TARS Ophthalmology Commercial Launch updates quarterly 2.5%
Immunocore T-cell receptor therapy company focused on oncology and infectious disease. IMCR Oncology Commercial PRAME data Q3 2024 2.5%
RTW Royalty 2 RTW-Urogen royalty deal based on revenues of both Jelmyto and UGN‐102 private Oncology Commercial Quarterly sales updates 2.3%
(1) Consists primarily of common stock and pre-funded warrants.
Table 7. Core portfolio positions greater than 50 bps, as of 30 June 2024 and
30 June 2023¹
Portfolio Company Private or Public² % of Group's net assets at 30/06/2024 % of Group's net assets at 30/06/2023
Avidity(3) Public 19.2% 1.8%
Rocket Public 8.1% 12.5%
Artios Private 5.3% 0.2%
JIXING Private 5.0% 7.3%
RTW Royalty Fund Private 4.2% -
Akero Public 3.3% -
Ensoma Private 2.5% -
Tarsus Public 2.5% 1.1%
Immunocore Public 2.5% 7.3%
RTW Royalty 2 Private 2.3% 4.0%
Apogee Public 2.2% 0.6%
Hercules Private 2.1% -
Cargo Public 1.6% 0.4%
89Bio Public 1.5% -
Urogen Public 1.5% -
Milestone³ Public 1.3% 2.5%
Evommune Private 1.3% -
Orchestra⁴ Public 1.2% 1.8%
Beta Bionics Private 1.2% 1.3%
Kyverna Public 0.9% 0.5%
Lycia Private 0.9% 0.3%
Numab Private 0.9% 0.5%
Ancora Private 0.9% 1.1%
NiKang Private 0.8% 1.2%
GH Research Public 0.6% 1.0%
1 The aggregate exposure of names below 50 bps, consisting of 26 positions, is
4.5% 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.
Table 8. RTW representation on portfolio companies' boards as of 30 June 2024
Portfolio Company ¹ RTW Board Member
Artios Chris Liu
Depixus Ovid Amadi
Ensoma Piratip Pratumsuwan
Hercules Gotham Makker
JIXING 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
1 In aggregate these positions represent 24% of the Group's NAV as at 30 June
2024.
Table 9. Top 5 "Other Public" portfolio segment holdings as of 30 June 2024
Position Ticker % of NAV Description
Madrigal Pharmaceuticals MDGL 7.3% Biopharmaceutical company focused on improving care for patients with
non-alcoholic steatohepatitis (NASH) and metabolic dysfunction associated
steatohepatitis (MASH).
Dyne Therapeutics DYNE 5.7% Biotechnology company developing oligonucleotide therapies for rare diseases
that affect muscle tissue.
Stoke Therapeutics STOK 2.4% Clinical stage biotech developing RNA treatments for severe genetic diseases.
Spyre Therapeutics SYRE 1.4% Developing potential best-in-class antibodies,
rational therapeutic combinations, and precision immunology approaches to
create efficacious and convenient Inflammatory Bowel Disease (IBD) therapies.
Fulcrum Therapeutics FULC 1.0% Biotech company developing drugs to treat genetically defined diseases by
modulating gene expression.
Private Portfolio Valuations and Cash Runway Analysis
The core private, core public and royalty 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 benefitted 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 30 June 2024, the average cash runway of our core private companies was
approximately two years, which provides them with sufficient time to focus on
clinical development plans. About one third have less than six months of
runway, two of which are RTW company creations, which is by design, as RTW's
funds have the flexibility to inject cash when necessary. Of the remainder,
only one is in a more challenging financial position and has been written down
in our portfolio to an insignificant level, while others are working on
various capital raising solutions.
Which brings us to our private valuations. The Board delegates valuation of
the portfolio to the Investment Manager. 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 process is overseen at the Investment Manager by the RTW Valuation
Committee. The Committee is supported by RTW's valuation team that is
independent from the investment team and receives advice from two independent
third-party valuation firms. The 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. The
integrity of the valuation process is overseen by the Audit Committee of the
Board, which conducts an independent review of the Investment Manager's
valuation policies and procedures. The valuations are also reviewed twice per
year by the Audit Committee as part of the interim and annual reporting
process and are subject to the scrutiny of KPMG.
The core private positions have seen a total of thirty-five valuation
adjustments so far in 2024. In the first half, twelve positions (not including
the Arix positions) were marked up by an average of 27% (excluding Numab,
which was marked up by 240% to reflect the deal with Johnson & Johnson,
the average was +7%); 10 positions were marked lower by an average of 17%. The
balance remained unchanged. 30% of the markdowns were primarily driven by
changes to relative comparables or market-based inputs. 50% of the markups
were primarily driven by comparables, and 50% were primarily driven by
idiosyncratic company performance, a financing round or transaction. At the
half year end, the average time since the last third-party valuation was seven
weeks and an average of seventeen 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. In the first half of the year, the two such
events saw an average step up from our holding value to the event of 41.7%.
The average MOIC to the event was 1.8x. This is consistent with our historical
averages (figure 3).
Figure 2. New private investments, private liquidity events and private MOIC
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.
3 2024 liquidity events include one IPO and one reverse merger.
4 2024 new privates include BioAge, Mirador, Obsidian, Santa Ana Bio, Hercules
and two newly acquired Arix positions greater than 50bps.
Figure 3. Core private portfolio - approximate cash runway as of 30 June 2024
Table 10. Private Valuation Statistics for H1 2024
Statistic H1 2024
Number of revaluations 35
Average time since last third-party valuation 7 weeks
Average time since last financing round 1.4 years
Average valuation change¹ +5.8%
Average write-up¹ +26.6%
Average write-down¹ -16.8%
Average step-up to IPO price 41.7%
Average MOIC to IPO price 1.8x
1 Does not include positions acquired in the Arix transaction.
Sector Review and Outlook
The Russell 2000 Biotech Index and the Nasdaq Biotech Index returned +1.7% and
+4.0% respectively in the first half. Much of the first quarter continued the
strong recovery which started in November last year. Small caps outperformed
large caps and IPOs picked up materially. Public financing activity was also
strongly up on last year, especially PIPEs (Private Investments in a Public
Equity), which hit an all-time high of US$7.8 billion raised in the quarter.
Several small acquisitions were announced. Johnson & Johnson's acquisition
of Ambrx and AstraZeneca's acquisition of Fusion suggest that pharmas are
still keen on Antibody Drug Conjugates (ADCs) and radiotherapy. Both have the
potential for more durable pricing in the post Inflation Reduction Act world
where Medicare can negotiate the prices for selected high-cost drugs used in
their program. Sanofi and Gilead announced tuck-in acquisitions in rare
disease: Inhibrx and CymaBay, respectively. In medtech, Boston Scientific
announced the US$3.7 billion acquisition of Axonics to add to its
neuromodulation business. This was all suggestive of a more normal market
environment.
However, the start of the second quarter saw the sector swoon once more as the
Fed adjusted its market signals in response to inflation data. Though painful,
it was not long-lived, and in June positive news from four closely watched
sector flag bearers boosted the sector. The FDA's Peter Marks granted
Sarepta's Duchenne gene therapy full approval despite a failed Phase 3,
standing firm on his push for regulatory flexibility. Zealand reported
competitive weight loss for petrelintide, the most promising alternative to
GLP1s. Argenx's Vyvgart received approval for CIDP, its second blockbuster
disease indication. And Alnylam's Amvuttra cut the risk of adverse
cardiovascular outcomes by nearly 30% in its landmark TTR cardiomyopathy Phase
3. All four companies posted strong gains.
There were two US biotech IPOs in the second quarter, bringing the
year-to-date total to nine, compared to twelve for the whole of last year.
There were also three M&A deals over US$1 billion in value, bringing the
year-to-date total to thirteen. Despite the quarter-over-quarter slowdown
after a bumper first quarter, the year-over-year trend remains positive and
public and private financing rounds are significantly up year-over-year. Not
all financings are performing well after the event, however, so a selective
approach is needed, but the markets are rewarding positive catalysts and
companies can finance their pipelines on the back of good news.
Figure 4: US Biopharma Financing Market - IPOs and Follow-Ons
The public market is still digesting the massive wave of new companies that
went public in 2020 and 2021, many of which should probably not have done so.
Twenty-eight percent of US biotech companies with a market cap over US$10
billion trade at less than the cash on their balance sheets, and about one
third of Nasdaq-listed biotech companies have less than a year of cash.
Despite that, we are cautiously optimistic that the IPO market will continue
to improve through this year and into next. Some will try to get ahead of the
US election others may wait until early next year. M&A may follow a
similar pattern around the election, but the fundamental reason for it remains
unchanged as large pharma companies need to replace their revenues lost to
patent cliffs. And with Lilly's and Novo's obesity drug profits likely burning
holes in their pockets, it seems possible or probable that they may join the
list of potential buyers for quality assets. Lilly's US$3.2 billion
acquisition of Morphic just after the end of the reporting period could be a
harbinger of things to come.
Figure 5: Proportion of US, small- and midcap biotech companies trading at
less than cash on their balance sheets at 30 June 2024
Figure 6: US biotech M&A deal volumes and value
The regulatory environment appears relatively sanguine. Drug pricing reform is
seemingly not at the top of the political agenda heading into the US
presidential election in November. That could change, but Biden's 2022
Inflation Reduction Act may have drawn the sting, with Medicare given
authority to negotiate prices for prescription drugs that had been expensive
for the federal health program. The results of negotiations for the first
batch of drugs selected were announced on 1(st) August and were better than
worst case expectations. Meanwhile, the FTC's gaze seems to have been averted
from pharma deals to Pharmacy Benefit Managers with a recently published
interim report assessing their impact on access to and affordability of
medicines. On the FDA side, we are encouraged that it continues to show
openness to novel regulatory endpoints that can speed up getting compelling
new products to patients. This is particularly true in Peter Marks' Center for
Biologic Evaluation and Research (CBER) division, which recently announced
another initiative called the "Rare Disease Innovation Hub", which aims to
unify the agency's approach in a bid to speed up rare disease medicines.
In summary, the overall backdrop for stock picking continues to improve. Good
data and good products are getting rewarded. While rate changes continue to
periodically inject volatility, correlations overall have declined. The
sector's recovery is still in the early innings. Biotech fund flows remain
negative, -5% year to date, suggesting a lack of retail interest and overall
market leadership is narrow and dominated by Big Tech and the GLP-1 leaders,
Lilly and Novo. We are optimistic that attractive valuations coupled with
increasing new drug approvals set the sector up well for when capital returns.
Key portfolio company events post period end
On 19th July 2024, Artiva Biotherapeutics (0.13% of NAV as of 30 June), a
clinical-stage biotechnology company focused on developing natural killer (NK)
cell-based therapies whose mission is to develop effective, safe, and
accessible cell therapies for patients with devastating autoimmune diseases
and cancers, had its initial public offering (IPO), raising US$167 million.
The company started trading on the Nasdaq Global Market under the ticker
symbol "ARTV".
RTW Investments, LP
12 September 2024
Strategy in Action
IMPACT FOCUS 1: Avidity Biosciences
Learn more about Avidity Biosciences,
Home - Avidity Biosciences (www.aviditybiosciences.com)
(https://www.aviditybiosciences.com/)
NAV
19.2%
30 June 2023: 1.8%
Ticker
"RNA"
Portfolio company ownership
<1%
30 June 2023: <1%
The need
Myotonic dystrophy type 1 (DM1) is a progressive and often fatal neuromuscular
disease with no approved therapies. More than 40,000 people are affected by
DM1 in the U.S. alone.
Facioscapulohumeral muscular dystrophy (FSHD) is muscle-weakening condition
marked by pain, fatigue, and disability. FSHD affects approximately 16,000 to
38,000 people in the U.S. alone.
Duchenne muscular dystrophy (DMD) is a genetic condition that is characterised
by progressive muscle damage and weakness. DMD primarily affects males, with 1
in 3,500 to 5,000 born with it.
Mission
Avidity Biosciences, Inc. is a biopharmaceutical company committed to
delivering a new class of RNA therapeutics called Antibody Oligonucleotide
Conjugates (AOCs™). Avidity aims to revolutionise healthcare by advancing
RNA therapeutics that effectively target underlying genetic causes of
diseases. Utilising a proprietary AOC platform, Avidity demonstrated the first
successful delivery of RNA into muscle tissue. They currently are in clinical
development for three rare muscle disorders.
Status
Avidity has been a part of the Company's portfolio since November 2019 when
the Company, together with other investment vehicles managed by the Investment
Manager, led the Series C financing round and later went on to support Avidity
through its IPO. In March of this year, Avidity announced positive long-term
data showing reversal of disease progression in people living with DM1 across
multiple endpoints.
In June, the company shared what it called "unprecedented" Phase 1 data for
its second program, FSHD. Treatment improved muscle damage markers and
increased muscle strength. After some struggles the past couple years, second
generation RNA medicines are now delivering exciting breakthroughs.
Next milestone
Duchenne Muscular Dystrophy Phase 1 data update expected in Q3 2024.
Duchenne muscular dystrophy patient and trial participant quotes:
"I think that it's amazing that when I was diagnosed, I was told there's no
treatment, no cure. The study has given me a lot of hope. I would love for
that to be able to be shared with other people in the community who have DM1."
"My strength was better, my outlook was better, my hands were working. I had
more strength, and I could stretch them out. I could open things and I could
turn door knobs and all these things that were harder."
"We are thrilled to support Avidity in their effort to develop AOC 1001, a
potentially first-in-class and disease-modifying therapy for patients with
myotonic dystrophy. We also look forward to supporting the Avidity team as
they work towards clinical trials execution for AOC 1001 and pipeline programs
of antibody conjugated oligonucleotides for rare neuromuscular diseases."
Piratip Pratumsuwan
Research Analyst and Managing Director
RTW Investments LP
IMPACT FOCUS 2: Merus N.V.
Learn more about Merus
https://merus.nl/ (https://merus.nl/)
NAV
0.4%
30 June 2023: 0.2% (in "other public" portfolio)
Ticker
"MRUS"
Portfolio company ownership
<1%
30 June 2023: <1%
The need
Head and neck squamous cell carcinoma (HNSCC) describes a group of cancers
that develop in the squamous cells that line the mucosal surfaces of the
mouth, throat, and larynx. These cancers begin when healthy cells change and
grow in an unchecked manner, ultimately forming tumours. HNSCC is generally
associated with tobacco consumption, alcohol use and/or HPV infections. It is
the sixth most common cancer worldwide and it is estimated that there were
more than 930,000 new cases and over 465,000 deaths from HNSCC globally in
2020.(1) The incidence of HNSCC continues to rise and is anticipated to
increase by 30% to more than 1 million new cases annually by 2030(2),
representing a potential US$3-4 billion global commercial opportunity at peak
sales, typically 4-6 years from launch for an oncology drug.
Mission
Closing in on cancer. Merus is a public, clinical-stage oncology company based
in the Netherlands, developing innovative full-length human bispecific and
trispecific antibody therapeutics, referred to as Multiclonics(®), with a
broad application for human disease. Its lead program, petosemtamab, is a
novel bispecific antibody for head and neck cancer that it believes could
become a new standard of care for patients with HNSCC.
Status
In May, Merus announced interim data from its Phase 1/2 trial of petosemtamab
in combination with pembrolizumab, demonstrating a stunning 67% response rate.
The company also announced plans to initiate a Phase 3 registrational trial of
petosemtamab in combination with pembrolizumab, regardless of HPV status, in
first line, PD-L1 expressing, head and neck cancer, which is expected to start
by the end of 2024. The company has also initiated a Phase 3 registrational
trial of petosemtamab monotherapy in 2/3L HNSCC.
Next milestone
Phase 1/2 update in Q3 2024 of petosemtamab monotherapy in 2/3L HNSCC. The
data could further support that petosemtamab could become a new standard of
care for patients with HNSCC.
"We are impressed by the robust clinical data of petosemtamab, Merus' lead
bispecific antibody, in head and neck cancer, a disease with high unmet
medical need and limited treatment options. We believe that petosemtamab has
the potential to transform the standard of care for patients with this
devastating cancer and are excited to follow the progress of the ongoing and
planned Phase 3 trials."
Chris Liu
Senior Research Analyst
RTW Investments
(1 )Sung et al. CA Cancer J Clin, 71:209-49, 2021
(2 )Johnson, D.E., Burtness, B., Leemans, C.R. et al. Head and
neck squamous cell carcinoma. Nat Rev Dis Primers 6, 92 (2020)
The RTW Foundation
The Investment Manager's social commitment extends beyond the core business.
Founded in 2018 as the philanthropic arm of RTW Investments, LP, RTW
Foundation powers rare disease research, medical innovation, and local
community collaborations to improve the health of underserved communities.
Mission: To power community initiatives and scientific research to improve the
health of underserved populations.
Through data-driven science, partnership collaboration, and meaningful impact,
the RTW Foundation seeks to fund research that helps develop pathways for
therapies for ultrarare diseases.
Research grants provide up to $150,000 of funding to conduct early-stage research.
The Foundation also
builds partnerships with local organisations to advance health equity and
health access.
"One of the hallmarks of our community partnerships is that we go beyond just
financial support. Our team truly engages with communities and serves
alongside our partners."
Rod Wong
Chief Investment Officer
RTW Investments LP
Statement of Principal Risks and Uncertainties for the Remaining Six Months of
the year to 31 December 2024
As described in the Group's annual consolidated financial statements for the
year ended 31 December 2023, the Group's principal and emerging risks and
uncertainties include the following:
- Failure to achieve investment objective;
- Unfavourable tax exposure;
- Counterparty risk;
- The Investment Manager relies on key personnel;
- Portfolio companies may be subject to litigation;
- Exposure to global political and economic risks;
- Clinical development and regulatory risks;
- Imposition of pricing controls for clinical products and services;
- Inflation;
- Availability of capital;
- Sustainability reporting; and
- Liquidity risk.
The Board believes that these risks are unchanged in respect of the remaining
six months of the year to 31 December 2024.
Further information in relation to these principal risks and uncertainties may
be found on pages 34 to 36 of the Group's annual report and audited
consolidated financial statements for the year ended 31 December 2023.
These inherent risks associated with investments in the biotech and
pharmaceutical sector could result in a material adverse effect on the Group's
performance and value of the Ordinary Shares.
Risks are mitigated and managed by the Board through continual review, policy
setting and regular reviews of the Group's risk matrix by the Audit Committee
to ensure that procedures are in place with the intention of minimising the
impact of the above-mentioned risks. The Board carried out a formal review of
the risk matrix at the Audit Committee meeting held on 30 July 2024. The Board
relies on periodic reports provided by the Investment Manager and
Administrator regarding risks that the Group faces. When required, experts
will be employed to gather information, including tax and legal advisers.
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that:
- the unaudited interim consolidated financial statements have been
prepared in conformity with US generally accepted accounting principles and
give a true and fair view of the assets, liabilities, financial position and
profit or loss of the Group; and
- the interim management report (which includes the Chair's Statement,
Report of the Investment Manager and Statement of Principal Risks and
Uncertainties) together with the unaudited interim consolidated financial
statements include a fair review of the information required by:
a. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules, being an
indication of important events that have occurred during the first six months
of the financial year and their impact on the unaudited interim consolidated
financial statements; and a description of the principal risks and
uncertainties for the remaining six months of the financial year; and
b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules, being
related party transactions that have taken place during the first six months
of the financial year and that have materially affected the financial position
or performance of the Group during that period; and any changes in the related
party transactions described in the last annual report that could do so.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Group's website
(https://www.rtwfunds.com/rtw-biotech-opportunities-ltd
(https://www.rtwfunds.com/rtw-biotech-opportunities-ltd) ). Legislation in
Guernsey governing the preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
By order of the Board
William Simpson Paul Le Page
Chairman Director
12 September 2024 12 September 2024
Independent Review Report to RTW Biotech Opportunities Ltd
Conclusion
We have been engaged by RTW Biotech Opportunities Ltd (the "Company") to
review the consolidated financial statements in the half-yearly financial
report for the six months ended 30 June 2024 of the Company and its subsidiary
(together, the "Group"), which comprises the unaudited interim consolidated
statement of assets and liabilities including the unaudited interim
consolidated condensed schedule of investments, the unaudited interim
consolidated statements of operations, changes in net assets and cash flows
and the related explanatory notes.
Based on our review, nothing has come to our attention that causes us to
believe that the consolidated financial statements in the half-yearly
financial report for the period ended 30 June 2024 do not give a true and
fair view of the financial position of the Group as at 30 June 2024 and of its
financial performance and its cash flows for the six month period then ended,
in accordance with U.S. generally accepted accounting principles and the
Disclosure Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International Standard on Review
Engagements (UK) 2410 Review of Interim Financial Information Performed by the
Independent Auditor of the Entity ("ISRE (UK) 2410") issued by the Financial
Reporting Council for use in the UK. A review of interim financial
information consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other review
procedures. We read the other information contained in the half-yearly
financial report and consider whether it contains any apparent misstatements
or material inconsistencies with the information in the consolidated financial
statements.
A review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Scope of review section of this report,
nothing has come to our attention to suggest that the directors have
inappropriately adopted the going concern basis of accounting or that the
directors have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
ISRE (UK) 2410. However future events or conditions may cause the Group and
the Company to cease to continue as a going concern, and the above conclusions
are not a guarantee that the Group and the Company will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been
approved by, the directors. The directors are responsible for preparing the
interim financial report in accordance with the DTR of the UK FCA.
The consolidated financial statements included in this interim report have
been prepared in accordance with U.S. generally accepted accounting
principles.
In preparing the half-yearly financial report, the directors are responsible
for assessing the Group and the Company's ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using
the going concern basis of accounting unless liquidation is imminent.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the consolidated financial statements in the half-yearly financial report
based on our review. Our conclusion, including our conclusions relating to
going concern, are based on procedures that are less extensive than audit
procedures, as described in the scope of review paragraph of this report.
The purpose of our review work and to whom we owe our responsibilities
This report is made solely to the Company in accordance with the terms of our
engagement letter to assist the Company in meeting the requirements of the DTR
of the UK FCA. Our review has been undertaken so that we might state to the
Company those matters we are required to state to it in this report and for no
other purpose. To the fullest extent permitted by law, we do not accept or
assume responsibility to anyone other than the Company for our review work,
for this report, or for the conclusions we have reached.
Andrew J. Salisbury
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Guernsey
12 September 2024
Unaudited Interim Consolidated Statement of Assets and Liabilities
as at 30 June 2024 and 31 December 2023
(Expressed in United States Dollars)
30 June 2024 (unaudited) 31 December 2023 (audited)
ASSETS:
Investments in securities, at fair value (cost at 30 June 2024: $443,811,113;
31 December 2023: $244,056,637)
577,548,507 367,611,231
Derivative contracts, at fair value (cost at 30 June 2024: $58,029,782; 31
December 2023: $6,271,193)
132,009,700 15,463,820
Cash and cash equivalents 6,757,859 2,721,553
Due from brokers 52,834,678 57,887,214
Receivable from unsettled trades 6,786,057 -
Other assets 1,268,194 2,550,609
TOTAL ASSETS 777,204,995 446,234,427
LIABILITIES:
Securities sold short, at fair value (proceeds at
30 June 2024: $15,969,628; 31 December 2023: $1,399,242) 14,884,837 1,197,921
Derivative contracts, at fair value (proceeds at
30 June 2024: $nil; 31 December 2023: $nil) 9,794,166 8,390,327
Due to brokers 67,433,468 5,329,681
Accrued expenses 803,864 2,293,541
TOTAL LIABILITIES 92,916,335 17,211,470
TOTAL NET ASSETS 684,288,660 429,022,957
NET ASSETS attributable to Ordinary Shares (shares at 655,393,270 399,283,811
30 June 2024: 335,713,649; 31 December 2023: 210,635,347)
NET ASSETS attributable to Non-Controlling Interest 28,895,390 29,739,146
1.9522 1.8956
NAV per Ordinary Share
The unaudited interim consolidated financial statements of the Group were
approved and authorised for issue by the Board of Directors on 12 September
2024 and signed on its behalf by:
William Simpson
Paul Le Page
Chair
Director
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Condensed Schedule of Investments
as at 30 June 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
Rocket Pharmaceuticals, Inc. 2,400,755 8,188,796 51,688,255 7.56
Madrigal Pharmaceuticals, Inc. 177,360 38,891,799 49,689,178 7.26
Dyne Therapeutics, Inc. 1,110,636 33,551,435 39,194,344 5.73
Avidity Biosciences, Inc. 904,558 12,334,501 36,951,194 5.40
Others* 138,493,434 141,735,738 20.71
Total United States 231,459,965 319,258,709 46.66
Netherlands
Healthcare 6,648,649 10,413,490 1.52
Ireland
Healthcare 6,676,508 6,137,405 0.90
Cayman Islands
Healthcare 1,162,220 1,188,540 0.17
Financials 46,790 53,668 0.01
Total Cayman Islands 1,209,010 1,242,208 0.18
British Virgin Islands
Healthcare 776,929 837,505 0.12
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 541,205 216,482 757,905 0.11
Canada
Healthcare 2,872,398 416,817 0.06
Japan
Healthcare 64,326 79,845 0.01
Total common stocks 249,924,267 339,143,884 49.56
Convertible preferred stocks
United States
Healthcare* 69,503,919 82,014,697 11.98
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 14,177,776 25,664,114 32,279,426 4.71
Others 4,110,583 3,943,070 0.58
Total China 29,774,697 36,222,496 5.29
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Condensed Schedule of Investments (continued)
as at 30 June 2024
(Expressed in United States Dollars)
Descriptions Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value (continued)
Convertible preferred stocks
United Kingdom
Healthcare
Artios Pharma Limited 21,991,191 13,135,198 35,899,284 5.25
Switzerland
Healthcare 1,729,518 5,806,232 0.85
Total convertible preferred stocks 114,143,332 159,942,709 23.37
Investment in private investment companies
Cayman Islands
Healthcare 23,892,851 28,475,884 4.17
Ireland
Healthcare 11,814,933 16,019,112 2.34
United Kingdom
Healthcare 12,957,658 2,897,822 0.42
Total investment in private investment companies 48,665,442 47,392,818 6.93
American depository receipts
United Kingdom
Healthcare 14,379,554 16,877,288 2.47
Netherlands
Healthcare 2,194,616 2,564,329 0.37
Cayman Islands
Healthcare 102,795 76,891 0.01
Total American depository receipts 16,676,965 19,518,508 2.85
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Condensed Schedule of Investments (continued)
as at 30 June 2024
(Expressed in United States Dollars)
Descriptions Cost Fair Value Percentage of Net Assets
Investments in securities, at fair value (continued)
Convertible notes
Canada
Healthcare 7,512,664 7,301,551 1.07
United States
Healthcare 5,571,113 2,923,623 0.43
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 131,733 1,317,330 1,325,414 0.19
Total convertible notes 14,401,107 11,550,588 1.69
Total investments in securities, at fair value 443,811,113 577,548,507 84.40
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Condensed Schedule of Investments (continued)
as at 30 June 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 90,199,249 13.18
Rocket Pharmaceuticals, Inc. 170,764 2,565,561 3,445,034 0.50
Others* 15,444,856 15,720,374 2.30
Total United States 54,442,090 109,364,657 15.98
Canada
Healthcare 3,121,272 1,275,034 0.19
Total warrants 57,563,362 110,639,691 16.17
Equity swaps
United States
Healthcare
Avidity Biosciences, Inc. 196,429 5,099,841 0.75
Others* 15,129,968 2.20
Total United States 20,229,809 2.95
British Virgin Islands
Healthcare 322,241 0.05
Total equity swaps 20,552,050 3.00
Contingent value rights
United States
Healthcare 466,420 817,959 0.12
Total contingent value rights 466,420 817,959 0.12
Total derivative contracts - assets, at fair value 58,029,782 132,009,700 19.29
* No individual investment security or contract constitutes greater than 5 per
cent. of net assets.
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Condensed Schedule of Investments (continued)
as at 30 June 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 14,628,291 13,690,758 2.01
British Virgin Islands
Financials 1,238,157 1,117,188 0.17
Total common stocks 15,866,448 14,807,946 2.18
American Depository receipts
Cayman Islands
Healthcare 103,180 76,891 0.00
Total securities sold short, at fair value 15,969,628 14,884,837 2.18
Descriptions Fair Value Percentage of Net Assets
Derivative contracts - liabilities, at fair value
Equity swaps
United States
Healthcare 9,794,166 1.43
Total United States 9,794,166 1.43
Total derivative contracts - liabilities, at fair value 9,794,166 1.43
See accompanying notes to the unaudited interim consolidated financial
statements.
Audited 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 unaudited interim consolidated financial
statements.
Audited 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 unaudited interim consolidated financial
statements.
Audited 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 unaudited interim consolidated financial
statements.
Audited 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 unaudited interim consolidated financial
statements.
Audited 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 unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Statement of Operations
For the six month periods ended 30 June 2024 and 30 June 2023
(Expressed in United States Dollars)
1 January 2024 to 30 June 2024 (unaudited) 1 January 2023 to
30 June 2023
(unaudited)
Investment income
Interest 1,089,563
(net of withholding taxes of $nil; 30 June 2023: $nil)
1,926,737
Dividends (net of withholding taxes of $4,258; 455,581
30 June 2023: $nil) 108,997
Other 837,160 341,807
Total investment income 2,872,894 1,886,951
Expenses
Management fees 3,436,352 2,115,840
Interest 1,679,406 1,106,575
Professional fees 411,615 388,034
Administrative fees 356,696 199,914
Research costs 341,711 247,998
Audit fees 186,995 235,641
Directors' fees 117,976 87,798
Other expenses 654,822 234,829
Total expenses 7,185,573 4,616,629
Net investment income/(loss) (4,312,679) (2,729,678)
Realised and change in unrealised gain/(loss) on investments, derivatives and
foreign currency transactions
Net realised gain/(loss) on securities and foreign currency transactions 81,097,820
10,237,597
Net change in unrealised gain/(loss) on securities and foreign currency (43,904,533)
translation
11,361,132
Net realised gain/(loss) on derivative contracts 5,155,442 (544,139)
Net change in unrealised gain/(loss) on derivative contracts (1,428,302)
63,383,452
Net realised and unrealised gain/(loss) on investments, derivatives and 90,137,623 35,220,846
foreign currency transactions
Net increase/(decrease) in net assets resulting from operations 85,824,944 32,491,168
See accompanying notes to the unaudited interim consolidated financial statements.
Unaudited Interim Consolidated Statement of Changes in Net Assets
For the six month period ended 30 June 2024
(Expressed in United States Dollars)
Ordinary Non-Controlling Interest
Share Class
Net assets, beginning of period 399,283,811 29,739,146
Operations
Net investment income/(loss) (4,312,679) -
Net realised gain/(loss) on securities and foreign currency transactions 10,237,597 -
Net change in unrealised gain/(loss) on securities and foreign currency 11,361,132 -
translation
Net realised gain/(loss) on derivative contracts 5,155,442 -
Net change in unrealised gain/(loss) on derivative contracts 63,383,452 -
Income/(loss) attributable to Non-Controlling Interest 843,756 (843,756)
Net change in net assets resulting from operations 86,668,700 (843,756)
Capital transactions
Issuance of Ordinary Shares (net of issuance cost of US$6,473,897) 180,781,065 -
Share buyback (Gross of $22,681 transaction costs; 30 June 2023: $nil) (Note (11,340,306) -
9)
Net change in net assets resulting from capital transactions 169,440,759 -
Net assets, end of period 655,393,270 28,895,390
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Statement of Changes in Net Assets
For the six month period ended 30 June 2023
(Expressed in United States Dollars)
Ordinary Non-Controlling Interest
Share Class
Net assets, beginning of period 326,079,521 21,844,468
Operations
Net investment income/(loss) (2,729,678) -
Net realised gain/(loss) on securities and foreign currency transactions 81,097,820 -
Net change in unrealised gain/(loss) on securities and foreign currency (43,904,533) -
translation
Net realised gain/(loss) on derivative contracts (544,139) -
Net change in unrealised gain/(loss) on derivative contracts (1,428,302) -
Income/(loss) attributable to Non-Controlling Interest (2,039,956) 2,039,956
Net change in net assets resulting from operations 30,451,212 2,039,956
Net assets, end of period 356,530,733 23,884,424
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Statement of Cash Flows
For the six month periods ended 30 June 2024 and 30 June 2023
(Expressed in United States Dollars)
1 January 2024 to 1 January 2023 to
30 June 2024 30 June 2023
(unaudited) (unaudited)
Cash flows from operating activities
Net increase/(decrease) in net assets resulting from operations 85,824,944 32,491,168
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 (10,237,597) (81,097,820)
Net change in unrealised (gain)/loss on securities and foreign currency 43,904,533
translation
(11,361,132)
Net realised (gain)/loss on derivative contracts (5,155,442) 544,139
Net change in unrealised (gain)/loss on derivative contracts (63,383,452) 1,428,302
Effect of exchange rate changes on cash and cash equivalents (109,564) (86,823)
Purchases of investments in securities (350,475,670) (62,998,246)
Proceeds from sales of investments in securities 220,618,160 126,303,452
Proceeds from securities sold short 38,323,325 20,627,975
Payments for securities sold short (12,818,107) (9,246,930)
Proceeds from derivative contracts 16,122,019 4,325,394
Payments for derivative contracts (60,925,651) (5,392,097)
Accretion of bond discount (1,628) -
Changes in operating assets and liabilities:
Other assets 1,655,862 (162,824)
(Receivable from)/payable for unsettled trades (6,786,057) (2,799,071)
Due to brokers 62,103,787 (17,716,626)
Accrued expenses (1,489,677) (70,312)
Net cash provided by/(used in) operating activities (98,095,880) 50,054,214
Cash flows from financing activities
Net proceeds from issuance of shares * 108,419,956 -
Share buyback (11,340,306) -
Net cash provided by/(used in) financing activities 97,079,650 -
Net change in cash and cash equivalents (1,016,230) 50,054,214
Cash, cash equivalents, and restricted cash, beginning of the period 60,608,767 29,161,624
Cash, cash equivalents, and restricted cash, end of the period 59,592,537 79,215,838
At 30 June 2024, the amounts categorised in cash, cash equivalents, and
restricted cash include the following:
Cash and cash equivalents 6,757,859 9,471,726
Due from brokers 52,834,678 69,744,112
Total 59,592,537 79,215,838
Supplemental disclosure of cash flow information
Cash paid during the period for interest 1,406,135 1,149,630
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 unaudited interim consolidated financial
statements.
Notes to the Unaudited Interim Consolidated Financial Statements
For the six month period ended 30 June 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 with the additional ticker symbol: RTWG denoting the
Sterling price. 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 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 unaudited interim 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 unaudited interim consolidated financial statements are expressed in
United States Dollars. The unaudited interim 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 unaudited interim 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 unaudited interim consolidated financial statements include accounts of
the Company consolidated with the accounts of the Subsidiary. All inter-group
balances have been eliminated upon consolidation. The Subsidiary is
incorporated in Guernsey.
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 period ended 30 June 2024, $840,033 of the income attributable to the
Non-Controlling Interest was comprised of mark to market movements of Notional
Ordinary Shares (31 December 2023: $5,137,836), with $1,683,789 of the income
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 30 June 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 30 June 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 30 June 2024, these investments are
categorised in Level 2 and Level 3 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.
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.
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 period 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 unaudited interim 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 unaudited
interim 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 30 June 2024, the Group had cash collateral
receivables of $27,254,447 (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 GBP1,200, which has increased to GBP1,600
per annum with effect from 1 January 2024. 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 unaudited interim
consolidated financial statements. Income tax and related interest and
penalties would be recognised as a tax expense in the unaudited interim
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 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 30 June 2024 or 31 December 2023.
Use of estimates
Preparing unaudited interim 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 unaudited interim 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 30 June 2024:
Level 1 Level 2 Level 3 Investments measured at net asset value* Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Assets (at fair value)
Investments in securities
Common stocks 337,441,584 843,434 858,866 - 339,143,884
Convertible preferred stocks - 2,460 159,940,249 - 159,942,709
Investment in private - 47,392,818 47,392,818
investment companies - -
American depository receipts 19,518,508 - - - 19,518,508
Convertible notes - - 11,550,588 - 11,550,588
Total investments in securities 356,960,092 845,894 172,349,703 47,392,818 577,548,507
Derivative contracts
Warrants 650 109,844,319 794,722 - 110,639,691
Equity swaps - 20,552,050 - - 20,552,050
Contingent value rights - - 817,959 - 817,959
Total derivative contracts 650 130,396,369 1,612,681 - 132,009,700
356,960,742 173,962,384 47,392,818
131,242,263 709,558,207
Liabilities (at fair value)
Securities sold short
Common stocks 14,807,946 - - - 14,807,946
American depository receipts 76,891 - - - 76,891
Total securities sold short 14,884,837 - - - 14,884,837
Derivative contracts
Equity swaps - 9,794,166 - - 9,794,166
Total derivative contracts - 9,794,166 - - 9,794,166
14,884,837 9,794,166 - - 24,679,003
* 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
(audited) (audited) (audited) (audited) (audited)
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.
Transfers between Levels 2 and 3 generally relate to whether significant
relevant observable inputs are available for the fair value measurements in
their entirety. See Note 1 for additional information related to the fair
value hierarchy and valuation techniques and inputs. For the period ended 30
June 2024, the Group had net transfers into Level 2 of $nil from Level 3 (for
the year ended 31 December 2023: $161,322) and transfers into Level 1 of
$3,411,345 from Level 3 due to conversion into publicly traded common stocks
(for the year ended 31 December 2023: $12,846,527). Transfers between levels
are deemed to occur at period/year end.
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 30 June 2024 and 31 December
2023:
Fair value at 30 June 2024 Valuation techniques Significant unobservable inputs Range of inputs
(unaudited)
Assets (at fair value)
Investments in securities
Convertible preferred stocks 63,845,966 Recent transaction price n/a n/a
49,210,945 Discounted cash flow WACC 13% - 40%
and/or market approach Revenue multiples 1.8x - 4.0x
Market rate of returns (13)% - 15%
46,767,986 Probability-weighted expected return method ("PWERM") WACC 20% - 22%
Revenue multiples 4.0x
Market step-up multiple 0.8x - 2.0x
Market rate of returns (25)% - 10%
Recovery rate 50%
115,352 Liquidation value n/a n/a
Convertible notes 8,891,886 PWERM Discount rate 5.5% - 5.6%
Expected volatility 43% - 60%
2,288,429 Recent transaction price n/a n/a
370,273 Discounted cash flow WACC 30%
and/or market approach Revenue multiples 4.0x
Market rate of returns (5)%
Common stocks 758,053 Recent transaction price n/a n/a
100,813 Market approach Revenue multiples 0.6x - 0.7x
Total investments in securities 172,349,703
Derivative contracts
Contingent value rights 817,959 Recent transaction price n/a n/a
Warrants 775,184 Discounted cash flow Expected volatility 40%
and/or market approach
and option pricing model
19,538 PWERM and Expected volatility 43%
option pricing model
Total derivative contracts 1,612,681
Fair value at 31 December 2023 Valuation techniques Significant unobservable inputs Range of inputs
(audited)
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
period ended 30 June 2024 were as follows:
Balance beginning 1 January 2024 Realised gains/ (losses)((a)) (unaudited) Change in Unrealised gains/ (losses)((a)) Purchases Sales Transfers into/(from) Level 3((b)) Ending balance 30 June 2024
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Assets (at fair value)
Investments in securities
Common stocks 904,339 - (45,473) - - - 858,866
Convertible preferred stocks 73,189,264 - 46,594,935 - (3,411,345) 159,940,249
43,567,395
Convertible notes 7,983,390 - (1,941,167) 5,508,365 - - 11,550,588
Total investments in securities 82,076,993 - 172,349,703
41,580,755 52,103,300 - (3,411,345)
Derivative contracts
Warrants 697,472 - 97,250 - - - 794,722
Contingent value rights 541,706 -
(190,167) 466,420 - - 817,959
Total derivative contracts 1,239,178 - (92,917)
466,420 - - 1,612,681
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)) (audited) Change in Unrealised gains/ (losses)((a)) (audited) Purchases Sales Transfers into/(from) Level 3((c)) Ending balance 31 December 2023
(audited) (audited) (audited) (audited) (audited)
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 unaudited interim 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 period for assets
still held at period end were as follows:
30 June 2024 31 December 2023
(unaudited) (audited)
Common stocks (45,473) 116,949
Convertible notes (1,941,167) (919,115)
Convertible preferred stocks 43,755,552 6,199,338
Contingent value rights (190,167) 541,706
Warrants 97,250 21,813
Change in unrealised gains and losses during the period for assets still held 41,675,995 5,960,691
at period 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:
30 June 2024 31 December 2023
(unaudited) (audited)
Realised gains 50,077,664 127,739,248
Realised losses (34,684,625) (60,622,155)
Net realised gain on securities, derivative contracts and securities sold 15,393,039 67,117,093
short
30 June 2024 31 December 2023
(unaudited) (audited)
Change in unrealised gains 192,910,829 132,672,225
Change in unrealised losses (118,166,245) (111,833,730)
Net change in unrealised gain/(loss) on securities, derivative contracts and 74,744,584 20,838,495
securities sold short
As at 30 June 2024, the Group had commitments (subject to completion of
certain parameters) to certain investments totalling $20,587,384 (31 December
2023: $59,732,160), which was mainly comprised of a $14,525,190 commitment to
an existing portfolio company for a second tranche investment.
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 30 June 2024, due from brokers totalled $52,834,678 (31 December 2023:
$57,887,214). Included within due from brokers is $23,816,175 (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
$27,254,447 (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 period,
categorised by primary underlying risk, to be representative of the volume of
its derivative activities during the period ended 30 June 2024:
30 June 2024 (unaudited) 31 December 2023 (audited)
Long exposure Short exposure Long exposure Short exposure
Primary underlying risk Notional amounts Notional amounts Notional amounts Notional amounts
Equity price
Warrants((a)) 68,437,147 - 3,963,562 -
Equity swaps 66,482,987 21,726,069 64,032,939 56,046,951
Contingent value rights 2,371,054 - 541,706 -
137,291,188 21,726,069 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 unaudited interim consolidated statement of
assets and liabilities and unaudited interim consolidated statement of
operations
The following tables identify the fair value amounts of derivative instruments
included in the unaudited interim consolidated statement of assets and
liabilities as derivative contracts, categorised by primary underlying risk,
at 30 June 2024 and 31 December 2023. The following table also identifies the
gain and loss amounts included in the unaudited interim 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 period ended 30 June 2024 and 30 June 2023.
30 June 2024 (unaudited)
Primary underlying risk Derivative assets Derivative liabilities Realised gain/(loss) Change in unrealised gain/(loss)
Equity price
Warrants 110,639,691 - (19,848) 51,901,210
Equity swaps 20,552,050 9,794,166 5,175,290 11,672,409
Contingent value rights 817,959 - - (190,167)
132,009,700 9,794,166 5,155,442 63,383,452
31 December 2023 (audited) 30 June 2023 (unaudited)
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 (543,767) (1,179,476)
Warrants 7,446,312 - (372) (790,532)
Contingent value rights 541,706 - - 541,706
15,463,820 8,390,327 (544,139) (1,428,302)
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 30 June 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 unaudited interim consolidated statement of
assets and liabilities to enable users of the unaudited interim 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 30 June 2024 and 31 December 2023, the Group held financial instruments
and derivative instruments that were eligible for offset in the unaudited
interim 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 unaudited interim consolidated statement of assets and
liabilities. The following table presents the potential effect of netting
arrangements for asset derivative contracts presented in the unaudited interim
consolidated statement of assets and liabilities:
Gross amounts of recognised assets Gross amounts offset in the unaudited interim consolidated statement of assets Gross amounts of recognised assets 30 June 2024 (unaudited)
and liabilities
Gross amounts not offset in the unaudited interim consolidated statement of
assets and liabilities
Description
Financial instruments((a)) Cash collateral received((b)) Net amount
Equity swaps
Cowen Financial Products, LLC - 16,501,383 (6,539,726) - 9,961,657
16,501,383
Morgan Stanley & Co. LLC 2,206,495 - 2,206,495 (1,199,055) - 1,007,440
Bank of America Merrill Lynch 1,288,543 - 1,288,543 (934,530) - 354,013
Jefferies & Co. 555,629 - 555,629 (555,629) - -
20,552,050 - 20,552,050 (9,228,940) - 11,323,110
Gross amounts of recognised assets Gross amounts offset in the consolidated statement of assets and liabilities Gross amounts of recognised assets 31 December 2023 (audited)
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 unaudited interim
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 unaudited interim consolidated
statement of assets and liabilities as of 30 June 2024 and audited
consolidated statement of assets and liabilities 31 December 2023:
Gross amounts of recognised liabilities Gross amounts offset in the unaudited interim consolidated statement of assets Gross amounts of recognised liabilities 30 June 2024 (unaudited) Net amount
and liabilities
Gross amounts not offset in the unaudited interim consolidated statement of
assets and liabilities
Description
Financial instruments((a)) Cash collateral pledged((b))
Equity swaps
Cowen Financial Products, LLC 6,539,726 - 6,539,726 (6,539,726) - -
Morgan Stanley & Co. LLC 1,199,055 - 1,199,055 (1,199,055) - -
Jefferies & Co. 1,120,855 - 1,120,855 (555,629) (565,226) -
Bank of America Merrill Lynch 934,530 - 934,530 (934,530) - -
9,794,166 - 9,794,166 (9,228,940) (565,226) -
Gross amounts of recognised liabilities Gross amounts offset in the consolidated statement of assets and liabilities Gross amounts of recognised liabilities 31 December 2023 (audited) 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 unaudited interim
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 unaudited
interim 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 Group is designed
only for sophisticated persons who are able to bear the economic risk of the
loss of their entire investment in the Group and who have a limited need for
liquidity in their investment. The following risks are applicable to the
Group:
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 Group'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 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 period ended 30 June 2024, the Company share activity was as
follows:
30 June 2024 30 June 2024 31 December 2023 31 December 2023
(unaudited) (unaudited) (audited) (audited)
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 30 June/31 December 335,713,649 10,253,791 210,635,347 1,753,791
During the period ended 30 June 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,
all 10,253,791 of repurchased Ordinary Shares were held as treasury shares (31
December 2023: 1,753,791).
During the period ended 30 June 2024, the Company issued 181,901,165 new
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 new 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 unaudited interim 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
30 June 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 period ended 30 June 2024
amounted to $3,436,352 (period ended 30 June 2023: $2,115,840) of which $nil
(31 December 2023: $nil) was outstanding at the period 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 period ended 30 June 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 gain of $840,033 in 2024 (31
December 2023: mark to market gain of $5,137,836), which is included in
Performance Allocation within the unaudited interim 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 $1,683,789 related to the Group's performance in the period (31
December 2023: allocation of $2,756,842).
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 period ended 30 June
2024, the Board did not approve a cash distribution to the Performance
Allocation Share Class (period ended 30 June 2023: $nil). At the period end,
the Performance Allocation Share Class of the Subsidiary is reflected within
the Non-Controlling Interest balance of $28,895,390 (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 and had a
remaining commitment of $1,107,148 at 30 June 2024. 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 30 June 2024, the number of Ordinary Shares held by each Director was as
follows:
30 June 2024 31 December 2023
(unaudited) (audited)
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
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, Ji
Xing, and Yarrow Biotechnology. As at 30 June 2024, he held 38,636,606
Ordinary Shares in the Group (11.51% of the Ordinary Shares in issue) (31
December 2023: 29,693,872, 14.10% of the Ordinary Shares in issue).
The total Directors' fees expense for the period amounted to $117,976 (30 June
2023: $87,798) of which $67,677 was outstanding at 30 June 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 and
each has served since the Subsidiary's incorporation on 23 November 2022.
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
Elysium Fund Management Limited ("EFML") 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 period ended 30 June 2024, EFML and MSFS charged administration
fees of $185,359 and $171,337 respectively (period ended 30 June 2023: EFML
charged $82,054 and MSFS charged $117,860), of which $31,769 and $123,028 (31
December 2023: EFML $18,465, MSFS $94,250) were outstanding at 30 June 2024,
and were included within accrued expenses.
12. Financial highlights
Financial highlights for the six month period ended 30 June 2024, six month
period ended 30 June 2023 and year ended 31 December 2023 are as follows:
30 June 2024 30 June 2023 31 December 2023
(unaudited) (unaudited) (audited)
Per Ordinary Share operating performance
Net Asset Value, beginning of period/year $ 1.90 $ 1.54 $ 1.54
Issuance of Ordinary Shares (0.23) - -
Share buybacks 0.03 - -
Income from investments
Net investment income/(loss) (0.01) (0.01) (0.02)
Net realised and unrealised gain/(loss) on securities, derivatives and foreign 0.26 0.16 0.42
currency transactions
Income/(loss) attributable to Non-Controlling Interest 0.00 (0.01) (0.04)
Total from investment operations 0.25 0.14 0.36
Net Asset Value, end of period/year $1.95 $1.68 $1.90
Total return
Total return before Performance Allocation 2.49% 9.34% 24.27 %
Performance Allocation (excluding mark to market) 0.50% - % (0.80) %
Total return after Performance Allocation 2.99% 9.34% 23.47 %
Ratios to average net assets*
Expenses 1.28 % 1.34 % 2.58 %
Performance Allocation (including mark to market) (0.15) % - % 2.28 %
Expenses and Performance Allocation 1.13 % 1.34 % 4.86 %
Net investment income/(loss) (0.76) % (0.79) % (1.38) %
NAV total return for the period/year 2.99 % 9.34 % 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
Effective 11 July 2024, the Company appointed Baroness Nicola Blackwood to the
Board of Directors as an independent, Non-Executive Director.
These unaudited interim consolidated financial statements were approved by the
Board of Directors on 12 September 2024. Subsequent events have been evaluated
through this date.
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, Inc.
Allurion Allurion Technologies, Inc.
Amplyx Amplyx Pharmaceuticals, Inc.
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.
Depixus Depixus SAS
Encoded Encoded Therapeutics, Inc.
Ensoma Ensoma, Inc.
Evoimmune Evoimmune, Inc.
Frequency Frequency Therapeutics, Inc.
GH Research GH Research PLC
Hercules Hercules CM NewCo
HSAC2 Health Sciences Acquisition Corporation 2
Immunocore Immunocore Limited
InBrace Swift Health, Inc.
Iteos iTeos Therapeutics, Inc.
Ji Xing or JIXING Ji Xing Pharmaceuticals Limited
Kyverna Kyverna Therapeutics, Inc.
Landos Landos Biopharma, Inc.
Lenz Lenz Therapeutics
Lycia Lycia Therapeutics, Inc.
Magnolia Magnolida Medical Technologies, Inc.
Merus Merus N.V.
Milestone Milestone Pharmaceuticals, Inc.
Mineralys Mineralys Therapeutics, LLC
Mirador Mirador Therapeutics, Inc.
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 (Shangha) Co., Ltd
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.
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.
Urogen Urogen Pharma
Ventyx Ventyx Biosciences, Inc.
Visus Visus Therapeutics, Inc.
Yarrow RTW Holdings LLC
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 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;
the Annual Report and audited financial statements;
"Annual Report"
"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 Biosciences 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;
"Calculation Date" 30 June or, if such date is not a business day, the previous business day;
"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;
"CNS" Central Nervous System;
"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;
"Crohn's Disease" a condition, in which a part(s) of digestive tract is inflamed;
"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;
"EU" or "European Union" the European Union first established by the treaty made at Maastricht on 7
February 1992;
"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;
"Greater China" encompasses mainland China, Macau, Hong Kong and Taiwan;
"the Group" the Company and its subsidiaries, RTW Biotech Opportunities Operating Ltd and
RTW Biotech UK Ltd;
"HCM" or "Hypertrophic cardiomyopathy" a cardiovascular disease characterised by an abnormally thick heart muscle;
"ImmTAC®" bi-specific biologic molecules designed to fight cancer or viral infections;
"Infantile Malignant Osteopetrosis" or "IMO" a rare genetic bone disease in young children, manifesting in an increased
bone density;
"Investigational New Drug" or the FDA's investigational New Drug program is the means by which a
pharmaceutical company obtains permission to start human clinical trials;
"IND"
"Investment Manager" RTW Investments, LP, also called RTW Investments or RTW;
"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;
"IRR" internal rate of return;
"ISDA" International Swaps and Derivatives Association;
"Latest Practicable Date" 30 June 2024, being the latest practicable date for valuing an asset for
inclusion in this report;
"Lentiviral vector or "LVV" based gene therapy - a type of viral vector used to deliver a gene;
"Leukocyte adhesion deficiency" or "LAD-I" a rare genetic disorder of immunodeficiency in young children;
"LifeSci Companies" companies operating in the life sciences, biopharmaceutical, or medical
technology industries;
"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;
"MAGE-A4" a protein expressed on certain types of tumours;
"Medtech" medical technology subsector of healthcare;
"Menin" a target for the treatment development in oncology;
Merck & Co., Inc.;
"Merck"
"MOC" Multiple on capital is the ratio of realised and unrealised gains divided by
the acquisition cost of an investment;
"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;
"NewCo" a company conceived and incubated by RTW Investments, LP;
"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
(https://www.britannica.com/science/biomolecule) or the totality of a
molecular process within an organism. In biology
(https://www.britannica.com/science/biology) the word omics refers to the
sum of constituents (https://www.merriam-webster.com/dictionary/constituents)
within a cell (https://www.britannica.com/science/cell-biology) . 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;
"PFIC" Passive Foreign Investment Company;
"Pilot study" a small-scale study;
"PIPE" private investment in a public equity;
Portfolio Companies private and public companies in the Group's portfolio;
"PRAME" a cancer-testis antigen (CTA) that is highly expressed in a broad range of
solid and hematologic malignancies;
"Premium Segment" Premium Segment of the Main Market of the London Stock Exchange;
"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);
"Pulmonary conditions" pathologic conditions that affect lungs;
"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);
"RNA medicines" a type of biotechnology that uses RNA to treat a disease;
"RTW" RTW Investments, LP, also referred to as the Investment Manager;
"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;
"Tachycardia" a heart rhythm disorder;
"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;
"Ulcerative Colitis" an inflammatory bowel disease that causes sores in the digestive tract;
"US GAAP" United States Generally Accepted Accounting Principles;
"Uveal melanoma" a type of eye cancer;
"Valuation Committee" Valuation Committee of the Investment Manager;
"WACC" weighted average cost of capital;
"XBI" the SPDR S&P Biotech ETF;
"XIRR" an internal rate of return calculated using irregular time intervals.
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 (US$356.5 million) divided by the number of Ordinary Shares in issue
(212,389,138) 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/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 (US$1.68) and the
reporting period. NAV per share at the beginning of the period (US$1.54) minus one expressed as
a percentage.
Share price growth/Total Shareholder Return The percentage increase(decrease) in the price per share during the reporting 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 (US$1.25) and the
period. the reporting period. price per share at the beginning of the period (US$1.21) minus 1.00 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 (US$1.25) and the
Ordinary Share, expressed as a percentage of the NAV per ordinary share. excess demand versus supply and vice versa. NAV per share at the end of the period (US$1.68) 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
(as of 30 June 2023) 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 (from initial
investment date to 30 June 2023).
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 method formula detailed in
of an AIF it manages, whether through borrowing of cash securities, or assets. Article 7 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)
General Company Information
Structure Closed-end Investment Fund
Domicile Guernsey
Listing London Stock Exchange, Premium Segment
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
SEDOLs BKTRRM2 and BNNXVW5
Tickers RTW (USD) and RTWG (GBP)
LEI 549300Q7EXQQH6KF7Z84
Website www.rtwfunds.com/rtw-biotech-opportunities-ltd
Schedule of Key Service Providers
Board of Directors Guernsey Advocates Public Relations
William Simpson (Chair, Carey Olsen (Guernsey) LLP Buchanan
Chair of Management Engagement Committee, Chair of Sustainability Committee) Carey House 107 Cheapside
Paul Le Page Les Banques London
(Chair of Audit Committee) St Peter Port EC2V 6DN
William Scott Guernsey
(Chair of Nomination & Remuneration Committee) GY1 4BZ Distribution Partner
Nicola Blackwood (Independent NED)* Cadarn Capital
Stephanie Sirota (NED) UK Legal Advisers (c)/(o) WeWork
Herbert Smith Freehills LLP 1 Fore Street Avenue
Investment Manager and AIFM Exchange House London
RTW Investments, LP Primrose Street EC2Y 9DT
40 10(t)(h) Avenue, Floor 7 London
New York EC2A 2EG
NY 10014
United States of America
Corporate Brokers Independent Auditor
Registered Office BofA Securities KPMG Channel Islands Limited
1(st) Floor, Royal Chambers 2 King Edward Street Glategny Court
St Julian's Avenue London Glategny Esplanade
St Peter Port EC1A 1HQ St Peter Port
Guernsey Guernsey
GY1 3JX Deutsche Numis Securities GY1 1WR
45 Gresham Street
Administrator and Company Secretary London Principal Bankers
Elysium Fund Management Limited EC2V 7BF Barclays Bank PLC, Guernsey Branch
1(st) Floor, Royal Chambers Le Marchant House
St Julian's Avenue Share Registrar Le Truchot
St Peter Port MUFG Pension & Market Services** St Peter Port
Guernsey 65 Gresham Street Guernsey
GY1 3JX London EC2V 7NQ GY1 3BE
Sub-Administrator
Morgan Stanley Fund Services USA LLC
2000 Westchester Avenue, 1(st) Floor
Purchase
NY 10577
United States of America
* On 11 July 2024, Baroness Nicola Blackwood was appointed as an independent
Non-Executive Director.
** The Group's share registrar, Link Group, was acquired by MUFG in May 2024.
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