RTW Biotech Opportunities (RTW) has announced that it will acquire Arix Bioscience. The transaction is expected to deliver RTW with an expected pro-forma net asset value of approximately $550 million, an increase of 63% The deal will enhance RTW’s profile, provide increased liquidity potential, a more efficient cost base, and a re-rating opportunity. Arix shareholders will receive new RTW shares at an implied premium of approximately 46 per cent to Arix’s pre-strategic review share price. The deal is expected to be immediately accretive to RTW’s NAV per share at completion.
The boards of RTW Bio and Arix believe the scheme has clear strategic rationale and offers compelling benefits to shareholders of both companies which are outlined in full below:
- RTW is a best-in-class manager with superior capabilities: RTW is a leading, specialised life science investor with a record of over 14 years of success, including delivering an annualised net return of 21.6 per cent since inception from its leading private fund. RTW’s capabilities are underpinned by a science-led investment approach and its full lifecycle strategy of investing and supporting growth companies across different stages of development, business inflection points and capital structures. A team of 43 investment professionals, the majority of whom have advanced scientific degrees, drive RTW’s science-led approach, which is focused on solving the most challenging unmet patient needs by identifying, investing in, supporting, and building innovative life science companies. This long-term approach to investing enables RTW to maximise value capture from the opportunities it participates in. RTW’s infrastructure and scale provide superior access to the most exciting life science companies and events. In 2022, RTW had access to more than 200 medical meetings and 200 deals from syndicate and partner investors alone. RTW intends to utilise its sophisticated infrastructure and science and research-led investment process to manage the assets of RTW Bio and Arix following completion of the scheme. Compared to Arix’s focus on life science private and venture capital investing, RTW is able to offer a greatly enhanced investment offering with a scaled equity investing platform, company creation, royalty and structured financing as well as alternative vehicles that provides a wider opportunity for returns.
- An enhanced return potential from deployment of new capital: RTW Bio has a track record of successfully deploying capital and generating returns. Through 2022 and year-to-date 2023, RTW Bio made 9 new investments and had 7 successful IPOs or exits of portfolio companies. The scheme enables RTW to access Arix’s assets which comprise approximately $128 million of liquid assets, of which approximately $60 million is expected to be cash following completion of the scheme, costs of the share purchase and other transaction related costs. RTW intends to deploy this capital in innovative life science companies to maximise value through public and private investments. RTW Bio also has the capability to invest cash quickly through its “other public” portfolio, which matches public long positions held in other RTW funds to generate returns while minimising cash drag. Additionally, RTW will deploy capital through its royalty and structured finance strategy which provides an income stream with meaningful returns with less susceptibility to traditional equity risks and market volatility.
- Immediate scale and complementary portfolio benefits: The scheme delivers a meaningful and immediate increase in NAV such that the combined NAV of the RTW Bio and Arix portfolio is expected to be approximately $550 million. RTW Bio and Arix have a uniquely complementary portfolio of assets, meaning the enlarged portfolio will be more diversified across private assets and benefit from the significant proportion of liquid assets from the Arix portfolio.
- Compelling value creation today and in the future for all shareholders: The scheme is expected to deliver value for both RTW Bio and Arix shareholders both immediately at completion as well as in the future. The terms of the scheme imply an offer price of £1.43 per Arix Share at announcement, which represents an approximate 46 per cent premium to the Arix share price of £0.98 on 12 July 2023, being the business day immediately prior to the announcement of Arix’s strategic review. It is expected that the scheme will be single digit NAV per share accretive to existing RTW Bio shareholders at completion. RTW Bio has delivered approximately 53 per cent NAV growth since IPO and will continue to target achieving strong returns and NAV growth over the larger asset base, including from deploying the additional capital available from the Arix portfolio.
- Enhanced profile provides liquidity and re-rating opportunity: The scheme further establishes RTW Bio as a leading UK-listed life sciences fund by NAV with a broader and more diversified shareholder register. This scale and increase in market capitalisation following completion of the scheme is anticipated to improve secondary market liquidity for the trading in RTW Bio shares. RTW Bio may also in the future qualify for index inclusion, which may further improve the secondary market liquidity of RTW Bio shares. The increased scale is expected to deliver a more efficient cost base, benefiting from the infrastructure of RTW and a simple, single management fee across a larger asset base. In all, these benefits could lead to a meaningful re-rating uplift opportunity for RTW Bio following completion of the scheme.
- Unique opportunity to buy into a depressed market while innovation is booming: The board of RTW Bio believes there are currently significant tailwinds that make now a compelling time to be deploying capital into the life science sector. The RTW Bio board believes this is a golden age of innovation with genetic information and new modalities accelerating the number of new treatments and corresponding number of new investment opportunities. Despite this, in part due to macro-economic conditions, life science remains out of favour relative to the other parts of the market, which means now is a unique time to invest in the right assets at depressed valuations. Further, shifting needs of the largest pharmaceutical companies are pushing M&A strategies to be earlier and across smaller transaction sizes, which means RTW Bio’s science-led strategy, which seeks to invest in innovation, is well positioned to benefit from these tailwinds in the future.
RTW : RTW Biotech Opportunities to acquire Arix Bioscience