Schroders Capital Global Innovation (INOV) has announced that its portfolio company Araris Biotech AG, has entered into an agreement to be acquired by Taiho Pharmaceutical Co. Ltd. for an upfront payment of US$400m, with the potential for additional milestone payments of up to US$740m. The transaction is expected to be completed in first half of 2025.

Returns from Araris sale and NAV uplift in INOV’s NAV

Araris Biotech is a Swiss biotechnology company developing next-generation antibody drug conjugates (ADCs). INOV was among the first investors in Araris as part of its CHF 2.5m seed round in 2019. In October 2022, INOV made a CHF 3.0m (£2.6m) investment into Araris, to support the further development and advancement of Araris’ ADC candidates, created using its proprietary linker technology.

INOV says that the upfront payment will generate a distribution of approximately US$24.3m (£18.7m) at closing – 7.2x up front gross multiple of invested capital (MoIC) – and potential additional distributions of up to US$43.6m (£33.7m) subject to near and long-term milestones (20.2x total gross MoIC).

INOV adds that, based on the valuation implied by the up-front purchase consideration, near-term milestone potential and accounting for specific closing adjustments according to INOV’s valuation policy, the estimated value of its holding would approximately be £19.5m. This represents a positive valuation revision of £16.7m compared to its last published carrying value of £2.8m as of 30 September 2024. The overall impact on INOV’s net asset value will be evaluated as part of INOV’s 31 March 2025 net asset value publication.

Update on initial capital return

INOV has advised that the full upfront proceeds from the sale of Araris are expected to be added to the intended initial return of capital that it has already disclosed, increasing the total from approximately £10m to £28.7m. The initial return of capital will take place shortly following the receipt of initial proceeds from Araris sale.

Track record to date

Schroders Capital has made 19 new investments since being appointed as INOV’s manager in 2019. This is the fourth exit, following on from the exits of Carmot Therapeutics at 3.2x gross MoIC, Tessian at 1.1x gross MoIC and Anthos Therapeutics at 1.9x gross MoIC (with the potential to increase to 3.4x gross MoIC with milestones). INOV comments that this brings the realised track record of new investments made by Schroders Capital to 3.3x gross MoIC (with potential upside through further earnouts to 6.3x gross MoIC).

Comments from Tim Creed, lead portfolio manager of INOV, and Harry Raikes, co-portfolio manager

“We chose to invest in Araris Biotech based on its compelling platform, with potential best-in-class antibody drug conjugates (“ADC’s”) with superior design, high linker solubility and simple manufacturing that address the shortcomings of current generation ADCs. Overall, INOV fulfilled our four key investment criteria: a strong management team, a significant market opportunity, high quality science and reputable co-investors. We are delighted by the news of this sale which reflects the unique nature of the Araris platform.”