Annual Financial Report
31/03/2022 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20220331:nRSe6492Ga&default-theme=true
RNS Number : 6492G RTW Venture Fund Limited 31 March 2022
LEI: 549300Q7EXQQH6KF7Z84
31 March 2022
RTW Venture Fund Limited
Annual Report and Audited Financial Statements for the Year Ended 31 December
2021
Record number of portfolio company IPOs, providing strong valuation step-ups
RTW Venture Fund Limited ("RTW" or the "Company"), a London Stock
Exchange-listed investment fund focused on identifying transformative assets
with high growth potential across the life sciences sector, is pleased to
announce its Annual Results for the year ended 31 December 2021.
Financial Highlights - further deployment progress
RTW Venture Fund Limited Year-end reporting period (01/01/2021-31/12/2021) Year-end reporting period (01/01/2020-31/12/2020) Admission (30/10/2019)
Ordinary NAV US$363.0 million US$375.3 million US$168.0 million
NAV per Ordinary Share US$1.71 US$1.96 US$1.04
NAV Growth per Ordinary Share (%) -13% +54% --
Price per Ordinary Share US$1.78 US$1.88(ii) US$1.04
Share price growth (%) (i) -5% 37%
Nasdaq Biotech (iii) 1% 27%
Russell 2000 Biotech (iii) -27% 53%
(i) Total shareholder return is an alternative
performance measure.
(ii) As the Company's December NAV was not published
until mid-January and the portfolio enjoyed an exceptionally strong month of
performance in December the Company's share price is shown as being at a
discount to the December 31 NAV even though its shares traded at a premium to
the published November NAV during December.
(iii) Source: Bloomberg.
Portfolio Highlights - deployment progress continues:
· As of 31 December 2021, the Company held 42 core portfolio
companies (2020: 22)
o 17 of which are publicly-listed (2020: 9)
o 25 of which are privately-held (2020: 13)
· Of these, 21 new core portfolio companies were added during the
period
· 44/55 or 80% of core/total portfolio companies' pipeline products
are in clinical stage programmes (2020: 25/33)
· As of 31 December 2021, two-thirds of NAV was invested in core
portfolio companies and one-third of NAV was invested in non-core portfolio
holdings.
· During the year to 31 December 2021, 9 portfolio companies
(Ventyx, Pyxis, Tenaya, Monta Rosa, Biomea Fusion, Prometheus, Landos,
Immunocore and GH Research) launched an initial public offering (IPO)
o Average 1.9x step-up from the initial time of investment to IPO (2020:
1.8x)
· During the period, RTW successfully migrated to the Official List
of the FCA and to trading on the Premium Segment of the London Stock Exchange
Roderick Wong, MD, Managing Partner and Chief Investment Officer of RTW
Investments, LP (the "Investment Manager") commented:
"I am pleased to report a resolute performance for RTW Venture Fund for 2021,
during a time of heightened turbulence across all markets, especially for the
biotech sector. The Company made considerable progress and outperformed the
Russell 2000 Biotech Index by a noticeable margin, proving our strong track
record of identifying transformative assets with high growth potential.
During 2021, the Company achieved a number of significant milestones,
including almost doubling the number of portfolio companies to 42 with 22
added during the course of the year. No less than 9 portfolio companies
completed IPOs, leading to an average 1.9x increase in valuations across those
companies. Additionally, RTW successfully migrated to the Official List of the
FCA and to trading on the Premium Segment of the London Stock Exchange, which
we hope will further enhance the Company's liquidity, profile and pave the way
for potential future index inclusions.
We believe that there remains significant demand for reliable capital to
support the discovery and development of scientific innovation globally, and
that the biotech sector remains extremely attractive following a historically
significant de-rating of the small cap biotech sector. The sell off has been
so extreme that it has now resulted in the highest number of biotech companies
trading at less than 2x cash in history, opening up an exciting range of
opportunities for us to identify high quality companies through our science
led approach.
We look ahead to 2022 with optimism and look forward to providing shareholders
with regular updates as we progress."
For Further Information
RTW Investments, LP +1 (646) 343 9280
Stephanie Sirota, Chief Business Officer
Alexandra Taracanova, PhD, Director of Investor Relations
Julia Enright, Senior Business Development Associate
Elysium Fund Management Limited +44 (0)14 8181 0100
Joanna Duquemin Nicolle, Chief Executive Officer
Sadie Morrison, Managing Director
J.P. Morgan Cazenove +44 (0)20 7742 4000
William Simmonds
Jérémie Birnbaum
James Bouverat (Sales)
BofA Securities +44 (0) 20 7628 1000
Edward Peel
Kieran Millar
Buchanan +44 (0)20 7466 5000
Charles Ryland
Henry Wilson
George Beale
About RTW Venture Fund Limited:
RTW Venture Fund Limited (LSE: RTW & RTWG) is an investment fund focused
on identifying transformative assets with high growth potential across the
life sciences sector. Driven by a long-term approach to support innovative
businesses, RTW Venture Fund invests in companies developing next-generation
therapies and technologies that can significantly improve patients' lives.
RTW Venture Fund Limited 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 RTW website at
www.rtwfunds.com (https://protect.mimecast-offshore.com/s/eY8OCgLEp4SlY4JEFN_vEF)
for more information.
Chairman's Statement
I present the 2021 annual results for RTW Venture Fund Limited (the "Company")
and am pleased to report that significant milestones were achieved during the
last year.
2021 Overview
Building upon the considerable achievements and extraordinary growth in 2020,
the Company and RTW continued executing their strategy in 2021. In spite of
the COVID-19 pandemic and market volatility in the biotech sector, the
Investment Manager remained focussed on the science-led fundamentals and
valuation of the underlying companies and demonstrated an accelerated pace of
capital deployment by investing in 21 new portfolio companies, compared with
15 in the previous financial year. This enabled the Company to continue to
build its portfolio of innovative biotechnology and medical technology
companies and providing solution-driven financing strategies at various points
in the individual life cycles of these companies.
Despite market volatility in the biotech sector, the Company share price,
which fell by 5.3% over the year, significantly outperformed its benchmark,
the small-cap heavy Russell 2000 Biotech Index, which fell by 26.9% over the
same period while slightly lower than the large-cap heavy Nasdaq Biotech Index
which returned +0.6% for the reporting period. From 31 December 2020 to 31
December 2021, the NAV declined by 12.8% from US$375.3 million or US$1.96 per
Ordinary Share to US$363.0 million or US$1.71 per Ordinary Share. The largest
detractor to the NAV was the share price performance of Rocket, which fell
heavily in line with the gene therapy sector as a whole as investors priced in
delays to clinical trials. This was partially offset by the better performance
of our private companies, particularly JIXING, and the IPOs of Landos,
Immunocore, Prometheus, GH Research, Monte Rosa, Tenaya, Ventyx and
acquisition of Inivata.
At the beginning of the year, the Company portfolio included 22 core portfolio
companies, of which 13 were privately held and nine were publicly listed. All
core portfolio companies were initiated as private investments by the
Investment Manager. During 2021, the Company added a further 21 portfolio
companies, one of which, Inivata, was later acquired by a third-party,
bringing the total number of core portfolio companies to 42, representing c.
two-thirds of NAV at the end of the year.
As in previous periods, to mitigate any drag on performance due to excess cash
awaiting deployment into new private assets, the Company currently has c.
one-third of NAV in a high-quality portfolio of listed companies or non-core
portfolio assets selected by the Investment Manager, to be representative of
positions that are also held in their other investment funds.
Share Issuance
During the reporting period our corporate broker, J.P. Morgan Cazenove,
reported significant demand from prospective shareholders, which was reflected
in the fact that the Company's share price has traded at an average premium to
NAV of c. 10% since its admission. Under our Articles and in accordance with
UK Listing rules, the Company has the authority to issue new shares of up to
20% of the outstanding share capital in any rolling twelve-month period
without filing an updated prospectus, provided the shares are issued on a
non-dilutive basis at a premium to NAV. In response to market demand in 2021,
the Company issued a further 20,873,403 shares, an 11% increase in the total
outstanding shares of the Company and raising an additional US$44.1 million
net of expenses. The share issuance was also modestly accretive to NAV,
contributing c. 1% to the NAV growth per Ordinary Share.
Migration to the Premium Listing of the Main Market of the LSE
As stated in the 2020 Annual Report, the Board intended to raise the profile
of the Company with a view to broadening its shareholder base by means of
exploring a migration to the Premium Listing of the Main Market of the London
Stock Exchange.
I am pleased to report that the Company successfully completed the migration
and was admitted to listing on the Official List of the FCA and to trading on
the Premium Segment of the London Stock Exchange plc's Main Market on 6 August
2021. The application for admission was approved by a shareholder vote at the
extraordinary general meeting held on 30 July 2021. The
Company also introduced an additional market quote for the shares on the
London Stock Exchange denominated in GBP under ticker "RTWG". There were
no changes to the legal form or nature of the Ordinary Shares nor to the
reporting currency of the Company's financial statements, which will remain
in US Dollars.
The Board believes that the Premium Segment of the Main Market is the most
appropriate platform for the continued growth of the Company by increasing
RTW Venture Fund's profile, broadening its shareholder register, adding a
Sterling denomination, and facilitating the Company's potential eligibility
for inclusion in the FTSE UK Index Series.
Outlook
Even with COVID-19 and war in Ukraine remaining pressing issues worldwide, the
Company is looking ahead with optimism and confidence. As a full life-cycle
investor, our Investment Manager also invests in public biotech and medtech
securities trading at attractive levels. We can take advantage of valuation
disparities between small and mid-cap and large-cap companies in the sector
and the overall biotech sector correction in 2022. The Investment Manager
believes that there remains significant demand for reliable capital to support
the discovery and development of scientific innovation globally, and that
there is an opportunity to grow their footprint in the UK and EU as an active
local participant in the biotech ecosystem. The Investment Manager therefore
intends to grow the Company's portfolio by attracting demand from new
shareholders to assist in the financing of an exciting pipeline of new ideas.
These are based upon the Company's strategy of founding, investing, and
supporting companies developing next-generation therapies and technologies
that can significantly improve patients' lives. Accordingly, the Board expects
the Company to deliver strong performance over the long term and creating
value for shareholders.
AGM
The Company will hold its Annual General Meeting (AGM) on 21 June 2022 to
review the annual results and provide portfolio updates. We would like to
dedicate a part of the meeting to address questions from our shareholders. At
the present time, we anticipate holding the AGM in a virtual format, although
COVID-permitting it may be held in person at Royal Chambers, St Julian's
Avenue, St Peter Port, Guernsey. However, we encourage our shareholders to
share your questions here and we will endeavour to answer as many as we can:
RTWVentureFund@rtwfunds.com.
On behalf of the Board, I would like to express my gratitude for your
continued support and wish you and your families a healthy, safe, and
prosperous 2022. I look forward to updating you further at the time of our
interim results later in the year.
William Simpson
Chairman of the Board of Directors
RTW Venture Fund Limited
30 March 2022
Report of the Investment Manager
Executive summary
We present the year-end results of the Company as of 31 December 2021. Since
its listing on the London Stock Exchange in October 2019, the Company has
achieved NAV growth of 64.4% from US$168.0 million, or US$1.04 per Ordinary
Share, to US$363.0 million, or US$1.71 per Ordinary Share as of 31 December
2021. For the reporting period, the NAV attributable to Ordinary Shares
declined by 12.8% from US$375.3 million NAV or US$1.96 per Ordinary Share as
of 31 December 2020. This compares with a decline in the Company's Russell
2000 benchmark of 26.9%. From Admission to 31 December 2021, the share price
has returned 71.2%.
Table 1. Financial Highlights
RTW Venture Fund Limited Year-end reporting period (01/01/2021-31/12/2021) Year-end reporting period (01/01/2020-31/12/2020) Admission (30/10/2019)
Ordinary NAV US$363.0 million US$375.3 million US$168.0 million
NAV per Ordinary Share US$1.71 US$1.96 US$1.04
NAV Growth per Ordinary Share (%) -13% +54% --
Price per Ordinary Share US$1.78 US$1.88(ii) US$1.04
Share price growth (%) (i) -5% 37%
Nasdaq Biotech (iii) 1% 27%
Russell 2000 Biotech (iii) -27% 53%
(i) Total shareholder return is an alternative
performance measure.
(ii) As the Company's December NAV was not published
until mid-January and the portfolio enjoyed an exceptionally strong month of
performance in December the Company's share price is shown as being at a
discount to the December 31 NAV even though its shares traded at a premium to
the published November NAV during December.
(iii) Source: Bloomberg.
RTW Investments, LP (the "Investment Manager", "us", "we"), a leading
healthcare-focused entrepreneurial investment firm with a strong track record
of supporting companies developing life-changing therapies, created the
Company as an investment fund focused on identifying transformative assets
with high growth potential across the biopharmaceutical and medical technology
sectors. Driven by our deep scientific understanding 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.
As of 31 December 2021, c. two-thirds of NAV was invested in core portfolio
companies, a similar figure to 31 December 2020 despite an increase in share
capital and reflecting the Company's long term target portfolio allocation
range. Core portfolio companies typically begin as private investments,
reflecting the key focus of the Company's strategy. However, our investment
approach is defined as full life cycle and therefore involves retaining our
private investments well beyond their IPO, hence our core portfolio consists
of both privately-held and publicly-listed companies.
The Company also invested approximately a third of its NAV in publicly listed,
non-core portfolio assets in order to mitigate any 'cash drag' effect pending
eventual re-investment in core portfolio opportunities as they arise. The
non-core portfolio assets were selected by us and are also held in our other
funds. The investments represented in this portfolio are similarly categorized
as innovative biotechnology and medical technology companies developing and
commercializing potentially disruptive and transformational products.
Over the year, our listed core holdings produced the majority of our losses
and our private core holdings produced the majority of our gains. In 2021, the
NAV per Ordinary Share declined by 12.8%. The main contributors to the NAV per
Ordinary Share decrease were Rocket, Frequency, Avidity, Athira, Pulmonx and
Tarsus, contributing c. 25% to the decline. These mark to market losses were
offset by the performance of our private companies, particularly JIXING and
IPOs of Landos, Immunocore, Prometheus, GH Research, Monte Rosa, Tenaya,
Ventyx and acquisition of Inivata, together contributing c. 12.3% to the NAV
growth. Share issuance at a premium to net asset value contributed c. 1.2% and
the balance of our performance is made up of operating expenses and a
performance allocation fee credit.
Figure 1. Performance drivers as of 31 December 2021
chart
On listing, the Company's core portfolio included six companies, four of which
were developing clinical-stage therapeutics and two med tech companies
developing transformative devices. Since listing, the Company has added 36
companies to its portfolio and has had one position acquired, with 15
additions in the 2020 financial year and 21 in 2021. Portfolio companies added
in the 2021 are listed below.
Our 2021 new investments include:
Company name Description
H1 2021
Visus Clinical stage biotech developing a presbyopia-correcting eye drop.
Ancora Medtech company developing minimally invasive implant for heart failure.
Artiva Developer of allogenic cord blood-derived Natural Killer (NK) cell therapy.
Ventyx Clinical stage biotech advancing a promising immunology pipeline for
autoimmune and inflammatory diseases.
Pyxis Oncology biotech developing antibody-drug conjugates.
Monte Rosa Pre-clinical stage targeted protein degradation biotech.
GH Research Clinical stage biotech developing therapies to manage mental disease.
RTW Royalty #2 Royalty as a part of RTW-Urogen deal relating to the development and
commercialization of urological cancer treatments.
Numab Therapeutics Swiss biotech developing next-gen multi-specific antibody-based
immunotherapies for cancer and inflammation.
Yarrow RTW-backed new company creation focused on CNS diseases.
Alcyone Gene therapy platform company developing therapies for CNS diseases.
Umoja Preclinical-stage lentiviral in vivo CAR-T oncology biotech.
Neurogastrx Clinical stage spec pharma focused on gastrointestinal disorders.
H2 2021
Magnolia Medical Medtech company focused on innovative blood and fluids collection devices.
Artios Oncology biotech developing first-in-class therapies based on DNA Damage
Response.
InBrace Medical technology company pioneering a behind-the-teeth teeth straightening
approach.
Lycia Biotech developing extracellular protein degradation-based pipeline of
therapies.
CinCor Biopharma developing next-gen treatments for cardio-renal diseases.
Acelyrin Biotech advancing an antibody mimetic for inflammatory conditions.
Kyverna Biotech developing cell therapy for autoimmune diseases.
Third Harmonic Bio Biotech advancing a small molecule for autoimmune mast cell disorders.
As of 31 December 2021, the portfolio included 42 companies that were
diversified across treatment modalities, therapeutic focus, and clinical stage
of their programs (Figure 2A-C). While the portfolio remains dominated by
US-based companies (Figure 2D), we are committed to adding UK and EU-based
companies in an effort to support the best assets globally and foster local
biotech ecosystems where we see attractive opportunities.
Figure 2. Portfolio breakdown, by (A) modality, (B) therapeutic focus, (C)
clinical stage and (D) geography as of 31 December 2021
(A) chart (B) chart
(C) chart (D) chart
Key updates for Portfolio Companies during 2021:
Clinical
· In April 2021, iTeos shared a positive preliminary Phase 1 data
update for its TIGIT antibody EOS-448 program in adult patients with advanced
solid tumors, indicating EOS-448 was generally well tolerated with no
dose-limiting toxicities observed and showed preliminary signs of clinical
activity as a monotherapy, including a partial response in a melanoma patient,
and stable disease in multiple patients.
· In May 2021, Rocket shared positive data updates to its
lentiviral vector (LVV)-based gene therapy programs for the treatment of
Fanconi Anaemia (FA) and (2) Leukocyte Adhesion Deficiency-I (LAD-I), and (3)
Pyruvate Kinase Deficiency (PKD). Rocket also announced that the FDA had put a
clinical hold on its adeno-associated virus (AAV)-based gene therapy for Danon
disease, a devastating, paediatric heart failure condition. The hold was not
triggered by safety concerns and patient enrollment resumed in Q3 2021.
· In June 2021, Tarsus announced positive results of Saturn-1
pivotal trial evaluating TP-03 for the treatment of demodex blepharitis. The
Saturn-1 Phase 2b/3 trial met all primary and secondary endpoints, and
demonstrated significant, clinically meaningful outcomes with no serious
treatment-related adverse events and no treatment-related discontinuations.
· In August 2021, Immunocore announced acceptance of its Biologic
License Application for tebentafusp in metastatic uveal melanoma with the FDA
and EMA, with the PDUFA action date set for February 23, 2022. Immunocore
received FDA approval for Kimmtrak (tebentafusp) in January 2022 ahead of the
expected PDUFA date.
· In October 2021, Avidity announced that the FDA had granted Fast
Track Designation to its lead program, AOC 1001, for the treatment of myotonic
dystrophy type 1 (DM1). Fast Track Designation enables more frequent
interactions with the FDA to expedite the development and review process for
drugs intended to treat serious or life-threatening conditions and that
demonstrate the potential to address unmet medical needs.
· In November 2021, Rocket provided a positive incremental data
update on its adeno-associated virus (AAV)-based gene therapy for Danon
disease Overall, it showed stabilization or improvement in functional and
biomarker metrics.
Financing
· In 2021, nine portfolio companies (Landos, Immunocore,
Prometheus, Biomea Fusion, Monte Rosa, GH Research, Tenaya, Ventyx and Pyxis
Oncology) launched an initial public offering (IPO) with an average 1.9x
valuation step-up from the initial time of investment to IPO, followed by an
additional average +15% performance on the first day of trading.
· In May 2021, JIXING announced an exclusive licencing agreement
with Milestone to develop and commercialize etripamil, a novel calcium channel
blocker designed to be a rapid-response therapy for episodic cardiovascular
conditions, in China. Following this announcement, the Company participated
alongside our other investment vehicles in a Series B financing round.
· In May 2021, NiKang Therapeutics completed a US$200 million
Series C financing round. The Company alongside other vehicles managed by the
Investment Manager participated in the financing round.
· We seeded our latest new company creation Yarrow Biotechnology, a
biotech developing antisense oligonucleotide-based therapeutics for disorders
with high unmet need. In May 2021, Yarrow announced a licensing agreement with
ProQR for its antisense oligonucleotide technology (ASO) to develop and
commercialize potential therapies for an undisclosed CNS target.
· In June 2021, iTeos and GSK announced a deal on development and
commercialization of iTeos' EOS-448 TIGIT targeting antibody, under which
iTeos is to receive a US$625M upfront payment in addition to potential
milestones, and royalty payments on ex-US sales up to US$1.45B in development
and commercial milestones.
· In June 2021, Inivata announced that NeoGenomics, Inc (NASDAQ:
"NEO") had completed its acquisition of the company, the intention of which
had previously been announced on 5 May 2021. NeoGenomics exercised its option
to acquire the remaining Inivata equity interest for US$390 million after it
had previously made a US$25 million minority equity investment.
· In August 2021, JIXING announced an exclusive license and
collaboration agreement with Oyster Pharma to develop and commercialize OC-01
(varenicline) and OC-02 (simpinicline) nasal sprays for the treatment of signs
and symptoms of dry eye disease for patients in Greater China. Following this
announcement, the Company participated alongside our other investment vehicles
in a Series C financing round.
· In December 2021, JIXING announced an expansion of its
collaboration with Cytokinetics by entering into an exclusive license and
collaboration agreement to develop and commercialize omecamtiv mecarbil for
the proposed treatment of heart failure with reduced ejection fraction (HFrEF)
in Greater China.
Portfolio performance and updates
The Company's share price has traded at an average premium of c. 10% since
inception (Figure 3A). The Company's overall returns since inception have
outperformed its biotech benchmarks, generating an overall return of c. 71% vs
c. 35% by the small and mid-cap heavy Russell 2000 Biotechnology Index and vs
c. 40% by the large-cap heavy Nasdaq Biotechnology Index (Figure 3B note: the
reporting period for this chart is 30 October 2019 to 31 December 2021). In
2021, the Company's share price declined by c. 5%, whilst the Nasdaq
Biotechnology Index returned c. 1% and the Russell 2000 Biotechnology index
returned c. -27% for the same period, respectively. Source Bloomberg.
Figure 3. RTW.L share price performance (A) and returns (B) as of 31 December
2021
(A) chart
(B) chart
Rocket's share price declined by 60%, which made it the main detractor from
the NAV per Ordinary Share this year (c. -22%). The FDA put Rocket's Danon
program on clinical hold in early May 2021 in order to ensure adequate
safeguards for patients in its clinical study. The trial was allowed to
resume in August 2021 (for context, this was a fast resolution). The company
also shared an update from the first five patients dosed in November 2021.
While the data suggest four patients have been stable over their one to two
years on study, investors expressed concern that a lack of improvement in
certain measurements may make phase 3 trial design more challenging. Despite
these points, Rocket remains among the top 3 largest independent gene therapy
companies by market capitalisation.
In context to this, it is worth noting that it was a challenging year for gene
therapy as a subsector. Of 30 publicly traded gene therapy companies, the
median decline has been 54%, with only three companies up on the year, no drug
approvals (the total remains at two), and no public acquisitions. Recent
setbacks have spanned safety, efficacy, and CMC (chemistry, manufacturing and
controls):
Figure 4. Gene therapy setbacks
chart
We believe the companies best positioned to overcome these near-term
challenges will be those who have chosen to focus on therapies for severe
diseases with limited options and that also have meaningful commercial
potential. Rocket's talented team and programs have been committed to this
mission from the start, and we remain optimistic for both our existing
programs and new opportunities.
As of 31 December 2021, nine portfolio companies, which included Landos,
Immunocore, Prometheus Biosciences, Biomea Fusion, Monte Rosa, GH Research,
Tenaya, Ventyx and Pyxis Oncology had gone public via an IPO with an average
1.9x step-up from the initial time of investment to IPO and an average private
holding period of 0.7 years, followed by an additional average c. 15%
performance on the first day of trading.
Table 2. Core portfolio companies IPOs in 2021
Company Initial funding type Ticker IPO date Performance on 1(st) day of trading
Landos Series B LABP February 2021 -25%
Immunocore Series B* IMCR February 2021 +66%
Prometheus Biosciences Series D RXDX March 2021 +33%
Biomea Fusion Series A BMEA April 2021 +9%
Monte Rosa Series C GLUE June 2021 +12%
GH Research Series B GHRS June 2021 +20%
Tenaya Series C TNYA July 2021 +2%
Ventyx Series B VTYX October 2021 +31%
Pyxis Oncology Series A PYXS October 2021 -17%
*Immunocore originated as a Series A investment with the Investment Manager
Table 3. Performance of core private and public portfolio investments as of 31
December 2021
Portfolio company Initial Investment Date Valuation Date MOC XIRR Private Holding Period (years)
Beta Bionics 6/28/2019 12/31/2021 1.0x -1.0% 2.5
Orchestra 6/28/2019 12/31/2021 0.9x -3.3% 2.5
Frequency^ 7/17/2019 03/23/2021 2.8x 85.3% 1.7
Landos* 8/9/2019 12/31/2021 1.2x 6.7% 2.4
Immunocore* 8/13/2019 12/31/2021 1.7x 28.5% 2.4
Avidity* 11/8/2019 12/31/2021 2.6x 56.9% 2.1
JIXING 2/10/2020 12/31/2021 1.7x 85.3% 1.9
Iteos* 3/24/2020 12/31/2021 4.2x 136.6% 1.8
Pulmonx* 4/17/2020 12/31/2021 2.5x 70.6% 1.7
Athira* 5/29/2020 12/31/2021 2.3x 101.2% 1.6
C4 Therapeutics* 6/2/2020 12/31/2021 3.6x 126.3% 1.6
Encoded 6/12/2020 12/31/2021 2.1x 62.1% 1.6
Milestone^^ 7/23/2020 12/31/2021 1.6x 43.5% 1.4
Nikang 9/9/2020 12/31/2021 1.1x 8.2% 1.3
Tarsus* 9/24/2020 12/31/2021 1.6x 45.4% 1.3
Prometheus* 10/30/2020 12/31/2021 5.0x 382.1% 1.2
RTW Royalty #1 11/13/2020 12/31/2021 1.2x 18.9% 1.1
Nuance 12/7/2020 12/31/2021 1.0x 0.0% 1.1
Tenaya* 12/17/2020 12/31/2021 1.5x 50.1% 1.0
Biomea* 12/23/2020 12/31/2021 0.9x -6.5% 1.0
Inivata** 12/24/2020 6/18/2021 2.6x 635.5% 0.5
Prometheus Labs 12/31/2020 12/31/2021 1.0x 0.0% 1.0
Ancora 1/20/2021 12/31/2021 1.0x 2.0% 0.9
Visus 1/26/2021 12/31/2021 1.1x 14.7% 0.9
Artiva 2/23/2021 12/31/2021 1.3x 30.7% 0.9
Ventyx* 2/26/2021 12/31/2021 2.0x 206.9% 0.8
Pyxis* 3/8/2021 12/31/2021 1.0x 5.9% 0.8
Monte Rosa* 3/12/2021 12/31/2021 2.0x 129.4% 0.8
GH Research* 4/9/2021 12/31/2021 1.9x 139.8% 0.7
RTW Royalty #2 5/5/2021 12/31/2021 1.1x 21.1% 0.7
Numab 5/7/2021 12/31/2021 1.0x -1.0% 0.7
Yarrow 5/14/2021 12/31/2021 1.0x 0.0% 0.6
Alcyone 6/8/2021 12/31/2021 1.0x 0.0% 0.6
Umoja 6/9/2021 12/31/2021 1.0x 8.2% 0.6
Neurogastrx 6/25/2021 12/31/2021 1.0x 0.0% 0.5
Magnolia 7/2/2021 12/31/2021 1.0x 0.0% 0.5
Artios 7/27/2021 12/31/2021 1.0x 0.0% 0.4
InBrace 8/27/2021 12/31/2021 1.0x 0.0% 0.3
Lycia 9/2/2021 12/31/2021 1.0x 0.0% 0.3
Cincor* 9/22/2021 12/31/2021 1.2x 95.0% 0.3
Acelyrin 10/20/2021 12/31/2021 1.0x 0.0% 0.2
Kyverna 11/9/2021 12/31/2021 1.0x 0.0% 0.1
Third Harmonic Bio 12/17/2021 12/31/2021 1.0x 0.0% 0.0
Average 1.6x 60% 1.1
Public company Price per share as of 29/10/2019 market close (as of listing of the Company) % Return
Rocket US$14.00 56%
*These positions originated in the portfolio as private companies and since
have gone public; as of 31 December 2021, Monte Rosa, GH Research, Tenaya,
Pyxis and Ventyx were under 180-day lock-up provision; **Acquired; ^Exited the
position; ^^Milestone is a public company, the Company holds private warrants.
Table 4. NAV capital breakdown
Type % of NAV as of 31 December 2021 % of NAV as of 31 December 2020
Core portfolio assets (private and public) 66.4% 68.7%
Non-core portfolio assets 38.6% 25.4%
Cash, due to/from brokers, other* -5.0% 5.9%
Total 100.0% 100.0%
*Other includes liabilities such as other payables and accrued expenses.
As of 31 December 2021, our top five holdings of non-core portfolio assets
represented c. 7% of NAV and consisted of: Alnylam (ticker: "ALNY"), a leading
RNA medicine company, Natera (ticker: "NTRA"), a clinical genetic testing
company, Masimo (ticker: "MASI"), a medtech company developing innovative
non-invasive patient monitoring technologies, Thermo Fisher Scientific (ticker
"TMO"), a leading scientific service provider, and Cytokinetics (ticker:
"CYTK"), a clinical-stage biotechnology company developing innovative
treatments for cardiovascular conditions. We expect to deploy the capital
invested into non-core portfolio assets into private companies as new
opportunities arise.
Table 5. Overview of portfolio companies' valuations(*) as of 31 December 2021
Portfolio Company Public/ Private Company's % interest in Portfolio Company's capital as of 31 December 2021 Valuation of Company's investment as of 31 December 2021 % of Company's net assets as of 31 December 2021 YTD P&L as of Valuation hierarchy
31 December 2021
Rocket Public <5% US$51.6 million 13.3% -US$88.8 million Level 1
JIXING Private <10% US$25.6 million 6.6% US$10.5 million Level 3
Prometheus Bio Public <5% US$21.7 million 5.6% US$16.5 million Level 1
Avidity Public <5% US$16.6 million 4.3% -US$0.7 million Level 1
RTW Royalty #2 Private <20% US$13.1 million 3.4% US$1.3 million Level 3
Immunocore Public <1% US$11.0 million 2.9% US$5.1 million Level 1
RTW Royalty #1 Private <10% US$10.0 million 2.6% US$1.8 million Level 3
C4 Therapeutics Public <1% US$9.7 million 2.5% US$0.1 million Level 1
Tenaya Public** <5% US$8.2 million 2.1% US$2.5 million ^ Level 2
GH Research Public <1% US$7.2 million 1.8% US$3.1 million Level 1
iTeos Public <1% US$6.9 million 1.8% US$1.3 million Level 1
Landos Public <5% US$6.1 million 1.6% US$0.9 million Level 1
Tarsus Public <1% US$5.2 million 1.3% -US$4.4 million Level 1
Beta Bionics Private <5% US$4.9 million 1.3% -US$0.5 million Level 3
NiKang Private <5% US$4.6 million 1.2% US$0.4 million Level 3
Ventyx Public** <1% US$4.6 million 1.2% US$1.9 million ^ Level 2
Encoded Private <1% US$4.2 million 1.1% US$2.2 million Level 3
Milestone Public <5% US$4.0 million 1.0% US$0.0 million Level 1
Monte Rosa Public <1% US$3.8 million 1.0% US$1.4 million Level 1
Alcyone Private <5% US$3.7 million 0.9% US$0.0 million Level 3
Pyxis Public** <1% US$3.5 million 0.9% -US$0.4 million ^ Level 2
Umoja Private <1% US$3.4 million 0.9% US$0.1 million Level 3
Ancora Private <1% US$2.9 million 0.8% US$0.0 million Level 3
Visus Private <5% US$2.4 million 0.6% US$0.3 million Level 3
Orchestra Private <1% US$2.3 million 0.6% -US$0.1 million Level 3
Pulmonx Public <1% US$1.9 million 0.5% -US$2.1 million Level 1
Nuance Private <1% US$1.8 million 0.5% US$0.0 million Level 3
Athira Public <1% US$1.7 million 0.4% -US$4.9 million Level 1
Numab Private <1% US$1.7 million 0.4% US$0.0 million Level 3
Neurogastrx Private <1% US$1.6 million 0.4% US$0.0 million Level 3
Kyverna Private <1% US$1.5 million 0.4% US$0.0 million Level 3
Third Harmonic Bio Private <1% US$1.4 million 0.4% US$0.0 million Level 3
Cincor Private <1% US$1.3 million 0.3% US$0.2 million Level 3
Artiva Private <1% US$1.2 million 0.3% US$0.2 million Level 3
Lycia Private <1% US$1.1 million 0.3% US$0.0 million Level 3
InBrace Private <1% US$0.9 million 0.2% US$0.0 million Level 3
Biomea Public <1% US$0.8 million 0.2% -US$0.2 million Level 1
Artios Private <1% US$0.8 million 0.2% US$0.0 million Level 3
Acelyrin Private <1% US$0.7 million 0.2% US$0.0 million Level 3
Magnolia Private <5% US$0.7 million 0.2% US$0.0 million Level 3
Yarrow Private <5% US$0.6 million 0.1% US$0.0 million Level 3
Prometheus Labs Private <1% US$0.1 million 0.0% US$0.0 million Level 3
(*) Valuations for Private Portfolio Companies on a fair market value basis as
of 31 December 2021. The valuations of Rocket, Avidity, iTeos, Athira, C4
Therapeutics, Milestone, Pulmonx, Tarsus, Landos, Immunocore, Prometheus
Biosciences, Biomea, Monte Rosa, GH Research, Tenaya, Pyxis and Ventyx have
been calculated using market capitalization based on their publicly quoted
market prices as of 31 December 2021. **In accordance with the Company's
valuation policy, the Company applies a discount to its investments in Private
Portfolio Companies which become Public Portfolio Companies that are subject
to customary post-IPO lock-up provisions. ^Also includes Level 1 securities
purchased at or after portfolio company IPO.
As of 31 December 2021, two members and one employee of the Investment Manager
served on the board of directors of Rocket and two members and three employees
served on the board of directors of Landos, JIXING, NiKang, Visus, Alcyone,
RTW Royalty #1 and #2, and Yarrow, which in aggregate represented 30.3% of NAV
of the Company.
Migration to the Main Market of the London Stock Exchange
We are pleased to report that RTW Venture Fund was admitted to the Premium
Segment of the Main Market on 6 August 2021 and introduced an additional
market quote denominated in GBP under ticker "RTWG". To satisfy the
diversification requirements that we agreed with the UK Listing Authority, we
reduced our position in Rocket and brought it under 25% of NAV, while adding
to the position in our private fund, making RTW overall a net-buyer of the
security. To note, the sale of Rocket shares by the Company to reduce the
position from c. 33% to c.25% did not result in any crystalized losses, as at
the time of the Company's IPO Rocket's share price was $14 and at the time of
sale on 11 May 2021 was $40, representing c.186% uplift.
We believe the Premium Segment of the Main Market is the most appropriate
platform for the continued growth of the Company. We look forward to
continuing to advance our presence in the UK and are honoured to bring access
to private markets and bespoke negotiated opportunities to an even broader
investor base now being listed on the Premium Segment. We also believe that by
maintaining a strong presence and providing much needed capital to late-stage
venture companies, we are doing our part in fostering a stable and well
capitalized investment ecosystem, which we believe will in turn benefit UK
companies and support further innovation.
Summary of Portfolio Companies with at least 1.0% position of NAV as of 31
December 2021:
As of 31 December 2021, the Company's portfolio included 42 companies, ranging
from biotechnology companies developing preclinical to clinical-stage
therapeutic programs, companies developing traditional small molecule
pharmaceuticals, and med-tech companies developing or commercializing
transformative devices. We selected the Company's portfolio companies based
upon our rigorous assessment of scientific and commercial potential,
opportunities to positively impact value, and with regard to the valuation of
the assets at the time of investment. The table below includes portfolio
companies and their catalysts that had ≥1.0% position size at the end of the
reporting period.
Table 6. RTW Venture Fund portfolio summary of catalysts (core portfolio
holdings >1.0% of NAV) as of 31 December 2021
Portfolio Company Description Public/ Private Clinical stage Expected upcoming catalyst % NAV
Rocket Gene therapy platform company for rare pediatric diseases; five clinical Public: "RCKT" Phase 2 Q2 2022 13.3%
programs for Fanconi anemia, Danon, LAD, PKD and IMO.
JIXING NewCo focused on acquiring rights from innovative therapies Private Phase 3 Series D; H1 2022 6.6%
in the West for development and commercialization in China.
Prometheus Biosciences Precision medicine company focused on IBD, a chronic inflammatory disease of Public: "RXDX" Phase 1 H1 2022 5.6%
GI tract; lead antibody program against TL1A.
Avidity Antibody conjugated RNA medicines company; lead program for myotonic Public: "RNA" Phase 1 H1 2022 4.3%
dystrophy, a degenerative disease with no therapy.
C4 Therapeutics Targeted protein degradation company working on Public: "CCCC" Phase 1 H1 2022 2.5%
blood cancers.
Iteos Novel immune checkpoint clinical stage company, with lead programs targeting Public: "ITOS" Phase 1 / 2 H1 2022 1.8%
TIGIT and A2A in Phase ½ for advanced solid tumors.
Landos Developer of oral therapies for autoimmune disease; lead program for Public: "LABP" Phase 2 / 3 Q2 2022 1.6%
inflammatory bowel disease.
Tarsus Clinical stage biotech developing first-in-class therapeutics Public: "TARS" Phase 3 H1 2022 1.3%
for ophthalmic conditions.
Milestone Clinical stage biopharma developing interventions for tachycardias. Public: "MIST" Phase 3 Q4 2022 1.0%
RTW Royalty #2 Royalty as a part of RTW-Urogen deal. Private - - 3.4%
Immunocore T-cell receptor therapy company focused on oncology Public: "IMCR" Registrational -- 2.9%
and infectious disease; lead program for uveal melanoma.
RTW Royalty #1 Royalty as a part of RTW-Ji Xing-Cytokinetics deal. Private - - 2.6%
Tenaya Biotech developing therapies that can address the underlying cause of heart Public: "TNYA" Preclinical - 2.1%
disease; lead asset gene therapy for HCM.
GH Research Clinical stage biotech developing therapies to manage mental disease. Public: "GHRS" Phase 2 -- 1.8%
Beta Bionics Closed-loop pancreatic system for automated Private Pivotal - 1.3%
and autonomous delivery of insulin.
NiKang Biotech using a structure-based design to develop innovative small molecules Private Preclinical - 1.2%
against promising molecular targets in oncology.
Ventyx Clinical stage biotech advancing a promising immunology pipeline for Public: "VTYX" Phase 2 - 1.2%
autoimmune and inflammatory diseases.
Encoded Gene therapy company developing treatments for rare pediatric CNS disorders. Private Preclinical - 1.1%
Monte Rosa Targeted protein degradation biotech. Public: "GLUE" Preclinical - 1.0%
Aggregate of <1.1% core portfolio companies include: Alcyone, Pyxis, 9.8%
Athira, Pulmonx, Biomea, Orchestra, Visus, Nuance, Numab, Ancora, Artiva,
Yarrow, Prometheus Labs, Neurogastrx, Umoja, Artios, Magnolia, InBrace, Lycia,
Cincor, Acelyrin, Kyverna and Third Harmonic Bio.
Sector review and outlook
Significant biotech sector underperformance, attractive valuations, high
innovation… By some measures of market performance, 2021 was small-cap
biotech's worst calendar year since the financial crisis over a decade ago.
The small-cap heavy Russell 2000 Biotech Index finished down -27%, just ahead
of 2008's -31%. Only 2002's drop of -54% was significantly worse. This
performance is most striking compared to the broader markets. The S&P500
finished +27%, making small-cap biotech's 54% underperformance the largest in
history (second largest was 1998's 42%) (Figure 5).
Figure 5. Russell 2000 Biotech Annual Performance
chart
Overall valuations for the Nasdaq Biotechnology Index (NBI) and SPDR S&P
Biotech (XBI) have now returned to the historical average (Figure 6). This
continues to be coupled with historically low interest rates and historically
high innovation.
Figure 6. Historic sector valuations
chart
Despite market performance, 2021 was a strong year for innovation. The FDA
managed through COVID resource constraints to approve 60 new drugs, topping
last year's 59. Approvals by modality include: RNA for three, novel antibody
technologies for three, and cell therapies for two. mRNA firmly established
itself as the preferred modality for Covid vaccines, and Intellia demonstrated
human proof-of-concept for in vivo CRISPR, unlocking another new modality in
the battle against disease.
2022 Outlook. Most of the headwinds that we faced over the course of 2021 have
either resolved or are far along in the process. In fact, we are hopeful
that 2022 will transition to tailwinds, such as a return to business as usual
at the FDA, multi-year clarity on drug pricing (should some form of the Build
Back Better bill pass), and a resurgence in M&A. Regarding M&A,
2021's total deal volume of $109B is down from $169B in 2020 and is the second
lowest in the last eight years. We speculate that the mix of more attractive
valuations, growing pressure from the coming wave of patent expirations and an
explosion of Covid related cash will be a potent recipe for deal making in
2022.
Figure 7. Biopharma M&A and Deal Capacity
chart
Figure 8. US Biotech IPOs
chart
IPO performance struggled this year under the weight of an all-time high 108
offerings. The average declined ~31% from offer date to YE 2021, after
several years of easy gains for crossover investors. Activity had already
begun to slow, with 60% of the year's IPOs taking place in the first half, and
the number of deals in Q4 starting to approach the run-rate that existed
before the mid-2020 boom. The number of small and relatively illiquid public
companies that have had poor aftermarket performance has resulted in the
highest number of companies trading at <2x cash in history, creating an
exciting backdrop of opportunities for us. We are hopeful this will lead to
the kind of environment that favors those with strong fundamental analytical
capabilities, and who also have the capital and courage to deploy after
painful losses. These are two of our greatest strengths historically that
have enabled us to distinguish ourselves in recoveries, and we are excited to
put them to use.
Figure 9. US Biotech Companies under $10 Billion Market Cap
chart
We think the primary market risks that bear watching sit largely outside of
healthcare and revolve around equities and the dynamic between inflation and
interest rates, and overall market volatility due to war in Ukraine.
Regardless of what happens to equities generally, we are quite optimistic the
historically large performance gap between biotech and the broader markets
will narrow.
Executing on our strategy. We are scientists and entrepreneurs who aspire to
change the lives of patients through innovation, and purposeful investing is
at the heart of everything we do. We power breakthrough therapies that
transform the lives of millions. Maximizing value realization from
transformative products takes time, and we believe it is critical to be
involved and invested in such companies throughout various stages of their
development and ultimately distribution to patients. In the instances where
our research leads us to find that a company doesn't exist, we have the
capability, human power, and funding to create a company de novo to advance an
asset we believe is worth building a business architecture around.
As a full life-cycle investor, we recognize the importance of providing growth
capital along with the support of an experienced team, if and when it is
needed, at any critical inflection point in an asset's life cycle. Scientific
development rarely follows a linear path and nor do we, which is why we are
always thinking about the optimal way to support a company. This can be
achieved through providing growth capital, creative financing solutions,
capital markets expertise, or guidance through investing our time and sharing
our collective experience as directors and stewards of tomorrow's most
exciting and disruptive companies.
Taking a long-term full lifecycle approach and having a true evergreen
structure enables us to avoid pitfalls of structural constraints of
venture-only or public-only vehicles. Our focus is on becoming the best
investors and company builders we can be, delivering exceptional results to
shareholders and making an impact on patients' lives.
As we look ahead to 2022 and beyond, based on the breadth of opportunities we
have been seeing and continue to see, we expect our efforts will translate
into further capital commitments. The last 24 months have been very active, as
we have added fifteen new companies in 2020 and twenty-one in 2021 to the
Company's growing portfolio, and we foresee continuing with a similar
investing pace in 2022. In 2021 and continuing in 2022, we are particularly
focused on attractive opportunities within small and mic-cap public biotech
companies given asymmetric risk / reward profiles of strong fundamentals and
decreased valuations.
Primary areas of focus remain in genetic medicines, small molecule, antibody
and next generation antibody therapies, targeted protein degradation, rare
diseases, targeted oncology, and medical technologies. We are excited by
advancements we are witnessing in neurology, ophthalmology, immunology,
muscular dystrophies, and cardiovascular and pulmonary diseases.
We have always emphasized the important point that exciting innovation is
taking place globally. Building upon our strong reputation in the U.S., we aim
to strengthen our presence with new offices in London and Shanghai to further
expand our presence and grow roots in these two strategic geographies. We are
as keen on exploring scientific programs coming out of the UK and Europe as we
are for those discovered and developed in the U.S. labs. We intend to continue
to build inroads and have been actively cultivating deeper relationships in
the UK.
We believe there is a significant demand for reliable capital providers, such
as ourselves, to continue to support scientific innovation and development of
transformative therapies for patients. With that in mind, we intend to grow
the Company's portfolio, by attracting new shareholders to assist in the
financing of an exciting pipeline of new ideas. We expect the split to remain
close to 80% biopharmaceutical assets and 20% across medical technology
assets. In line with prior guidance, we anticipate two-thirds of the core
portfolio investments will be made in mid to later stage venture companies and
one-third of the investments focused on active company building around the
discovery and development or licensing and distribution of promising assets.
Key Portfolio Company Events Post Period End
On 6 January 2022, CinCor announced pricing of its US$193.6 million IPO, by
offering 12.1 million shares at US$16.00 per share. The shares began trading
on Nasdaq Global Market on 7 January 2022 under ticker "CINC". Since IPO
CinCor shares have traded down 4.4% as of 23 March 2022.
The Company's investments in CinCor remains under 180-day lock-up provision.
In January 2022, the biotech sector has experienced a further selloff driven
by investor fears over inflation and interest rates. The selloff resulted in a
NAV per Ordinary Share decrease of 14% as of 31 January 2022. In February
2022, Russia invaded Ukraine, which resulted in further turmoil and
uncertainty in the global markets. The Company's NAV per Ordinary Share
further declined by 2% as of 28 February 2022. The Company does not have any
portfolio companies in the affected regions.
RTW Investments, LP
30 March 2022
Our Long Term Strategy
Transforming the lives of millions
Our long-term strategy is anchored in identifying sources of transformational
innovations by engaging in a deep scientific research and rigorous idea
generation process, which is complemented with years of financial investment,
company building, transactional, and legal expertise.
Identify
Identify transformational innovations
We have developed expertise through our comprehensive study of industry and
academic efforts in targeted areas of significant innovation. Thanks to the
genome, there is more clarity around the causes of disease. Coupled with new
exciting modalities that can address genetic diseases in a targeted way, drug
innovation is accelerating.
Engage
Engage in deep research and unlocking value
We developed repeatable internal processes combining technology and manpower
to comprehensively cover critical drivers of innovation globally. We seek to
identify biopharmaceutical and medical technology assets, ascertained through
rigorous scientific analysis that have a high probability of becoming
commercially viable products and can dramatically change the course of
treatment and in some cases bring effective and/or full curative outcomes to
patients.
Build
Build new companies around promising academic licences
We have the capabilities to partner with universities and in-license academic
programs, by providing capital and infrastructure to entrepreneurs to advance
scientific programs. Particularly working in rare diseases, often areas with
little existing research and treatment options, means that forming a rare
disease-focused company is a way of shining a light on this space and creating
a roadmap to eventually developing a curative treatment.
Support
Support full lifecycle investment
A key part of our competitive advantage is the ability to determine at what
point in a company's life cycle we should support the target asset or
pipeline. As a full lifecycle investor, we can provide growth capital,
creative financing solutions, capital markets expertise, or guidance through
investing our time and sharing our collective experience as directors and
stewards of tomorrow's most exciting and innovative companies. Taking a
long-term full lifecycle approach and having a true evergreen structure
enables us to avoid pitfalls of structural constraints of venture-only or
public-only vehicles. Our 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.
Our Strategy in Action
Identify transformational innovations
RTW focuses on identifying transformational innovations across the life
sciences space, specifically backing scientific programs that have the
potential to disrupt the prevailing standard of care in their respective
disease areas.
Avidity
4.3% of NAV
2020: 3.9%
Portfolio company ownership
<5%
2020: <5%
The need
It is estimated that about 40,000 Americans suffer from myotonic dystrophy, a
rare genetic muscular dystrophy with no approved treatments.
Mission
Avidity is developing antibody oligonucleotide conjugate (AOC™)
therapeutics, which combines the tissue selectivity of monoclonal antibodies
and the precision of oligonucleotide-based therapeutics to overcome barriers
to the delivery of oligonucleotides and target genetic drivers of disease.
Status
Avidity's lead program is in clinical trials for myotonic dystrophy (MD) and
has discovery efforts underway to address additional diseases of the muscle.
Next milestone
Avidity is expected to share its preliminary Phase 1 clinical trial data for
its lead program in myotonic dystrophy in H1 2022.
We believe the best way to create value is by solving unmet needs
As the global life sciences market experiences rapid growth, our strategic
focus on addressing unmet patient needs has led to multiple opportunities for
value creation.
Key achievements
Core portfolio companies
42
2020: 22
New companies added in 2021
21
2020: 15
Therapeutic areas addressed by core portfolio
10
2020: 9
Key statistics
Therapeutics
c.86%
2020: c.80%
Medtech
c.14%
2020: c.20%
Portfolio companies' pipeline products are
in clinical stage programs
44/55
2020: 25/33
Priorities for 2022
As we look ahead to 2022, based on the breadth of opportunities we have been
seeing and continue to see, we expect our efforts will translate into further
capital commitments. The past year has been very active, and we foresee
continuing with a similar investing pace in 2022.
Primary areas of focus remain in genetic medicines, small molecule, antibody
and next generation antibody therapies, rare diseases, targeted oncology, and
medical technologies. We are excited by advancements we are witnessing in
neurology, ophthalmology, immunology, muscular dystrophies, and cardiovascular
and pulmonary diseases.
Link KPIs
5 Diversified portfolio across multiple therapeutic areas, treatments
modalities and geographies
6 Active and robust pipeline
Link principal risks
3 The Investment Manager relies on key personnel
4 Portfolio Companies may be subject to litigation
6 Clinical Development & Regulatory Risks
8 COVID-19
Innovation Boom
We are living in an era where we are witnessing innovation accelerating at a
breakneck speed with unparalleled opportunities for value creation.
The growth of new drug modalities has been dramatically accelerating. Whilst
small molecules dominated drug development for over 30 years, antibodies and
proteins grew quite gradually for about 20 years. Over the most recent
decade the number of modalities has doubled, and furthermore in the first two
years of this decade we added as many new modalities as in the previous ten
years.
chart
We are seeing validated technologies, such as those derived from DNA and RNA
science, that can effectively deliver therapeutic solutions across large
swaths of diseases, resulting in companies with highly efficient development
engines.
We believe there is an opportunity to offer attractive risk-adjusted returns
to shareholders by building companies that possess unique and heretofore
unrecognized growth opportunities that will benefit by capitalization,
proactive skilled management, and supportive and sustainable governance
practices.
Cheap genetic information
Cheap genetic information has revolutionized the discovery process, which is
yielding validated drug targets at an unprecedented rate. According to the
National Human Genome Research Institute, the approximate cost to sequence a
human genome fell to less than $1,000 in 2020. This reduction in cost has
fuelled tremendous productivity. According to data from the United States
Patent and Trademark Office, the number of drug patents has inflected upward
since 2010, which is translating into more new drugs in company pipelines.
Technological applications are also creating platforms of addressable
diseases, increasing bandwidth, and enabling companies to target more diseases
with superior scientific accuracy and safety profiles than in previous
generations of drug development.
Market leaders
Market valuation and growth
Although genetically validated targets can sometimes be addressed by existing
traditional approaches, such as small molecules and antibodies, in specific
tissues it is hard to beat the speed and ease in which DNA and RNA based
medicines can be developed. Gene therapies also carry the potential for a
one-time cure and RNA medicines for infrequent injections. The market for
genetic medicine has been growing. According to Capital IQ, the cumulative
market capitalization of the genetic medicine companies has increased from
$9.4B at the end of 2014 to $202.8B by the end of 2021. Genetic medicine
includes companies that use in vivo and ex vivo gene therapy, genetic editing,
sRNA and mRNA based technologies to develop new treatments.
Looking at just 2021, the FDA approved 60 new drugs, topping the previous
year's 59. Approvals by modality include: RNA for three, novel antibody
technologies for three, and cell therapies for two. Additionally, mRNA firmly
established itself as the preferred modality for COVID vaccines, and Intellia
demonstrated human proof-of-concept for in vivo CRISPR, unlocking another new
modality in the battle against disease.
Our strategy in action
Engaging in deep research and unlocking value
RTW's team is comprised of individuals with medical and advanced scientific
training and legal and banking experience, enabling a deeply differentiated
approach to research, idea generation and strategic investment.
JIXING
6.6% of NAV
2020: 1.3%
Portfolio company ownership
<10%
2020: <20%
The need
We formed JIXING in early 2020, borne out of a two-year study of innovation,
biotechnology, and access to healthcare in China. JIXING is a Shanghai-based
biotechnology company focused on the development and distribution of
innovative US and European drugs in the Chinese market.
Mission
JIXING will leverage clinical development and commercial expertise in the
United States and Europe to bring global innovative medicines to Chinese
patients.
Status
JIXING's pipeline now includes five assets focused on cardiovascular and
ophthalmology conditions with high unmet need through partnerships with
Cytokinetics, Milestone, and Oyster Pharma. RTW further capitalized JIXING by
providing Series B and C funding.
Next catalyst
By working closely with the JIXING team we look to in-license additional
late-clinical stage or commercial stage assets into its growing pipeline and
provide further capital for business operation expansion.
How we approach research and investment
We seek to identify biopharmaceutical and medical technology assets,
ascertained through rigorous scientific analysis, that have a high probability
of becoming commercially viable products and can significantly improve
patients' lives.
Key achievements
Medical conference meetings attended
147
2020: 115
Private investments
25
2020: 16
Key statistics
Medical conference presentations attended
3,480
2020: 2,000
Poster presentations captured
6,500
2020: 3,400
Priorities for 2022
Continue expanding institutional data library and research coverage to track
and source the most promising assets globally.
- Private investments deal pace in line with 2020-2021
- Two-thirds of the deals to be in mid-late stage venture and one-third in new
company creation and early stage venture
Link KPIs
1 NAV growth
2 Total shareholder return
3 Premium/discount to NAV
4 Percent of NAV invested in core portfolio companies
6 Active and robust pipeline
Link principal risks
1 Failure to achieve investment objective
2 Counterparty Risk
3 The Investment Manager relies on key personnel
4 Portfolio Companies may be subject to litigation
5 Exposure to global political and economic risks
7 Imposition of pricing controls for clinical products and services
Leveraging RTW's research process for differentiated idea generation
Our competitive advantage is anchored in our internal idea generation process,
which we have refined over the years. In our focus areas we aspire to achieve
a level of research depth consistent with those making permanent capital
decisions, which means we are generally comparing ourselves to the work done
within large biotech and pharma companies. The process begins with attending
over 100 medical meetings worldwide each year. Medical conferences are where
all meaningful scientific data are first shared with the scientific community.
Over the years we have built our institutional level database library,
enhanced by technology and data science. This effort leads us to some of the
most promising assets, where we then seek out the companies or academics
behind the projects. Externally, we also generate ideas in traditional ways,
too. We place high value on building long-term relationships with management
teams and scientists, and enjoy working with our investment firm peers and
other players in our community.
We like to use the analogy that we are organized much like a business
development team at a large biotech company. Across our team we have doctors,
scientists, and drug development expertise, along with bankers, lawyers and
operators who can execute.
Our rigorous approach to deal sourcing involves deep research in areas of
expertise.
The research coverage is structured based on a modality (i.e. gene therapy,
RNA medicine, small and large molecules, medtech) or a therapeutic area (i.e.
rare disease, cancer, immunology, neurology) with a collaborative,
consensus-building approach of gaining the most comprehensive knowledge,
leading to conviction on the most likely transformational therapies.
We leverage our proprietary in-house research developed over fifteen years of
operating in the life sciences sector. RTW has developed repeatable internal
processes combining an institutional data library, technology, and manpower to
comprehensively cover critical drivers of innovation.
Work with management teams and syndicate partners.
We believe in developing long-term relationships with great entrepreneurs and
scientists who are as passionate about medicine as we are, and working closely
with our peers to support companies at any stage of their lifecycle.
Actively engaging our wide network of doctors, academics and universities for
promising new academic work. We continue to cultivate relationships with
entrepreneurs, principal investigators, and academic institutions to allow for
a wide range of intelligence gathering of investment opportunities.
An investment strategy built for the future
The well-roundedness of the RTW team, strengthened by strong ties across
industry, academia and banking platforms, gives it the ability to source
viable prospective target businesses, capitalise them, and ensure
public-market readiness.
Identify an area of transformational innovation
We have developed expertise through our comprehensive study of industry and
academic efforts in targeted areas of significant innovation. We distill
opportunities across healthcare through three distinct lenses: disease areas,
scientific technologies, and genetic analysis.
Identify value and assets that answer the unmet need
We apply a rigorous approach to idea screening, analysis, and capital
commitment. The process starts with the careful tracking of transformational
events. Examples of such events include clinical data, regulatory decisions,
product launches, competitive entrants, intellectual property disputes,
industry transformations, distressed situations, and corporate change. Our
analytical approach incorporates the study of historical data gathered from
scientific literature, regulatory agencies, medical meetings, management
teams, and internal expertise.
Select assets with high odds of becoming approved therapies
We assign probabilities to various outcomes and use conservative valuation
techniques to assign valuations to the various scenarios.
Identify how RTW can maximize value
Opportunities for financial engineering or active involvement are also
considered, such as royalties, SPACs, structured deals, distress financing,
and company formation.
Our strategy in action
Build new companies around promising academic licenses
RTW engages in new company formation around promising academic licenses. We
are well-placed to offer support to early-stage life sciences companies and
NewCos. RTW's business and operations teams consist of members with financial,
capital markets, legal, regulatory, tax, and accounting expertise and enforces
a strong compliance culture.
Rocket
13.3% of NAV
2020: 41.1%
Portfolio company ownership
<5%
2020: <5%
The need
Rocket is a clinical-stage platform biotechnology company advancing an
integrated and sustainable pipeline of genetic therapies for rare childhood
disorders.
Mission
Rocket's mission is to develop first-in-class and best-in-class, curative gene
therapies for patients with devastating diseases. Rocket was born out of a
year-long study in gene therapy. In late 2015, Rocket was formed around a
single academic license from a European academic institution. RTW helped
Rocket hire a world-class management team, including CEO Dr. Gaurav Shah and
COO Kinnari Patel, and continued to identify additional targets and licensed
four more academic programs.
Status
Five products in clinical trials (2020: five)
Two programs in registration- enabling Phase 2 (2020: one)
Medium-term milestones
First global submission
Platform and pipeline expansion
How we build new companies
RTW's business and operations teams consist of members with financial, capital
markets, legal, regulatory, tax, and accounting expertise and enforces a
strong compliance culture.
Key achievements
New company creation
1
2020: 1
In-licensing deals for JIXING and Yarrow
4
2020: 1
Funding rounds backed by RTW in JIXING and Yarrow in 2021
3
2020: 1
Key statistics
In depth study of China biotech sector before newco creation
2 years
Longstanding expertise in genetic diseases and oligotherapeutics
10+ years
Total newco creations
3
Priorities for 2022
Continue due diligence efforts to in-license additional assets into JIXING and
Yarrow pipeline.
Start a new company creation in the UK.
Link KPIs
5 Diversified portfolio across multiple therapeutic areas, treatments
modalities and geographies
Link principal risks
3 The Investment Manager relies on key personnel
We leverage collective genius
We leverage our proprietary "data-first" research process to source the
highest quality assets across the US, UK, and Europe, and complement the
scientific rigour with years of financial investment, company building, and
transactional expertise. RTW has a world class infrastructure for supporting
new company creation. Because we have always made exciting assets the driver
of what we work on, over the years we developed the skills and brought in the
talent needed to support companies regardless of stage. This has made its way
into our own firm DNA, and most of us actually enjoy being creative on the
business side nearly as much as we enjoy science.
Our research approach is collaborative and consensus-based, led by the team
with industry and academic backgrounds, which sets the tone for exceptional
research. We believe that true value creation takes time and solving for
patients' unmet needs endures volatile markets.
We have expanded our new ventures team with experienced venture capitalists
and drug developers, as well as capabilities in data science technology to
enhance data management. Our business team, complemented by experienced
investment bankers and ex consultants, focuses on building targeted academic
relationships in areas of high yield science, managing the capital markets
process and syndicate building, and becoming a thought leader in the broader
healthcare ecosystem.
Core portfolio companies added in 2021: 21
2020: 15
Core portfolio businesses supported in 2021
24
2020: 22
The US Market:
RTW has a core focus on the US, with deep coverage of opportunities from
academia to mid-size public companies. The US Portfolio Companies reflect a
larger pool of opportunities created by the most robust venture and capital
markets ecosystem.
What this means for investors:
- access to a robust pool of private and public opportunities
- access to venture and capital markets that support innovation
The UK & European Market:
RTW has identified and invested in exceptional British and European scientific
assets. It wishes to contribute to these biotech ecosystems by injecting
capital where needed. It intends to engage in NewCo creation around promising
early-stage assets by partnering with universities and in-licensing academic
programs as well as through its proprietary in-house efforts; and providing
financial and human capital to entrepreneurs to advance scientific programs in
development.
What this means for investors:
- access to cutting edge research labs and academic knowledge
- access to much greater breadth of science and opportunity
- participation in value creation in local biotech ecosystem
The China Market:
RTW plans to capture commercialization opportunities in China by investing
across the venture capital lifecycle from new company formation to IPO to
bring successful innovative Western drugs to Chinese patients.
What this means for investors:
- access to Chinese budding biotech market, innovation and expertise
- an opportunity to establish themselves in a new market with the scope for
significant growth
Our strategy in action
Support investments throughout the lifecycle
Drug development is not a linear process. There are advancements and setbacks,
and we are structured to maximize value creation at any point beginning with
company creation to late stage venture and into publicly traded markets. We
let the fundamentals and not market movements dictate our investment.
Immunocore
2.9% of NAV
2020: 1.7%
Portfolio company ownership
<1%
2020: <1%
The need
Immunocore is a UK-based publicly traded biotechnology pioneering the
development of a novel class of T-cell receptor (TCR) bispecific
immunotherapies designed to treat a broad range of diseases, including cancer,
infectious and autoimmune disease. Immunocore originated with the Investment
Manager as a private company when RTW participated in a $320M Series A round
in July 2015, subsequently supporting Immunocore in Series B and C rounds, as
well as through its IPO in February 2021.
Mission
Immunocore is developing tebentafusp, a novel bispecific T cell receptor (TCR)
therapy for uveal melanoma, a rare and aggressive form of melanoma that
affects the eye. In addition, the company is advancing ImmTAX, its proprietary
platform technology of bispecific molecules that have the potential to
overcome the limitations of the natural immune system allowing a patient's own
T cells to recognise and kill the infected or cancerous cells via an immune
activating effector function.
Status
Tebentafusp was in registrational status as YE 2021 and approved in January
2022.
Four additional programs in clinic: two Phase 1 trials in oncology and two
Phase 1 trials in infectious disease (Hepatitis B and HIV).
Next catalyst
Kimmtrak (tebentafusp), a first-in-class TCR therapy, received FDA approval
for uveal melanoma in January 2022.
How we support companies through the lifecycle
We are full life cycle investors supporting scientists and entrepreneurs at
any stage where we identify opportunity, from academic programs in need of
industry sponsorship all the way to mature publicly traded companies.
Key achievements
Number of portfolio company IPOs
9
2020: 6
Together NAV contribution in 2021
8%
2020: 15%
Key statistics
Average step-up from the time of investment to IPO
1.9x
2020: 1.8x
NAV in aggregate of 9 (2020: 5) portfolio companies where we have a board seat
c.30%
2020: c.48%
Priorities for 2022
Continue supporting existing portfolio companies based on their capital needs,
as well as continue expanding our creative financial solutions tool kit.
Link KPIs
4 Percent of NAV invested in core portfolio companies
5 Diversified portfolio across multiple therapeutic areas, treatments
modalities and geographies
Link principal risks
5 Exposure to global political and economic risks
Progressing research to innovation to reality through collaboration,
excellence and consensus.
We support companies through the ups and downs of the often challenging
journey to bring therapies to patients.
True value realization from transformative products takes time, and in order
to capture that value, it is critical to be involved and invested in such
companies throughout the various stages of their development and ultimately
distribution to patients. Scientific development rarely follows a linear path
and nor do we, which is why we are always thinking about the optimal way to
support a company.
As a full-life cycle investor, RTW has achieved multiple successful
transaction milestones and provided creative financial solutions, including
successfully creating new companies around academic licenses, supporting those
companies along the life cycle by taking them public through reverse mergers,
recapitalizations, SPACs, and offering royalty-backed funding.
RTW has earned a constructive reputation of being deeply knowledgeable in
science, supportive to entrepreneurs and aligned with the companies for the
long term, until the maximum value of those underlying assets can be achieved.
This has become an earned privilege for us.
[graphic content below]
Clinical stages of the portfolio companies (based on the most advanced
program)
Modality Company Name Disease / Tx Area Stage
Genetic Medicine
Rocket Rare disease Phase 2
Avidity Rare disease Phase 1
Encoded Rare disease Phase 1
Tenaya Cardiovascular Preclinical
Yarrow Rare disease Preclinical
Alcyone Rare disease Preclinical
Antibody
Immunocore Oncology Registrational
iTeos Oncology Phase 2
Prometheus Inflammation Phase 1
Ventyx Autoimmune Phase 1
Numab Oncology Phase 1
Pyxis Oncology Preclinical
Cell therapy
Artiva Oncology Phase 1
Kyverna Autoimmune Phase 1
Umoja Oncology Preclinical
Targeted protein degradation
C4 Oncology Phase 1
Monte Rosa Oncology Preclinical
Lycia Inflammatory Preclinical
Medtech and Diagnostics
Pulmonx Pulmonary Commercial
InBrace Orthodontic Commercial
Magnolia Sepsis (inflammatory) Commercial
Beta Bionics Type 1 Diabetes Pivotal
Orchestra Cardiovascular Pivotal
Ancora Cardiovascular Pivotal
Prometheus labs Inflammation N/A
Spec Pharma
Nuance Iron deficiency Commercial
Small molecule
JIXING Cardiovascular Phase 3
Milestone Cardiovascular Phase 3
Tarsus Ophthalmology Phase 3
Athira Neurology Phase 2/3
Landos Autoimmune Phase 2
Visus Ophthalmology Phase 2
GH Research Neurology Phase 2
Neurogastrx GI Phase 2
Cincor Cardiovascular Phase 2
Acelyrin Inflammatory Phase 2
Nikang Oncology Phase 1
Biomea Oncology Phase 1
Artios Oncology Phase 1
Third Harmonic Bio Autoimmune Phase 1
Progress through clinical trials
44% of portfolio companies have progressed to the next stage of their clinical
trials in 2021.
chart
*excludes commercial stage portfolio companies and companies added in 2021.
Our Business Model
A business model built for the future
Transformational innovations
Our long-term strategy is anchored in identifying sources of transformational
innovations by engaging in a deep scientific research and rigorous idea
generation process, which is complemented with years of financial investment,
company building, transactional, and legal expertise.
What we need to create value
Experienced team
A collaborative team of doctors, academics, drug developers, coupled with
seasoned venture capitalists, investment bankers, lawyers and operators with a
strong compliance culture.
Deep scientific expertise
We developed repeatable internal processes combining technology and manpower
to comprehensively cover critical drivers of innovation globally to identify
biopharmaceutical and medical technology assets that have a high probability
of becoming commercially viable products and can dramatically change the
course of treatment outcomes to patients.
Full life cycle investing
Taking a long-term full lifecycle approach and having a true evergreen
structure enables us to avoid pitfalls of structural constraints of
venture-only or public-only vehicles.
Global reach
Our Priority is to unlock value by advancing early-stage scientific
development and delivering innovative therapies to patients in need.
How we create value
Our purpose drives everything we do
Identify transformative assets with high growth potential across the
biopharmaceutical and medical technology sectors. Driven by our deep
scientific understanding and a long-term approach to supporting innovative
businesses, we invest in companies developing next-generation therapies and
technologies that can significantly improve patients' lives.
Invest in relationships
We focus on identifying transformational innovations and unmet needs across
the life sciences space, specifically backing scientific programs that have
the potential to disrupt the prevailing standard of care in their respective
disease areas.
Deep scientific expertise
We believe in developing long-term relationships with great entrepreneurs and
scientists who are as passionate about medicine as we are, and working closely
with our peers to support companies at any stage of their lifecycle.
Support through the lifecycle
A key part of our competitive advantage is the ability to determine at what
point in a company's life cycle we should support the target asset or
pipeline. As a full-life cycle investor, we can provide growth capital,
creative financing solution, capital markets expertise, or guidance through
investing our time and sharing our collective experience as directors and
stewards of tomorrow's most exciting and disruptive companies.
Value creation
Patient benefits
Innovation is the best medicine. We believe solving unmet patients' needs is
the best way to create value.
· RTW's top 10 most successful investments since inception
commercialized 10 drugs.
Shareholder
Privileged access to private markets and bespoke negotiated opportunities.
· 71% (2020: 81%) total shareholder return since inception
Portfolio companies
We support teams trying to solve the inevitable setbacks that occur when
introducing a first in class or disruptive therapy.
· 66% (2020: 69%) of NAV deployed into 42 (2020: 22) core portfolio
companies
RTW Charitable Foundation
Founded as the charitable foundation arm of RTW, RTWCF partners with
organizations conducting disease research and championing humanitarian causes.
· 9 rare disease grants awarded across 6 countries
· 12 community organizations and research partners have been
supported in responding to COVID needs in New York City
New Company Creation
chart
Portfolio Review
Seeking gene therapy cures
Rocket's pipeline is comprised of first-in-class gene therapies that
incorporate both adeno-associated viral vector (AAV) and lentiviral vector
(LVV) approaches to gene therapy. They are platform agnostic and choose each
program's gene therapy platform based on what is most practical for the
disorder being targeted.
Rocket
Market Cap 2021
$1.4B
2020: $3.5B
NAV invested
13.3%
2020: 41.1%
Portfolio company ownership<5%
2020: <5%
The need
Rocket is a clinical-stage company advancing an integrated and sustainable
pipeline of genetic therapies for rare childhood disorders.
Mission
Rocket's mission is to develop first-in-class and best-in-class, curative gene
therapies for patients with devastating diseases.
Status
- Five programs are in the clinical trials
- Two programs in registration- enabling Phase 2
Medium-term milestones
- First global submission
- Platform and pipeline expansion
Identifying unmet patient need
We seek to invest and build companies developing transformative therapies.
Thanks to genome, disruptive innovation of new modular technologies, such as
RNA medicine and gene therapy, can address targets undruggable before by older
modalities like small molecules and antibodies.
Forming and building Rocket
Rocket was born out of more than a year-long study in gene therapy. In late
2015, Rocket was formed around a single academic license from a European
academic institution. RTW hired a world-class management team, including CEO
Dr. Gaurav Shah, COO Kinnari Patel, and CMO Dr. Jonathan Schwartz, and
continued to identify additional targets and licensed four more academic
programs.
Supporting Rocket through the lifecycle
RTW completed two private financings, syndicating both the Series A and Series
B rounds, and took Rocket public through a reverse merger in January 2018. We
believe opportunities exist to license additional gene therapy academic assets
into the Rocket pipeline in the future. In addition to our board
representation in the company, Rocket's generous pipeline diversification of
now five clinical programs creates an attractive risk reward opportunity,
giving us comfort in owning an outsized position in the company.
Developing first in class gene therapies
Five of Rocket's clinical programs include four lentiviral vector-based gene
therapies for the treatment of:
- Fanconi Anemia, a difficult to treat genetic disease that leads to bone
marrow failure and potentially cancer;
- Leukocyte Adhesion Deficiency-I, a rare genetic disorder of immunodeficiency
in young children;
- Pyruvate Kinase Deficiency, a rare genetic disorder affecting red blood
cells;
- Infantile Malignant Osteopetrosis, a rare, severe monogenic bone resorption
disorder characterized by skeletal deformities, neurologic abnormalities and
bone marrow failure;
- and an adeno-associated virus-based gene therapy for Danon disease, a
devastating, paediatric heart failure condition.
Rocket's goal is to have all five clinical program become approved
first-in-class gene therapies. The company is aspiring to become the next
"Genentech of gene therapy" and we are looking forward to supporting them on
this journey.
Catalysts
Fanconi Anemia (LVV) Q3 2022
Leukocyte Adhesion Deficiency-I (LVV) Q2 2022
Danon Disease (AAV) H2 2022
Pyruvate Kinase Deficiency (LVV) H2 2022
Infantile Malignant Osteopetrosis (LVV) TBD
Portfolio review
Disruptive science, driven by heart
JIXING is a leading biotechnology company committed to bringing innovative
science and medicines to underserved patients in China
Latest funding round in 2021
Series C
2020: Series A
NAV invested
6.6%
2020: 1.3%
Portfolio company ownership
<10%
2020: <20%
Pipeline assets in 2021
5
2020: 1
The need
We formed JIXING in early 2020, borne out of a two-year study of innovation,
biotechnology, and access to healthcare in China. JIXING is a leading
biotechnology company headquartered in Shanghai committed to bringing
innovative science and medicines to underserved Chinese patients with serious
and life-threatening diseases.
Mission
Backed by RTW, JIXING partners with global biotechnology companies to develop
and commercialize novel, innovative therapeutics to treat unmet medical needs
in cardiovascular and ophthalmic diseases. With a strong and further
developing asset pipeline, industry leading talent, and patient-centric focus,
JIXING is dedicated to deliver a meaningful and lasting impact on patients in
Greater China.
Status
JIXING's pipeline now includes 5 assets focused on cardiovascular and
ophthalmology conditions with high unmet need through partnerships with
Cytokinetics, Milestone, and Oyster Pharma. RTW further capitalized JIXING by
providing a Series B and C funding.
Named Joseph Romanelli, a former President of Merck's operations in China and
a 25-year pharmaceutical industry veteran, as a new CEO of JIXING.
Next catalyst
By working closely with the JIXING team we look to in-license additional
late-clinical stage or commercial stage assets into its growing pipeline and
provide further capital for business operation expansion.
chart
Portfolio review
Opening up unrealised potential
Yarrow is an RTW-incubated company developing antisense oligonucleotide (ASO)
therapeutics for severe, genetically defined CNS diseases.
Latest funding round in 2021
Seed
NAV invested
0.1%
Portfolio company ownership
<5%
Pipeline assets in 2021
1
Recent advances have enabled and derisked development of ASO therapeutics for
CNS diseases. Next generation sequencing has improved diagnosis and patient
pool access. Whilst fundamental understanding of CNS biology has made big
strides thanks to improved sequencing, biochemistry, and imaging techniques,
allowing the deciphering of molecular mechanisms that cause a disease.
Furthermore, improved potency and performance through widened medicinal
chemistry repertoire and better molecular understanding, as well as and
increases number of tractable CNS genetic targets resulted in substantial
improvements in ASO therapeutics design.
The need
There are 100+ genetically-defined CNS diseases tractable antisense with
oligonucleotide (ASO) therapeutics. However, only 7 monogenic CNS diseases
have ASOs in development or approved. Genetically-defined CNS diseases provide
a vast opportunity for new, innovative ASO therapeutics.
Mission
Yarrow is developing ASO therapeutics for severe, genetically defined CNS
diseases. Yarrow was founded and incubated by the RTW team in New York and is
rooted in the firm's longstanding expertise and commitment to solving genetic
diseases and oligotherapeutics.
Status
Yarow in-licenced its first ASO asset from ProQR. RTW capitalized Yarrow by
providing seed funding.
Next milestone
By working closely with the Yarrow team, we look to expand Yarrow's internal
R&D capabilities, in-licence additional assets into the growing pipeline
and further capitalize its business and team expansion.
Operational and Financial Review for the year
Market Capitalisation
The Company's market capitalisation grew from U$360 million to US$378 million
during year. This was driven by equity issuance and offset by a decline in the
Company's share price.
Ordinary NAV
The Ordinary NAV of the Company declined from US$375.3 million to US$363.0
million during the year. The main driver of the decline was the share price
performance of publicly-listed portfolio companies, this was partially offset
by issuance of 20.9m shares.
NAV Per Ordinary Share
The 12.8% decline in NAV per Ordinary Share was primarily driven by the
performance of Rocket share price and the Company's other public portfolio
companies. There was also a small positive contribution of approximately 1%
from equity issuance at a premium to NAV during the year and a reduction in
the performance allocation accrual.
Premium / discount
The Company's shares traded on average c. 10% premium due to market demand
during the reporting period. At the year end, the Company's Ordinary Shares
were trading at a 4.1% premium to NAV (2020: 4.1% discount to NAV). The
Company's NAV for December 2020 moved sharply higher but was reported in
January 2021 resulting in the shares trading at a discount to the unpublished
December NAV in December 2020 and recovering to a premium to the published
December 2020 NAV during 2021.
Total Return to Shareholders Based on Ordinary NAV
As the Company has not paid dividends, the negative total return for the year
of -12.8% (2020: +54.3%) equates to the decline in NAV per Ordinary Share.
There was no performance allocation triggered during the reporting period as
the total shareholder return based on ordinary NAV movements was negative.
Total Return to Shareholders Based on Share Price
The negative share price return of -5.3% in the year compared to the NAV
movement of -12.8% was the result of the Company's shares moving from a
discount to a premium. Nevertheless, the Company's shares traded at a premium
to NAV throughout the majority of the period.
Ongoing Charges
The Company's ongoing charges ratio is 1.78%, calculated in accordance with
the AIC recommended methodology, which excludes non-recurring costs and uses
the average NAV in its calculation.
Key Performance Indicators
The Board has identified the following indicators for assessing the Company's
annual performance in meeting its objectives:
Financial KPIs Description Progress Key factors Link to the strategy Link to risks and uncertainties
1. NAV Growth Includes performance of the portfolio companies and cash management strategy 12.8% Ordinary NAV decline during the reporting period driven largely by Portfolio performance and progression through clinical trials Achieve superior long-term capital appreciation; targeting an annualized total Failure to achieve investment objective
public companies' share price performance
return of 20% over the medium term
Net of all fees and costs Cash management Clinical Development & Regulatory Risks
Capital pool and deployment Exposure to global political and economic risks
Scientific and financial risks Impact of COVID-19
2. Total Shareholder Return Indicates performance of delivering value to the shareholders (5.3)% return during the reporting period (US$1.88 to US$1.78 price per share) Portfolio performance Achieve superior long-term capital appreciation; targeting an annualized total NAV growth and performance drivers
return of 20% over the medium term
Liquidity of RTW.L shares Failure to achieve investment objective
General market sentiment Clinical Development & Regulatory Risks
Exposure to global political and economic risks
Impact of COVID-19
3. Premium/ discount to NAV Indicates the level of supply and demand for the Company's shares. The Company traded at an average premium of c. 10% to NAV during the year. Portfolio performance Achieve superior long-term capital appreciation; targeting an annualized total NAV growth and performance drivers
return of 20% over the medium term
Liquidity of company's shares
Failure to achieve investment objective
Governance
Exposure to global political and economic risks
4. Percent of NAV invested in core portfolio companies Indicates level of capital deployment into core portfolio companies More than 2 /3 of the NAV capital deployed into core portfolio companies Level of capital deployment and investment pace, as well as funds availability Identify transformative assets with high growth potential across the The Investment Manager relies on key personnel
to be deployed into new portfolio companies or for follow-on investments into biopharmaceutical and medical technology sectors
existing portfolio companies
Clinical Development & Regulatory Risks
Exposure to global political and economic risks
Impact of COVID-19
Non-Financial KPIs
5. Diversified portfolio across geographies and therapeutic modalities Measures Company's commitment to invest in the best-in-class science and Portfolio companies' focus spans across multiple therapeutic areas, treatment Continue to diversify within life sciences sector, looking for opportunities Progress investing and supporting companies developing next generation Clinical Development & Regulatory Risks
innovative assets worldwide modalities and geographies globally and also support local biotech ecosystems therapies and technologies that can significantly improve patients' lives
Exposure to global political and economic risks
6. Active and robust pipeline Delivers transformational new treatments and medical devices to patients in 44/55 programs are in clinical stage capturing a spectrum of early-stage Phase Balance and breadth of the pipeline across all clinical stages Progress towards delivering transformational treatments to patients in areas Clinical Development & Regulatory Risks
need 1 to late stage Pivotal
of high unmet need
Data readouts and progress through multiple clinical stages Exposure to global political and economic risks
Commercial opportunity and competitive landscape Imposition of pricing controls
Impact of COVID-19
Risk Management
Our long-term strategy is anchored in identifying transformative assets with
high growth potential across the biopharmaceutical and medical technology
sectors. Driven by our deep scientific understanding and a long-term approach
to supporting innovative businesses, we invest in companies developing
next-generation therapies and technologies that can significantly improve
patients' lives. With this significant opportunity also come the risk.
Our risk framework is overseen by the Audit Committee under delegation from
the Board. Everyone participates in managing the risks, including the Board,
the RTW team, the Company's other advisers, and our portfolio companies.
Risk framework
Our risk framework begins with the Board, where the Board defines risk
appetite, oversees the process to ensure a robust assessment of principal
risks, considers the key risks and potential future risks, and receives an
update at each Board meeting. A risk register is maintained that sets out our
principal risks and risk appetite. The RTW team is responsible for day-to-day
operation and oversight of the risk framework. The RTW team has a culture of
transparency, ensuring that any developments are shared and addressed
effectively with the benefit of input from the whole team, and reported to the
Board where appropriate. We rely on having highly experienced personnel to
support and manage issues as they arise.
The Audit Committee oversees and monitors the risk framework, including
reviewing the risk register to ensure it properly captures the principal
risks, overseeing the framework for identifying risks (including potential
future risks), reviewing the ongoing operation and effectiveness of our
control environment to manage the principal risks we face on an annual basis,
and ensuring that any actions identified are taken forward by the RTW team.
This review process provides a focus to drive continuous improvement in our
risk processes.
Identifying principal risks
We evaluate our principal risks on an ongoing basis and using both top-down
and bottom-up inputs. We also continuously assess for future risks that could
have a potential impact. During the year the Board and the Investment Manager
had ongoing discussions and reviews to consider the current and potential
risks of the Company. We were pleased that our principal risks substantially
capture our key strategic risks to the success of our business model. The
discussions also generated insights into a range of potential emerging risks
and has helped to focus attention on additional areas for monitoring by the
Board and the Investment Manager.
The RTW team carries out a bottom-up review, considering each of our life
science companies and our internal operations, both as a specific exercise and
on an ongoing basis through our regular monitoring of our portfolio companies.
In doing this we draw on the underlying assessments by the management teams of
each of our life science companies. These inputs are brought together in our
risk register, which is reviewed by the Audit Committee in detail each year.
The principal risks identified by the Board are set out below. These have not
substantially changed in the last year. The Board also monitors future risks
that may arise, including: the longer-term risks of changes to US
pharmaceutical drug pricing; US FDA productivity and impact of the COVID-19
pandemic; and potential long-term impact of the COVID-19 pandemic on the
biotech sector and portfolio companies.
Risk management structure
Board of Directors
Risk management leadership; risk appetite
Audit Committee
Review and monitor the risk framework
RTW Team
Risk management is integral to the investment process and financial management
Implementing and monitoring risk controls; risk reporting
Other advisers
Risk identification; risk reporting
Portfolio companies' management teams
Risk identification and mitigation
Risk appetite
The Board is willing to accept a level of risk in managing our business to
achieve our strategic goals. As part of the risk framework, the Board reviews
the risk appetite in relation to each of the principal risks, and monitors the
actual risk against that. Where a risk is approaching or outside the target
risk, the Board will consider the actions being taken to manage the risks. The
Audit Committee this year carried out a detailed review of the defined risk
types, to ensure it continues to reflect the understanding of the Board
and accurately reflected the risks we take. Following that review the Audit
Committee recommended to the Board that the risk appetite remained
appropriate, and the Board has accepted that recommendation.
Principal and Emerging Risks and Uncertainties
Under the FCA's Disclosure Guidance and Transparency Rules the Directors are
required to identify the material risks to which the Company is exposed, and
the steps taken to mitigate those risks.
The Company has five categories of risks in its risk register namely:
· Investment Risks
· Operational Risks
· Governance/Reputational Risks
· External Risks
· Emerging Risks
RISK TYPE RISK DESCRIPTION RISK CONTROL MEASURE
INVESTMENT
1. Failure to achieve investment The Company's target return on net assets is not The Board will monitor and supervise the Company's performance, compared to
objective
guaranteed and may not be achieved. the target return, similar
investment funds and broader market conditions. Where performance is
unsatisfactory, the Board will discuss the appropriate response with the
Investment Manager.
OPERATIONAL
2. Counterparty Risk The Company has the potential to be exposed to the creditworthiness of trading The Company uses Goldman Sachs, Morgan Stanley and Bank of America Merrill
counterparties in OTC derivatives contracts, its prime broker in the event of Lynch as prime brokers and Cowen, UBS, Bank of America Merrill Lynch, Goldman
re-hypothecation of its investments and any counterparty where collateral or Sachs, and Morgan Stanley as ISDA counterparties. To monitor counter party
cash margin is provided or where cash is deposited in the normal course of risk, the Investment Manager monitors fluctuations in share prices, percentage
business. changes in daily, monthly, and annual 5-year CDS spreads and S&P credit
ratings. If a share price moves up or down in excess of 20%, the trader at the
Investment Manager is alerted immediately. In case of an alert, the trader
notifies RTW's Chief Compliance Officer. There has been no disruption in
operations with the Company's counterparties to date. The Company's bankers
are an offshore branch of Barclays Bank PLC and are also included in the
Investment Manager's CDS monitoring program.
GOVERNANCE/
REPUTATIONAL
3. The Investment Manager relies on key personnel The Investment Manager relies on the founder of RTW, Roderick Wong M.D. and In the event that Roderick Wong was to no longer work for the Investment
has a growing team. Roderick Wong is a key figure at the Investment Manager Manager or was incapacitated, the Board is able to terminate the Investment
and will be extensively involved in investment decisions. Management Agreement within 180 days if a suitable replacement has not been
found and would consider whether it was appropriate to wind up the Company and
return capital to shareholders, or to appoint a new Investment Manager.
4. Portfolio Companies may be subject to litigation Portfolio Companies may be subject to product liability claims. Such liability The Investment Manager's due diligence process includes considering the risk
claims would have a direct financial impact and may impact market acceptance that innovative therapies may have unforeseen side effects, based on the
even if ultimately rebutted. Investment Manager's extensive sector knowledge and experience, and based on
research all published and publicly available information based on safety
concerns.
EXTERNAL
5. Exposure to global political and economic risks It is anticipated that approximately 75% of investments will be in US The Investment Manager has extensive experience transacting across the global
companies or licensing agreement with US institutions and 25% of investments healthcare marketplace and will be responsible for identifying relevant events
will be made outside of the US. The Company's investments will be exposed to and updating the investment plans appropriately.
foreign exchange, and global political, economic, and regulatory risks.
6. Clinical Development & Regulatory Risks New drugs, medical devices and procedures are subject to extensive regulatory The Investment Manager's due diligence process includes the likely attitude of
scrutiny before approval, and approvals can be revoked. regulators towards a potential new therapy. The due diligence will also
consider the unmet need of the disease and whether the therapy offers
advantages over the current standard of care. In the current COVID-19
pandemic it is possible that the FDA and other clinical regulators globally
will prioritise therapies, diagnostics and devices related to this disease
which might slow clinical trials.
7. Imposition of pricing controls for clinical products and services Portfolio Company products may be subject to price controls, price gouging While future political developments cannot be reliably forecast, the
claims and other pricing regulation in the US and other major markets; or Investment Manager's due diligence process includes an assessment of political
government healthcare systems may be the major purchasers of the products. risk, and the likely acceptability of the investee's pricing intentions.
8. COVID-19 As the global pandemic due to COVID-19 enters its third year, the UK The Investment Manager has extensive experience transacting across the global
government in common with the US and many other countries has taken steps to healthcare marketplace, and will be responsible for identifying relevant
remove the restriction that were put in place to limit the transmission of the events and updating the investment plans appropriately.
COVID-19 virus. Whilst the ultimate scope of these measures has been eased by
various degrees across geographies, they have had a severe impact on the
Global Economy, which Governments and the Central Banks were attempting to
offset with both traditional and unconventional fiscal and monetary policy
measures. The Company's portfolio will be impacted by any risks emerging
from long term changes in the macroeconomic environment.
EMERGING
9. Inflation The unprecedented level of fiscal and monetary stimulus that has been applied The compounding creation of value through innovation in the biotechnology
to the global economy has caused US inflation to surge to a 40-year high and sector, in which the Investment Manager invests, outweighs the singular and/
resulted in sharp falls in the share prices of technology firms without or short-term adjustment to valuation levels arising from changes in discount
current earnings. rates as a result of rising inflationary expectations.
This may lead to reduced demand for the Company's shares. The Investment Manager holds investments that have current earnings and
cash-flows and has a significant exposure to phase 3 products which have a
high probability of achieving cash-flows in the near-term.
10. Availability of capital A record number of Biotech IPOs occurred in 2021 and a record number of The Investment Manager is experienced in identifying potential in companies
companies are trading at <2x than their cash balances, implying that the that have strong fundamentals at attractive valuations that create an
market believes that not all companies will survive. asymmetric and attractive risk/reward profile.
The Board reviews the financing status of the Company's private portfolio with
the manager at each valuation meeting.
11. Ukraine Invasion The Invasion of Ukraine by Russia has led to the imposition of harsh sanctions The Investment Manager has confirmed that the Company has no direct or
on Russia and substantial restrictions on the ability to transact in Russian indirect exposure to Russian securities or assets.
securities and trade with Russian companies. These sanctions and the
corresponding impact on commodity and transport costs have the potential to
delay the global economic recovery from Covid-19.
Longer Term Viability Statement
Assessing the prospects of the Company
The corporate planning process is underpinned by scenarios that encompass a
wide spectrum of potential outcomes. These scenarios are designed to explore
the resilience of the Company to the potential impact of significant risks set
out below.
The scenarios are designed to be severe but plausible and take full account of
the availability and likely effectiveness of the mitigating actions that could
be taken to avoid or reduce the impact or occurrence of the underlying risks
and which would realistically be open to management in the circumstances. In
considering the likely effectiveness of such actions, the conclusions of the
Board's regular monitoring and review of risk and the Investment Manager's
internal control systems is taken into account.
The Board reviewed the impact of stress testing the quantifiable risks to the
Company's cash flows as detailed in risk factors 1-5 above and concluded that
the Company, would have sufficient working capital to fund its operations in
the following extreme scenario:
(1) The Company incurred NAV losses of 39% of NAV over a three-year period
ending 28 February 2025.
(2) No new capital was raised.
(3) $110m of private investments were funded from cash and by selling public
portfolio investments.
To provide some context for this scenario the worst-case annual losses for the
NASDAQ Biotech Index (NBI) in the last 10 years were 8.9% in 2018 and 21.4% in
2016 respectively. The Company's three-year loss scenario exceeds the
cumulative impact of both of these worst-case years of 28.3% spread over three
years. The annualized volatility of the NBI index for the last 10 years is 25%
so an annual loss of 40% or more is only likely to occur every twenty years if
the index returns are normally distributed. As there have been no consecutive
losing years for the NBI in recent history a cumulative loss of between 28.3%
and 40% is therefore assumed to be a reasonable stress test.
The Board considers that this stress testing-based assessment of the Company's
prospects is reasonable in the circumstances of the inherent uncertainty
involved.
The period over which we confirm longer term viability
Within the context of the corporate planning framework discussed above, the
Board has assessed the prospects of the Company over a three-year period
ending 28 February 2025. Whilst the Board has no reason to believe the Company
will not be viable over a longer period, given the inherent uncertainty
involved, the period over which the Board considers it possible to form a
reasonable expectation as to the Company's longer term viability, based on the
stress testing scenario planning discussed above, is the three year period to
February 2025. This period is used for the Investment Manager's business plans
and has been selected because it presents the Board and therefore readers of
the Annual Report with a reasonable degree of confidence whilst still
providing an appropriate longer term outlook.
Confirmation of longer term viability
The Board confirms that it has carried out a robust assessment of the emerging
and principal risks facing the Company, including those that would threaten
its business model, future performance, solvency or liquidity.
Based upon the robust assessment of the principal and emerging risks facing
the Company and its stress testing-based assessment of the Company's
prospects, the Board confirms that it has a reasonable expectation that the
Company will be able to continue in operation and meet its liabilities as they
fall due over the period to February 2025.
On behalf of the Board
William Simpson
Chairman
30 March 2022
Engaging with Stakeholders (Section 172)
Section 172 of the Companies Act 2006 applies directly to UK domiciled
companies. Nonetheless the AIC Code requires that the matters set out in
section 172 are reported on by all companies, irrespective of domicile,
provided this does not conflict with local company law.
Section 172 recognises that directors are responsible for acting in a way
that they consider, in good faith, is the most likely to promote the success
of the Company for the benefit of its shareholders as a whole. In doing so,
they are also required to consider the broader implications of their decisions
and operations on other key stakeholders and their impact on the wider
community and the environment. Key decisions are those that are either
material to the Company or are significant to any of the Company's key
stakeholders. The Company's engagement with key stakeholders and the key
decisions that were made or approved by the Directors during the year are
described below.
Stakeholder group Methods of engagement Benefits of engagements
Shareholders
The major investors in the Company's shares are set out below. The Company engages with its shareholders through the issue of regular In the financial year the Company issued:
portfolio updates in the form of RNS announcements and quarterly factsheets.
- 26 portfolio updates by way of RNS
Continued access to capital is vital to the Company's longer term growth
- 12 monthly NAV announcements by way of RNS
objectives, and therefore, in line with its objectives, the Company seeks to The Company provides in-depth commentary on the investment portfolio,
maintain shareholder satisfaction through: corporate governance and corporate outlook in its Annual and Interim Reports - Fact sheets on a quarterly basis
and financial statements.
- Positive risk-adjusted returns
- Annual and Interim Reports
- Continuous portfolio updates communication.
In addition, the Company, through its brokers and Investment Manager undertake
regular roadshows to meet with existing and prospective investors to solicit Through its roadshows and broker outreach, the Company has met with 150+
their feedback, understand any areas of concern, and share forward looking investors / prospective investors.
investment commentary.
The Board receives quarterly feedback from its brokers in respect of their
investor engagement and investor sentiment.
Service providers
The Company does not have any direct employees; however, it works closely with The Company has identified its key service providers and on an annual basis The feedback given by the service providers is used to review the Company's
a number of service providers (the Investment Manager, Administrators, undertakes a review of performance based on a questionnaire through which it policies and procedures to ensure open lines of communication, and operational
secretaries, auditor, third party valuation agent, brokers and other also seeks feedback. efficiency.
professional advisers).
The independence, quality and timeliness of their service provision is
critical to the success of the Company. Furthermore, the Board and its sub-committees engage regularly with its
service providers on a formal and informal basis.
The Company will also regularly review all material contracts for service
quality and value.
Portfolio Companies
The Company has currently invested in 42 Portfolio Companies which are set out The Investment Manager engages on a regular basis with its portfolio companies Honesty, fairness and integrity of the management teams of the portfolio
below. in order to conduct regular on-going due diligence and to meet obligations if companies are vital to the long-term success of the Company's investments.
the Investment Manager holds a board seat.
Community & Environment
The Company does not have any direct employees. The Company aims to minimize its environmental footprint. The Company and the Directors minimise air travel by making maximum use of
video conferencing for Company related matters.
Climate change impact. The Company does not anticipate any material impact to its business model from
climate change.
RTW Charitable Foundation represents an extension of the Investment Manager's To the research grant recipients, RTW Charitable Foundation offers not only
mission where its research process helps RTW identify important causes of financial support, but also guidance gleaned from RTW's experience in drug
human suffering, and introduces the firm to individuals and organizations development and company building.
trying to make a difference.
Beyond research, RTW Charitable Foundation offers support to humanitarian
RTW Charitable Foundation was created by the Investment Manager so that RTW causes, initiatives that raise disease awareness and programs with a direct
can apply its work in the community and help patients in instances when there patient impact.
is limited potential for commercial gain.
Environmental, Social and Community Issues
As an investment company, the Company does not have any employees or physical
property, and most of its activities are performed by other organisations.
Therefore, the Company does not combust fuel and does not have any greenhouse
gas emissions to report from its operations, nor does it have direct
responsibility for any other emission producing sources.
Responsible Investing
The Board believes that all companies have a duty to consider their impact on
the community and the environment. Three of the four Directors, the
Administrator, Company Secretary and external auditor are all based in
Guernsey and Board meetings are held in Guernsey, thus negating the need for
long commutes or flights to/from Board meetings, and thereby minimising the
negative environmental impact of travel to/from Board meetings.
The Investment Manager's approach to investment in life sciences companies is
comprised of goals and principles that are aligned specifically with our
mission to power breakthrough therapies that transform the lives of millions,
to find cures for diseases, and improve quality of life. RTW invests in and
supports companies developing life-transforming therapies and technologies for
patients afflicted with disease and disability. As a guiding principle, we
prioritize overall positive impact on patients and long-term meaningful
outcomes to society. We believe that staying aligned with RTW's founding
principles is the foundation of our success and enables us to make socially
conscious and responsible investments in life sciences companies.
RTW Charitable Foundation
RTW has also created the RTW Charitable Foundation so that we can apply our
work in the community and help patients in instances when there is limited
potential for commercial gain. While improving human health on a global scale
is its own fulfilment, RTWCF allows RTW to bring hope to those with the rarest
of diseases but whose suffering we find no less affecting.
Statement of Assets and Liabilities
as at 31 December 2021 and 31 December 2020
(Expressed in United States Dollars)
2021 2020
US$ US$
ASSETS:
Investments in securities, at fair value (cost at 31 December 2021: 409,179,507 390,790,635
US$271,421,062; cost at 31 December 2020:
US$151,961,275)
Derivative contracts, at fair value (cost at 31 December 2021: US$2,348,062; 10,983,574 4,713,942
cost at 31 December 2020: US$1,763,991)
Cash and cash equivalents 6,484,057 4,553,481
Due from brokers 12,323,965 20,032,971
Receivable from unsettled trades 200,695 685,498
Other assets 191,565 124,575
TOTAL ASSETS 439,363,363 420,901,102
LIABILITIES:
Securities sold short, at fair value (proceeds at 31 December 2021: 9,318,393 6,672,359
US$9,620,981; proceeds at 31 December 2020: US$4,986,163)
Derivative contracts, at fair value (proceeds at 31 December 2021: US$nil; 3,310,833 579,782
proceeds at 31 December 2020: US$6,903)
Due to brokers 38,019,859 361,032
Accrued expenses 861,545 530,070
Payable for unsettled trades 492,007 145,930
TOTAL LIABILITIES 52,002,637 8,289,173
TOTAL NET ASSETS 387,360,726 412,611,929
NET ASSETS attributable to Ordinary Shares (shares at 31 December 2021: 363,040,222 375,281,126
212,389,138; shares at 31 December 2020: 191,515,735)
NET ASSETS attributable to Performance Allocation Shares (shares at 31 24,320,504 37,330,803
December 2021: 1; shares at 31 December 2020: 1)
1.7093 1.9595
NAV per Ordinary Share
The audited financial statements of the Company were approved and authorised
for issue by the Board of Directors on 30 March 2022 and signed on its behalf
by:
William Simpson
Paul Le Page
Chairman
Director
See accompanying notes to the financial statements.
Condensed Schedule of Investments
as at 31 December 2021
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value US$ Percentage of Net Assets
US$ %
Investments in securities, at fair value
Common stocks
United States
Financials 108,150 106,527 0.03
Healthcare
Prometheus Biosciences, Inc. 740,564 5,396,652 21,850,828 5.64
Rocket Pharmaceuticals, Inc. 2,364,728 6,223,376 51,622,012 13.33
Others* 131,292,813 177,272,154 45.76
Materials 45,415 9,801 0.00
Total United States 143,066,406 250,861,322 64.76
Ireland
Healthcare 4,099,989 7,155,755 1.85
Netherlands
Healthcare 3,339,207 4,302,049 1.11
Canada
Healthcare 4,400,407 2,573,859 0.66
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 541,205 216,482 844,280 0.22
British Virgin Islands
Healthcare 226,450 689,080 0.18
Cayman Islands
Financials 422,961 414,583 0.11
Healthcare 104,050 103,530 0.03
Total Cayman Islands 527,011 518,113 0.14
Bermuda
Healthcare 260,330 262,413 0.07
Belgium
Healthcare 207,840 146,096 0.04
Switzerland
Healthcare 106,002 83,035 0.02
Total common stocks 156,450,124 267,436,002 69.05
* No individual investment security or contract constitutes greater than 5
percent of net assets.
See accompanying notes to the financial statements.
Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Descriptions Number Cost Fair Value US$ Percentage of Net Assets
of Shares US$ %
Investments in securities, at fair value
(continued)
Convertible preferred stocks
United States
Healthcare* 35,924,442 39,402,135 10.17
China
Healthcare
Ji Xing Pharmaceuticals Ltd. 10,599,945 14,824,184 24,793,386 6.40
Others 1,771,209 1,771,209 0.46
Total China 16,595,393 26,564,595 6.86
Switzerland
Healthcare 1,704,186 1,693,165 0.44
Ireland
Healthcare 116,545 132,819 0.03
Total convertible preferred stocks 54,340,566 67,792,714 17.50
Exchange traded funds
United States
Index
SPDR S&P 500 ETF TRUST 67,579 26,216,888 32,097,322 8.28
Total exchange traded funds 26,216,888 32,097,322 8.28
Investment in private investment companies
Ireland
Healthcare 11,814,933 13,068,663 3.37
United States
Healthcare 8,234,839 10,013,859 2.59
Total investment in private investment companies 20,049,772 23,082,522 5.96
* No individual investment security or contract constitutes greater than 5
percent of net assets.
Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Descriptions Cost Fair Value Percentage of Net Assets
US$ US$ %
Investments in securities, at fair value
(continued)
American depository receipts
United Kingdom
Healthcare 7,368,293 12,033,889 3.11
Netherlands
Healthcare 3,786,165 3,962,050 1.02
Ireland
Healthcare 893,338 1,085,120 0.28
Sweden
Healthcare 438,397 388,133 0.10
Israel
Healthcare 372,855 308,578 0.08
China
Healthcare 549,132 202,418 0.05
Singapore
Healthcare 231,809 67,036 0.02
Total American depository receipts 13,639,989 18,047,224 4.66
Convertible bonds
United States
Healthcare 723,723 723,723 0.18
Total convertible bonds 723,723 723,723 0.18
Total investments in securities, at fair value 271,421,062 409,179,507 105.63
See accompanying notes to the financial statements.
Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Descriptions Cost Fair Value Percentage of Net Assets
US$ US$ %
Derivative contracts - assets, at fair value
Equity swaps
United States
Healthcare 5,442,939 1.41
British Virgin Islands
Healthcare 2,128,260 0.55
Netherlands
Healthcare 4,225 0.00
Total equity swaps 7,575,424 1.96
Warrants
Canada
Healthcare 1,939,543 3,077,816 0.79
United States
Healthcare 407,920 329,865 0.09
Cayman Islands
Financials 599 469 0.00
Total warrants 2,348,062 3,408,150 0.88
Total derivative contracts - assets, at fair value 2,348,062 10,983,574 2.84
See accompanying notes to the financial statements.
Condensed Schedule of Investments (continued)
as at 31 December 2021
(Expressed in United States Dollars)
Descriptions Proceeds US$ Fair Value Percentage of Net Assets
US$ %
Securities sold short, at fair value
Common stocks
United States
Healthcare 8,526,920 8,330,314 2.15
Materials 56,309 9,801 0.00
Total United States 8,583,229 8,340,115 2.15
Netherlands
Healthcare 278,805 324,576 0.09
Cayman Islands
Financials 96,480 97,018 0.03
Switzerland
Healthcare 106,146 83,035 0.02
Total common stocks 9,064,660 8,844,744 2.29
American depository receipts
Sweden
Healthcare 462,836 388,133 0.10
China
Healthcare 93,485 85,516 0.02
Total American depository receipts 556,321 473,649 0.12
Total securities sold short, at fair value 9,620,981 9,318,393 2.41
Descriptions Fair Value Percentage of Net Assets
US$ %
Derivative contracts - liabilities, at fair value
Equity swaps
United States
Healthcare 3,223,278 0.83
Ireland
Healthcare 52,601 0.01
Israel
Healthcare 34,954 0.01
Total derivative contracts - liabilities, at fair value 3,310,833 0.85
See accompanying notes to the financial statements.
Condensed Schedule of Investments
as at 31 December 2020
(Expressed in United States Dollars)
Descriptions Number of Shares Cost Fair Value Percentage of Net Assets
US$ US$ %
Investments in securities, at fair value
Common stocks
United States
Healthcare
Rocket Pharmaceuticals, Inc. 3,089,728 8,131,396 169,440,683 41.07
Others* 97,062,100 176,270,298 42.72
Total United States 105,193,496 345,710,981 83.79
Canada
Healthcare 3,891,345 2,360,037 0.57
Netherlands
Healthcare 2,011,065 1,695,645 0.41
Cayman Islands
Healthcare 749,216 938,398 0.23
British Virgin Islands
Healthcare 226,450 383,740 0.09
China
Healthcare 7,325 13,224 0.00
Total common stocks 112,078,897 351,102,025 85.09
Convertible preferred stocks
United States
Healthcare* 23,972,095 23,591,822 5.72
United Kingdom
Healthcare 7,402,614 7,707,415 1.87
Cayman Islands
Healthcare 6,862,515 6,862,515 1.66
Ireland
Healthcare 116,545 109,806 0.03
Total convertible preferred stocks 38,353,769 38,271,558 9.28
*No individual investment security or contract constitutes greater than 5
percent of net assets.
See accompanying notes to the financial statements.
Condensed Schedule of Investments (continued)
as at 31 December 2020
(Expressed in United States Dollars)
Descriptions Cost Fair Value Percentage of Net Assets
US$ US$ %
Investments in securities, at fair value (continued)
American depository receipts
Ireland
Healthcare 1,093,043 1,004,772 0.24
Israel
Healthcare 422,828 394,447 0.10
Cayman Islands
Healthcare 12,738 17,833 0.00
Total American depository receipts 1,528,609 1,417,052 0.34
Total investments in securities, at fair value 151,961,275 390,790,635 94.71
Descriptions Cost Fair Value Percentage of Net Assets
US$ US$ %
Derivative contracts - assets, at fair value
Warrants
Canada
Healthcare 1,589,508 2,721,084 0.66
United States
Healthcare 155,991 209,900 0.05
Total warrants 1,745,499 2,930,984 0.71
Equity swaps
United States
Healthcare 13,412 859,586 0.21
British Virgin Islands
Healthcare 3,873 846,117 0.20
Canada
Healthcare 1,207 77,255 0.02
Total equity swaps 18,492 1,782,958 0.43
Total derivative contracts - assets, at fair value 1,763,991 4,713,942 1.14
See accompanying notes to the financial statements.
Condensed Schedule of Investments (continued)
as at 31 December 2020
(Expressed in United States Dollars)
Descriptions Proceeds Fair Value Percentage of Net Assets
US$ US$ %
Securities sold short, at fair value
Common stocks
United States
Healthcare 4,541,074 6,229,135 1.51
Netherlands
Healthcare 213,386 199,896 0.05
Canada
Healthcare 58,823 78,292 0.02
Total common stocks 4,813,283 6,507,323 1.58
American depository receipts
Israel
Healthcare 149,412 147,203 0.04
Cayman Islands
Healthcare 23,468 17,833 0.00
Total American depository receipts 172,880 165,036 0.04
Total securities sold short, at fair value 4,986,163 6,672,359 1.62
Descriptions Proceeds Fair Value Percentage of Net Assets
US$ US$ %
Derivative contracts - liabilities, at fair value
Equity swaps
United States 6,903 579,782 0.14
Healthcare
Total derivative contracts - liabilities, at fair value 6,903 579,782 0.14
See accompanying notes to the financial statements.
Statement of Operations
For the year ended 31 December 2021 and 31 December 2020
(Expressed in United States Dollars)
2021 2020
US$ US$
Investment income
Interest (net of withholding taxes of US$nil 2020: US$nil) 363,673 70,291
Dividends (net of withholding taxes of US$123,894; 2020: US$nil) 294,027 83,814
Total investment income 657,700 154,105
Expenses
Management fees 4,813,854 2,912,850
Professional fees 1,070,317 1,068,017
Listing fees 936,615 -
Administrative fees 330,834 233,459
Audit fees 288,254 162,016
Directors' fees 214,353 220,875
Research fees 237,984 130,489
Interest 215,606 73,545
Other expenses 346,867 305,856
Total expenses 8,454,684 5,107,107
Net investment income/(loss) (7,796,984) (4,953,002)
Realised and change in unrealised gain/(loss) on investments, derivatives and
foreign currency transactions
Net realised gain/(loss) on securities and foreign currency transactions 41,280,297 8,337,422
Net change in unrealised gain/(loss) on securities and foreign currency (99,115,160) 159,009,990
translation
Net realised gain/(loss) on derivative contracts (1,648,961) (2,880,680)
Net change in unrealised gain/(loss) on derivative contracts 2,936,018 1,139,850
Net realised and unrealised gain/(loss) on investments, derivatives and (56,547,806) 165,606,582
foreign currency transactions
Net increase/(decrease) in net assets resulting from operations (64,344,790) 160,653,580
See accompanying notes to the financial statements.
Statement of Changes in Net Assets
For the year ended 31 December 2021
(Expressed in United States Dollars)
Ordinary Share Class Fund Performance Allocation Share Class Fund Total Shareholders' Funds
US$ US$ US$
Net assets, beginning of year 375,281,126 37,330,803 412,611,929
Operations
Net investment gain/(loss) (7,796,984) - (7,796,984)
Net realised gain/(loss) on securities and foreign currency transactions 41,280,297 - 41,280,297
Net change in unrealised gain/(loss) on securities and foreign currency (99,115,160) - (99,115,160)
translation
Net realised gain/(loss) on derivative contracts (1,648,961) - (1,648,961)
Net change in unrealised gain/(loss) on derivative contracts 2,936,018 - 2,936,018
Performance Allocation 8,035,379 (8,035,379) -
Net change in net assets resulting from operations (56,309,411) (8,035,379) (64,344,790)
Capital transactions
Issuance of Ordinary Shares (net of issuance cost of US$222,883) 44,068,507 - 44,068,507
Performance Allocation distribution - (4,974,920) (4,974,920)
Net change in net assets resulting from capital transactions 44,068,507 (4,974,920) 39,093,587
Net change in net assets (12,240,904) (13,010,299) (25,251,203)
Net assets, end of year 363,040,222 24,320,504 387,360,726
See accompanying notes to the financial statements.
Statement of Changes in Net Assets
For the year ended 31 December 2020
(Expressed in United States Dollars)
Ordinary Share Class Fund Performance Allocation Share Class Fund Total Shareholders' Funds
US$ US$ US$
Net assets, beginning of year 205,695,869 8,691,106 214,386,975
Operations
Net investment gain/(loss) (4,953,002) - (4,953,002)
Net realised gain/(loss) on securities and foreign currency transactions 8,337,422 - 8,337,422
Net change in unrealised gain/(loss) on securities and foreign currency 159,009,990 - 159,009,990
translation
Net realised gain/(loss) on derivative contracts (2,880,680) - (2,880,680)
Net change in unrealised gain/(loss) on derivative contracts 1,139,850 - 1,139,850
Performance Allocation (32,787,677) 32,787,677 -
Net change in net assets resulting from operations 127,865,903 32,787,677 160,653,580
Capital transactions
Issuance of Ordinary Shares (net of issuance costs of US$209,676) 41,719,354 - 41,719,354
Performance Allocation distribution - (4,147,980) (4,147,980)
Net change in net assets resulting from capital transactions 41,719,354 (4,147,980) 37,571,374
Net change in net assets 169,585,257 28,639,697 198,224,954
Net assets, end of year 375,281,126 37,330,803 412,611,929
See accompanying notes to the financial statements.
Statement of Cash Flows
For the year ended 31 December 2021 and 31 December 2020
(Expressed in United States Dollars)
2021 2020
US$ US$
Cash flows from operating activities
Net increase/(decrease) in net assets resulting from operations (64,344,790) 160,653,580
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 (41,280,297) (8,337,422)
Net change in unrealised (gain)/loss on securities and foreign currency 99,115,160 (159,009,990)
translation
Net realised (gain)/loss on derivative contracts 1,648,961 2,880,680
Net change in unrealised (gain)/loss on derivative contracts (2,936,018) (1,139,850)
Purchases of investments in securities (202,925,739) (117,412,482)
Proceeds from sales of investments in securities 119,715,056 66,905,737
Proceeds from securities sold short 15,049,848 6,506,635
Payments for securities sold short (5,416,866) (2,306,452)
Proceeds from derivative contracts (784,778) 1,222,986
Payments for derivative contracts (1,466,746) (5,785,761)
Changes in operating assets and liabilities:
Other assets (66,990) (118,767)
(Receivable from)/payable for unsettled trades 830,880 (1,072,270)
Due to brokers 37,658,827 361,032
Accrued expenses 331,475 (130,162)
Net cash provided by/(used in) operating activities (including restricted (44,872,017) (56,782,506)
cash)
Cash flows from financing activities
Net proceeds from issuance of shares 44,068,507 41,719,354
Performance Allocation distribution (4,974,920) (4,147,980)
Net cash provided by/(used in) financing activities 39,093,587 37,571,374
Net change in cash and cash equivalents (including restricted cash) (5,778,430) (19,211,132)
Cash and cash equivalents (including restricted cash), beginning of the year 24,586,452 43,797,584
Cash and cash equivalents (including restricted cash), end of the year 18,808,022 24,586,452
At 31 December 2021, the amounts categorised in cash and cash equivalents
(including restricted cash) include the following:
Cash and cash equivalents 6,484,057 4,553,481
Due from brokers 12,323,965 20,032,971
Total cash and cash equivalents (including restricted cash) 18,808,022 24,586,452
Supplemental disclosure of cash flow information
Cash paid during the year for interest 250,980 84,698
See accompanying notes to the financial statements
Notes to the Financial Statements
For the year ended 31 December 2021
(Expressed in United States Dollars)
1. Nature of operations and summary of significant accounting policies
RTW Venture Fund Limited (the "Company"), is a publicly listed Guernsey
non-cellular company limited by shares. It 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 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 under ticker
symbol RTWG.
The Company 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 the Investment Manager's (as defined below) existing US-based
funds. The Company focuses on creating, building, and supporting world-class
life sciences, biopharmaceutical and medical technology companies. The
Company'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 Company appointed RTW
Investments, LP, a Delaware limited partnership (the "Investment Manager"), to
provide the Company 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 financial statements are expressed in United States Dollars. The financial
statements which give a true and fair view and have been prepared in
conformity with US generally accepted accounting principles ("US GAAP") and
are in compliance with the Companies (Guernsey) Law, 2008. The Company is an
investment company and follows the accounting and reporting guidance in
Financial Accounting Standards Board's ("FASB") Accounting Standards
Codification Topic 946, Financial Services - Investment Companies.
Although the Company was in a net current liability position as at 31 December
2021, the Directors considered that it is appropriate to adopt a going concern
basis of accounting in preparing the 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.
The COVID-19 pandemic continues to be a risk to the global economy, and,
although the impact of COVID-19 continues to be seen across the world, the
implications for financial markets has begun to reduce, with equity
volatilities improving. Although impeded by the discovery of the new Omicron
variant in the fourth quarter of 2021, overall indices were in a better
position than at the start of 2021.
Like the majority of companies, COVID-19 has had an impact on the Company's
operations but, at the height of the lockdowns in Guernsey and the United
States, the Investment Manager, Administrator and Sub-Administrator
demonstrated that they were able to work remotely without any significant
negative impact on the Company's operations.
While the ongoing implications of COVID-19 are still unknown, as of year-end,
the movements in the market are encouraging but, should another new variant
lead to further lockdowns this could change again. However, in part due to the
successful vaccine roll-out, there is light at the end of the COVID-19
pandemic tunnel, and it is expected that the risk to the Company from it will
continue to decrease throughout 2022.
Although the COVID-19 pandemic could have a negative impact on investment
valuations and on the volatility of investment valuations, it does not impact
the ability of the Company to continue as a going concern. The impact of the
COVID-19 pandemic is changing but the Directors consider that the Company is
well placed to deal with challenges arising from the COVID-19 pandemic.
Cash and cash equivalents (including restricted cash)
Cash represents cash deposits held at financial institutions. Cash equivalents
include short-term highly liquid investments of sufficient credit quality that
are readily convertible to known amounts of cash and have original maturities
of three months or less. Cash equivalents are carried at cost plus accrued
interest, which approximates fair value. Cash equivalents are held for the
purpose of meeting short-term liquidity requirements, rather than for
investment purposes. As at 31 December 2021 and 31 December 2020, the Company
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
Company 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 Company 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 Company.
Unobservable inputs reflect the Company'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 Company 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
("NAV") as a practical expedient are not categorized 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 Company 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 Company's own
assumptions are set to reflect those that market participants would use in
pricing the asset or liability at the measurement date. The Company 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 Company 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. A discount for lack of marketability based on the 180 day
restriction period under SEC Rule 144 is applied for investments that the
Company purchases prior to an IPO and that subsequently begin trading on the
NASDAQ national market.
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 an Independent Valuer to challenge their assessed fair value on
certain unlisted investments. The Investment Manager's unlisted investment
valuation policy applies to 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 NAV practical
expedient approach. 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.
The market approach utilizes guideline public companies relying on projected
revenues to derive an indicated enterprise value. Due to the nature of the
investments, being in the early stages of development, the projected revenues
are 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 revenues, the early development stage of each of the investments and
the indicated enterprise value is discounted at an appropriate rate.
The income approach utilizes the discounted cash flow method. Projected cash
flows for each investment were discounted to determine an assumed enterprise
value.
Where applicable, the indicated enterprise value was 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 was 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 was allocated to the equity class on either a fully
diluted basis or using an option pricing model. The resulting indicated value
on a per share basis is then multiplied by the number of shares to derive the
fair market value.
American depository receipts
The Company 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 bonds
Convertible bonds are recorded at fair value using valuation techniques based
on observable inputs. These instruments are generally categorised in Level 2
of the fair value hierarchy. In instances where significant inputs are
unobservable, convertible bonds are categorised in Level 3 of the fair value
hierarchy.
Convertible preferred stock
The Company 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 3 investments in convertible preferred stock are
valued in accordance with the unlisted investments section above. As of 31
December 2021, these investments are categorised in Level 1 and Level 3 of the
fair value hierarchy.
Investment in private investment companies
The Company values investment in private investment companies using the net
asset values provided by the underlying private investment companies as a
practical expedient. The Company applies the practical expedient to its
private investment companies on an investment-by-investment basis and
consistently with the Company's entire position in a particular investment,
unless it is probable that the Company will sell a portion of an investment at
an amount different from the NAV of the investment.
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.
Fair value - valuation processes
The Company establishes valuation processes and procedures to ensure that the
valuation techniques are fair and consistent, and valuation inputs are
supportable. The Company designates the Investment Manager's Valuation
Committee to oversee the entire valuation process of the Company's
investments. The Valuation Committee comprises various members of the
Investment Manager, including those separate from the Company's portfolio
management and trading functions, and reports to the Board.
The Valuation Committee is responsible for developing the Company'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 Company'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 Company 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 Company engages the services of a third-party
valuation firm, the Independent Valuer, to perform an independent review of
the valuation of the Company's Level 3 investments and may adjust its
valuations based on the recommendations from the Investment Manager's
Valuation Committee.
Translation of foreign currency
Assets and liabilities denominated in foreign currencies are translated into
United States Dollar amounts at the year-end exchange rates. Transactions
denominated in foreign currencies, including purchases and sales of
investments, and income and expenses, are translated into United States Dollar
amounts on the transaction date. Adjustments arising from foreign currency
transactions are reflected in the statement of operations.
The Company 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 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 Company'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. For the year
ended 31 December 2020, realised gains and losses on investment transactions
were determined using cost calculated on a first in, first out basis. However,
with effect from 1 January 2021, realised gains and losses on investment
transactions have been calculated on a specific identification method. The
change in accounting policy was made in order to achieve a more favorable tax
outcome for shareholders. It is impracticable to determine the cumulative
effect of applying the change in accounting policy through retrospective
application on prior periods owing to the change in Administrator during the
year, hence the change was made prospectively as of the earliest date
practicable, 1 January 2021. Note that, following the change, there is no
effect on either the Company's net assets as at 31 December 2021 or net
increase/(decrease) in net assets resulting from operations for the year then
ended and the Directors are of the opinion that any retrospective application
of this change would not be material to the prior period reported results.
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 Company'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 Company has the legal right to offset the recognised amounts
and intends to settle on a net basis.
The Company has elected not to offset fair value amounts recognised for cash
collateral receivables and payables against fair value amounts recognised for
derivative positions executed with the same counterparty under the same master
netting arrangement. At 31 December 2021, the Company had cash collateral
receivables of US$12,228,870 (31 December 2020: US$5,191,837) (see Note 3)
with derivative counterparties under the same master netting arrangement.
Income taxes
The Company is exempt from taxation in Guernsey and is charged an annual
exemption fee of £1,200. The Company 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 Company is managed so as not to be resident in the UK for UK tax purposes
and as a foreign limited partnership for US tax purposes and provides full tax
reporting for its US shareholders.
The Company 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 Company 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 Company's financial
statements. Income tax and related interest and penalties would be recognised
as a tax expense in the statement of operations if the tax position was deemed
to meet the more likely than not threshold.
The Investment Manager has analysed the Company's tax positions and has
concluded no liability for unrecognised tax benefits should be recorded in
relation 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.
Prior to re-domiciliation the Company did not record a provision for US
federal, state, or local income taxes because the participating members
reported their share of the Company's income or loss on their income tax
returns. The Company files an income tax return in the US federal
jurisdiction, and may have to file income tax returns in various US states and
foreign jurisdictions. Generally, the Company was subject to income tax
examinations by major taxing authorities for the tax period since inception.
Based on its analysis, the Company determined that it had not incurred any
liability for unrecognised tax benefits as of 31 December 2021 or 31 December
2020.
Use of estimates
Preparing 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
financial statements and the reported amounts of income and expenses during
the reporting period. Actual results could differ from those estimates.
New accounting pronouncements
There were no new accounting pronouncements required to be adopted by the
Company during the year.
2. Fair value measurements
The Company's assets and liabilities recorded at fair value have been
categorised based upon a fair value hierarchy as described in the Company's
significant accounting policies in Note 1.
The following table presents information about the Company's assets and
liabilities measured at fair value as of 31 December 2021:
Level 1 Level 2 Level 3 Investments measured at net asset value* Total
US$ US$ US$ US$
Assets (at fair value)
Investments in securities
Common stocks 249,490,511 16,001,524 1,943,967 - 267,436,002
Convertible preferred stocks 615,444 - 67,177,270 - 67,792,714
Exchange traded funds 32,097,322 - - - 32,097,322
Investment in private - - - 23,082,522
investment companies 23,082,522
American depository receipts 18,047,224 - - - 18,047,224
Convertible bonds - - 723,723 - 723,723
Total investments in securities 300,250,501 16,001,524 69,844,960 23,082,522 409,179,507
Derivative contracts
Equity swaps - 7,575,424 - - 7,575,424
Warrants 6,576 3,267,566 134,008 - 3,408,150
Total derivative contracts 6,576 10,842,990 134,008 - 10,983,574
300,257,077 26,844,514 69,978,968 420,163,081
23,082,522
Liabilities (at fair value)
Securities sold short
Common stocks 8,844,744 - - 8,844,744
American depository receipts 473,649 - - 473,649
Total securities sold short 9,318,393 - - 9,318,393
Derivative contracts
Equity swaps - 3,310,833 - 3,310,833
Total derivative contracts - 3,310,833 - 3,310,833
9,318,393 3,310,833 - 12,629,226
* The Company's investment in private investment companies that are valued at
their net asset value are not categorized within the fair value hierarchy.
The following table presents information about the Company's assets and
liabilities measured at fair value as of 31 December 2020:
Level 1 Level 2 Level 3 Total
US$ US$ US$ US$
Assets (at fair value)
Investments in securities
Common stocks 307,923,358 34,091,286 9,087,381 351,102,025
Convertible preferred stocks 109,806 - 38,161,752 38,271,558
American depository receipts 1,417,052 - - 1,417,052
Total investments in securities 309,450,216 34,091,286 47,249,133 390,790,635
Derivative contracts
Warrants 75,917 2,721,084 133,983 2,930,984
Equity swaps - 1,782,958 - 1,782,958
Total derivative contracts 75,917 4,504,042 133,983 4,713,942
309,526,133 38,595,328 47,383,116 395,504,577
Liabilities (at fair value)
Securities sold short
Common stocks 6,507,323 - - 6,507,323
American depository receipts 165,036 - - 165,036
Total securities sold short 6,672,359 - - 6,672,359
Derivative contracts
Equity swaps - 579,782 - 579,782
Total derivative contracts - 579,782 - 579,782
6,672,359 579,782 - 7,252,141
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 year ended 31
December 2021, the Company had transfers into Level 2 of US$9,064,760 from
Level 3 due to conversion into publicly traded common stocks subject to an
unexpired 180-day lock-up as at 31 December 2021 (2020: US$9,002,481) and
transfers into Level 1 of US$20,330,984 from Level 3 due to conversion into
publicly traded common stocks (2020: US$4,999,996). During the year ended 31
December 2021, US$8,210,689 (2020: US$nil) relating to investment companies
measured using NAV as a practical expedient and which are not categorized in
the fair value hierarchy, was transferred out of Level 3. Transfers between
levels are deemed to occur at year end.
The following tables summarise the valuation techniques and significant
unobservable inputs used for the Company's investments that are categorised
within Level 3 of the fair value hierarchy as of 31 December 2021 and 31
December 2020:
Fair value at 31 December 2021 Valuation techniques Significant unobservable inputs Range of inputs
US$
Assets (at fair value)
Investments in securities
Convertible preferred 60,740,530 Discounted cash flow; WACC 16% - 38%
stocks
Market approach
Market approach; Exit revenue multiple 3.0x - 4.0x
expected volatility
and/or
and/or option pricing model
Expected volatility 40% - 135%
market up step multiple
1.0x - 1.8x
6,436,740 Price of most recent funding round n/a n/a
Common stocks 844,280 Market approach; Expected volatility 60%
and/or
and/or option pricing m market step up multiple 1.1x - 1.7x
pricing modepricing mil
pricing model multiple
1,099,687 Price of most recent n/a n/a
Funding roundfunfunding round funding round
funding round
Convertible bonds 723,723 Price of most recent n/a n/a
funding round
Total investments in securities 69,844,960
Derivative contracts
Warrants 133,983 Price of most recent n/a n/a
funding round
25 Discounted cash flow; WACC 38%
Market approach; and/or option pricing model Exit revenue multiple 3.0x
expected volatility
45%
Total derivative contracts 134,008
Fair value at 31 December 2020 Valuation techniques Significant unobservable inputs Range of inputs
US$
Assets (at fair value)
Investments in securities
Convertible preferred stocks 20,777,728 Price of most recent funding round n/a n/a
Discounted cash flows, option pricing model
17,384,024 WACC 28%-42%
Exit revenue multiple
4x
Expected volatility
50%-80%
Common stocks 8,741,068 Price of most recent funding round n/a n/a
Discounted cash flows, option pricing model
346,313 Expected volatility 95%
Total investments in securities 47,249,133
Derivative contracts
Warrants 133,983 Price of most recent funding round n/a n/a
Total derivative contracts 133,983
The significant unobservable inputs used in the fair value measurements of
Level 3 convertible preferred stocks are WACC, exit revenue multiple, and
expected volatility. Increases in the WACC in isolation would result in a
lower fair value for the security, and vice versa. Increases in the exit
multiple 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 table below 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 Company has
classified within the Level 3 category. As a result, the unrealised gains and
losses for assets and liabilities within the Level 3 category may include
changes in fair value that were attributable to both observable and
unobservable inputs.
Changes in Level 3 assets and liabilities measured at fair value for the year
ended 31 December 2021 were as follows:
Balance beginning 1 January 2021 Realised gains/ (losses)((a)) Change in Unrealised gains/ (losses)((a)) Purchases Sales Transfers into/(from) Level 3* Ending balance 31 December 2021
US$ US$ US$ US$ US$ US$ US$
Assets (at fair value)
Investments in securities
Convertible preferred stocks 38,161,752 1,440,394 13,226,721 46,075,180 (2,331,033) (29,395,744) 67,177,270
Common stocks 9,087,381 - 502,587 564,688 - (8,210,689) 1,943,967
Convertible bonds - - - 723,723 - - 723,723
Total investments in securities 47,249,133 1,440,394 13,729,308 47,363,591 (2,331,033) (37,606,433) 69,844,960
Derivative contracts
Warrants 133,983 - 1 24 - - 134,008
Total derivative contracts 133,983 - 1 24 - - 134,008
* Conversions of preferred stock into common stock.
Changes in Level 3 assets and liabilities measured at fair value for the year
ended 31 December 2020 were as follows:
Balance beginning 1 January 2020 Realised gains/ (losses)((a)) Change in Unrealised gains/ (losses)((a)) Purchases Sales Transfers into/(from) Level 3* Ending balance 31 December 2020
US$ US$ US$ US$ US$ US$ US$
Assets (at fair value)
Investments in securities
Convertible preferred stocks 26,064,551 - (640,023) 28,972,718 (3,000,004) (13,235,490) 38,161,752
Convertible notes - - - 762,640 - (762,640) -
Common stocks - - 125,210 8,966,519 - (4,348) 9,087,381
Total investments in securities 26,064,551 - (514,813) 38,701,877 (3,000,004) (14,002,478) 47,249,133
Derivative contracts
Warrants - - - 133,983 - - 133,983
Total derivative contracts - - - 133,983 - - 133,983
* Conversions of preferred stock and convertible notes into common stock.
((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 statement of operations.
Changes in Level 3 unrealised gains and losses during the year for assets
still held at year end were as follows:
2021 2020
US$ US$
Convertible preferred stocks 12,873,757 (640,023)
Common stocks 497,966 125,210
Change in unrealised gains and losses during the year for assets still held at 13,371,723 (514,813)
year end
Total realised gains and losses and unrealised gains and losses in the
Company's investment in securities, derivative contracts and securities sold
short are made up of the following gain and loss elements:
2021 2020
US$ US$
Realised gains 54,163,408 17,159,030
Realised losses (14,532,072) (11,702,288)
Net realised gain on securities, derivative contracts and securities sold 39,631,336 5,456,742
short
2021 2020
US$ US$
Change in unrealised gains 106,379,343 218,626,449
Change in unrealised losses (202,558,485) (58,476,609)
Net change in unrealised gain/(loss) on securities, derivative contracts and (96,179,142) 160,149,840
securities sold short
As at 31 December 2021, the Company had commitments (subject to completion of
certain parameters) to certain of its investments totaling US$2,358,325.
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.
At 31 December 2021, amounts included within due from brokers of US$95,095 (31
December 2020: US$14,841,134) can be used for investment. The Company pledged
cash collateral to counterparties to over-the-counter derivative contracts of
US$12,228,870 (31 December 2020: US$5,191,837) which is included in due from
brokers.
In the normal course of business, substantially all of the Company's
securities transactions, money balances, and security positions are transacted
with the Company's prime brokers, Goldman Sachs & Co. LLC, Cowen Financial
Products, LLC, UBS AG, Bank of America Merrill Lynch, Morgan Stanley & Co.
LLC, Jeffries & Co. and J.P. Morgan Securities, LLC. The Company 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
Company'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 Company utilizes 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 Company'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 Company is also subject to additional counterparty risk
due to the inability of its counterparties to meet the terms of their
contracts.
Warrants
The Company may receive warrants from its portfolio companies upon an
investment in the debt or equity of a portfolio company. The warrants provide
the Company 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 Company to lose its entire investment
in a warrant.
The Company 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 Company is the fair value of the contracts and
the purchase price of the warrants. The Company considers the effects of
counterparty risk when determining the fair value of its investments in
warrants.
Equity swap contracts
The Company is subject to equity price risk in the normal course of pursuing
its investment objectives. The Company 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 Company 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.
Volume of derivative activities
The Company considers the average month-end notional amounts during the year,
categorised by primary underlying risk, to be representative of the volume of
its derivative activities during the year ended 31 December 2021:
31 December 2021 31 December 2020
Long exposure Short exposure Long exposure Short exposure
Primary underlying risk Notional amounts US$ Notional amounts US$ Notional amounts US$ Notional amounts US$
Equity price
Equity swaps 2,347,607 - 5,756,513 7,117,933
Warrants((a)) 9,031,998 66,149,127 1,487,443 -
11,379,605 66,149,127 7,243,956 7,117,933
((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 statement of assets and liabilities and statement
of operations
The following tables identify the fair value amounts of derivative instruments
included in the statement of assets and liabilities as derivative contracts,
categorised by primary underlying risk, at 31 December 2021 and 31 December
2020. The following table also identifies the gain and loss amounts included
in the statement of operations as net realised gain/(loss) on derivative
contracts and net change in unrealised gain/(loss) on derivative contracts,
categorised by primary underlying risk, for the year ended 31 December 2021
and 31 December 2020.
31 December 2021
Primary underlying risk Derivative assets Derivative liabilities Realised gain/(loss) Change in unrealised gain/(loss)
US$ US$ US$ US$
Equity price
Equity swaps 7,575,424 3,310,833 (1,651,404) 3,061,415
Warrants 3,408,150 - 2,443 (125,397)
10,983,574 3,310,833 (1,648,961) 2,936,018
31 December 2020
Primary underlying risk Derivative assets Derivative liabilities Realised gain/(loss) Change in unrealised gain/(loss)
US$ US$ US$ US$
Equity price
Equity swaps 1,782,958 579,782 - 1,185,485
Warrants 2,930,984 - (2,880,680) (45,635)
4,713,942 579,782 (2,888,680) 1,139,850
5. Securities lending agreements
The Company has entered into securities lending agreements with its prime
brokers. From time to time, the prime brokers lend securities on the Company's
behalf. As of 31 December 2021 and 31 December 2020, no securities were loaned
and no collateral was received.
6. Offsetting assets and liabilities
The Company is required to disclose the impact of offsetting assets and
liabilities represented in the statement of assets and liabilities to enable
users of the 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 Company to another party are determinable,
the Company has the right to offset the amounts owed with the amounts owed by
the other party, the Company intends to offset and the Company's right of
setoff are enforceable by law.
As of 31 December 2021 and 31 December 2020, the Company held financial
instruments and derivative instruments that were eligible for offset in the
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 Company against applicable
liabilities or payment obligations of the Company to the counterparty. These
arrangements also allow the counterparty to net any of its applicable
liabilities or payment obligations they have to the Company against any
collateral sent to the Company.
As discussed in Note 1, the Company has elected not to offset assets and
liabilities in the statement of assets and liabilities. The following table
presents the potential effect of netting arrangements for asset derivative
contracts presented in the statement of assets and liabilities:
Gross amounts of recognised assets Gross amounts offset in the statement of assets and liabilities Gross amounts of recognised assets and liabilities 31 December 2021 Net amount
Gross amounts not offset in the statement of assets and liabilities
Description
Financial instruments((a)) Cash collateral received((b))
Equity swaps
Cowen Financial Products, LLC 5,777,357 - 5,777,357 (1,532,754) - 4,244,603
Bank of America Merrill Lynch 1,396,737 - 1,396,737 (1,190,091) - 206,646
Morgan Stanley & Co. LLC 306,560 - 306,560 (77,393) - 229,167
Jeffries & Co. 78,710 - 78,710 (78,710) - -
UBS AG 16,060 - 16,060 (16,060) - -
7,575,424 - 7,575,424 (2,895,008) - 4,680,416
Gross amounts of recognised assets Gross amounts offset in the statement of assets and liabilities Gross 31 December 2020
amounts of Gross amounts not offset in the statement of assets and liabilities
recognised
assets and liabilities Net amount
Description
Financial instruments((a)) Cash collateral received((b))
Equity swaps
Cowen Financial Products, LLC 1,487,760 - 1,487,760 (296,372) -
1,191,388
UBS AG 323,371 - 323,371 (60,876) - 262,495
Bank of America Merrill Lynch 32,659 - 32,659 (32,659) -
-
1,843,790 1,843,790 (389,907) - 1,453,883
((a)) Amounts related to master netting agreements (e.g. ISDA), determined by
the Company 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 Company 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 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 statement of assets and
liabilities as of 31 December 2021 and 31 December 2020:
Gross amounts of recognised liabilities Gross amounts offset in the statement of assets and liabilities Gross amounts of recognised liabilities 31 December 2021 Net amount
Gross amounts not offset in the statement of assets and liabilities
Description
Financial instruments((a)) Cash collateral pledged((b))
Equity swaps
Cowen Financial Products, LLC 1,532,754 - 1,532,754 (1,532,754) - -
Bank of America Merrill Lynch 1,190,091 - 1,190,091 (1,190,091) - -
Jeffries & Co. 406,977 - 406,977 (78,710) (328,267) -
UBS AG 103,618 - 103,618 (16,060) (87,558) -
Morgan Stanley & Co. LLC 77,393 - 77,393 (77,393) - -
3,310,833 - 3,310,833 (2,895,008) (415,825) -
Gross amounts of recognised liabilities Gross amounts offset in the statement of assets and liabilities Gross amounts of recognised liabilities 31 December 2020 Net amount
Gross amounts not offset in the statement of assets and liabilities
Description
Financial instruments((a)) Cash collateral pledged((b))
Equity swaps
Cowen Financial Products, LLC 296,372 - 296,372 (296,372) - -
UBS AG 60,876 - 60,876 (60,876) - -
Bank of America Merrill Lynch 284,370 - 284,370 (32,659) - 251,711
641,618 - 641,618 (389,907) - 251,711
((a)) Amounts related to master netting agreements (e.g. ISDA), determined by
the Company 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 Company 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 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 Company is subject to certain inherent risks arising from its investing
activities of selling securities short. The ultimate cost to the Company to
acquire these securities may exceed the liability reflected in these financial
statements.
8. Risk factors
Some underlying investments may be deemed to be a highly speculative
investment and are not intended as a complete investment program. The Company
is designed only for sophisticated persons who are able to bear the economic
risk of the loss of their entire investment in the Company and who have a
limited need for liquidity in their investment. The following risks are
applicable to the Company:
Market risk
Certain events particular to each market in which Portfolio Companies conduct
operations, as well as general economic and political conditions, may have a
significant negative impact on the operations and profitability of the
Company's investments and/or on the fair value of the Company's investments.
Such events are beyond the Company's control, and the likelihood they may
occur and the effect on the Company cannot be predicted. The Company intends
to mitigate market risk generally by investing in LifeSci 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 Company'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 Company 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 companies. Biotech companies 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 Company's financial condition.
Portfolio Companies may not successfully translate promising scientific theory
into a commercially viable business opportunity. Further, the 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 LifeSci Companies. These
companies may be more volatile and have less experience and fewer resources
than more established companies.
Concentration risk
The Company may not make an investment or a series of investments in a
Portfolio Company that result in the Company's aggregate investment in such
Portfolio Company exceeding 15 per cent. of the Company's gross assets, save
for Rocket for which the limit will be 25 per cent. as stated in the Company's
prospectus. Each of these investment restrictions will be calculated as at the
time of investment. As such, it is possible that the Company'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 Company's
portfolio of investments may also lack diversification among LifeSci Companies
and related investments.
Concentration of credit risk
In the normal course of business, the Company maintains its cash balances in
financial institutions, which at times may exceed US federal or UK insured
limits, as applicable. The Company 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 Company 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 Company will attempt to limit its
transactions to counterparties which are established, well capitalised and
creditworthy.
Liquidity risk
Liquidity risk is the risk that the Company cannot meet its financial
commitments as they fall due. The Company'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 Company'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 Company 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 Company's investment in such Portfolio Company, or any
distributions received from the Portfolio Company. Under its investment
policy, the Company does not intend to enter into any securities or
financially engineered products designed to hedge portfolio exposure or
mitigate portfolio risk as a core part of its investment strategy.
9. Share capital
During the year the Company issued 20,873,403 Ordinary Shares, as follows:
2021 2020
Number of Number of Ordinary Shares
Ordinary Shares
As at 1 January 191,515,735 161,544,695
Issuance of Ordinary Shares 20,873,403 29,971,040
As at 31 December 212,389,138 191,515,735
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.
The Performance Allocation Amount will be allocated to the Performance
Allocation Share Class Fund. All Performance Allocation Shares are held by RTW
Venture Performance, LLC. As at 31 December 2021, there is one Performance
Allocation Share in issue (31 December 2020: one).
Performance Allocation Shares shall carry the right to receive, and
participate in, any dividends or other distributions of the Company available
for dividend or distribution. Performance Allocation Shares shall not be
entitled to receive notice of, to attend or to vote at general meetings of the
Company.
Management Shares shall not be entitled to receive, and participate in, any
dividends or other distributions of the Company available for dividend or
distribution. Management Shares shall be entitled to receive notice of, to
attend or to vote at general meetings of the Company. Upon admission the
Management shares of the Company were compulsorily redeemed by the Directors
for nil consideration.
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
Company. 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 Company.
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 Company (the "Management Fee"). For purposes of
determining the Management Fee, private investments will be valued at the fair
value. The Management Fee will be prorated for any period that is less than a
full month. The Management Fees charged for the year amounted to US$4,813,854
(31 December 2020: US$2,912,850) of which US$nil (31 December 2020: US$nil)
was outstanding at the year end.
Performance Allocation
The Articles provide that in respect of each Performance Allocation Period,
the Performance Allocation Amount shall be allocated to the Performance
Allocation Share Class Fund, subject to the satisfaction of a hurdle
condition.
The Performance Allocation Amount relating to the Performance Allocation
Period 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 Fund 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 Fund entered into a letter agreement dated 21 April 2020, pursuant
to which the Performance Allocation Share Class Fund agreed to defer
distributions of the Company's Ordinary Shares that would otherwise be
distributed to the Performance Allocation Share Class Fund no later than 30
business days after the publication of the Company's audited annual financial
statements. Under that letter agreement, such Ordinary Shares shall be
distributed to the Performance Allocation Share Class Fund at such time or
times as determined by the Board of Directors of the Company.
The Company will increase or decrease the amount owed to the Performance
Allocation Share Class Fund based on its investment exposure to the Company's
performance had such Performance Ordinary Shares been so issued. The
Performance Allocation Amount for the year ended 31 December 2021 includes the
residual, undistributed Performance Allocation Amounts from prior years that
were previously converted into a total of 14,228,208 Notional Ordinary Shares.
These Notional Ordinary Shares are subject to market risk alongside the
Ordinary Shares and incurred a mark-to-market loss of US$3,559,670 in 2021.
Additionally, there was a reallocation of the uncrystallized performance
allocation back to Ordinary Shareholders of US$4,475,709 related to the
Company's performance in the year. Together with the Notional Ordinary Shares
mark-to-market loss of US$3,559,670, the total period to date performance
allocation reversal is US$8,035,379, which is incorporated into the value of
the 31 December 2021 Performance Allocation balance of US$24,320,504.
Until the Company makes a distribution of Ordinary Shares to the Performance
Allocation Share Class Fund, the Company will have an unsecured discretionary
obligation to make such distribution at such time or times as the Board of
Directors of the Company determines. RTW Venture Performance, LLC has agreed
to the deferral of the distributions of the Company's Ordinary Shares in
connection with its own tax planning. The Company does not believe that the
deferral of such distributions to the Performance Allocation Share Class Fund
will have any negative effects on holders of the Company's Ordinary Shares.
The Investment Manager is a member of the Performance Allocation Share Class
Fund, and will therefore receive a proportion of the Performance Allocation
Amount. In May 2021, the Board approved a cash distribution of US$4,974,920 to
the Performance Allocation Share Class Fund (31 December 2020: US$4,147,980).
At the year end the Performance Allocation was US$24,320,504 (31 December
2020: US$37,330,803).
The Investment Manager is also refunded any research costs incurred on behalf
of the Company.
One of the Directors of the Company, Stephanie Sirota, is also a partner and
the Chief Business Officer of the Investment Manager. The following table
represents the number of related parties who served on the board of directors
of investments held by the Company during the year ended 31 December 2021 and
31 December 2020:
Investments Partners Employees
Rocket Two((a)) One
HSAC2 Holdings II Two((a)) One
Ji Xing One((b)) One
RTW Royalty (#1) - One
RTW Royalty (#2) - One
Yarrow Biotechnology One((b)) One
((a))Roderick Wong, Naveen Yalamanchi
((b))Roderick Wong
As at 31 December 2021, the number of Ordinary Shares held by each Director
was as follows:
2021 2020
Number of Ordinary Shares Number of Ordinary Shares
William Simpson 150,000 100,000
Paul Le Page 103,000 103,000
William Scott 150,000 100,000
Stephanie Sirota 1,000,000 763,004
William Simpson added to his holding during the year by purchasing 50,000
Ordinary Shares in the Company's share issuance programme at a premium to NAV.
Stephanie Sirota added to her holding during the year by purchasing 236,996
Ordinary Shares in the Company's share issuance programme at a premium to NAV.
William Scott added to his holding during the year by purchasing 50,000
Ordinary Shares in the Company's share issuance programme at a premium to NAV.
Roderick Wong is a major shareholder and also a member of the Investment
Manager. As at 31 December 2021, he held 29,218,773 (13.76% of the Ordinary
Shares in issue) (31 December 2020: 27,286,368, 14.25% of the Ordinary Shares
in issue) Ordinary Shares in the Company.
The total Directors' fees expense for the year amounted to US$214,353 (31
December 2020: US$220,875) of which US$52,761 was outstanding at 31 December
2021 (31 December 2020: US$53,136), included within accrued expenses.
11. Administrative services
On 1 February 2021, Elysium Fund Management Limited ("EFML") was appointed as
Administrator, taking over the administration, corporate secretarial,
corporate governance and compliance services from Ocorian Administration
(Guernsey) Limited ("OAGL"). Further, from 1 February 2021 Morgan Stanley Fund
Services USA LLC ("MSFS") was appointed to serve as the Company's
Sub-Administrator.
During the year EFML and MSFS charged administration fees of US$107,767 and
US$223,067 respectively (2020: OAGL charged US$233,459) of which US$8,396 and
US$76,053 (2020: US$51,947 was outstanding to OAGL) was outstanding at 31
December 2021, and is included within accrued expenses.
12. Financial highlights
Financial highlights for the year ended 31 December 2021 and 31 December 2020
are as follows:
2021 2020
Per Ordinary Share operating performance
Net Asset Value, beginning of year US$ 1.96 US$ 1.27
Issuance of Ordinary Shares 0.02 0.02
Income from investments
Net investment income/(loss) (0.04) (0.03)
Net realised and unrealised gain/(loss) on investments, derivatives and (0.23) 0.70
foreign currency transactions
Total from investment operations (0.27) 0.67
Net Asset Value, end of year US$ 1.71 US$ 1.96
Total return
Total return before Performance Allocation (15.35)% 62.35%
Performance Allocation 2.58% (8.46)%
Total return after Performance Allocation (12.77)% 53.89%
Ratios to average net assets*
Expenses 2.22% 2.11%
Performance Allocation (2.11)% 13.56%
Expenses and Performance Allocation 0.11% 15.67%
Net investment income/(loss) (2.04)% (2.05)%
NAV total return for the year (15.35)% 62.35%
*The Company's annualised ongoing charges ratio is 1.78%, calculated in
accordance with the AIC recommended methodology, which excludes non-recurring
costs and uses the average NAV in its calculation.
Financial highlights are calculated for Ordinary Shares. An individual
shareholder's financial highlights may vary based on participation in new
issues, different Performance Allocation arrangements, and the timing of
capital share transactions. Net investment income/loss does not reflect the
effects of the Performance Allocation.
13. Subsequent events
On 6 January 2022, CinCor announced pricing of its US$193.6 million IPO, by
offering 12.1 million shares at US$16.00 per share. The shares began trading
on Nasdaq Global Market on 7 January 2022 under ticker "CINC".
These financial statements were approved by the Board of Directors and
available for issuance on 30 March 2022. Subsequent events have been evaluated
through this date.
General Company Information - Investment Objective and Investment Policy
The Company
RTW Venture Fund Limited is a company that was incorporated as a limited
liability corporation in the State of Delaware, United States of America on 16
February 2017, with the name "RTW Special Purpose Fund I, LLC", and
re-domiciled into Guernsey under the Companies Law on 2 October 2019 with
registration number 66847 on the Guernsey Register of Companies.
The Company is registered with the Guernsey Financial Services Commission
("GFSC") as a Registered Closed-ended Collective Investment Scheme and is an
investment company limited by shares. The registered office of the Company is
1(st) Floor, Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey, GY1
3JX.
On 30 October 2019, the issued Ordinary Shares of the Company were listed and
admitted to trading on the Specialist Fund Segment of the Main Market of the
London Stock Exchange. The ISIN of the Company's Ordinary Shares is
GG00BKTRRM22 and trades under the ticker symbol "RTW" and "RTWG".
The Company's Ordinary Shares were admitted to trading on the Premium Segment
of the London Stock Exchange with effect from 6 August 2021.
Investment Objective
The Company seeks to achieve positive absolute performance and superior
long-term capital appreciation, with a focus on forming, building, and
supporting world-class life sciences, biopharmaceutical and medical technology
companies. It intends to create a diversified portfolio of investments across
a range of businesses, each pursuing the development of superior
pharmacological or medical therapeutic assets to enhance the quality of life
and/or extend patient life.
Investment Policy
The Company seeks to achieve its investment objective by leveraging RTW
Investments, LP's (the "Investment Manager") data-driven proprietary pipeline
of innovative assets to invest in life sciences Companies:
· across various geographies (globally);
· across various therapeutic categories and product types
(including but not limited to genetic medicines, biologics, traditional
modalities such as small molecule pharmaceuticals and antibodies, and medical
devices);
· in both a passive and active capacity and intends, from time to
time, to take a controlling or majority position with active involvement in a
Portfolio Company to assist and influence its management. In those
situations, it is expected that the Investment Manager's senior executives may
serve in temporary executive capacities; and
· by participation in opportunities created by the Investment
Manager's formation of companies de novo when a significant unmet need has
been identified and the Company is able to build a differentiated, sustainable
business to address said unmet need.
The Company expects to invest approximately 80% of its gross in the
biopharmaceutical sector and approximately 20% of its gross assets in the
medical technology sector.
The Company's portfolio will reflect its view of the most compelling
opportunities available to the Investment Manager, with an initial investment
in each privately held Portfolio Company ("Private Portfolio Company")
expected to start in a low single digit per cent. of the Company's gross
assets and grow over time, as the Company may, if applicable, participate in
follow-on investments and/or continue holding the Portfolio Company as it
becomes publicly-traded. It is intended certain long-term holds will increase
in size and may represent between five and ten per cent. or greater of the
Company's gross assets.
The Company anticipates deploying one-third of its capital toward early-stage
and de novo company formations (including newly formed entities around
early-stage academic licenses and commercial stage corporate assets) and
two-thirds of its capital in mid- to late-stage ventures.
The Company may choose to invest in Portfolio Companies listed on a public
stock exchange ("Public Portfolio Companies") depending on market conditions
and the availability of appropriate investment opportunities. Equally, as part
of a full-life cycle investment approach, it is expected that Private
Portfolio Companies may later become Public Portfolio Companies. Monetisation
events such as IPOs and reverse mergers will not necessarily represent exit
opportunities for the Company. Rather, the Company may decide to retain all or
some of its investment in such Portfolio Companies or the acquiring Company
where they meet the standard of diligence set by the Investment Manager. The
Company is not required to allocate a specific percentage of its assets to
Private Portfolio Companies or Public Portfolio Companies.
The Company also intends, where appropriate, to invest further in its
Portfolio Companies, supporting existing investments throughout their
lifecycle. The Company may divest its interest in Portfolio Companies in part
or in full when the risk-reward trade-off is deemed to be less favourable.
From time to time, the Company may seek opportunities to optimise investing
conditions, and to allow for such circumstances, the Company will have the
ability to hedge or enter into securities or derivative structures in order to
enhance the risk-reward position of the portfolio and its underlying
securities.
Investment restrictions
The Company will be subject to the following restrictions when making
investments in accordance with its investment policy:
• the Company may not make an investment or a series of investments in
a Portfolio Company that result in the Company's aggregate investment in such
Portfolio Company exceeding 15% (or, in the case of Rocket Pharmaceuticals,
Inc., 25%) of the Company's gross assets at the time of each such investment;
• the Company may not make any direct investment in any tobacco
company and not knowingly make or continue to hold any Public Portfolio
Company investments that would result in exposure to tobacco companies
exceeding one per cent. of the aggregate value of the Public Portfolio
Companies from time to time.
Each of these investment restrictions will be calculated as at the time of
investment. In the event that any of the above limits are breached at any
point after the relevant investment has been made (for instance, upon
successful realisation of economic and/or scientific milestones or as a result
of any movements in the value of the Company's gross assets), there will be no
requirement to sell or otherwise dispose of any investment (in whole or in
part).
Leverage and borrowing limits
The Company may use conservative leverage in the future in order to enhance
returns and maximise the growth of its portfolio, as well as for working
capital purposes, up to a maximum of 50% of the Company's net asset value at
the time of incurrence. Any other decision to incur indebtedness may be taken
by the Investment Manager for reasons and within such parameters as are
approved by the Board. There are no limitations placed on indebtedness
incurred in the Company's underlying investments.
Capital deployment
The Company anticipates that it will initially, upon Admission and upon any
subsequent capital raises, invest up to 80% of available cash in Public
Portfolio Companies that have been diligenced by the Investment Manager and
represent holdings in other portfolios managed by the Investment Manager,
subsequently rebalancing the portfolio between Public Portfolio Companies and
Private Portfolio Companies as opportunities to invest in the latter become
available.
Cash management
The Company's uninvested capital may be invested in cash instruments or bank
deposits pending investment in Portfolio Companies or used for working capital
purposes.
Hedging
As described above, the Company may seek opportunities to optimise investing
conditions, and to allow for such circumstances, there will be no limitations
placed on the Company's ability to hedge or enter into securities or
derivative structures in order to enhance the risk-reward position of the
portfolio and its underlying securities.
On an ongoing basis, the Company does not intend to enter into any securities
or financially engineered products designed to hedge portfolio exposure or
mitigate portfolio risk as a core part of its investment strategy, but may
enter into hedging transactions to hedge individual positions or reduce
volatility related to specific risks such as fluctuations in foreign exchange
rates, interest rates, and other market forces.
Glossary (unaudited)
Defined Terms
"Adjusted Net Asset Value" the NAV adjusted by deducting the unrealised gains and unrealised losses in
respect of private Portfolio Companies;
"Acelyrin" Acelyrin. Inc.;
"Administrator" means Elysium Fund Management Limited;
"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;
"Alcyone" Alcyone Therapeutics, Inc.;
"Ancora" Ancora Heart, Inc.;
"Annual General Meeting" or "AGM" the annual general meeting of the shareholders of the Company;
"Annual Report" the Annual Report and audited financial statements;
"Antibody" a large Y-shaped blood protein that can stick to the surface of a virus,
bacteria, or receptor on a cell;
"Antibody-Oligonucleotide Conjugates" or "AOC" molecules that combine structures of an antibody and an oligo;
"Artios" Artios Pharma, Inc.;
"Artiva" Artiva Biotherapeutics, Inc.;
"Athira" Athira Pharma, Inc.;
"Autoimmune diseases" conditions, where the immune system mistakenly attacks a body tissue;
"Avidity" Avidity Biosciences, Inc.;
"Beta Bionics" Beta Bionics, Inc.;
"Biomea" Biomea Fusion, Inc.;
"BLA" or "Biological License Application" a request for permission to introduce, or deliver for introduction, a biologic
product into interstate commerce;
"C4 Therapeutics" or "C4T" C4 Therapeutics, Inc.;
"Cardiac myosin" a target of the treatment development for a cardiovascular condition;
"Cardiovascular disease" conditions affecting heart and vascular system;
"CinCor" CinCor Pharma, Inc.;
"Clinical stage" or "clinical trial" a therapy in development goes through a number of clinical trials to ensure
its safety and efficacy. The trials in human subjects range from Phase 1 to
Phase 3. All studies done prior to clinical testing in human subjects are
considered preclinical;
"Companies Law" the Companies (Guernsey) Law, 2008 (as amended);
"Company" or "RTW Venture Fund Limited" RTW Venture Fund Limited is a company incorporated in and controlled from
Guernsey as a close-ended Investment Company. The Company has an unlimited
life and is registered with the GFSC as a Registered Closed-ended Collective
Investment Scheme. The registered office of the Company is 1(st) Floor, Royal
Chambers, St Julian's Avenue, St Peter Port, Guernsey, GY1 3JX;
"Company's Articles" means the Company's Articles of Incorporation;
"Corporate Brokers" being Barclays and J.P. Morgan Cazenove, until February 2022, when BofA
Securities was appointed and Barclays ceased to act for the Company;
"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 as at the date of this document, or who served
during the reporting period, and "Director" means any one of them;
"Dravet Syndrome" a type of rare paediatric epilepsy;
"DTR" Disclosure Guidance and Transparency Rules of the UK's FCA;
"Encoded" Encoded Therapeutics, Inc.;
"EU" or "European Union" the European Union first established by the treaty made at Maastricht on 7
February 1992;
"Fanconi Anemia" a rare genetic blood condition in young children;
"FATCA" the Foreign Account Tax Compliance Act;
"FCA" the Financial Conduct Authority;
"FCA Rules" the rules or regulations issued or promulgated by the FCA from time to time
and for the time being in force (as varied by any waiver or modification
granted, or guidance given, by the FCA);
"FDA" the US Food and Drug Administration;
"FDA Breakthrough Device Designation" a process designed to facilitate the development and expedite the review of
the device that provides a more effective treatment or diagnosis of
life-threatening or irreversibly debilitating human disease or conditions;
"FDA Breakthrough Drug Designation" a process designed to expedite the development and review of drugs which may
demonstrate substantial improvement over available therapy;
"FDA Fast Track designation" a process designed to facilitate the development and expedite the review of
drugs to treat serious conditions and fill an unmet medical need;
"FRC" the Financial Reporting Council;
"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 February 2016;
"GH Research" GH Research PLC;
"HCM" or "Hypertrophic cardiomyopathy" a cardiovascular disease characterized by an abnormally thick heart muscle;
"Immunocore" Immunocore Limited;
"InBrace" InBrace or Swift Health, Inc.;
"Independent Valuer" Alvarez & Marsal Valuation Services, LLC;
"Infantile Malignant Osteopetrosis" or "IMO" a rare genetic bone disease in young children, manifesting in an increased
bone density;
"Inivata" Inivata Ltd;
"Interim Report" the interim (half-yearly) report and financial statements;
"Investigational New Drug" or "IND" the FDA's investigational New Drug program is the means by which a
pharmaceutical company obtains permission to start human clinical trials;
"Investment Manager" RTW Investments, LP, also referred to as RTW;
"IPEV Guidelines" the International Private Equity and Venture Capital Valuation Guidelines;
"IPO" an initial public offering;
"IRR" internal rate of return;
"ISDA" International Swaps and Derivatives Association;
"iTeos" iTeos Therapeutics, Inc.;
"JIXING" Ji Xing Pharmaceuticals, formerly China New Co;
"Kyverna" Kyverna Therapeutics, Inc.;
"Landos" Landos Biopharma, Inc.;
"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" or "LSE" London Stock Exchange plc;
"LSE" London Stock Exchange's main market for listed securities;
"Lycia" Lycia Therapeutics, Inc.;
"Magnolia Medical" or "Magnolia" Magnolia Medical Technologies, Inc.;
"Medtech" medical technology sector within healthcare;
"Milestone" Milestone Pharmaceuticals, Inc.;
"MOC" Multiple on capital is the ratio of realised and unrealised gains divided by
the acquisition cost of an investment;
"Monte Rosa" Monte Rosa Therapeutics, Inc.;
"Myotonic Dystrophy" a genetic condition that affects muscle function;
"NASDAQ Biotech" 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 Company less its liabilities, calculated in
accordance with the valuation guidelines laid down by the Board;
"Neurogastrx" Neurogastrx, Inc.;
"NewCo" a new company;
"NiKang" Nikang Therapeutics, Inc;
"Non-core portfolio assets" investments made in public companies as a part of cash management strategy;
"Notional Ordinary Shares" Performance Ordinary Shares, in which receipt of such shares has been
deferred;
"Nuance" Nuance Pharma;
"Numab" Numab Therapeutics, Inc.;
"Official List" the official list of the UK Listing Authority;
"Oligonucleotides" or "Oligos" a short DNA or RNA molecules that have a wide range of applications in genetic
testing and research;
"Oncology" a therapeutic area focused on diagnosis, prevention and treatment of cancer;
"Ophthalmic conditions" conditions affecting the eye;
"Orchestra BioMed" or "Orchestra" Orchestra BioMed, Inc.:
"Ordinary Shares" the Ordinary Shares of the Company;
"Performance Allocation Amount" an allocation connected with the performance of the Company to be allocated to
the Performance Allocation Share Class Fund in such amounts and as such times
as shall be determined by the Board;
"Performance Allocation Period" the First Performance Allocation Period and/or a subsequent Performance
Allocation Period, as the context so requires;
"Performance Allocation Share Class Fund" a class fund for the Performance Allocation Shares to which the Performance
Allocation will be allocated;
"Performance Allocation Shares" performance allocation shares of no-par value in the capital of the Company;
"Performance Allocation Shareholder" the holder of Performance Allocation Shares;
"POI Law" The Protection of Investors (Bailiwick of Guernsey) Law, 2020;
"Portfolio Companies" Private and public companies included into the portfolio;
"Premium Segment" Premium Segment of the Main Market of the LSE;
"Prometheus" Prometheus Biosciences, Inc.;
"Prospectus" the prospectus of the Company, most recently updated on 14 October 2019 and
available on the Company's website (www.rtwfunds.com/venture-fund
(http://www.rtwfunds.com/venture-fund) );
"Pulmonary conditions" pathologic conditions that affect lungs;
"Pulmonx" Pulmonx Corporation;
"Pyruvate Kinase Deficiency" or "PKD" a rare genetic disorder affecting red blood cells;
"Pyxis" Pyxis Oncology, Inc.;
"Rare disease" a disease that affects a small percentage of the population;
"Registrar" Link Market Services (Guernsey) Limited;
"RNA medicines" a type of biotechnology that uses RNA to treat a disease;
"Rocket Pharmaceuticals" or "Rocket" Rocket Pharmaceuticals, Inc.;
"RTW" RTW Investments, LP, also referred to as the Investment Manager;
"RTWCF" RTW Charitable Foundation;
"RTW Royalty" RTW Royalty Holding Company;
"Russell 2000 Biotech" a stock index of small cap biotechnology and pharmaceutical companies;
"SEC Rule 144" selling restricted and control securities;
"SFS" Specialist Fund Segment of the London Stock Exchange;
"Small molecule" a compound that can regulate a biologic activity;
"Tachycardia" a heart rhythm disorder;
"Tarsus" Tarsus, Inc.;
"Tenaya" Tenaya Therapeutics. Inc.;
"Third Harmonic Bio" Third harmonic Bio, Inc.
"TIGIT" a target for a checkpoint antibody development in immune-oncology;
"TL1A" a target for the treatment of inflammation associated with inflammatory bowel
disease (IBD);
"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;
"UK" United Kingdom;
"UK Code" the UK Corporate Governance Code 2018 published by the Financial Reporting
Council in July 2018;
"Ulcerative Colitis" an inflammatory bowel disease that causes sores in the digestive tract;
"Umoja" Umoja Biopharma. Inc.;
"US" the United States of America;
"US GAAP" US Generally Accepted Accounting Principles;
"Uveal melanoma" a type of eye cancer;
"Valuation Committee" Valuation Committee of the Investment Manager;
"Ventyx" Ventyx Biosciences, Inc.;
"Visus" Visus Therapeutics, Inc.;
"WACC" weighted average cost of capital;
"XIRR" an internal rate of return calculated using irregular time intervals.
"Yarrow" Yarrow Biotechnology, Inc.
Alternative Performance Measures (unaudited)
APM Definition Purpose Calculation
Cash Cash held by the Company's Bankers, Prime Broker and an ISDA counterparty. A measure of the Company's liquidity, working capital and investment level. Cash and cash equivalents, Due from brokers less Due to brokers on the
Statement of Assets & Liabilities.
NAV per Ordinary share The Company'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$363.0m) 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$1.71) and the
reporting period. NAV per share at the beginning of the period (US$1.96) 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$1.78) and the
period. the reporting period. price per share at the beginning of the period (US$1.88) minus one expressed
as a percentage. The measure excludes transaction costs.
Share Price Premium (Discount) The amount by which the Ordinary Share price is higher/lower than the NAV per A key measure of supply and demand for the Company's shares. A premium The quotient of the price per share at the end of the period (US$1.78) and the
Ordinary Share, expressed as a percentage of the NAV per Ordinary Share. implies excess demand versus supply and vice versa. NAV per share at the end of the period (US$1.71) minus one expressed as a
percentage.
Ongoing charges ratio The recurring costs that the Company has incurred during the period excluding A measure of the minimum gross profit that the Company needs to produce to Calculated in accordance with the AIC methodology detailed on the web link
performance fees and one off legal and professional fees expressed as a make a positive return for shareholders. below.
percentage of the Company's average NAV for the period.
https://www.theaic.co.uk/sites/default/files/documents/AICOngoingChargesCalculationMay12.pdf
(https://protect-eu.mimecast.com/s/U0eKCmY06cjnvQpRHG0WkX?domain=theaic.co.uk)
Ongoing Charges 2021 2020
US$ US$
Fees to Investment Manager 4,813,854 2,912,850
Legal and professional fees 1,070,317 1,068,017
Listing fees 936,615 -
Administration fees 330,834 233,459
Directors' remuneration 214,353 220,875
Audit fees 288,254 162,016
Other expenses 800,457 509,890
Total expenses 8,454,684 5,107,107
Non-recurring expenses (1,176,627) (18,331)
Total ongoing expenses 7,278,057 5,088,776
Average NAV 408,929,032 241,755,741
Annualised ongoing charges (using AIC methodology) 1.78 % 2.10 %
-- ENDS --
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR FLFIEVLIIVIF