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Arix Bioscience starts new wave of investments after VelosBio sale

What Arix does

Arix Bioscience PLC (LON:ARIX) is a venture capital company that invests in disruptive growth companies with the potential to significantly increase in worth as they progress through clinical trials and conduct financing rounds at higher valuations.

It aims to provide more than just capital when it invests.

Arix will take a board seat and play an active role to support portfolio companies. It also brings to the party scientific and commercial experience to help navigate clinical and operational hurdles.

The firm’s PLC balance sheet enables it to take a longer-term view than non-listed peers that might have a set investment horizon.

It can provide investee businesses with the flexible, patient capital they require to grow.

Arix describes itself as being “unconstrained by institution, geography or stage of company development”.

It, therefore, has the ability to source the best life science innovation without restriction.

How it’s doing

Arix saw a sharp increase in its net asset value (NAV) per share in 2020.

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

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

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

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

In March, Arix announced a share buyback worth £25mln and also took a 5.6% stake in Pyxis Oncology after leading a US$152mln funding round.

What the boss says: Naseem Amin, Arix’s executive chairman

“This has been a period of outstanding achievement for our company.

“We have begun the journey of turning our promises to shareholders into delivery – realising £158m during the year while at the same time refocusing the portfolio, restructuring and reducing our costs and laying the foundation for the next wave of investments,” 

What the broker says

Peel Hunt, with a price target of 256p, said “the real stand-out in the results today is the execution/value creation from FY20”.

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

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

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