RTW Biotech Opportunities had a great year in 2023, returning 23.5% in NAV terms and 16.0% in share price terms, both well ahead of the 10.6% return posted by the Russell 2000 Biotech index and even further ahead of the 3.7% return generated by the Nasdaq Biotech Index.
Some highligts:
- During the year ended 31 December 2023, 2 portfolio companies were acquired:
- Cincor Pharma by AstraZeneca for a 206% premium (including contingent value rights) to the prior closing price; and
- Prometheus Biosciences by Merck for a 75% premium
- During the year to 31 December 2023, 6 portfolio companies went public:
- Mineralys Therapeutics, Acelyrin Inc., Apogee Therapeutics, and Cargo Therapeutics, completed an initial public offering (IPO)
- The average step-up from prior private holding value to IPO price was 46%
- Orchestra BioMed went public through a merger with RTW’s SPAC; Tourmaline Bio went public through a reverse merger
- The Group added 7 new companies to its core portfolio in 2023;
- Oricell Therapeutics, Cargo Therapeutics, Allurion Technologies, Abdera Therapeutics, RTW Royalty Fund, Tourmaline Bio and Basking Biosciences
- While exiting 7 core portfolio companies excluding takeouts: Monte Rosa Therapeutics, Ventyx Biosciences, Tenaya Therapeutics, Third Harmonic Bio, C4 Therapeutics, Acelyrin Inc. and Mineralys Therapeutics
- As of 31 December 2023, the Group held 36 core portfolio companies (2022: 39)
- 12 of which are publicly-listed (2022: 14)
- 24 of which are privately-held (2022: 25)
- As of 31 December 2023, 66.7% of NAV was invested in core portfolio companies (2022: 70.9%)
- 61% (2022: 68%) of the core portfolio companies’ pipeline products are in clinical stage programmes, and 22% have commercial products (2022: 14%)
- On 9 February, Kyverna Therapeutics successfully listed on the Nasdaq Global Select Market, with an upsized IPO, raising $319m. On the first day of trading, Kyverna’s share price traded up by 36.4% to close at $30.00 per share. As at 31 December 2023, Kyverna represented 0.45% of the NAV.
- On 13 February, the company announced the completion of the recommended all-share acquisition of Arix Bioscience.
- Further, on 20 February, the company issued an unaudited, indicative and estimated pro forma NAV attributable to ordinary shareholders of the company as at the closing of the Arix transaction on 12 February 2024 of US$644.2m, equivalent to US$1.88 per share.
Extracts from the manager’s report
The company’s share price has not kept pace with the strong NAV performance, however, with continued NAV outperformance in comparison to the market and peers, and with the sector’s fortunes having turned markedly in the fourth quarter of 2023, we expect the discount to narrow.
NAV performance in 2023 was driven by the core public portfolio with a +24.7% contribution to the NAV. Prometheus Biosciences (+12.6% of NAV) and Rocket Pharmaceuticals (+8.4% of NAV) accounted for the majority of the gains. Prometheus was acquired by Merck for US$200.00 per share in cash, a 75% premium to the prior closing price, whilst Rocket’s share price bounced back strongly this year as it continued to progress several of its clinical programmes.
The group’s unique exposure to companies created by RTW Investments was significantly additive this year. Rocket’s continued clinical progression was rewarded in 2023 after a challenging couple of years for the shares of gene therapy companies. JIXING had a transformational year by, most notably, completing the first round of its Series D financing, which was co-led by RTW and Bayer AG, with whom it also agreed a strategic partnership.
During the year, four of our portfolio companies completed successful IPOs. Most notably, Cargo Therapeutics (2.0% of NAV) listed on the Nasdaq Global Select Market in November. The Group co-led its Series A financing round in March 2023 and anchored its IPO in November. Since listing, the shares have performed very well, rising by approximately 70%.
There was a sharp reversal in the market performance in the final two months of 2023, as interest rate expectations inflected and a flurry of takeouts helped buoy sentiment in the biotech sector. The sector’s vigorous move off the bottom is indicative of a re-evaluation after several years of fund flows out of the sector. With the fundamentals behind M&A remaining unchanged and a shrinking pool of high-quality assets to acquire, prospects for the sector’s continued recovery look positive. Financing conditions in the sector may remain tighter than normal, however, and this environment enables RTW to flex the transactional capabilities it has built over the years to help support exciting companies and capture investment opportunities. With the acquisition of Arix Bioscience recently completed, the resultant increase in scale should prove well-timed to take advantage.
RTW : RTW Biotech had a great 2023