TIDMRTW
RNS Number : 2172M
RTW Biotech Opportunities Ltd
13 September 2023
LEI: 549300Q7EXQQH6KF7Z84
13 September 2023
RTW Biotech Opportunities Ltd
Interim Report for the period ended 30 June 2023
Strong NAV performance, significantly outperforming benchmark
indices
RTW Biotech Opportunities Ltd (the "Group"), the London Stock
Exchange-Premium listed investment company focused on identifying
transformative assets with high growth potential across the
biopharmaceutical and medical technology sectors, is pleased to
announce its Interim Report for the six months ended 30 June
2023.
Financial Highlights:
The Group continued to outperform the benchmark indices in the
period since Admission, demonstrating the strength of the
Investment Manager, investment strategy and the portfolio:
RTW Biotech Opportunities Interim reporting Previous Interim Admission
Ltd period reporting period (30/10/2019)-
(01/01/2023-30/06/2023) (01/01/2022-30/06/2022) 30/06/2023
Ordinary NAV - start of US$326.1 million US$363.0 million US$168.0 million
period
------------------------- ------------------------- -----------------
Ordinary NAV - end of period US$356.5 million US$265.7 million US$356.5 million
------------------------- ------------------------- -----------------
NAV per Ordinary Share US$1.54 US$1.71 US$1.04
- start of period
------------------------- ------------------------- -----------------
NAV per Ordinary Share US$1.68 US$1.25 US$1.68
- end of period
------------------------- ------------------------- -----------------
NAV movement per Ordinary
Share +9.3% -26.8% +61.5%
------------------------- ------------------------- -----------------
Price per Ordinary Share US$1.21 US$1.78 US$1.04
- start of period
------------------------- ------------------------- -----------------
Price per Ordinary Share US$1.25 US$0.97 US$1.25
- end of period
------------------------- ------------------------- -----------------
Share price return (i) +2.9% -45.7% +19.7%
------------------------- ------------------------- -----------------
Benchmark returns (ii)
---------------------------------------------------------------------------------------------------------
Russell 2000 Biotech +5.3% -39.1% -0.3%
------------------------- ------------------------- -----------------
Nasdaq Biotech -3.2% -20.7% +20.7%
------------------------- ------------------------- -----------------
(i) Total shareholder return is an alternative performance measure
(ii) Source: Capital IQ
Portfolio Highlights
-- As at 30 June 2023, the Group had decreased the number of
core portfolio companies to 37 (H1 2022: 41).
o 10 publicly-listed (H1 2022: 15)
o 27 privately-held (H1 2022: 26)
-- A stand-out event for the period was the sale of Prometheus
Biosciences, which at the time was the Group's largest holding
(14.8% of NAV). Prometheus was acquired by Merck at a 75% premium
to the prior closing price. Total proceeds from the sale of
Prometheus shares amounted to US$99.1 million on total invested
capital of US$8.4 million, representing an 11.8x multiple. The
multiple on capital invested in the private rounds was 22x.
-- CinCor Pharma announced an agreement to be acquired by
AstraZeneca for US$1.3 billion. The total consideration amounted to
a 207% premium to the prior closing price. At the time of the
announcement, the position represented 0.6% of NAV.
-- 5 new core portfolio companies were added during the period (H1 2022: 2).
o Co-led Cargo Therapeutics Series A financing round in March
2023 (0.4% NAV)
o Co-led Oricell Therapeutics Series B financing round in
February 2023 (0.6% NAV)
o Participated in Abdera Therapeutics Series B financing round
in April 2023 (0.3% NAV)
o Participated in a bridge financing in Allurion Technologies in
February 2023 (0.01% NAV)
o Participated in Tourmaline Bio's Series A financing round in
May 2023 (0.2% NAV)
-- 24/37 core portfolio companies had pipeline products in
clinical stage programmes (H1 2022: 28/41) on 30 June 2023.
-- As at 30 June 2023, 51% of NAV was invested in core portfolio
companies (H1 2022: 62%), whilst 31% was invested in other public
portfolio companies (H1 2022: 33.5%) and 18% was held in cash plus
assets and current liabilities (H1 2022: 5%).
-- 3 private portfolio companies - Mineralys, Acelyrin and
Orchestra BioMed - successfully listed on the Nasdaq during the
period, and Tourmaline Bio entered into a merger agreement with
Nasdaq-listed Talaris Therapeutics, which is expected to close in
the fourth quarter.
o Mineralys successfully launched an upsized initial public
offering (IPO) in February 2023, raising US$192 million.
-- On the first day of trading, Mineralys' share price rose by
15.25%, to close at US$18.44 per share.
o Acelyrin successfully launched an upsized IPO in May 2023,
raising US$540 million.
-- On the first day of trading, Acelyrin's share price traded up
by 30.55% to close at US$23.50 per share.
o Orchestra BioMed announced the closing of its merger with
RTW's Health Sciences Acquisitions Corporation 2 and started
trading on the Nasdaq.
-- The Group participated in a US$125 million strategic
financing deal with Milestone Pharmaceuticals. The strategic
financing included US$50 million in convertible notes from
RTW-managed funds, including the Group, as well as a commitment by
the Investment Manager of US$75 million in royalty funding.
Post Period-End Highlights
-- Apogee Therapeutics successfully listed on the Nasdaq via an
upsized IPO in July 2023, raising US$300 million.
o On the first day of trading, Apogee's share price traded up by
24.9% to close at $21.23 per share. At 30 June 2023, Apogee
represented 0.6% of the Group's NAV.
-- Following a February 2023 announcement that Allurion
Technologies would go public via a business combination transaction
that would include a PIPE led by RTW-managed funds, including the
Group, and a synthetic royalty financing, the transaction was
completed on 1 August 2023, and Allurion began trading on the NYSE
on 2 August, raising US$100 million.
-- The Company announced a share buyback programme, given the
Board's belief that the share price materially undervalues the
Company.
Roderick Wong, MD, Managing Partner and Chief Investment Officer
of RTW Investments, LP (the "Investment Manager") commented:
"We are pleased to report the Group achieved strong performance,
particularly in comparison with our benchmarks, which we have
outperformed not only during the period but also on a one and
three-year basis. During the six months to 30 June 2023, RTW's NAV
increased by +9.3% compared with +5.3% for the Russell 2000 Biotech
index.
"Performance since inception remained significantly ahead of
both the Nasdaq Biotech and Russell 2000 Biotech indices with RTW
achieving a +61.5% NAV performance since inception compared with
+20.7% for the Nasdaq Biotech index and -0.3% for the Russell 2000
Biotech index, over the same periods.
"It has been a very active six months for the Group, with three
portfolio companies listing on the Nasdaq and one announcing a
merger with a listed entity. We have also seen two take-outs in the
portfolio at very healthy premiums, one of which was RTW's largest
position at the time, Prometheus Biosciences. Additionally, there
have been five new core portfolio companies added to the portfolio,
while five core public portfolio companies were exited.
"With the second longest and deepest bear market for the biotech
sector now behind us, this is an exciting time to invest in highly
attractive opportunities across our private, core public and other
public portfolios. We look ahead to the remainder of 2023 with
confidence as we look to add both public and private companies to
our portfolio of transformative assets with high growth potential
across the biopharma and med-tech sectors. We look forward to
updating shareholders with our continued progress throughout the
remainder of the year."
For Further Information
RTW Investments, LP +44 20 7959 6361
Woody Stileman, Managing Director
Krisha McCune, Director, Client
Service
---------------------
Elysium Fund Management Limited +44 (0)14 8181 0100
---------------------
Joanna Duquemin Nicolle, Chief Executive
Officer
Sadie Morrison, Managing Director
---------------------
Numis +44 (0)20 7260 1000
---------------------
Freddie Barnfield
Nathan Brown
Euan Brown
---------------------
BofA Securities +44 (0)20 7628 1000
---------------------
Edward Peel
Kieran Millar
---------------------
Buchanan +44 20 7466 5107
---------------------
Charles Ryland
Henry Wilson
George Beale
---------------------
Cadarn Capital +44 (0)73 6888 3211
---------------------
David Harris
---------------------
Morgan Stanley Fund Services USA
LLC +1 (914) 225 8885
---------------------
About RTW Biotech Opportunities Ltd: RTW Biotech Opportunities
Ltd (LSE: RTW & RTWG) is an investment fund focused on
identifying transformative assets with high growth potential across
the biopharmaceutical and medical technology sectors. Driven by a
long-term approach to support innovative businesses, RTW Biotech
Opportunities Ltd invests in companies developing next-generation
therapies and technologies that can significantly improve patients'
lives. RTW Biotech Opportunities Ltd 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 website at www.rtwfunds.com/rtw-biotech-opportunities-ltd for more information.
Highlights
30 June 2023 Financial Highlights
US$1.68 NAV per Ordinary Share
US$356.5 million Ordinary NAV 30 June 2022: US$1.25
30 June 2022: US$265.7 million
+61.5% Ordinary NAV growth since inception +19.7% total shareholder return since inception
30 June 2022: +20.1% 30 June 2022: -7.1%
--------------------------------------------------
+9.3% Ordinary NAV per share growth YTD +2.9% total shareholder return YTD
30 June 2022: -26.8% 30 June 2022: -45.7%
--------------------------------------------------
US$9.5 million in cash / cash equivalents US$1.25 price per Ordinary Share (1)
30 June 2022: US$7.6 million 30 June 2022: US$0.97
--------------------------------------------------
1 The share price has since recovered to US$1.26 at 11 September
2023.
Portfolio Highlights in the period
Capital markets activity in the core portfolio(1): 5 new core portfolio companies added
2 take-outs, 2 IPOs, 1 SPAC merger, 1 reverse merger, 5 core public portfolio companies exited
and 2 announced strategic financings
24/37 core portfolio companies have clinical programs
51% of NAV invested in the core portfolio 30 June 2022: 28/41
30 June 2022: 62%
37 core portfolio companies in total:
27 private, 10 public
30 June 2022: 26 private, 15 public
------------------------------------------------------
1 Core portfolio consists of companies that were initially added
to the portfolio as private investments, reflecting the key focus
of the Group's strategy. As initially private investments continue
to be held beyond IPO, the core portfolio consists of both
privately-held and publicly-listed companies.
Our Purpose
Transforming the lives of millions
RTW's long-term strategy is anchored in identifying sources of
transformational innovations with significant commercial potential
by engaging in deep scientific research and a rigorous idea
generation process, which is complemented by years of investment,
company building, and both transactional and legal expertise.
Identify
Identify transformational innovations
RTW has developed expertise through a comprehensive study of
industry and academic efforts in targeted areas of significant
innovation. Thanks to the decoding of the human genome, there is
more clarity around the causes of disease. Coupled with exciting
new modalities that can address genetic diseases in a targeted way,
drug innovation is accelerating.
Engage
Engage in deep research to unlock value
RTW has developed repeatable internal processes combining
technology and manpower to comprehensively cover critical drivers
of innovation across the globe. We seek to identify, through
rigorous scientific analysis, biopharmaceutical and medical
technology assets that have a high probability of becoming
commercially viable products, dramatically changing the course of
treatment and in some cases bringing effective and/or fully
curative outcomes to patients.
Build
Build new companies around promising academic licences
RTW has the capabilities to partner with universities and
in-license academic programs, by providing capital and
infrastructure to entrepreneurs to advance scientific programs.
Particularly in rare disease there is often little existing
research and are few treatment options, so forming a rare
disease-focused company is a way of shining a light on this space
and creating a roadmap to eventually developing curative
treatments.
Support
Support full life cycle investment
A key part of RTW's competitive advantage is the ability to
determine at which point of 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
solutions, capital markets expertise, or guidance through
contributing our time and sharing our collective experience as
directors and stewards of tomorrow's most exciting and innovative
companies. Taking a long-term full life cycle approach and having a
truly evergreen structure enables us to avoid the pitfalls and
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.
Chair's Statement
I am pleased to report that the Investment Manager ("RTW") has
achieved a solid performance for the Group. The Group's NAV
returned +9.3% over the six-month period, materially outperforming
both the Russell 2000 Biotech and the Nasdaq Biotech Index ("NBI")
which returned +5.3% and -3.2% respectively. The Group's NAV has
also strongly outperformed its biotech benchmarks over one year and
three years.
Since admission in October 2019, the Group's NAV has
significantly outperformed its biotech benchmarks returning +61.5%
versus -0.3% and +20.7% for the Russell 2000 Biotechnology Index
and the NBI, respectively. However, the Company's share price has
lagged NAV growth with a +19.7% return as the shares fell to a
discount to NAV in 2022, alongside many of our peers, after having
traded at a small premium for most of the prior years since
admission. The discount widened in the early part of the year as
the shares traded sideways despite a pickup in the Group's NAV but
started to narrow again towards the end of the reporting
period.
H1 2023 Overview and Outlook
There has been no shortage of positive activity in the portfolio
in the first half of 2023 with two take-outs, two IPOs, a SPAC
merger, a reverse merger, two announced strategic financings, five
new private investments and five exits (not including the
take-outs). At the end of the period, the Group had thirty-seven
core portfolio holdings, a decrease from forty-one last year. The
core portfolio represents 51.2% of NAV, down from 61.8% at the same
time last year. The "other public" portfolio (a replica of the long
names held in RTW's private funds, devised to mitigate the cash
drag of setting aside cash for future deployment into core
positions) remains at about one third of NAV. The reduced
allocation to the core portfolio and the currently elevated
Available Cash position (18%) is a result of the Group recently
receiving substantial proceeds from the sale of Prometheus
Biosciences to Merck
The Prometheus sale was the stand-out event in the first half of
the year. At 14.8% of NAV, Prometheus was the Group's largest
holding when it was acquired by Merck at a 75% premium to the prior
closing price. Total proceeds from the sale of Prometheus shares
amounted to US$99.1 million on total invested capital of US$8.4
million, representing an 11.8x multiple. The multiple on capital
invested in the private rounds was 22x. This transformational
transaction is a perfect example of the Group's successful
investment strategy at work. The ability to invest across a
company's life cycle provides significant advantages. Surveying
early-stage private assets provides access to experimental data
that typically isn't shared in the public markets and investing
early allows time to build relationships with entrepreneurs and
management teams. Without the pressure to exit at an IPO, the
Investment Manager typically aims to increase the size of the most
promising investments as they enter the public markets. It was the
duration and flexibility offered by our listed investment company
structure that allowed the Investment Manager to increase
conviction and grow the position through the IPO and multiple
inflection points right up to the end.
In light of this significant success in demonstrating the value
of a full life cycle investment strategy, the Group announced a
capital allocation plan after the end of the reporting period. This
included a share buyback, given the Board's belief that the share
price materially undervalues the Group and its portfolio. The Board
believes that this further demonstrates: 1) its confidence in the
outlook for the biotech sector and the Group's portfolio; 2)
capital allocation discipline; and 3) the proven value of the
Group's model. The Board is pleased with the reaction from our
shareholders and the market.
With the biotech sector only just recovering from the second
deepest and second longest bear market in its history, now is a
particularly opportune time to take receipt of the Prometheus
proceeds. Valuations are attractive, fundamentals have turned
around and M&A has become a significant tailwind. As a result,
the Group will retain an appropriate level of the proceeds to
invest in highly attractive equity opportunities across the
private, core public and other public portfolios over the medium
term, as per the Group's core objective.
Financing conditions in the sector remain tight, however, and
this environment enables RTW to flex the transactional capabilities
it has built over the years to help support exciting companies by
offering strategic financing solutions including royalty financing.
The Company's shareholders will access royalty opportunities
through an investment in RTW's "4010 Royalty Fund." There will be
no double-charging, as fees will be taken at the Company level
only. The Board considers that this presents an attractive,
uncorrelated, cash-yielding investment that complements the Group's
portfolio. The Group intends to limit royalty investment exposure
to approximately 15% of NAV including the current royalty holding
in the portfolio, which was 4.0% of NAV as at 30 June.
In a time when private market valuations are so heavily
scrutinised, it is important to have a robust valuation process. We
strongly believe this to be the case with RTW's Valuation
Committee's fair value approach to marking the private portfolio on
a monthly basis, in conjunction with two independent third-party
valuation firms, Alvarez & Marsal and Houlihan Lokey. The proof
comes when private investments become public companies. With two
IPOs in the first half and another just after the end of the
reporting period, we have a reasonable sample to assess the private
portfolio's fair value. With all of these events seeing a step-up
from their prior private holding value by an average of 58%, we
emphasise our confidence in the Group's portfolio and outlook for
the sector.
AGM Results and Name Change
The Group held its Annual General Meeting on 21 June 2023 to
consider the audited consolidated financial statements and other
matters, including a change of name from RTW Venture Fund Limited
to RTW Biotech Opportunities Ltd. We are grateful to shareholders
who cast their votes. The results have been announced to the market
and published on the Investment Manager's website
https://www.rtwfunds.com/rtw-biotech-opportunities-ltd/.
The Board believes that this name better places it amongst its
listed healthcare and biotech investment company peers and more
accurately reflects the Group's full life cycle approach to biotech
investing as a partner that can invest in both the private and
public domains and across the capital structure with the
flexibility to focus on where the most attractive opportunities
exist.
New Corporate Broker and Distribution Partner
In April, the Board appointed Numis as a corporate broker
alongside BofA Securities, which remains as Joint Corporate Broker.
Soon after, the Group started working with Cadarn Capital, a
specialist investment company distribution and investor relations
partner to accelerate the Group's brand recognition, particularly
in the UK, after more than three years of peer-leading performance
since admission.
On behalf of the Board, I would like to express our gratitude
for your continued support and wish you all the best for the
remainder of 2023.
William Simpson
Chair of the Board of Directors
RTW Biotech Opportunities Ltd
12 September 2023
Report of the Investment Manager
Executive Summary
Since listing on the London Stock Exchange in October 2019, the
Group has grown the NAV attributable to Ordinary Shareholders from
US$168.0 million to US$356.5 million as of 30 June 2023. The NAV
per Ordinary Share has increased 61.5% from US$1.04 to US$1.68 in
the same period. Disappointingly, the share price has not kept pace
with NAV, returning +19.7%, as the shares fell to a discount in
early 2022 and have remained there despite a substantial pick-up in
the Group's NAV from the low in May 2022. From that point in time
until the end of the current reporting period, the NAV has
increased by 37.7% from US$1.22, while the share price has
increased by only 8.7%. With continued NAV outperformance versus
the market and peers, and with the sector's recovery gaining
momentum, it is our expectation that the share price should
follow.
Financial Highlights, Performance Drivers and Significant
Events
Table 1. Financial Highlights
RTW Biotech Opportunities Interim reporting Previous Interim Admission
Ltd period reporting period (30/10/2019)-
(01/01/2023-30/06/2023) (01/01/2022-30/06/2022) 30/06/2023
Ordinary NAV - start US$326.1 million US$363.0 million US$168.0 million
of period
------------------------- ------------------------- -----------------
Ordinary NAV - end US$356.5 million US$265.7 million US$356.5 million
of period
------------------------- ------------------------- -----------------
NAV per Ordinary Share US$1.54 US$1.71 US$1.04
- start of period
------------------------- ------------------------- -----------------
NAV per Ordinary Share US$1.68 US$1.25 US$1.68
- end of period
------------------------- ------------------------- -----------------
NAV movement per
Ordinary Share +9.3% -26.8% +61.5%
------------------------- ------------------------- -----------------
Price per Ordinary US$1.21 US$1.78 US$1.04
Share - start of period
------------------------- ------------------------- -----------------
Price per Ordinary US$1.25 US$0.97 US$1.25
Share - end of period
------------------------- ------------------------- -----------------
Share price return
(i) +2.9% -45.7% +19.7%
------------------------- ------------------------- -----------------
Benchmark returns (ii)
----------------------------------------------------------------------------------------------------
Russell 2000 Biotech +5.3% -39.1% -0.3%
------------------------- ------------------------- -----------------
Nasdaq Biotech -3.2% -20.7% +20.7%
------------------------- ------------------------- -----------------
(i) Total shareholder return is an alternative performance measure
(ii) Source: Capital IQ
RTW Investments, LP, the "Investment Manager", a leading global
healthcare-focused investment firm with a strong track record of
supporting companies developing life-changing therapies, created
the Group as an investment fund focused on identifying
transformative assets with high growth potential across the
biopharmaceutical and medical technology sectors. Driven by deep
scientific expertise 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 while creating significant
value for our shareholders.
NAV performance in the first half of 2023 has overwhelmingly
been driven by the core public portfolio (+12.6% contribution) with
two of those positions being acquired by large cap pharma companies
at significant premiums. In particular, our largest holding
Prometheus Biosciences, which contributed +12.6% to NAV, announced
in April that it was to be acquired by Merck for US$200.00 per
share in cash, a 75% premium to the prior closing price. In
January, CinCor Pharma (+0.9% contribution) announced an agreement
to be acquired by AstraZeneca for US$1.3 billion upfront. CinCor
shareholders also received a non-tradable contingent value right,
payable upon receipt of FDA approval. Combined, these payments
represent a 206% premium. There were no other contributors of note.
Core public holding, Avidity Biosciences, was the only noticeable
detractor (-2.4%) after it announced clinical data in May that did
not meet expectations.
The core private portfolio made a small negative contribution
(-0.6%) to NAV. Within that, RTW Royalty 2 (Urogen) contributed
+0.5%, incorporating distributions received this year and a 7%
increase in the valuation as sales revenue forecasts provided by
independent analysts were added to our valuation models. This was
offset by write-downs in Alcyone (-0.4%) which is in a challenged
financing position, and Neurogastrx (-0.5%) which suffered a
clinical setback and is being wound down. The "other public"
portfolio contributed -1.2% to NAV.
Orchestra BioMed was not a significant contributor or detractor
in the reporting period (-0.2% when combined with the contribution
from HSAC2 founder shares); however, it is worth commenting on as
its merger in January with our SPAC ("HSAC2") was a notable event.
A strong start saw the shares trade above US$20 (versus US$10 at
the de-merger), then trade down to US$7 at the end of the reporting
period. With the majority of its market cap in cash, an EV of less
than US$100 million, and backed by global medical devices leader,
Medtronic, we remain excited for the future of the company and
continue to believe that SPACs are a useful financing vehicle,
especially in bear markets, in spite of the challenges they have
had in recent times in the general market.
Figure 1. Performance Drivers as of 30 June 2023
* Exited positions
Key updates for Core Portfolio Companies during H1 2023:
Clinical & Commercial
-- In January, Rocket announced the addition of a new cardiac
gene therapy program, RP-A601, for arrhythmogenic cardiomyopathy
due to plakophilin 2 pathogenic variants (PKP2-ACM).
-- In March, Avidity Biosciences announced that discussions were
ongoing with the US FDA regarding the partial clinical hold on new
participant enrolment in its Phase 1/2 clinical trial for AOC 1001
(treats Mytonic Dystrophy).
-- In March, Immunocore positively surprised the market with
US$42 million of net sales of Kimmtrak in Q4 2022.
-- In May, Rocket posted several positive data updates from
their PKD, Fanconi Anaemia, LAD-I and Danon Disease programs at the
American Society of Cell and Gene Therapy ("ASGCT") conference.
-- In May, Avidity's partial clinical hold was eased. However,
the data from the higher dose of AOC 1001 in the muscular dystrophy
trial didn't appear to further reduce expression of toxic DMPK, the
hallmark of the disease.
-- In May, Rocket received FDA clearance for the company's
RP-A601 programme to enter the clinic.
-- In April, Neurogastrx announced the latest data from its
NG010 trial that indicated the top-line primary end point did not
meet statistical significance and its resultant potential
liquidation.
Financing
-- In January, CinCor Pharma announced an agreement to be
acquired by AstraZeneca for $1.3 billion upfront. CinCor
shareholders will also receive a non-tradable contingent value
right, payable upon receipt of FDA approval. Combined, these
payments represent a 206% premium.
-- In January, Orchestra BioMed announced the closing of its
merger with RTW's Health Sciences Acquisitions Corporation 2 and
started trading on the Nasdaq under the ticker "OBIO". Medtronic
joined as Orchestra's commercial partner, anchoring the combination
alongside RTW.
-- In February, Mineralys Therapeutics went public through an
upsized initial public offering, which raised US$192 million, under
the ticker "MLYS".
-- In February, the Group participated in a bridge financing
round in Allurion Technologies, a company with a swallowable,
procedure-less gastric pill balloon for weight loss. Earlier that
month the company announced its intention to go public via a
business combination that would include a fully committed PIPE led
by RTW Investments and a non-dilutive, synthetic royalty financing
to close concurrently with the business combination.
-- In March, the Group and other funds managed by RTW co-led a
US$45 million Series B-1 financing round of OriCell Therapeutics, a
China-based cell therapy company.
-- In March, the Group and other funds managed by RTW co-led a
US$200 million Series A financing round in Cargo Therapeutics, a
clinical stage CAR T-cell therapy company.
-- In March, the Group announced its participation in a US$125
million strategic financing deal with Milestone Pharmaceuticals.
The strategic financing included US$50 million in convertible notes
from RTW-managed funds, including the Group, as well as a
commitment by RTW of US$75 million in royalty funding.
-- In April, Prometheus Biosciences announced that it agreed to
be acquired by Merck for US$200.00 per share in cash, a 75% premium
to the prior closing price, for a total consideration of US$10.8
billion.
-- In April, the Group participated in a Series B financing of
Abdera Therapeutics; a pre-clinical stage biopharmaceutical company
focused on small cell lung cancer and other solid tumours. The
company raised US$142 million in a combined series A and B.
-- In May, Acelyrin went public through an upsized US$540
million initial public offering under the ticker "SLRN".
-- In June, Prometheus Biosciences announced that its
acquisition by Merck had been completed.
-- In June, Tourmaline Bio announced a merger with Talaris
Therapeutics alongside a US$75 million private placement that will
provide the company with a cash runway through 2026. The merger is
expected to close in the fourth quarter of 2023.
Portfolio Breakdown, New Investments & Capital Allocation
Plan
We define the core public portfolio as companies that were
initially added to our portfolio as private investments, reflecting
the key focus of the Group's strategy. Our investment approach is
defined as full life cycle and therefore involves retaining private
investments beyond their IPOs; hence the core portfolio consists of
both privately-held and publicly-listed companies.
As of 30 June 2023, the Group's core portfolio accounted for
51.2% of NAV (H1 2022: 61.8%) and included 37 companies (H1 2022:
41), ranging from biotechnology companies developing preclinical to
clinical-stage therapeutic programs, companies developing
traditional small molecule pharmaceuticals, and med-tech companies
developing or commercialising transformative devices. We selected
these companies based upon our rigorous assessment of scientific
and commercial potential and with regard to the valuation of the
assets at the time of investment. Table 4 shows the top fifteen
portfolio companies at the end of the reporting period.
Private companies accounted for 21.7% of NAV on 30 June 2023 and
core public companies accounted for 29.5%. The small decrease in
exposure to private investments primarily reflects the migration of
three positions into the core public portfolio as a result of IPOs
(Mineralys and Acelyrin) and a SPAC merger (Orchestra BioMed).
These events outweighed the addition of the new private positions
shown in Table 3. The lower exposure to the core public portfolio
reflects the aforementioned sale of Prometheus to Merck and the
exiting of our holdings in Monte Rosa, Ventyx, Tenaya, Third
Harmonic and C4.
Approximately one third of the Group's NAV is invested in other
publicly listed companies, which is similar to the same period last
year. The "other public" portfolio is designed to mitigate the drag
of setting aside cash for future deployment into core positions.
This portfolio of assets has been carefully selected, matching, on
a pro-rated basis, the long investments held in our private funds.
The investments represented in this portfolio are similarly
categorised as innovative biotechnology and medical technology
companies developing and commercialising potentially disruptive and
transformational products.
As of 30 June, the Group had an Available Cash position of 18%
of NAV. This primarily reflects proceeds received from the sale of
Prometheus stock. We will retain an appropriate level of these
proceeds to invest in highly attractive opportunities across the
private, core public and other public portfolios. We also plan to
leverage the sector's current tight financing conditions by
offering strategic financing solutions including royalty financing
deployed through "4010 Royalty Fund", another fund managed by RTW
Investments. The Board also plans to distribute a portion of the
Prometheus proceeds through a share buyback, which has now
commenced. We share the Board's view that the current discount to
NAV undervalues the Group and its portfolio, and we feel that this
action represents an attractive, NAV-accretive investment.
As of 30 June 2023, the portfolio was diversified across
treatment modalities, therapeutic focus, and clinical stage. While
the portfolio is still majority invested in US-based companies, we
are committed to adding UK and EU companies in an effort to support
the best assets across the globe and help foster local biotech
ecosystems. By constructing the portfolio in such a way, investors
get exposure to the most innovative parts of a highly specialised
sector with the explosive potential of companies like Prometheus
Biosciences.
Looking forward, we expect the total portfolio sector allocation
to remain close to 80% biopharmaceutical assets and 20% medical
technology assets. In line with prior prospectus guidance, we
anticipate two-thirds of new investments will be made in mid- to
later-stage venture companies and one-third focused on active
company building around the discovery and development or licensing
and distribution of promising assets. As per our recently announced
capital allocation plan, royalty investments (across biopharma and
medtech) will be limited to approximately 15% of NAV.
Table 2. NAV capital breakdown as of 30 June 2023 compared to 30
June 2022
Portfolio grouping % of NAV % of NAV
30 June 2023 30 June 2022
Core private 21.7% 31.1%
-------------- --------------
Core public 29.5% 30.7%
-------------- --------------
"Other public" 30.8% 33.5%
-------------- --------------
Available Cash 18.0% 4.7%
-------------- --------------
Total 100.0% 100.0%
-------------- --------------
Table 3. New investments added in the first half of 2023
Company name Description % NAV
Clinical stage biotech company targeting
Cargo Therapeutics large B-cell lymphoma 0.4%
---------------------------------------------------- ------
Medtech company with a swallowable, procedure-less
gastric pill balloon for weight loss,
commercially available in 5 countries,
Allurion Technologies clinical stage in the U.S. 0.01%
---------------------------------------------------- ------
Preclinical stage pharmaceutical company
OriCell Therapeutics focusing on multiple myeloma 0.6%
---------------------------------------------------- ------
Preclinical biopharma company developing
Abdera Therapeutics radiopharmaceuticals for lung cancer 0.3%
---------------------------------------------------- ------
Late-stage biotech company developing
medicines for thyroid eye disease and
Tourmaline Bio atherosclerotic cardiovascular disease 0.2%
---------------------------------------------------- ------
Figure 2. Core Portfolio breakdown as a percentage of NAV,
adjusted to be out of 100%, by (A) Therapeutic Focus, (B) Modality,
(C) Clinical Stage and (D) Geography as of 30 June 2023
Table 4. Top fifteen core positions as of 30 June 2023
Portfolio Company Description Therapeutic Area Clinical stage of Expected upcoming % NAV
lead program catalyst
Gene therapy
platform company
for rare paediatric
diseases. Four
clinical programs
for Fanconi
anaemia, Danon,
Rocket LAD, and PKD. Rare Disease Phase 2 Q3 2023 12.5%
--------------------- --------------------- ------------------- ---------------------- ------
T-cell receptor
therapy company
focused on oncology
and infectious
Immunocore disease Oncology Commercial Q3 2023 7.3%
--------------------- --------------------- ------------------- ---------------------- ------
NewCo focused on
acquiring rights
from innovative
therapies for
development and
commercialisation Cardiovascular,
Ji Xing in China Ophthalmology Phase 3 Series D Q4 2023 7.3%
--------------------- --------------------- ------------------- ---------------------- ------
Royalty deal with
Urogen for JELMYTO,
the first
FDA-approved
treatment for
low-grade upper
tract urothelial
RTW Royalty 2 cancer Oncology Commercial Q3 4.0%
--------------------- --------------------- ------------------- ---------------------- ------
Clinical stage
company developing
interventions for FDA filing
Milestone tachycardias Cardiovascular Phase 3 Q3 2023 2.5%
--------------------- --------------------- ------------------- ---------------------- ------
Medical device
company focused on
developing products
for the treatment
of coronary artery
disease and
Orchestra hypertension Cardiovascular Phase 3 - 1.8%
--------------------- --------------------- ------------------- ---------------------- ------
Antibody conjugated
RNA medicines
company. Lead
program for
myotonic dystrophy,
a degenerative
disease with no P1 Data
Avidity therapy Myotonic Dystrophy Phase 1 Q4 2023 1.8%
--------------------- --------------------- ------------------- ---------------------- ------
Closed-loop
pancreatic system
for automated and
autonomous delivery
Beta Bionics of insulin Type 1 Diabetes Phase 3 - 1.3%
--------------------- --------------------- ------------------- ---------------------- ------
Biotech using a
structure-based
design to develop
innovative small
molecules against
promising
molecular targets Data
NiKang in oncology Oncology Phase 1 Q1 2024 1.2%
--------------------- --------------------- ------------------- ---------------------- ------
Medical device
company developing
products that
target dysfunction
of the left
ventricle,
the underlying
cause of heart
Ancora failure Cardiovascular Phase 3 - 1.1%
--------------------- --------------------- ------------------- ---------------------- ------
Clinical stage
biotech developing
first-in-class
therapeutics for
ophthalmic
Tarsus conditions Ophthalmology Phase 3 PDUFA Q3 2023 1.1%
--------------------- --------------------- ------------------- ---------------------- ------
Clinical stage
biotech developing
therapies to manage Data
GH Research mental disease CNS Phase 2 YE 2023 1.0%
--------------------- --------------------- ------------------- ---------------------- ------
Biopharma company
focused on
accelerating the
development and
delivery of
transformative
medicines
Acelyrin in immunology Inflammation Phase 2 - 0.8%
--------------------- --------------------- ------------------- ---------------------- ------
Medical diagnostics
company that has
patented a
technique and
technology for
blood culture
Magnolia Medical collection Inflammation, sepsis Commercial - 0.7%
--------------------- --------------------- ------------------- ---------------------- ------
China-based pharma
company developing
tumour cellular
immunotherapeutics
to treat relapsed
and refractory
OriCell multiple myeloma Multiple myeloma Preclinical - 0.6%
--------------------- --------------------- ------------------- ---------------------- ------
Table 5. Core portfolio positions as of 30 June 2023 compared to
30 June 2022
Portfolio Private(1)/ Valuation % of Valuation % of
Company Public(2) in US$ Group's in US$ Group's
at 30/06/2023 net assets at 30/06/2022 net assets
at 30/06/2023 at 30/06/2022
---------------
Rocket Public 47,705,037 12.5% 32,538,657 11.5%
------------------ --------------- --------------- --------------- ---------------
Immunocore Public 27,716,450 7.3% 12,034,341 4.2%
------------------ --------------- --------------- --------------- ---------------
Ji Xing Private 27,586,548 7.3% 24,451,819 8.6%
------------------ --------------- --------------- --------------- ---------------
RTW Royalty
2 Private 15,086,772 4.0% 14,474,522 5.1%
------------------ --------------- --------------- --------------- ---------------
Milestone
(5) Public 9,577,632 2.5% 3,772,913 1.3%
------------------ --------------- --------------- --------------- ---------------
Orchestra
(3) (4) Public 6,979,837 1.8% 2,471,736 0.9%
------------------ --------------- --------------- --------------- ---------------
Avidity Public 6,952,998 1.8% 10,171,421 3.6%
------------------ --------------- --------------- --------------- ---------------
Beta Bionics Private 5,117,893 1.3% 5,673,324 2.0%
------------------ --------------- --------------- --------------- ---------------
NiKang Private 4,452,023 1.2% 4,359,087 1.5%
------------------ --------------- --------------- --------------- ---------------
Ancora Private 4,240,240 1.1% 2,754,042 1.0%
------------------ --------------- --------------- --------------- ---------------
Tarsus Public 4,181,963 1.1% 3,161,080 1.1%
------------------ --------------- --------------- --------------- ---------------
GH Research Public 3,639,221 1.0% 3,061,056 1.1%
------------------ --------------- --------------- --------------- ---------------
Acelyrin (3) Public 3,008,053 0.8% 1,306,017 0.5%
------------------ --------------- --------------- --------------- ---------------
Magnolia Medical Private 2,628,698 0.7% 2,589,231 0.9%
------------------ --------------- --------------- --------------- ---------------
OriCell Private 2,339,375 0.6% - -
------------------ --------------- --------------- --------------- ---------------
Apogee Private 2,303,380 0.6% - -
------------------ --------------- --------------- --------------- ---------------
Umoja Private 2,248,947 0.6% 2,669,948 0.9%
------------------ --------------- --------------- --------------- ---------------
Encoded Private 2,216,591 0.6% 2,881,595 1.0%
------------------ --------------- --------------- --------------- ---------------
Mineralys
(3) Public 1,982,335 0.5% 1,034,231 0.4%
------------------ --------------- --------------- --------------- ---------------
Kyverna Private 1,863,590 0.5% 1,292,043 0.5%
------------------ --------------- --------------- --------------- ---------------
Numab Private 1,852,448 0.5% 1,642,139 0.6%
------------------ --------------- --------------- --------------- ---------------
Nuance Private 1,665,286 0.4% 1,526,120 0.5%
------------------ --------------- --------------- --------------- ---------------
Lenz Private 1,451,751 0.4% 1,471,248 0.5%
------------------ --------------- --------------- --------------- ---------------
Cargo Private 1,412,351 0.4% - -
------------------ --------------- --------------- --------------- ---------------
Abdera Private 1,136,802 0.3% - -
------------------ --------------- --------------- --------------- ---------------
Lycia Private 979,462 0.3% 969,864 0.3%
------------------ --------------- --------------- --------------- ---------------
Tourmaline
Bio Private 891,289 0.2% - -
------------------ --------------- --------------- --------------- ---------------
Artiva Private 865,532 0.2% 919,286 0.3%
--------------- --------------- --------------- ---------------
Artios Private 741,774 0.2% 681,351 0.2%
--------------- --------------- --------------- ---------------
Swift Health Private 645,171 0.2% 740,211 0.3%
--------------- --------------- --------------- ---------------
CinCor Public 541,706 0.1% 3,329,206 1.2%
--------------- --------------- --------------- ---------------
Prometheus
Labs Private 175,734 0.05% 207,885 0.1%
--------------- --------------- --------------- ---------------
Alcyone Private 149,750 0.04% 4,054,228 1.4%
--------------- --------------- --------------- ---------------
Yarrow Private 149,231 0.04% 463,044 0.2%
--------------- --------------- --------------- ---------------
Neurogastrx Private 114,535 0.03% 1,597,646 0.6%
--------------- --------------- --------------- ---------------
Allurion Private 39,247 0.01% - -
--------------- --------------- --------------- ---------------
Visus Private 149 0.00004% 2,237,667 0.8%
------------------ --------------- --------------- --------------- ---------------
1 Valuations for private portfolio companies on a fair value
basis.
2 The valuations of public positions were calculated using their
market capitalisation as of 30 June 2023
3 Position was private at the last interim reporting period end
and has since gone public. In accordance with the Group's valuation
policy in practice prior to 2023, as at 30 June 2022, the Group
applied a discount to its investments in private companies that
became public companies subject to customary post-IPO lock-up
provisions. As of 1 January 2023, the Group has elected to early
adopt FASB's ASU 2022-03, ASC Topic 820, "Fair Value Measurement of
Equity Securities Subject to Contractual Sale Restrictions" which
eliminated this practice. Refer to Note 1 to these unaudited
interim consolidated financial statements.
4 Includes shares held in the initial SPAC vehicle (HSAC2) that
merged with Orchestra in January 2023
5 Includes pre-funded warrants
Table 6. RTW representation on portfolio company boards as of 30
June 2023
Portfolio Company (1) RTW representative on the board
Alcyone Piratip Pratumsuwan
-------------------------------------------
Ji Xing Rod Wong, Peter Fong, Gotham Makker
-------------------------------------------
Magnolia Ovid Amadi
-------------------------------------------
Nikang Chris Liu
-------------------------------------------
Rocket Rod Wong, Gotham Makker, Naveen Yalamanchi
-------------------------------------------
Yarrow Rod Wong, Peter Fong, Gotham Makker
-------------------------------------------
1 In aggregate these represent 22% of the NAV of the Group at 30
June 2023
Table 7. Top 5 "Other Public" portfolio holdings as of 30 June
2023
Position Ticker % of Description
NAV
Argenx SE ARGX 3.8% Commercial stage multi-pipeline immunology
company
------- ----- -------------------------------------------
PTC Therapeutics PTCT 2.4% Commercial stage biotech making therapies
for rare genetic diseases.
------- ----- -------------------------------------------
Axsome Therapeutics AXSM 2.1% Commercial stage biotech focused on
CNS
------- ----- -------------------------------------------
Stoke Therapeutics STOK 2.0% Clinical stage biotech developing
RNA treatments for severe genetic
diseases
------- ----- -------------------------------------------
Establishment ESTA 1.9% Commercial stage medtech manufacturing
Labs Holdings innovative breast health solutions
------- ----- -------------------------------------------
Private Portfolio Valuations and Cash Runway Analysis
The core private and public portfolios are the foundation of the
Group's strategy. They are built on our rigorous assessment of the
best private market investment opportunities. We have always been
highly selective in this area, focusing only on companies with both
well-founded science and attractive commercial opportunities. We
are now benefiting from this discipline in a challenging capital
markets environment as our private portfolio is a good size and
well-funded.
As of 30 June 2023, the average cash runway of the twenty-four
companies in our private portfolio that burn cash was twenty-six
months, which gives them a good amount of time to focus on their
clinical development plans until funding markets improve. There are
eleven companies with less than twelve months of runway, two of
which are RTW company creations, which is by design. Of the
remainder, most have reasonable and well-formed capital raising
plans in place. Two are in more challenging financial positions and
one of those is being wound down with residual cash being returned
to shareholders.
Which brings us to our private valuations. We hold our private
company investments at 'fair value' i.e., the price that would be
received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants. This is assessed
in accordance with US GAAP, utilizing valuation techniques
consistent with the International Private Equity and Venture
Capital Guidelines including, but not limited to, the income
approach and the market approach. Valuations are adjusted both
during regular valuation cycles and on an ad hoc basis in response
to 'trigger events' which may include changes in fundamentals, an
intention to carry out an IPO, or changes to the valuations of
comparable public companies. Our valuation process ensures that
private companies are valued in both a fair and timely manner.
The process is overseen by the RTW Valuation Committee. The
Committee is supported by RTW's valuation team that is independent
from the investment team and receives advice from two independent
third-party valuation firms, Alvarez & Marsal and Houlihan
Lokey. The Committee approves valuations of private company
investments on a monthly basis and utilises the analysis of an
independent third-party valuation firm no less frequently than
twice in a year in determining the fair value of each material
private investment. The valuations are also reviewed twice per year
by the Board and are subject to the scrutiny of KPMG in the annual
audit process.
In the first half of this year, the private portfolio saw a
total of thirty-six valuation adjustments. Twelve positions were
marked up by an average of 16.8%; twelve were marked lower by any
average of -26.6%. The balance remained at cost given the recent
date of the investment. At 30 June, the average time since the last
third-party valuation was 4.7 weeks and with an average of 1.2
years having elapsed since the last financing round.
The value of the private portfolio is best demonstrated by the
three portfolio IPOs that have completed so far this year
(including Apogee Therapeutics which occurred after the reporting
period). In all cases, we saw a step-up in valuation from prior
private holding value by c. 58% on average and a 1.82x multiple on
invested capital. It is worth noting that this is happening in an
environment where there have only been a few meaningful biopharma
IPOs, highlighting the quality of the portfolio. Figure three shows
the pickup in IPO and new investment activity in our core portfolio
versus last year.
Figure 3. New private investments and IPOs by year since
admission
Figure 4. Core Portfolio Cash Runway Analysis
Figure 5. Private portfolio year to date valuation changes
*Position that went public during the period
Table 8. RTW's Private Valuation Statistics for H1 2023
Number of revaluations 36
Average time since last third-party 4.7 weeks
valuation (at 30 June)
----------
Average time since last financing 1.2 years
round (at 30 June)
----------
Average valuation change -3.7%
----------
Average write-up 16.8%
----------
Average write-down -26.6%
----------
Average step-up to IPO price 58%
----------
Average MOIC to IPO price 1.82x
----------
Table 9. Performance of core portfolio investments since
inception as of 30 June 2023
Portfolio Holding Initial Valuation MOC(1) XIRR(1) Holding
Investment Date or Period
Exit Date (yrs)
(3)
Inivata (2) 24/12/2020 18/06/2021 2.6 635.5% 0.5
------------- ------------ ------- -------- --------
Prometheus Bio (2) 30/10/2020 13/06/2023 24.7 275.8% 2.6
------------- ------------ ------- -------- --------
RTW Royalty Holdings
(2) 13/11/2020 30/12/2022 3.4 129.6% 2.6
------------- ------------ ------- -------- --------
iTeos (2) 24/03/2020 17/03/2022 3.6 108.2% 2.0
------------- ------------ ------- -------- --------
Frequency (2) 17/07/2019 23/03/2021 2.8 85.3% 1.7
------------- ------------ ------- -------- --------
Mineralys 01/06/2022 30/06/2023 1.8 74.8% 1.1
------------- ------------ ------- -------- --------
Cincor (2) 22/09/2021 24/02/2023 2.1 68.3% 1.8
------------- ------------ ------- -------- --------
Acelyrin 20/10/2021 30/06/2023 2.0 58.5% 1.7
------------- ------------ ------- -------- --------
Athira (2) 29/05/2020 30/06/2022 1.6 56.8% 2.1
------------- ------------ ------- -------- --------
Immunocore 13/08/2019 30/06/2023 3.0 35.2% 3.9
------------- ------------ ------- -------- --------
RTW Investments ICAV
for RTW Fund 2 05/05/2021 30/06/2023 1.5 20.4% 2.2
------------- ------------ ------- -------- --------
Apogee Therapeutics 15/11/2022 30/06/2023 1.1 15.8% 0.6
------------- ------------ ------- -------- --------
Pulmonx (2) 17/04/2020 04/11/2022 1.3 13.1% 2.6
------------- ------------ ------- -------- --------
Prometheus Labs 31/12/2020 30/06/2023 1.3 12.2% 2.5
------------- ------------ ------- -------- --------
Tarsus 24/09/2020 30/06/2023 1.3 9.7% 2.8
------------- ------------ ------- -------- --------
Magnolia 02/07/2021 30/06/2023 1.2 9.1% 2.0
------------- ------------ ------- -------- --------
Avidity 08/11/2019 30/06/2023 1.3 7.8% 3.6
------------- ------------ ------- -------- --------
Ji Xing 10/02/2020 30/06/2023 1.1 5.9% 3.4
------------- ------------ ------- -------- --------
Encoded 12/06/2020 30/06/2023 1.1 3.4% 3.0
------------- ------------ ------- -------- --------
Numab 07/05/2021 30/06/2023 1.1 3.3% 2.1
------------- ------------ ------- -------- --------
Ancora 20/01/2021 30/06/2023 1.0 1.7% 2.4
------------- ------------ ------- -------- --------
NiKang 09/09/2020 30/06/2023 1.0 1.6% 2.8
------------- ------------ ------- -------- --------
Abdera 04/04/2023 30/06/2023 1.0 0.0% 0.2
------------- ------------ ------- -------- --------
Allurion 23/02/2023 30/06/2023 1.0 0.0% 0.3
------------- ------------ ------- -------- --------
Cargo 09/02/2023 30/06/2023 1.0 0.0% 0.4
------------- ------------ ------- -------- --------
Oricell 24/02/2023 30/06/2023 1.0 0.0% 0.3
------------- ------------ ------- -------- --------
Tourmaline 02/05/2023 30/06/2023 1.0 0.0% 0.2
------------- ------------ ------- -------- --------
Ventyx (2) 26/02/2021 20/03/2023 1.0 0.0% 2.1
------------- ------------ ------- -------- --------
Kyverna 09/11/2021 30/06/2023 1.0 0.0% 1.6
------------- ------------ ------- -------- --------
GH Research 09/04/2021 30/06/2023 1.0 -1.7% 2.2
------------- ------------ ------- -------- --------
Artios 27/07/2021 30/06/2023 1.0 -2.2% 1.9
------------- ------------ ------- -------- --------
Nuance 07/12/2020 30/06/2023 0.9 -2.4% 2.6
------------- ------------ ------- -------- --------
Artiva 23/02/2021 30/06/2023 0.9 -3.4% 2.3
------------- ------------ ------- -------- --------
C4 Therapeutics (2) 02/06/2020 08/02/2023 0.9 -4.9% 2.7
------------- ------------ ------- -------- --------
Lenz Therapeutics 13/04/2022 30/06/2023 0.9 -5.3% 1.2
------------- ------------ ------- -------- --------
Beta Bionics 28/06/2019 30/06/2023 0.8 -7.0% 4.0
------------- ------------ ------- -------- --------
Lycia 02/09/2021 30/06/2023 0.9 -7.6% 1.8
------------- ------------ ------- -------- --------
Milestone 23/07/2020 30/06/2023 0.9 -8.7% 2.9
------------- ------------ ------- -------- --------
Orchestra 28/06/2019 30/06/2023 0.8 -9.3% 4.0
------------- ------------ ------- -------- --------
Biomea (2) 23/12/2020 24/01/2022 0.9 -10.2% 1.1
------------- ------------ ------- -------- --------
Swift Health 27/08/2021 30/06/2023 0.7 -15.4% 1.8
------------- ------------ ------- -------- --------
Umoja 09/06/2021 30/06/2023 0.7 -16.3% 2.1
------------- ------------ ------- -------- --------
Monte Rosa (2) 12/03/2021 02/02/2023 0.7 -19.2% 1.9
------------- ------------ ------- -------- --------
Tenaya (2) 17/12/2020 08/02/2023 0.2 -51.1% 2.1
------------- ------------ ------- -------- --------
Landos (2) 09/08/2019 02/11/2022 0.1 -55.0% 3.2
------------- ------------ ------- -------- --------
Third Harmonic (2) 17/12/2021 12/04/2023 0.2 -67.1% 1.3
------------- ------------ ------- -------- --------
Pyxis (2) 08/03/2021 08/07/2022 0.2 -70.5% 1.3
------------- ------------ ------- -------- --------
Neurogastrx 25/06/2021 30/06/2023 0.1 -73.2% 2.0
------------- ------------ ------- -------- --------
Alcyone 08/06/2021 30/06/2023 0.0 -87.5% 2.1
------------- ------------ ------- -------- --------
Yarrow 14/05/2021 30/06/2023 0.1 -97.0% 2.1
------------- ------------ ------- -------- --------
Visus 26/01/2021 30/06/2023 0.0 -98.2% 2.4
------------- ------------ ------- -------- --------
AVERAGE 1.6 18.0% 2.0
------------------------------------------------- ------- -------- --------
1 Alternative Performance Measure
2 Exited position
3 The valuation date for all investments still held at the
period end was 30 June 2023. Dates other than 30 June 2023 are the
dates that a position was exited.
Table 10. Performance of Rocket Pharmaceuticals from admission
to 30 June 2023
Share price at admission Share price at 30 June 2023 Share price return %
Rocket Pharmaceuticals US$14.00 US$19.87 42%
-------------------------- ----------------------------- ---------------------
Sector review and outlook
Pharma went shopping in the first half of the year. Total deal
value of US$93 billion puts sector M&A activity on track to be
at the highest level since 2019. 2019's US$328 billion total was
driven by two large deals, Bristol-Meyers' US$74 billion for
Celgene Corporation and AbbVie's US$63 billion for Allergan plc,
both focused on diversification and cost savings. In contrast,
recent deals have been about innovative assets that can deliver
growth. Deal highlights include Pfizer's US$43 billion for Seagen
Inc., Merck's US$11 billion for Prometheus, Novartis' US$3.2
billion for Chinook Therapeutics, Sanofi's acquisition of
Provention Bio for US$2.9 billion and Lilly's US$2.4 billion for
Dice Therapeutics. Premiums ranged from 30% for Seagen up to 270%
for Provention Bio and proxies tell the story of competitive
processes. Of the three large cap pharma companies we have
highlighted as most in need of patent cliff revenue replenishment
(Bristol, Pfizer, and Merck), only Pfizer has addressed a
significant part of its exclusivity losses this decade, not to
mention the potential impact of the Inflation Reduction Act (IRA)
on small molecule portfolios. With attractive valuations for midcap
biotech companies and record (and growing) cash piles on large cap
pharma balance sheets, we think these deals will continue.
Despite the strong pick-up in M&A, the biotech sector's
burgeoning recovery from the second worst bear market in its
history flattered to deceive in the first half of the year. From
the low in mid-May last year to the end of January this year, the
Russell 2000 Biotech Index rallied over 40%, but then finished the
first quarter -7.3%. It rallied back slightly in the second quarter
to finish the first half +5.3%, but it was the only sector index to
finish the half in meaningfully positive territory. The pharma
heavy Arca index was +0.7%, the large cap heavy NBI was -3.2%, and
the most commonly traded small cap index, the XBI, was +0.2%. At
US$85.00, the XBI is trading at approximately the same level as it
was in 2015 and only marginally above last year's lows when
adjusting for subsequent take-outs and transformational clinical
data. As a result, sector valuations remain attractive. The NBI is
trading at 5.8x price to sales, which is still only 29% above
Global Financial Crisis lows. At the smaller end of the spectrum,
180 of the 578 companies with less than US$10 billion of market
capitalisation are trading at less than the cash on their balance
sheets.
We suspect that some negative sector headlines might have
impacted sentiment in the short term (without impacting
fundamentals too much). The FTC Chair Lina Khan's push to expand
the definition of anti-competitiveness beyond portfolio overlap
likely dampened excitement about M&A. In the FTC's lawsuit to
block Amgen's acquisition of Horizon Therapeutics, Khan introduced
theoretical product bundling of non-overlapping products as an
argument to block the deal. While we think the odds are low, should
courts decide in favour of the FTC, agreements not to bundle across
products seem a straightforward remedy in the same way that there
were no pharma deals in the last decade that were blocked due to
portfolio overlap - any issues were solvable with the divestiture
of overlapping products.
The banking crisis in the first quarter also likely weighed on
sentiment, especially with "biotech bank", Silicon Valley Bank
("SVB"), featuring so heavily. This was made moot by the deposit
backstop, and SVB's orderly wind-down should have no material
impact on biotech funding. However, it did conceal two significant
M&A deals that happened on the same weekend: Pfizer-Seagen was
the biggest deal since 2019 and Sanofi-Provention was the biggest
premium paid so far this year.
Another reason the sector's recovery has decelerated is likely
the strong performance in the technology sector, driven by interest
in AI. The year-to-date performance divergence between tech and
biotech is as wide as it has ever been. For biotech, the near-term
opportunity to apply AI is in the laborious idea generation and
screening phases of target discovery and molecular design, making
these processes more efficient. This is clearly more incremental
rather than transformational, as the market thinks AI will be for
some large cap tech names, which have driven the sector's returns,
pulling growth capital flows away from other sectors.
The good news is that capital markets activity is showing some
improvement on top of the M&A already mentioned. Follow-on
activity has been solid, rewarding those drug developers that can
deliver successful data or news, with many of these offerings being
oversubscribed and upsized. IPO activity is still slow with only
three significant biotech debuts this year. Two more IPOs took
place after the end of the reporting period, and they performed
well on debut. We think that our portfolio company Apogee
Therapeutics' upsized IPO in July may augur well for a better IPO
environment ahead given its strong performance despite its being a
pre-clinical company.
Finally, we believe that there is room for upside surprises with
the Inflation Reduction Act ("IRA"), as we approach implementation
later this year. The market appears to have assumed that Medicare
price negotiations are effectively early genericisation with
dramatic and immediate price drops. Amid this sentiment, we think
there could be some upside optionality. For example, the
negotiation framework leaves the door open for more modest price
reductions, especially for drugs that address high unmet needs with
limited alternatives. What's more, pharma companies are now
challenging the IRA in courts. In our view, if there is anything
that ameliorates the worst-case scenarios, then this will likely be
interpreted as positive for the sector.
Key portfolio company events post period end
On 17 July 2023, Apogee Therapeutics, a pre-clinical company
focused on inflammation, went public through an upsized IPO,
raising US$300 million. The company started trading on the Nasdaq
under the ticker symbol "APGE".
Outlook for the remainder of 2023: A plan for future
sustainability reporting and policy
Following the Board's directive in the second quarter to develop
an approach to ESG for RTW Biotech Opportunities Ltd, the Group
engaged sustainability advisory firm, Terra Instinct, to be its
partner in developing a new policy and investor reporting. As an
independent third party, Terra Instinct will take stock of the
Investment Manager's investment process, governance infrastructure,
and other relevant controls and procedures to help craft an ESG
policy and framework for future reporting, including the
presentation of estimates and carbon emissions metrics, all with a
view to being in line with relevant standards. The first reporting
is expected in the 2023 Annual Report.
RTW Investments, LP
12 September 2023
Statement of Principal Risks and Uncertainties for the Remaining
Six Months of the year to 31 December 2023
As described in the Group's annual consolidated financial
statements for the year ended 31 December 2022, the Group's
principal and emerging risks and uncertainties include the
following:
- Failure to achieve investment objective;
- Counterparty risk;
- The Investment Manager relies on key personnel;
- Portfolio companies may be subject to litigation;
- Exposure to global political and economic risks;
- Clinical development and regulatory risks;
- Imposition of pricing controls for clinical products and services;
- Inflation;
- Ukraine war;
- Availability of capital;
- Liquidity risk.
The Board believes that these risks are unchanged in respect of
the remaining six months of the year to 31 December 2023.
Further information in relation to these principal risks and
uncertainties may be found on pages 34 to 36 of the Group's annual
report and audited consolidated financial statements for the year
ended 31 December 2022.
These inherent risks associated with investments in the biotech
and pharmaceutical sector could result in a material adverse effect
on the Group's performance and value of the Ordinary Shares.
Risks are mitigated and managed by the Board through continual
review, policy setting and regular reviews of the Group's risk
matrix by the Audit Committee to ensure that procedures are in
place with the intention of minimising the impact of the
above-mentioned risks. The Board carried out a formal review of the
risk matrix at the Audit Committee meeting held on 27 July 2023.
The Board relies on periodic reports provided by the Investment
Manager and Administrator regarding risks that the Group faces.
When required, experts will be employed to gather information,
including tax advisers and legal advisers.
Statement of Directors' Responsibilities
The Directors confirm to the best of their knowledge that:
- the unaudited interim consolidated financial statements have
been prepared in conformity with US generally accepted accounting
principles; and
- the interim management report (which includes the Chair's
Statement, Report of the Investment Manager and Statement of
Principal Risks and Uncertainties) together with the unaudited
interim consolidated financial statements include a fair review of
the information required by:
a. DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
unaudited interim consolidated financial statements; and a
description of the principal risks and uncertainties for the
remaining six months of the financial year; and
b. DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place during the
first six months of the financial year and that have materially
affected the financial position or performance of the Group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the Group's
website (https://www.rtwfunds.com/rtw-biotech-opportunities-ltd).
Legislation in Guernsey governing the preparation and dissemination
of financial statements may differ from legislation in other
jurisdictions.
By order of the Board
William Simpson Paul Le Page
Chair Director
12 September 2023 12 September 2023
INDEPENT REVIEW REPORT TO RTW BIOTECH OPPORTUNITIES LTD
(formerly RTW Venture Fund Limited)
Conclusion
We have been engaged by RTW Biotech Opportunities Ltd (formerly
RTW Venture Fund Limited)(the "Company") to review the consolidated
financial statements in the half-yearly financial report for the
six months ended 30 June 2023 of the Company and its subsidiary
(together, the "Group"), which comprises the unaudited interim
consolidated statement of assets and liabilities including the
unaudited interim consolidated condensed schedule of investments,
the unaudited interim consolidated statements of operations,
changes in net assets and cash flows and the related explanatory
notes.
Based on our review, nothing has come to our attention that
causes us to believe that the consolidated financial statements in
the half-yearly financial report for the period ended 30 June 2023
do not give a true and fair view of the financial position of the
Company as at 30 June 2023 and of its financial performance and its
cash flows for the six month period then ended, in conformity with
U.S. generally accepted accounting principles and the Disclosure
Guidance and Transparency Rules ("the DTR") of the UK's Financial
Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK) 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity ("ISRE (UK) 2410") issued by the Financial Reporting Council
for use in the UK. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the consolidated financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Scope of review
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with ISRE (UK) 2410. However future events or conditions
may cause the Group or the Company to cease to continue as a going
concern, and the above conclusions are not a guarantee that the
Group and the Company will continue in operation.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the interim financial report in accordance with the
DTR of the UK FCA.
The consolidated financial statements included in this interim
report have been prepared in accordance with U.S. generally
accepted accounting principles.
In preparing the half-yearly financial report, the directors are
responsible for assessing the Group and the Company's ability to
continue as a going concern, disclosing, as applicable, matters
related to going concern and using the going concern basis of
accounting unless liquidation is imminent.
Our responsibility
Our responsibility is to express to the Company a conclusion on
the consolidated financial statements in the half-yearly financial
report based on our review. Our conclusion, including our
conclusions relating to going concern, are based on procedures that
are less extensive than audit procedures, as described in the scope
of review paragraph of this report.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the Company in accordance with the
terms of our engagement letter to assist the Company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the Company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the Company for our
review work, for this report, or for the conclusions we have
reached.
Dermot Dempsey
For and on behalf of KPMG Channel Islands Limited
Chartered Accountants
Guernsey
12 September 2023
Unaudited Interim Consolidated Statement of Assets and
Liabilities
as at 30 June 2023 and 31 December 2022
(Expressed in United States Dollars)
30 June 2023 31 December 2022
(unaudited) (audited)
ASSETS:
Investments in securities, at fair value (cost at 30 June 2023:
$269,083,089; 31 December
2022: $259,472,596) 319,379,663 350,125,577
Derivative contracts, at fair value
(cost at 30 June 2023: $3,137,223;
31 December 2022: $2,614,659) 17,299,695 21,467,649
Cash and cash equivalents 9,471,726 6,966,168
Due from brokers 69,744,112 22,195,456
Receivable from unsettled trades 140,511 439,798
Other assets 508,574 345,750
TOTAL ASSETS 416,544,281 401,540,398
-------------- ------------------
LIABILITIES:
Securities sold short, at fair value
(proceeds at 30 June 2023: $18,620,507;
31 December 2022: $15,407,927) 19,098,561 12,438,334
Derivative contracts, at fair value
(proceeds at 30 June 2023: $nil;
31 December 2022: $nil) 5,664,527 8,926,743
Due to brokers 8,106,390 25,823,016
Payable for unsettled trades 2,463,202 5,561,560
Accrued expenses 796,444 866,756
TOTAL LIABILITIES 36,129,124 53,616,409
-------------- ------------------
TOTAL NET ASSETS 380,415,157 347,923,989
============== ==================
NET ASSETS attributable to Ordinary Shares
(shares at 30 June 2023: 212,389,138;
31 December 2022: 212,389,138) 356,530,733 326,079,521
============== ==================
NET ASSETS attributable to Non-Controlling Interest 23,884,424 21,844,468
============== ==================
NAV per Ordinary Share 1.6787 1.5353
============== ==================
The unaudited interim consolidated financial statements of the
Group were approved and authorised for issue by the Board of
Directors on 12 September 2023 and signed on its behalf by:
William Simpson Paul Le Page
Chair Director
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Condensed Schedule of
Investments
as at 30 June 2023
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
--------------------------------- ----------- ------------ ------------ ---------------
Investments in securities,
at fair value
Common stocks
United States
Healthcare
Rocket Pharmaceuticals,
Inc. 2,400,755 8,188,796 47,703,002 12.54
Others* 127,515,791 121,984,566 32.07
Total United States 135,704,587 169,687,568 44.61
Netherlands
Healthcare 6,553,862 7,843,162 2.06
Ireland
Healthcare 6,637,310 6,368,860 1.67
British Virgin Islands
Healthcare 776,929 1,264,551 0.33
Bermuda
Healthcare 808,297 992,316 0.26
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 541,205 216,482 595,382 0.16
Canada
Healthcare 2,752,161 557,697 0.15
Cayman Islands
Financials 46,790 49,270 0.01
Healthcare 84,830 432,632 0.11
------------ ------------ ---------------
Total Cayman Islands 131,620 481,902 0.12
Total common stocks 153,581,248 187,791,438 49.36
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Condensed Schedule of Investments
(continued)
as at 30 June 2023
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
------------------------------------ ----------- ----------- ------------ ---------------
Investments in securities, at
fair value (continued)
Convertible preferred stocks
United States
Healthcare* 42,502,730 35,071,074 9.22
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 10,599,945 14,824,184 16,299,307 4.28
Others 1,771,208 1,665,285 0.44
----------- ------------ ---------------
Total China 16,595,392 17,964,592 4.72
Ireland
Healthcare 1,093,042 2,164,154 0.57
Switzerland
Healthcare 1,729,518 1,852,448 0.49
Total convertible preferred
stocks 61,920,682 57,052,268 15.00
American depository receipts
United Kingdom
Healthcare
Immunocore Holdings plc 462,249 11,872,691 27,716,450 7.29
Netherlands
Healthcare 8,497,764 9,584,240 2.52
Ireland
Healthcare 1,701,274 3,345,424 0.88
Sweden
Healthcare 178,258 260,325 0.07
Total American depository
receipts 22,249,987 40,906,439 10.76
Convertible notes
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 978,174 9,781,740 10,691,858 2.81
Canada
Healthcare 7,512,664 7,512,660 1.97
United States
Healthcare 2,221,835 338,228 0.09
Total convertible notes 19,516,239 18,542,746 4.87
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Condensed Schedule of Investments
(continued)
as at 30 June 2023
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
----------------------------------- ------------ ------------ ------------ ---------------
Investments in securities, at fair
value (continued)
Investment in private investment
companies
Ireland
Healthcare 11,814,933 15,086,772 3.97
Total investment in private
investment companies 11,814,933 15,086,772 3.97
Total investments in securities,
at fair value 269,083,089 319,379,663 83.96
============ ============ ===============
See accompanying notes to the unaudited interim consolidated financial
statements.
Unaudited Interim Consolidated Condensed Schedule of Investments
(continued)
as at 30 June 2023
(Expressed in United States Dollars)
Number Percentage
Descriptions of contracts Cost Fair Value of Net Assets
--------------------------- -------------- ---------- ----------- ---------------
Derivative contracts - assets,
at fair value
Equity swaps
United States
Healthcare 11,888,081 3.13
British Virgin Islands
Healthcare 2,093,912 0.55
Ireland
Healthcare 662,644 0.17
Total equity swaps 14,644,637 3.85
Warrants
Canada
Healthcare 2,462,706 1,507,276 0.40
United States
Healthcare
Rocket Pharmaceuticals,
Inc. 10,709 6,282 2,035 0.00
Others 668,235 604,041 0.16
---------- ----------- ---------------
Total United States 674,517 606,076 0.16
Total warrants 3,137,223 2,113,352 0.56
Contingent value rights
United States
Healthcare 541,706 0.14
Total contingent value
rights 541,706 0.14
Total derivative contracts - assets,
at fair value 3,137,223 17,299,695 4.55
========== =========== ===============
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Condensed Schedule of Investments
(continued)
as at 30 June 2023
(Expressed in United States Dollars)
Percentage
Descriptions Proceeds Fair Value of Net Assets
-------------------------------------- ----------- ----------- ---------------
Securities sold short,
at fair value
Common stocks
United States
Healthcare 16,920,032 16,944,342 4.46
Bermuda
Healthcare 937,113 992,316 0.26
Cayman Islands
Financials 46,135 49,270 0.01
Healthcare 46,260 432,633 0.11
----------- ----------- ---------------
Total Cayman Islands 92,395 481,903 0.12
Netherlands
Healthcare 347,970 419,675 0.11
Total common stocks 18,297,510 18,838,236 4.95
American depository receipts
Sweden
Healthcare 322,997 260,325 0.07
Total American depository receipts 322,997 260,325 0.07
Total securities sold short,
at fair value 18,620,507 19,098,561 5.02
=========== =========== ===============
Percentage
Descriptions Fair Value of Net Assets
--------------------------------------------- ----------- ---------------
Derivative contracts - liabilities,
at fair value
Equity swaps
United States
Healthcare 5,583,588 1.47
Index 80,939 0.02
----------- ---------------
Total United States 5,664,527 1.49
Total derivative contracts - liabilities,
at fair value 5,664,527 1.49
=========== ===============
See accompanying notes to the unaudited interim consolidated
financial statements.
Audited Consolidated Condensed Schedule of Investments
as at 31 December 2022
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
--------------------------------- ----------- ------------- ------------- ---------------
Investments in securities,
at fair value
Common stocks
United States
Healthcare
Prometheus Biosciences,
Inc. 670,916 6,802,058 52,946,904 15.22
Rocket Pharmaceuticals,
Inc. 2,400,755 8,188,796 46,982,775 13.50
Others* 124,096,539 118,157,365 33.96
Total United States 139,087,393 218,087,044 62.68
Netherlands
Healthcare 4,368,486 5,345,551 1.54
Ireland
Healthcare 4,099,988 2,981,309 0.86
Canada
Healthcare 3,275,323 1,012,216 0.29
British Virgin Islands
Healthcare 547,564 997,552 0.29
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 541,205 216,482 600,738 0.17
Cayman Islands
Financials 254,581 257,459 0.07
Healthcare 188,880 194,370 0.06
------------- ------------- ---------------
Total Cayman Islands 443,461 451,829 0.13
Bermuda
Healthcare 260,330 208,004 0.06
Belgium
Healthcare 165,629 32,919 0.01
Total common stocks 152,464,656 229,717,162 66.03
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the unaudited interim consolidated
financial statements.
Audited Consolidated Condensed Schedule of Investments
(continued)
as at 31 December 2022
(Expressed in United States Dollars)
Number
of Percentage
Descriptions Shares Cost Fair Value of Net Assets
------------------------------------ ----------- ------------ ------------ ---------------
Investments in securities, at
fair value (continued)
Convertible preferred stocks
United States
Healthcare* 44,011,844 38,108,351 10.95
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 10,599,945 14,824,185 16,433,316 4.73
Others 1,771,209 1,622,898 0.47
------------ ------------ ---------------
Total China 16,595,394 18,056,214 5.20
Switzerland
Healthcare 1,729,518 1,768,384 0.51
Ireland
Healthcare 116,545 117,696 0.03
Total convertible preferred
stocks 62,453,301 58,050,645 16.69
American depository receipts
United Kingdom
Healthcare
Immunocore Holdings plc 453,985 11,440,789 25,908,924 7.45
Others 1,064,820 813,170 0.23
------------ ------------ ---------------
Total United Kingdom 12,505,609 26,722,094 7.68
Netherlands
Healthcare 8,996,563 9,918,906 2.85
Ireland
Healthcare 893,338 961,567 0.28
Sweden
Healthcare 339,248 528,539 0.15
Israel
Healthcare 372,743 98,985 0.03
Total American depository
receipts 23,107,501 38,230,091 10.99
* No individual investment security or contract constitutes greater
than 5 percent of net assets.
See accompanying notes to the unaudited interim consolidated
financial statements.
Audited Consolidated Condensed Schedule of Investments
(continued)
as at 31 December 2022
(Expressed in United States Dollars)
Number Percentage
Descriptions of Shares Cost Fair Value of Net Assets
----------------------------------- ----------- ------------ ------------ ---------------
Investments in securities, at fair
value (continued)
Investment in private investment
companies
Ireland
Healthcare 11,814,933 14,074,846 4.04
Total investment in private
investment companies 11,814,933 14,074,846 4.04
Convertible notes
China
Healthcare
Ji Xing Pharmaceuticals
Ltd. 762,474 7,624,737 8,191,552 2.35
United States
Healthcare 2,007,468 1,861,281 0.53
Total convertible notes 9,632,205 10,052,833 2.88
Total investments in securities,
at fair value 259,472,596 350,125,577 100.63
============ ============ ===============
See accompanying notes to the unaudited interim consolidated
financial statements.
Audited Consolidated Condensed Schedule of Investments
(continued)
as at 31 December 2022
(Expressed in United States Dollars)
Percentage
Descriptions Cost Fair Value of Net Assets
----------------------------------------- ---------- ----------- ---------------
Derivative contracts - assets,
at fair value
Equity swaps
United States
Healthcare 16,781,963 4.83
British Virgin Islands
Healthcare 2,097,803 0.60
Ireland
Healthcare 206,563 0.06
Total equity swaps 19,086,329 5.49
Warrants
Canada
Healthcare 1,939,543 1,858,925 0.53
United States
Healthcare 674,517 522,337 0.15
Cayman Islands
Financials 599 58 0.00
Total warrants 2,614,659 2,381,320 0.68
Total derivative contracts - assets,
at fair value 2,614,659 21,467,649 6.17
========== =========== ===============
See accompanying notes to the unaudited interim consolidated
financial statements.
Audited Consolidated Condensed Schedule of Investments
(continued)
as at 31 December 2022
(Expressed in United States Dollars)
Percentage
Descriptions Proceeds Fair Value of Net Assets
-------------------------------------- ----------- ----------- ---------------
Securities sold short,
at fair value
Common stocks
United States
Healthcare 14,521,155 11,500,094 3.31
Netherlands
Healthcare 293,711 221,800 0.06
Cayman Islands
Financials 96,480 98,829 0.03
Healthcare 46,260 89,072 0.03
----------- ----------- ---------------
Total Cayman Islands 142,740 187,901 0.06
Total common stocks 14,957,606 11,909,795 3.43
American depository receipts
Sweden
Healthcare 450,321 528,539 0.15
Total American depository receipts 450,321 528,539 0.15
Total securities sold short,
at fair value 15,407,927 12,438,334 3.58
=========== =========== ===============
Percentage
Descriptions Fair Value of Net Assets
--------------------------------------------- ----------- ---------------
Derivative contracts - liabilities,
at fair value
Equity swaps
United States
Healthcare 7,041,281 2.02
Index 1,860,052 0.54
----------- ---------------
Total United States 8,901,333 2.56
Israel
Healthcare 25,410 0.01
Total derivative contracts - liabilities,
at fair value 8,926,743 2.57
=========== ===============
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Statement of Operations
For the six month periods ended 30 June 2023 and 30 June
2022
(Expressed in United States Dollars)
1 January 2023 to 1 January 2022 to
30 June 2023 30 June 2022
(unaudited) (unaudited)
------------------ ------------------
Investment income
Interest
(net of withholding taxes of $nil; 30 June 2022: $nil) 1,089,563 95,611
Dividends (net of withholding taxes of $nil; 30 June 2022: $1,041) 455,581 603,135
Other 341,807 -
------------------ ------------------
Total investment income 1,886,951 698,746
------------------ ------------------
Expenses
Management fees 2,115,840 1,889,306
Interest 1,106,575 132,354
Professional fees 388,034 378,758
Research costs 247,998 420,054
Audit fees 235,641 117,100
Administrative fees 199,914 160,113
Directors' fees 87,798 102,434
Dividends - 2,372
Other expenses 234,829 146,595
------------------ ------------------
Total expenses 4,616,629 3,349,086
------------------ ------------------
Net investment income/(loss) (2,729,678) (2,650,340)
================== ==================
Realised and change in unrealised gain/(loss) on investments,
derivatives and foreign currency
transactions
Net realised gain/(loss) on securities and foreign currency transactions 81,097,820 17,933,993
Net change in unrealised gain/(loss) on securities and foreign currency
translation (43,904,533) (124,566,690)
Net realised gain/(loss) on derivative contracts (544,139) (2,150,440)
Net change in unrealised gain/(loss) on derivative contracts (1,428,302) 7,569,273
Net realised and unrealised gain/(loss) on investments, derivatives and
foreign currency
transactions 35,220,846 (101,213,864)
------------------ ------------------
Net increase/(decrease) in net assets resulting from operations 32,491,168 (103,864,204)
================== ==================
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Statement of Changes in Net
Assets
For the six month period ended 30 June 2023
(Expressed in United States Dollars)
Ordinary Non-Controlling
Share Class Interest
------------- ----------------
Net assets, beginning of period 326,079,521 21,844,468
Operations
Net investment income/( loss) (2,729,678) -
Net realised gain/(loss) on securities and foreign
currency transactions 81,097,820 -
Net change in unrealised gain/(loss) on securities
and foreign currency translation (43,904,533) -
Net realised gain/(loss) on derivative contracts (544,139) -
Net change in unrealised gain/(loss) on derivative
contracts (1,428,302) -
Income/(loss) attributable to Non-Controlling
Interest (2,039,956) 2,039,956
Net change in net assets resulting from operations 30,451,212 2,039,956
------------- ----------------
Net assets, end of period 356,530,733 23,884,424
============= ================
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Statement of Changes in Net
Assets
For the six month period ended 30 June 2022
(Expressed in United States Dollars)
Performance
Ordinary Allocation Total Shareholders'
Share Class Share Class Funds
-------------- ------------- --------------------
Net assets, beginning of period 363,040,222 24,320,504 387,360,726
Operations
Net investment income/( loss) (2,650,340) - (2,650,340)
Net realised gain/(loss) on securities
and foreign currency transactions 17,933,993 - 17,933,993
Net change in unrealised gain/(loss)
on securities and foreign currency
translation (124,566,690) - (124,566,690)
Net realised gain/(loss) on derivative
contracts (2,150,440) - (2,150,440)
Net change in unrealised gain/(loss)
on derivative contracts 7,569,273 - 7,569,273
Performance Allocation 6,521,130 (6,521,130) -
Net change in net assets resulting
from operations (97,343,074) (6,521,130) (103,864,204)
-------------- ------------- --------------------
Net assets, end of period 265,697,148 17,799,374 283,496,522
============== ============= ====================
See accompanying notes to the unaudited interim consolidated
financial statements.
Unaudited Interim Consolidated Statement of Cash Flows
For the six month periods ended 30 June 2023 and 30 June
2022
(Expressed in United States Dollars)
1 January 1 January
2023 to 2022 to
30 June 2023 30 June 2022
(unaudited) (unaudited)
--------------- -------------------------------
Cash flows from operating activities
Net increase/(decrease) in net assets
resulting from operations 32,491,168 (103,864,204)
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 (81,097,820) (17,933,993)
Net change in unrealised (gain)/loss on
securities and foreign currency translation 43,904,533 124,566,690
Net realised (gain)/loss on derivative
contracts 544,139 2,150,440
Net change in unrealised (gain)/loss on
derivative contracts 1,428,302 (7,569,273)
Effect of exchange rate changes on cash
and cash equivalents (86,823) -
Purchases of investments in securities (62,998,246) (74,873,499)
Proceeds from sales of investments in
securities 126,303,452 102,920,476
Proceeds from securities sold short 20,627,975 18,317,735
Payments for securities sold short (9,246,930) (7,713,126)
Proceeds from derivative contracts 4,325,394 909,574
Payments for derivative contracts (5,392,097) (3,326,611)
Changes in operating assets and liabilities:
Other assets (162,824) 121,011
Due from investments - (2,020,197)
(Receivable from)/payable for unsettled
trades (2,799,071) (100,744)
Due to brokers (17,716,626) (24,634,775)
Accrued expenses (70,312) 10,108
Net cash provided by/(used in) operating
activities 50,054,214 6,959,612
--------------- -------------------------------
Cash flows from financing activities
Net proceeds from issuance of shares - -
Performance Allocation distribution - -
Net cash provided by/(used in) financing
activities - -
--------------- -------------------------------
Net change in cash and cash equivalents 50,054,214 6,959,612
Cash, cash equivalents, and restricted
cash, beginning of the period 29,161,624 18,808,022
--------------- -------------------------------
Cash, cash equivalents, and restricted
cash, end of the period 79,215,838 25,767,634
=============== ===============================
At 30 June 2023, the amounts categorised in cash, cash equivalents,
and restricted cash include the following:
Cash and cash equivalents 9,471,726 7,555,421
Due from brokers 69,744,112 18,212,213
Total 79,215,838 25,767,634
=============== ===============================
Supplemental disclosure of cash flow
information
Cash paid during the period for interest 1,149,630 135,420
See accompanying notes to the unaudited interim consolidated
financial statements.
1. Nature of operations and summary of significant accounting policies
RTW Biotech Opportunities Ltd, formerly known as RTW Venture
Fund Limited (the "Company"), is a publicly listed Guernsey
non-cellular company limited by shares. The Company 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 the 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 with the additional ticker symbol: RTWG denoting the
Sterling price. The original ticker, RTW, continues to denote the
US Dollar price.
On 22 June 2023, the Company changed its name from "RTW Venture
Fund Limited" to "RTW Biotech Opportunities Ltd".
On 1 December 2022 the Company changed its status for U.S.
federal tax purposes from a publicly traded partnership to a
corporation. The Group believes that the change in status will
cause it to be treated as a passive foreign investment company.
This change has been necessitated by recent changes to U.S. tax
legislation due to come into effect from 1 January 2023. The
Company established a new wholly owned subsidiary, RTW Venture Fund
Operating Limited (the "Subsidiary"), to which it has transferred
its right to the profits and losses attributable to the Group's
portfolio of assets. This reorganisation has had no economic impact
on shareholders. All the income and expenses of the Subsidiary are
consolidated with the income and expenses of the Group. On 14 July
2023, the Subsidiary changed its name from "RTW Venture Fund
Operating Limited" to "RTW Biotech Opportunities Operating
Ltd.".
The Group 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
RTW's existing US-based funds. The Group focuses on creating,
building, and supporting world-class life sciences,
biopharmaceutical and medical technology companies. The Group'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 Group is
managed by RTW Investments, LP, a Delaware limited partnership, to
provide the Group 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 unaudited interim consolidated financial statements are
expressed in United States Dollars. The unaudited interim
consolidated financial statements which give a true and fair view
and have been prepared in accordance with US generally accepted
accounting principles ("US GAAP") and are in compliance with the
Companies (Guernsey) Law, 2008. The entities comprised within the
Group are investment companies and follow the accounting and
reporting guidance in Financial Accounting Standards Board's
("FASB") Accounting Standards Codification Topic 946, Financial
Services - Investment Companies.
The Directors consider that it is appropriate to adopt a going
concern basis of accounting in preparing the unaudited interim
consolidated 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
Principles of consolidation
The unaudited interim consolidated financial statements include
accounts of the Company consolidated with the accounts of the
Subsidiary. All inter-group balances have been eliminated upon
consolidation. The Subsidiary is incorporated in Guernsey.
Non-Controlling Interest
An affiliate of the Investment Manager, RTW Venture Performance
LP, holds an interest in the Subsidiary. The Non-Controlling
Interest captures both Performance Allocation and mark to market
movements on the New Performance Allocation Share held by RTW
Venture Performance LP in the Subsidiary. For the period ended 30
June 2023, the entirety of the income/(loss) attributable to
Non-Controlling Interest was comprised of mark to market movements
of Notional Ordinary Shares.
Cash, cash equivalents, and 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 30 June 2023 and 31 December 2022,
the Group 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 Group 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 Group 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 Group.
Unobservable inputs reflect the Group'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 Group 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 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 Group 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 Group's own assumptions are set to reflect those
that market participants would use in pricing the asset or
liability at the measurement date. The Group 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 Group 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.
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 Independent
Valuers 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 net asset value practical expedient approach. A
combination of the valuation techniques mentioned may also be
utilised. 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 utilises guideline public companies relying
on projected revenues to derive an indicative 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 and the early development stage of each of the
investments, the indicative enterprise value is discounted at an
appropriate rate.
The income approach utilises the discounted cash flow method.
Projected cash flows for each investment are discounted to
determine an assumed enterprise value.
Where applicable, the indicative enterprise value has been
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 is 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 is allocated to the equity class on either a fully
diluted basis or using an option pricing model. The resulting
indicative value on a per share basis is then multiplied by the
number of shares to derive the fair market value.
American depository receipts
The Group 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 notes
The Group values investments in convertible notes in accordance
with the unlisted investments section above. As of 30 June 2023,
these investments are all categorised in Level 3 of the fair value
hierarchy.
Convertible preferred stock
The Group 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 30 June 2023, these
investments are categorised in Level 1 and Level 3 of the fair
value hierarchy.
Investment in private investment companies
The Group values investment in private investment companies
using the net asset values provided by the underlying private
investment companies as a practical expedient. The Group applies
the practical expedient to its private investment companies on an
investment-by-investment basis and consistently with the Group's
entire position in a particular investment, unless it is probable
that the Group will sell a portion of an investment at an amount
different from the net asset value of the investment.
Private investment in public equity
Private investment in public equity ("PIPE") cannot be offered
for sale to the public until the issuer complies with certain
statutory or contractual requirements. Such securities traded on
inactive markets or valued by reference to similar instruments or
where a discount may be applied are generally categorised in Level
2.
Derivative contracts
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.
Contingent value rights
Contingent value rights that are not traded on an organized
facility are valued using a market approach or such
other analysis and information as the Group may determine.
Fair value - valuation processes
The Group establishes valuation processes and procedures to
ensure that the valuation techniques are fair and consistent, and
valuation inputs are supportable. The Group designates the
Investment Manager's Valuation Committee to oversee the entire
valuation process of the Group's investments. The Valuation
Committee comprises various members of the Investment Manager,
including those separate from the Group's portfolio management and
trading functions, and reports to the Board.
The Valuation Committee is responsible for developing the
Group'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 Group'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 Group 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 Group engages the services of
third-party valuation firms, the Independent Valuers, to perform an
independent review of the valuation of the Group's Level 3
investments and the Group 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 period-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 unaudited interim consolidated
statement of operations.
The Group 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 unaudited
interim consolidated 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
Group'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.
Realised gains and losses on investment transactions are determined
using cost calculated on first in, first out basis.
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 Group'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 Group has the legal right to offset
the recognised amounts and intends to settle on a net basis.
The Group 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 30 June 2023, the Group had cash collateral
receivables of $16,116,362 (31 December 2022: $16,384,706) (see
Note 3) with derivative counterparties under the same master
netting arrangement.
Income taxes
On 1 December 2022, the Company changed its status for US
federal tax purposes from a publicly traded partnership ("PTP") to
a corporation. This change by the Board was necessitated due to
recent changes to US tax legislation that came into effect on 1
January 2023. Pursuant to this, the Company established the
Subsidiary, a partnership for US federal tax purposes, to which the
Company transferred its portfolio of assets and the attributable
profits and losses. The Company, as a corporation, is expected to
be treated as a Passive Foreign Investment Company ("PFIC") for US
federal tax purposes.
The Company and Subsidiary are exempt from taxation in Guernsey
and are each charged an annual exemption fee of GBP1,200. The Group
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 Group is managed so as not to be resident in
the UK for UK tax purposes.
The Group 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 Group 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
Group's unaudited interim consolidated financial statements. Income
tax and related interest and penalties would be recognised as a tax
expense in the unaudited interim consolidated statement of
operations if the tax position was deemed to meet the more likely
than not threshold.
The Investment Manager has analysed the Group's tax positions
and has concluded no liability for unrecognised tax benefits should
be recorded related 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.
The Company and the Subsidiary each file income tax returns in
the US federal jurisdiction and, as applicable, in US state or
local jurisdictions, or non-US jurisdictions. Generally, the Group
was subject to income tax examinations by major taxing authorities
for each tax period since inception. Based on its analysis, the
Group determined that it had not incurred any liability for
unrecognised tax benefits as of 30 June 2023 or 31 December
2022.
Use of estimates
Preparing unaudited interim consolidated 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 unaudited interim consolidated financial statements and the
reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
New accounting pronouncements
In June 2022, the FASB issued ASU 2022-03, ASC Topic 820, "Fair
Value Measurement of Equity Securities Subject to Contractual Sale
Restrictions". The amendment clarifies that contractual sale
restrictions should not be considered when measuring the equity
security's fair value and prohibits an entity from recognizing a
contractual sale restriction as a separate unit of account. The
amendments in this ASU are effective for the Group beginning after
15 December 2024. Early adoption is permitted for both interim and
annual financial statements that have not yet been issued or made
available for issuance. The Group has chosen to early adopt this
pronouncement as of 1 January 2023 and does not expect this
guidance to have a material impact on its consolidated financial
statements and related disclosures.
2. Fair value measurements
The Group's assets and liabilities recorded at fair value have
been categorised based upon a fair value hierarchy as described in
the Group's significant accounting policies in Note 1.
The following table presents information about the Group's
assets and liabilities measured at fair value as of 30 June
2023:
Investments
measured
at net asset
Level 1 Level 2 Level 3 value* Total
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
-------------- -------------- -------------- -------------- ----------------
Assets (at fair value)
Investments in
securities
Common stocks 185,754,591 1,265,582 771,265 - 187,791,438
Convertible preferred
stocks 2,164,152 - 54,888,116 - 57,052,268
American depository
receipts 40,906,439 - - - 40,906,439
Convertible notes - - 18,542,746 - 18,542,746
Investment in private
investment companies - - - 15,086,772 15,086,772
Total investments
in securities 228,825,182 1,265,582 74,202,127 15,086,772 319,379,663
-------------- -------------- -------------- -------------- ----------------
Derivative contracts
Equity swaps - 14,644,637 - - 14,644,637
Warrants - 1,828,186 285,166 - 2,113,352
Contingent value
rights - 541,706 - - 541,706
-------------- -------------- -------------- -------------- ----------------
Total derivative
contracts - 17,014,529 285,166 - 17,299,695
-------------- -------------- -------------- -------------- ----------------
228,825,182 18,280,111 74,487,293 15,086,772 336,679,358
============== ============== ============== ============== ================
Liabilities (at fair
value)
Securities sold
short
Common stocks 18,788,966 49,270 - - 18,838,236
American depository
receipts 260,325 - - - 260,325
-------------- -------------- -------------- -------------- ----------------
Total securities
sold short 19,049,291 49,270 - - 19,098,561
-------------- -------------- -------------- -------------- ----------------
Derivative contracts
Equity swaps - 5,664,527 - - 5,664,527
-------------- -------------- -------------- -------------- ----------------
Total derivative
contracts - 5,664,527 - - 5,664,527
-------------- -------------- -------------- -------------- ----------------
19,049,291 5,713,797 - - 24,763,088
-------------- -------------- -------------- -------------- ----------------
* The Group'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 Group's
assets and liabilities measured at fair value as of 31 December
2022:
Investments
measured
at net asset
Level 1 Level 2 Level 3 value* Total
(audited) (audited) (audited) (audited) (audited)
-------------- ------------- ------------- -------------- --------------
Assets (at fair value)
Investments in
securities
Common stocks 225,817,734 534,871 3,364,557 - 229,717,162
Convertible preferred
stocks 117,696 - 57,932,949 - 58,050,645
American depository
receipts 38,230,091 - - - 38,230,091
Investment in private
investment companies - - - 14,074,846 14,074,846
Convertible notes - - 10,052,833 - 10,052,833
Total investments
in securities 264,165,521 534,871 71,350,339 14,074,846 350,125,577
-------------- ------------- ------------- -------------- --------------
Derivative contracts
Equity swaps - 19,086,329 - - 19,086,329
Warrants - 1,904,409 476,911 - 2,381,320
-------------- ------------- ------------- -------------- --------------
Total derivative
contracts - 20,990,738 476,911 21,467,649
-------------- ------------- ------------- -------------- --------------
264,165,521 21,525,609 71,827,250 14,074,846 371,593,226
============== ============= ============= ============== ==============
Liabilities (at fair
value)
Securities sold
short
Common stocks 11,810,966 98,829 - - 11,909,795
American depository
receipts 528,539 - - - 528,539
-------------- ------------- ------------- -------------- --------------
Total securities
sold short 12,339,505 98,829 - 12,438,334
-------------- ------------- ------------- -------------- --------------
Derivative contracts
Equity swaps - 8,926,743 - - 8,926,743
-------------- ------------- ------------- -------------- --------------
Total derivative
contracts - 8,926,743 - - 8,926,743
-------------- ------------- ------------- -------------- --------------
12,339,505 9,025,572 - - 21,365,077
-------------- ------------- ------------- -------------- --------------
* The Group's investment in private investment companies that
are valued at their net asset value are not categorized within the
fair value hierarchy.
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 period ended 30 June 2023, the Group
had net transfers into Level 2 of $161,322 from Level 3 due to
conversion into publicly traded common stocks subject to an
unexpired 180-day lock-up as at 30 June 2023 (for the year ended 31
December 2022: $4,555,194) and transfers into Level 1 of $9,331,273
from Level 3 due to conversion into publicly traded common stocks
(for the year ended 31 December 2022: $nil). Transfers between
levels are deemed to occur at period/year end.
The following tables summarise the valuation techniques and
significant unobservable inputs used for the Group's investments
that are categorised within Level 3 of the fair value hierarchy as
of 30 June 2023 and 31 December 2022:
Fair value Significant
at 30 June unobservable Range
2023 (unaudited) Valuation techniques inputs of inputs
------------------ ---------------------- --------------------- -----------
Assets (at fair value)
Investments in securities
Convertible preferred Discounted cash
stocks 44,551,292 flow WACC 15% - 41%
and/or market Revenue multiples 2.5x -
approach 4.0x
Market step-up 0.7x - 1.3x
multiple
Market rate of (20)% -
returns 25%
7,346,103 Price of most recent
funding round n/a n/a
2,990,721 Probability weighted WACC 14% - 19%
expected return
method ("PWERM")
Revenue multiples 4.0x
Market step-up 0.9x -
multiple 1.6x
Market rate of (30)% -
returns (5)%
Recovery rate 3%
Discounted cash
Convertible notes 10,691,854 flow WACC 15%
and/or market
approach Revenue multiples 4.0x
Market step-up 0.7x -
multiple 1.1x
Market rate of (10)% -
returns 0%
7,701,142 Price of most recent n/a n/a
funding round
Market rate of (30)% -
149,750 PWERM returns 0%
Recovery rate 3%
Discounted cash
Common stocks 771,116 flow WACC 15%
and/or market Revenue multiples 0.2x -
approach Market step-up 4.0x
multiple 0.7x -
1.1x
Market rate of (10)% -
returns 0%
149 Recent transaction n/a n/a
price
Total investments
in securities 74,202,127
==================
Derivative contracts
Discounted cash
Warrants 285,166 flow, WACC 33% - 37%
Market approach, Revenue multiple 4.0x
Market rate of
returns Expected (13)% -
and/or option pricing volatility 3%
model 43% - 50%
Total derivative contracts 285,166
==================
Fair value
at 31 December
2022
Significant unobservable Range
(audited) Valuation techniques inputs of inputs
---------------- ---------------------- -------------------------- -------------
Assets (at fair value)
Investments in
securities
Convertible
preferred Discounted cash
stocks 50,023,996 flow WACC 13% - 33%
and/or market Revenue multiples 2.8x -
approach 4.0x
Market step-up
multiple 0.7x - 1.5x
Market rate of -30% -
returns 20%
7,908,953 Price of most recent
funding round n/a n/a
Discounted cash
Convertible notes 8,772,349 flow WACC 13%
and/or market
approach Revenue multiples 4.0x
Market step-up 0.7x -
multiple 1.1x
Market rate of
returns 0%
Market rate of
1,280,484 PWERM returns -30%
Recovery rate 0% - 50%
Discounted cash
Common stocks 1,208,299 flow WACC 13%
and/or market Revenue multiples 0.2x -
approach Market step-up 4.0x
multiple 0.7x -
1.1x
Market rate of
returns -10%
Probability of
2,156,109 PWERM business 95%
combination
149 Price of most recent
funding round n/a n/a
Total investments
in securities 71,350,339
================
Derivative contracts
Discounted cash
Warrants 315,589 flow, WACC 33%
Market approach, Revenue multiple 4.0x
Market rate of
returns Expected
and/or option pricing volatility 10%
model 53%
161,322 PWERM Expected volatility 25%
Total derivative
contracts 476,911
================
The significant unobservable inputs used in the fair value
measurements of Level 3 common stock, convertible preferred stocks,
convertible notes, and warrants include, but are not limited to,
WACC, revenue and/or earnings multiple, market rate of return, and
expected volatility. Increases in the WACC in isolation would
result in a lower fair value for the security, and vice versa.
Increases in multiples and/or market rate of returns 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 below table 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 Group 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 period ended 30 June 2023 were as follows:
Balance Ending
beginning Change Transfers balance
1 January Realised in Unrealised into/(from) 30 June
2023 gains/ (losses)(a) gains/ (losses)(a) Purchases Sales Level 3* 2023
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Assets (at
fair value)
Investments
in
securities
Common stocks 3,364,557 - (437,183) - - (2,156,109) 771,265
Convertible
preferred
stocks 57,932,949 - (2,059,571) 6,189,902 - (7,175,164) 54,888,116
Convertible
notes 10,052,833 - (1,394,121) 9,884,034 - - 18,542,746
Total
investments
in securities 71,350,339 - (3,890,875) 16,073,936 - (9,331,273) 74,202,127
============== =================== =================== ============== ============== ============== ==============
Derivative
contracts
Warrants 476,911 - (30,423) - - (161,322) 285,166
Total derivative
contracts 476,911 - (30,423) - - (161,322) 285,166
============== =================== =================== ============== ============== ============== ==============
* Includes conversion of convertible bonds into convertible
preferred stock and convertible notes.
Changes in Level 3 assets and liabilities measured at fair value
for the year ended 31 December 2022 were as follows:
Balance Ending
beginning Change Transfers balance
1 January Realised in Unrealised into/(from) 31 December
2022 gains/ (losses)(a) gains/ (losses)(a) Purchases Sales Level 3(b) 2022
(audited) (audited) (audited) (audited) (audited) (audited) (audited)
Assets (at
fair value)
Investments
in
securities
Convertible
preferred
stocks 67,177,270 - (17,555,053) 12,142,203 - (3,831,471) 57,932,949
Common stocks 1,943,967 - (664,647) 2,085,237 - - 3,364,557
Convertible
notes - - 420,628 8,195,772 - 1,436,433 10,052,833
Convertible
bonds 723,723 - - 1,436,433 - (2,160,156) -
Total
investments
in securities 69,844,960 - (17,799,072) 23,859,645 - (4,555,194) 71,350,339
============ =================== =================== ============ ============ ============ ============
Derivative
contracts
Warrants 134,008 - 76,306 266,597 - - 476,911
------------ ------------------- ------------------- ------------ ------------ ------------ ------------
Total derivative
contracts 134,008 - 76,306 266,597 - - 476,911
============ =================== =================== ============ ============ ============ ============
(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 unaudited
interim consolidated statement of operations.
(b) Conversions of preferred stock into common stock.
Changes in Level 3 unrealised gains and losses during the period
for assets still held at period end were as follows:
31 December
30 June 2023 2022
(unaudited) (audited)
Common stocks (16,125) (664,647)
Convertible notes (1,294,842) 420,628
Convertible preferred stocks (1,974,247) (13,404,700)
Warrants (30,423) 76,306
Change in unrealised gains and
losses during the period for assets
still held at period end (3,315,637) (13,572,413)
============== =============
Total realised gains and losses and unrealised gains and losses
in the Group's investment in securities, derivative contracts and
securities sold short are made up of the following gain and loss
elements:
31 December
30 June 2023 2022
(unaudited) (audited)
Realised gains 101,384,363 47,604,728
Realised losses (20,830,682) (41,995,983)
Net realised gain on securities,
derivative contracts and securities
sold short 80,553,681 5,608,745
============== =============
31 December
30 June 2023 2022
(unaudited) (audited)
Change in unrealised
gains 54,511,837 112,585,347
Change in unrealised
losses (99,844,672) (152,339,558)
-------------- --------------
Net change in unrealised gain/(loss)
on securities, derivative contracts
and securities sold short (45,332,835) (39,754,211)
============== ==============
As at 30 June 2023 the Group had commitments (subject to
completion of certain parameters) to certain investments totalling
$5,628,584 (31 December 2022: $2,544,486).
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.
As at 30 June 2023, due from brokers totalled $69,744,112 (31
December 2022: $22,195,456). Included within due from brokers is
$53,627,750 (31 December 2022: $5,810,750) which can be used for
investment. The Group pledged cash collateral to counterparties to
over-the-counter derivative contracts of $16,116,362 (31 December
2022: $16,384,706) which is included in due from brokers.
In the normal course of business, substantially all of the
Group's securities transactions, money balances, and security
positions are transacted with the Group's prime brokers and
counterparties, Goldman Sachs & Co. LLC, Cowen Financial
Products, LLC, UBS AG, Bank of America Merrill Lynch, Morgan
Stanley & Co. LLC, Jefferies & Co. and J.P. Morgan
Securities, LLC. The Group 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 Group'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 Group 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
Group'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 Group is also subject to additional
counterparty risk due to the inability of its counterparties to
meet the terms of their contracts.
Warrants
The Group may receive warrants from its portfolio companies upon
an investment in the debt or equity of a portfolio company. The
warrants provide the Group 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
Group to lose its entire investment in a warrant.
The Group 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 Group is the
fair value of the contracts and the purchase price of the warrants.
The Group considers the effects of counterparty risk when
determining the fair value of its investments in warrants.
Equity swap contracts
The Group is subject to equity price risk in the normal course
of pursuing its investment objectives. The Group 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 Group 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 Group considers the average month-end notional amounts
during the period, categorised by primary underlying risk, to be
representative of the volume of its derivative activities during
the period ended 30 June 2023:
31 December 2022
30 June 2023 (unaudited) (audited)
--------------------------- ------------------------
Short Long Short
Long exposure exposure exposure exposure
-------------- ----------- ----------- -----------
Primary underlying Notional Notional Notional Notional
risk amounts amounts amounts amounts
-------------------------- -------------- ----------- ----------- -----------
Equity price
Equity swaps 68,199,619 59,402,138 48,774,292 56,273,944
Warrants(a) 2,650,211 - 4,024,470 -
Contingent value rights 541,706 - - -
71,391,536 59,402,138 52,798,762 56,273,944
============== =========== =========== ===========
(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 unaudited interim consolidated
statement of assets and liabilities and unaudited interim
consolidated statement of operations
The following tables identify the fair value amounts of
derivative instruments included in the unaudited interim
consolidated statement of assets and liabilities as derivative
contracts, categorised by primary underlying risk, at 30 June 2023
and 31 December 2022. The following table also identifies the gain
and loss amounts included in the unaudited interim consolidated
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 period
ended 30 June 2023 and 30 June 2022.
30 June 2023 (unaudited)
--------------------------------------------------------
Change in
Primary underlying Derivative Derivative Realised unrealised
risk assets liabilities gain/(loss) gain/(loss)
--------------------- ----------- ------------- ------------- -------------
Equity price
Equity swaps 14,644,637 5,664,527 (543,767) (1,179,476)
Warrants 2,113,352 - (372) (790,532)
Contingent value
rights 541,706 - - 541,706
17,299,695 5,664,527 (544,139) (1,428,302)
=========== ============= ============= =============
31 December 2022 30 June 2022 (unaudited)
(audited)
-------------------------- ----------------------------
Change in
Primary underlying Derivative Derivative Realised unrealised
risk assets liabilities gain/(loss) gain/(loss)
--------------------- ----------- ------------- ------------- -------------
Equity price
Equity swaps 19,086,329 8,926,743 (2,150,440) 7,759,459
Warrants 2,381,320 - - (190,186)
----------- ------------- ------------- -------------
21,467,649 8,926,743 (2,150,440) 7,569,273
=========== ============= ============= =============
5. Securities lending agreements
The Group has entered into securities lending agreements with
its prime brokers. From time to time, the prime brokers lend
securities on the Group's behalf. As of 30 June 2023 and 31
December 2022, no securities were loaned and no collateral was
received.
6. Offsetting assets and liabilities
The Group is required to disclose the impact of offsetting
assets and liabilities represented in the unaudited interim
consolidated statement of assets and liabilities to enable users of
the unaudited interim consolidated 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 Group
to another party are determinable, the Group has the right to
offset the amounts owed with the amounts owed by the other party,
the Group intends to offset and the Group's right of setoff is
enforceable by law.
As of 30 June 2023 and 31 December 2022, the Group held
financial instruments and derivative instruments that were eligible
for offset in the unaudited interim consolidated 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 Group against
applicable liabilities or payment obligations of the Group to the
counterparty. These arrangements also allow the counterparty to net
any of its applicable liabilities or payment obligations they have
to the Group against any collateral sent to the Group.
As discussed in Note 1, the Group has elected not to offset
assets and liabilities in the unaudited interim consolidated
statement of assets and liabilities. The following table presents
the potential effect of netting arrangements for asset derivative
contracts presented in the unaudited interim consolidated statement
of assets and liabilities:
30 June 2023 (unaudited)
Gross amounts not offset
in the unaudited interim
consolidated statement
of
assets and liabilities
------------ ------------- ------------- -----------------------------
Gross
amounts
offset in
the
unaudited
interim Gross
Gross consolidated amounts
amounts statement of
of of assets recognised Cash
recognised and assets and Financial collateral Net
Description assets liabilities liabilities instruments(a) received(b) amount
--------------- ------------ ------------- ------------- --------------- ------------
Equity swaps
Bank of
America
Merrill Lynch 7,706,960 - 7,706,960 (753,861) - 6,953,099
Cowen
Financial
Products, LLC 4,279,889 - 4,279,889 (1,803,874) - 2,476,015
Morgan Stanley
& Co. LLC 2,313,308 - 2,313,308 (2,136,372) - 176,936
Jefferies &
Co. 344,480 - 344,480 (344,480) - -
14,644,637 - 14,644,637 (5,038,587) - 9,606,050
============ ============= ============= =============== ============ ============
31 December 2022 (audited)
Gross amounts not offset
in the consolidated statement
of
assets and liabilities
------------- ------------- ------------- ------------------------------
Gross
amounts
offset in
the Gross
Gross consolidated amounts
amounts statement of
of of assets recognised Cash
recognised and assets and Financial collateral Net
Description assets liabilities liabilities instruments(a) received(b) amount
--------------- ------------- ------------- ------------- --------------- -------------
Equity swaps
Bank of
America
Merrill Lynch 12,929,367 - 12,929,367 (3,983,939) - 8,945,428
Cowen
Financial
Products, LLC 3,239,591 - 3,239,591 (1,224,200) - 2,015,391
Morgan Stanley
& Co. LLC 2,797,503 - 2,797,503 (2,797,503) - -
Jefferies &
Co. 119,868 - 119,868 (119,868) - -
19,086,329 - 19,086,329 (8,125,510) - 10,960,819
============= ============= ============= =============== ============= ==========
(a) Amounts related to master netting agreements (e.g. ISDA),
determined by the Group 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 Group 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 unaudited interim
consolidated 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
unaudited interim consolidated statement of assets and liabilities
as of 30 June 2023 and audited consolidated statement of assets and
liabilities 31 December 2022:
30 June 2023 (unaudited)
Gross amounts not offset
in the unaudited interim
consolidated statement
of
assets and liabilities
--------------- -------------- -------------- -------------- ------------------------------- -----------
Gross amounts
offset in
the unaudited
interim
consolidated
Gross statement
amounts of assets Gross amounts Cash
of recognised and of recognised Financial collateral
Description liabilities liabilities liabilities instruments(a) pledged(b) Net amount
---------------- -------------- -------------- -------------- -----------
Equity swaps
Morgan Stanley
& Co. LLC 2,136,372 - 2,136,372 (2,136,372) - -
Cowen Financial
Products, LLC 1,803,874 - 1,803,874 (1,803,874) - -
Bank of America
Merrill Lynch 753,861 - 753,861 (753,861) - -
Jefferies & Co. 970,420 - 970,420 (344,480) (625,940) -
5,664,527 - 5,664,527 (5,038,587) (625,940) -
============== ============== ============== =============== ============== ===========
31 December 2022 (audited)
Gross amounts not offset
in the consolidated statement
of
assets and liabilities
--------------- -------------- -------------- -------------- ------------------------------- -----------
Gross amounts
offset in
the
consolidated
Gross statement
amounts of assets Gross amounts Cash
of recognised and of recognised Financial collateral
Description liabilities liabilities liabilities instruments(a) pledged(b) Net amount
---------------- -------------- -------------- -------------- -----------
Equity swaps
Bank of America
Merrill Lynch 3,983,939 - 3,983,939 (3,983,939) - -
Morgan Stanley
& Co. LLC 3,372,143 - 3,372,143 (2,797,503) (574,640) -
Cowen Financial
Products, LLC 1,224,200 - 1,224,200 (1,224,200) - -
Jefferies & Co. 336,931 - 336,931 (119,868) (217,063) -
UBS AG 9,530 - 9,530 - (9,530) -
8,926,743 - 8,926,743 (8,125,510) (801,233) -
============== ============== ============== =============== ============== ===========
(a) Amounts related to master netting agreements (e.g. ISDA),
determined by the Group 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 Group 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 unaudited interim
consolidated 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 Group is subject to certain inherent risks arising from its
investing activities of selling securities short. The ultimate cost
to the Group to acquire these securities may exceed the liability
reflected in these unaudited interim consolidated financial
statements.
8. Risk factors
Some underlying investments may be deemed to be highly
speculative investments and are not intended as a complete
investment program. The Group is designed only for sophisticated
persons who are able to bear the economic risk of the loss of their
entire investment in the Group and who have a limited need for
liquidity in their investment. The following risks are applicable
to the Group:
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 Group's investments and/or on
the fair value of the Group's investments. Such events are beyond
the Group's control, and the likelihood they may occur and the
effect on the Group cannot be predicted. The Group intends to
mitigate market risk generally by investing in Medtech and Biotech
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 Group'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 Group 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 and medical technology
companies, which 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 Group's
financial condition.
Portfolio Companies may not successfully translate promising
scientific theory into a commercially viable business opportunity.
Further, the Portfolio 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 Medtech and
Biotech Companies. These companies may be more volatile and have
less experience and fewer resources than more established
companies.
Concentration risk
The Group may not make an investment or a series of investments
in a Portfolio Company that result in the Group's aggregate
investment in such Portfolio Company exceeding 15 per cent. of the
Group's gross assets, save for Rocket for which the limit is 25 per
cent. as stated in the Group's prospectus. Each of these investment
restrictions will be calculated as at the time of investment. As
such, it is possible that the Group'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 Group's portfolio of investments may also lack
diversification among Medtech and Biotech Companies and related
investments.
Concentration of credit risk
In the normal course of business, the Group maintains its cash
balances in financial institutions, which at times may exceed US
federal or UK insured limits, as applicable. The Group 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 Group 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 Group will attempt to
limit its transactions to counterparties which are established,
well capitalised and creditworthy.
Liquidity risk
Liquidity risk is the risk that the Group cannot meet its
financial commitments as they fall due. The Group'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 Group'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 Group 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 Group's
investment in such Portfolio Company, or any distributions received
from the Portfolio Company. Under its investment policy, the Group
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 period ended 30 June 2023 the Company did not issue
any Ordinary Shares:
31 December
30 June 2023 2022 30 June 2022
(unaudited) (audited) (unaudited)
------------------ ----------------- -----------------
Number of Number of Number of
Ordinary Shares Ordinary Shares Ordinary Shares
------------------ ----------------- -----------------
As at 1 January 212,389,138 212,389,138 212,389,138
Issuance of Ordinary
Shares - - -
------------------ ----------------- -----------------
As at 30 June/31 December 212,389,138 212,389,138 212,389,138
================== ================= =================
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.
On 1 December 2022, the Performance Allocation Share held by RTW
Venture Performance LP was surrendered in exchange for a New
Performance Allocation Share issued by the Subsidiary. The New
Performance Allocation Share issued by the Subsidiary has identical
terms to the original Performance Allocation Share issued by the
Company. From 1 December 2022, the Performance Allocation Amount is
now allocated at the Subsidiary level, and is presented in the
Group's financial statements as part of the Non-Controlling
Interest. The sole New Performance Allocation Share is held by RTW
Venture Performance LP. As at 30 June 2023, there were no
Performance Allocation Shares of the Company in issue (31 December
2022: nil) and one New Performance Allocation Share of the
Subsidiary in issue (31 December 2022: one).
New Performance Allocation Shares of the Subsidiary carry the
right to receive, and participate in, any dividends or other
distributions of the Subsidiary available for dividend or
distribution. New Performance Allocation Shares are not entitled to
receive notice of, to attend or to vote at general meetings of the
Company or the Subsidiary.
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 Group. 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 Group.
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 Group (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 period ended 30
June 2023 amounted to $2,115,840 (period ended 30 June 2022:
$1,889,306) of which $nil (31 December 2022: $nil) was outstanding
at the period end.
Performance Allocation
The Performance Allocation Share held by RTW Venture Performance
LP was surrendered in exchange for a New Performance Allocation
Share issued by the Subsidiary. The New Performance Allocation
Share issued by the Subsidiary has identical terms to the original
Performance Allocation Share issued by the Company.
In respect of each Performance Allocation Period, the
Performance Allocation Amount shall be allocated at the Subsidiary
level and disclosed on the Group's financial statements within the
Non-Controlling Interest, subject to the satisfaction of a hurdle
condition.
The Performance Allocation Amount relating to the Performance
Allocation Period, which is calculated solely at the Subsidiary, 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 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 entered into a letter
agreement dated 21 April 2020, pursuant to which the Performance
Allocation Share Class agreed to defer distributions of Ordinary
Shares that would otherwise be distributed to the Performance
Allocation Share Class no later than 30 business days after the
publication of the Group's audited annual consolidated financial
statements. Under that letter agreement, such Ordinary Shares shall
be distributed to the Performance Allocation Share Class at such
time or times as determined by the Boards of Directors of the
Group.
The Group will increase or decrease the amount owed to the
Performance Allocation Share Class based on its investment exposure
to the Group's performance had such Performance Ordinary Shares
been so issued. The Performance Allocation Amount for the period
ended 30 June 2023 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 gain of $2,039,956 in 2023 (31
December 2022: notional loss of $2,476,036), which is included in
Performance Allocation within the unaudited interim consolidated
statement of changes in net assets. There was no reallocation of
uncrystallized performance allocation back to Ordinary Shareholders
related to the Group's performance in the period.
Until the Group makes a distribution of Ordinary Shares to the
Performance Allocation Share Class, the Group will have an
unsecured discretionary obligation to make such distribution at
such time or times as the Board of Directors of the Group
determines. RTW Venture Performance LP has agreed to the deferral
of the distributions of the Subsidiary's Ordinary Shares in
connection with its own tax planning. The Group does not believe
that the deferral of such distributions to the Performance
Allocation Share Class 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 and will therefore receive a proportion of the
Performance Allocation Amount. For the period ended 30 June 2023,
the Board did not approve a cash distribution to the Performance
Allocation Share Class (period ended 30 June 2022: $nil). At the
period end the Performance Allocation Share Class of the Subsidiary
is reflected within the Non-Controlling Interest balance of
$23,884,424 (31 December 2022: $21,844,468).
The Investment Manager is also refunded any research costs
incurred on behalf of the Group.
One of the Directors of the Group, Stephanie Sirota, is also a
partner and the Chief Business Officer of the Investment
Manager.
As at 30 June 2023, the number of Ordinary Shares held by each
Director was as follows:
31 December
30 June 2023 2022
(unaudited) (audited)
--------------------- ------------------
Number of Ordinary Number of
Shares Ordinary Shares
--------------------- ------------------
William Simpson 200,000 200,000
Paul Le Page 128,000 128,000
William Scott 350,000 305,003
Stephanie Sirota 1,010,000 1,010,000
Roderick Wong is a major shareholder and a member of the
Investment Manager. Roderick Wong serves on the board of the
following investments: Rocket, Ji Xing, and Yarrow Biotechnology.
As at 30 June 2023, he held 29,693,872 Ordinary Shares in the Group
(13.93% of the Ordinary Shares in issue) (31 December 2022:
29,593,872, 13.93% of the Ordinary Shares in issue).
The total Directors' fees expense for the period amounted to
$87,798 (30 June 2022: $102,434) of which $50,219 was outstanding
at 30 June 2023 (31 December 2022: $48,281) and is included within
accrued expenses.
All of the Directors of the Company were also appointed as
directors of the Subsidiary on its incorporation on 23 November
2022.
11. Administrative services
Elysium Fund Management Limited ("EFML") serves as Administrator
to the Group, providing administration, corporate secretarial,
corporate governance and compliance services. Morgan Stanley Fund
Services USA LLC ("MSFS") serves as the Group's
Sub-Administrator.
During the period ended 30 June 2023, EFML and MSFS charged
administration fees of $82,054 and $117,860 respectively (period
ended 30 June 2022: EFML charged $49,173 and MSFS charged $110,940)
of which $24,765 and $61,929 (31 December 2022: EFML $6,484, MSFS
$91,099) was outstanding at 30 June 2023, and is included within
accrued expenses.
12. Financial highlights
Financial highlights for the six month period ended 30 June
2023, six month period ended 30 June 2022 and year ended 31
December 2022 are as follows:
30 June 30 June 31 December
2023 2022 2022
(unaudited) (unaudited) (audited)
-------------------- ------------------ --------------------------
Per Ordinary Share operating
performance
Net Asset Value, beginning of
period $ 1.54 $ 1.71 $ 1.71
Income from investments
Net investment income/(loss) (0.01) (0.01) (0.02)
Net realised and unrealised
gain/(loss)
on investments, derivatives and
foreign currency transactions 0.16 (0.45) (0.15)
Performance allocation (0.01) - -
-------------------- ------------------ --------------------------
Total from investment operations 0.14 (0.46) (0.17)
-------------------- ------------------ --------------------------
Net Asset Value, end of period $1.68 $ 1.25 $ 1.54
==================== ================== ==========================
Total return
Total return before Performance
Allocation 9.34 % (26.81)% (10.18)%
Performance Allocation (excluding
mark to market) - % - % - %
-------------------- ------------------ --------------------------
Total return after Performance
Allocation 9.34 % (26.81)% (10.18)%
==================== ================== ==========================
Ratios to average net assets*
Expenses 1.34 % 1.10 % 2.47%
Performance Allocation - % (2.14)% (1.44)%
-------------------- ------------------ --------------------------
Expenses and Performance Allocation 1.34 % (1.04)% 1.03%
==================== ================== ==========================
(0.79)
Net investment income/(loss) % (0.87)% (1.75)%
NAV total return for the period 9.34 % (26.81)% (10.18)%
* Ratios are not annualised.
Financial highlights are calculated for Ordinary Shares. An
individual shareholder's financial highlights may vary based on the
timing of capital share transactions. Net investment income/loss
does not reflect the effects of the Performance Allocation.
13. Subsequent events
Subsequent to the period end the Company bought back 500,000
Ordinary Shares at an average price of US$1.29 for a total cost of
US$643,750. At the point of signing these unaudited interim
consolidated financial statements, all 500,000 of the shares were
held in treasury.
These unaudited interim consolidated financial statements were
approved by the Board of Directors on 12 September 2023. Subsequent
events have been evaluated through this date.
Listing of portfolio company abbreviations used throughout this
report
Shorthand Company
Name Legal Company Name
Abdera Abdera Therapeutics, Inc.
----------------------------------------
Acelyrin Acelyrin, Inc.
----------------------------------------
Alcyone Alcyone Therapeutics, Inc.
----------------------------------------
Allurion Allurion Technologies, Inc.
----------------------------------------
Ancora Ancora Heart, Inc.
----------------------------------------
Apogee Apogee Therapeutics, Inc.
----------------------------------------
Artios Artios Pharma, Inc.
----------------------------------------
Artiva Artiva Biotherapeutics, Inc.
----------------------------------------
Athira Athira Pharma, Inc.
----------------------------------------
Avidity Avidity Biosciences, Inc.
----------------------------------------
Biomea Biomea Fusion, Inc.
----------------------------------------
C4 Therapeutics C4 Therapeutics, Inc.
----------------------------------------
Cargo Cargo Therapeutics, Inc.
----------------------------------------
CinCor CinCor Pharma, Inc.
----------------------------------------
Encoded Encoded Therapeutics, Inc.
----------------------------------------
Frequency Frequency Therapeutics, Inc.
----------------------------------------
GH Research GH Research PLC
----------------------------------------
Health Sciences Acquisition Corporation
HSAC2 2
----------------------------------------
Immunocore Immunocore Limited
----------------------------------------
Iteos iTeos Therapeutics, Inc.
----------------------------------------
Ji Xing Ji Xing Pharmaceuticals Limited
----------------------------------------
Kyverna Kyverna Therapeutics, Inc.
----------------------------------------
Landos Landos Biopharma, Inc.
----------------------------------------
Lenz Lenz Therapeutics
----------------------------------------
Lycia Lycia Therapeutics, Inc.
----------------------------------------
Magnolia Magnolida Medical Technologies, Inc.
----------------------------------------
Milestone Milestone Pharmaceuticals, Inc.
----------------------------------------
Mineralys Mineralys Therapeutics, LLC
----------------------------------------
Monte Rosa Monte Rosa Therapeutics, Inc.
----------------------------------------
Neurogastrx Neurogastrx, Inc.
----------------------------------------
Nikang Nikang Therapeutics, Inc.
----------------------------------------
Nuance Nuance Pharma
----------------------------------------
Numab Numab Therapeutics, Inc.
----------------------------------------
Orchestra Orchestra BioMed, Inc.
----------------------------------------
OriCell Therapeutics (Shangha) Co.,
OriCell Ltd
----------------------------------------
Prometheus Prometheus Biosciences, Inc.
----------------------------------------
Prometheus Labs Prometheus Laboratories, Inc.
----------------------------------------
Pulmonx Pulmonx Corporation
----------------------------------------
Pyxis Pyxis Oncology, Inc.
----------------------------------------
Rocket Rocket Pharmaceuticals, Inc.
----------------------------------------
RTW Royalty Holdings LLC (royalty deal
RTW Royalty 1 for Mavacamten)
----------------------------------------
RTW Royalty 2 RTW Fund 2 (royalty deal for Jelmyto)
----------------------------------------
Swift Health Swift Health, Inc.
----------------------------------------
Tarsus Tarsus, Pharmaceuticals, Inc.
----------------------------------------
Tenaya Tenaya Therapeutics, Inc.
----------------------------------------
Third Harmonic Third Harmonic Bio, Inc.
----------------------------------------
Tourmaline Tourmaline Bio, Inc.
----------------------------------------
Umoja Umoja Biopharma, Inc.
----------------------------------------
Ventyx Ventyx Biosciences, Inc.
----------------------------------------
Visus Visus Therapeutics, Inc.
----------------------------------------
Yarrow RTW Holdings LLC
----------------------------------------
Glossary of Defined Terms
"4010 Royalty Fund" refers to a private fund managed by RTW
Investments. The Group will invest in this fund via a feeder fund
called 4010 Royalty Offshore FNT Fund, LP;
"Adjusted Net Asset the Net Asset Value adjusted by deducting
Value" the unrealised gains and unrealised losses
in respect of private Portfolio Companies;
"Administrator" refers to Elysium Fund Management Limited;
"AIC" the Association of Investment Companies;
"AIFM" Alternative Investment Fund Manager;
"Annual Report" the Annual Report and Audited Consolidated
Financial Statements;
"Antibody" a large Y-shaped blood protein that can stick
to the surface of a virus, bacteria, or receptor
on a cell;
"AOC" Antibody-Oligonucleotide Conjugates, molecules
that combine structures of an antibody and
an oligo;
"Arca"
NYSE Arca Biotechnology Index (ticker BTK)
consisting of 30 companies that are a part
of the biotechnology industry and are primarily
involved in the use of biological processes
to develop products or provide services;
"Biotech" biotechnology subsector of healthcare;
"Calculation Date" 30 June or, if such date is not a business
day, the previous business day;
"Cardiovascular conditions affecting heart and vascular system;
disease"
"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.
"CNS" Central Nervous System
RTW Biotech Opportunities Ltd is a company
"the Company " incorporated in Guernsey as a closed-ended
Investment Company.
"Core portfolio"
includes private companies and public companies
that were initially added to the portfolio
as private investments;
"Danon Disease" a rare genetic heart condition in children,
predominantly boys;
"Directors " or
"Board" the directors of the Company and the Subsidiary
as at the date of this document and "Director"
means any one of them;
"Fanconi Anaemia" a rare genetic blood condition in young children;
"FCA " the Financial Conduct Authority;
"FDA" the United States Food and Drug Administration;
"FTC" the Federal Trade Commission;
"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;
"Group" the Company and the Subsidiary;
"HCM" or "Hypertrophic a cardiovascular disease characterised by
cardiomyopathy" an abnormally thick heart muscle;
"Independent Valuers" refers to Alvarez & Marsal Valuation Services,
LLC and Houlihan Lokey, Inc.;
"Investigational the FDA's investigational New Drug program
New Drug" or is the means by which a pharmaceutical company
"IND" obtains permission to start human clinical
trials;
"IPEV" the International Private Equity and Venture
Capital Valuation (IPEV) Guidelines set out
recommendations, intended to represent current
best practice, on the valuation of Private
Capital Investments:
"IPO" an initial public offering;
"IRA" Inflation Reduction Act of 2022;
"ISDA" International Swaps and Derivatives Association;
"Leukocyte adhesion a rare genetic disorder of immunodeficiency
deficiency" or "LAD-I" in young children;
"London Stock Exchange London Stock Exchange plc;
"
"LSE" London Stock Exchange's main market for listed
securities;
"Medtech" medical technology subsector of healthcare;
"Merck" Merck & Co., Inc.;
"MOC" Multiple on capital is the ratio of realised
and unrealised gains divided by the acquisition
cost of an investment;
"Myotonic Dystrophy" a genetic condition that affects muscle function;
"NASDAQ Biotech"
or "NBI" 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 the value of the assets of the Group less
" or "NAV" its liabilities, calculated in accordance
with the valuation guidelines established
by the Board;
"NewCo" a company incubated by RTW Investments, LP;
"Non-core portfolio investments made in public companies as a
assets" part of cash management strategy;
"Notional Ordinary Performance Ordinary Shares in which receipt
Shares" of such shares has been deferred;
"Official List the official list of the UK Listing Authority;
"
"Oligonucleotides" short DNA or RNA molecules that have a wide
or "Oligos" 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;
"Ordinary Shares" the Ordinary Shares of the Company;
"Other public portfolio" the portion of the portfolio selected to match,
on a pro-rated basis, the long investments
held in our private funds and designed to
mitigate the drag of setting aside cash for
future deployment into core positions.;
"Performance Allocation
Shares"
performance allocation shares of no-par value
in the capital of the Company (prior to the
1 December 2022 reorganisation), or performance
allocation shares of no-par value in the capital
"Performance Allocation of the Subsidiary (with effect from the 1
Period" December 2022 reorganisation);
each period ending on a Calculation Date and
beginning on the business day immediately
"PIPE" following the last Performance Allocation
Period in respect of which a Performance Allocation
has been allocated;
private investment in a public equity;
"Premium Segment" Premium Segment of the Main Market of the
London Stock Exchange;
"Prospectus" the prospectus of the Company, most recently
updated on 14 October 2019 and available on
the Company's website (www.rtwfunds.com/rtw-biotech-opportunities-ltd);
"Pyruvate Kinase a rare genetic disorder affecting red blood
Deficiency" or "PKD" cells;
pharmaceuticals consisting of a radioactive
"Radiopharmaceuticals" compound used in radiation therapy;
"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;
"RTW" RTW Investments, LP, also referred to as the
Investment Manager;
"Russell 2000 Biotech" a stock index of small cap biotechnology and
pharmaceutical companies;
"Small molecule" a compound that can regulate a biologic activity;
"SPAC" Special Purpose Acquisition Company;
"Sub-Administrator" Morg an S t an l ey Fun d Se r v ic e s USA
LLC;
RTW Biotech Opportunities Operating Ltd;
"Subsidiary"
"Tachycardia" a heart rhythm disorder;
"Type 1 Diabetes" a type of insulin resistance;
or "T1D"
"Total shareholder a measure of shareholders' investment in a
return" company with reference to movements in share
price and dividends paid over time;
"US GAAP" United States Generally Accepted Accounting
Principles;
"Uveal melanoma" a type of eye cancer;
"Valuation Committee" Valuation Committee of the Investment Manager;
"WACC"
weighted average cost of capital;
"XBI" the SPDR S&P Biotech ETF;
"XIRR" an internal rate of return calculated using
irregular time intervals.
Alternative Performance Measures
APM Definition Purpose Calculation
Available Cash held by the A measure of Cash and cash equivalents,
Cash Group's Bankers, the Due from brokers, Receivable
Prime Brokers and Group's from unsettled trades
ISDA liquidity, and other miscellaneous
counterparties. working current assets, less
capital Due to brokers, Payable
and for unsettled trades
investment and other miscellaneous
level. current liabilities
on the Statement of
Assets & Liabilities.
------------------- -------------- -----------------------------------------------------------------------
NAV per The Group's NAV A measure of The net assets attributable
Ordinary divided by the the to Ordinary Shares
Share number value of one on the statement of
of Ordinary Ordinary financial position
Shares. Share. (US$356.5 million)
divided by the number
of Ordinary Shares
in issue (212,389,138)
as at the calculation
date.
------------------- -------------- -----------------------------------------------------------------------
Price per The Company's A measure of Extracted from the
share closing the official list of the
share price on the supply and London Stock Exchange.
London Stock demand
Exchange for the
for a specified Company's
date. shares.
------------------- -------------- -----------------------------------------------------------------------
NAV Growth The percentage A key measure The quotient of the
increase/decrease of NAV per share at the
in the NAV per the success end of the period (US$1.68)
Ordinary of and the NAV per share
share during the the at the beginning of
reporting period. Investment the period (US$1.54)
Manager's minus one expressed
investment as a percentage.
strategy.
------------------- -------------- -----------------------------------------------------------------------
Share price The percentage A measure of The quotient of the
growth/Total increase(decrease) the price per share at
Shareholder in the price per return that the end of the period
Return share during the could (US$1.25) and the price
reporting period. have been per share at the beginning
obtained of the period (US$1.21)
by holding a minus 1.00 expressed
share as a percentage. The
over the measure excludes transaction
reporting costs.
period.
------------------- -------------- -----------------------------------------------------------------------
Share Price The amount by A key measure The quotient of the
Premium/ which of price per share at
(Discount) the Ordinary Share supply and the end of the period
price is demand (US$1.25) and the NAV
higher/lower for the per share at the end
than the NAV per Company's of the period (US$1.68)
Ordinary Share, shares. A minus one expressed
expressed as a premium as a percentage.
percentage implies
of the NAV per excess
ordinary demand versus
share. supply
and vice
versa.
------------------- -------------- -----------------------------------------------------------------------
Multiple on The multiple that A measure to The ratio between initial
Invested measures value evaluate capital invested in
Capital that performance a portfolio company
(MOIC or MOC) an investment has of and current (as of
generated. the realised 30 June 2023) value
and of the investment.
unrealised It is a gross metric
investments. and calculation is
performed before fees
and incentive.
------------------- -------------- -----------------------------------------------------------------------
Extended The percentage or A measure of The rate also expressed
Internal single rate of return as a percentage that
Rate of return which is used calculates the returns
Return when applied to when on the total investment
(XIRR) all transactions multiple made with increments
in a portfolio investments through a given period
company. have been (from initial investment
made date to 30 June 2023).
over time
into
a portfolio
company.
------------------- -------------- -----------------------------------------------------------------------
Ongoing The recurring A measure of Calculated in accordance
Charges costs the with the AIC methodology
Ratio that the Group has minimum gross detailed at the web
incurred during profit link below:
the period that the https://www.theaic.co.uk/sites/default/files/documents/AICOngoingCharg
excluding Group esCalculationMay12.pdf
performance fees needs to
and one-off legal produce
and professional to make a
fees, expressed positive
as a percentage return for
of the Group's shareholders.
average
NAV for the
period.
------------------- -------------- -----------------------------------------------------------------------
General Company Information
Structure: Closed-End Investment Dividend policy: To ISIN: GG00BKTRRM22
Fund be reinvested
Domicile: Guernsey Management fee: 1.25% SEDOLs: BKTRRM2 /
BNNXVW5
Listing: London Stock Exchange, Performance fee: 20% Tickers: RTW (USD)
Premium Segment with 8.0% hurdle and RTWG (GBP)
Launch date: 30 October Ongoing Charges Ratio: LEI: 549300Q7EXQQH6KF7Z84
2019 1.9%
Currencies: USD and Website: www.rtwfunds.com/rtw-biotech-opportunities-ltd
GBP
Investment Restrictions
No more than 15% of gross assets to be invested in other funds admitted
to listing by the FCA;
The aggregate investment in a portfolio company will not exceed 15%
of the Group's gross assets at the time of investment; and
No direct investments in
tobacco.
--------------------------------- ----------------------- --------------------------------------------------------
Schedule of Key Service Providers
Board of Directors Investment Manager and Distribution Partner
AIFM
William Simpson (Chair) RTW Investments, LP Cadarn Capital
Paul Le Page (Chair of 40 10th Avenue, Floor c/o WeWork
Audit Committee) 7
William Scott New York, NY 10014 1 Fore Street Avenue
Stephanie Sirota (Non-independent) United States of America London
EC2Y 9DT
Administrator and Company Guernsey Advocates to Independent Auditor
Secretary the Group
Elysium Fund Management Carey Olsen (Guernsey) KPMG Channel Islands
Limited LLP Limited
1st Floor, Royal Chambers Carey House Glategny Court
St Julian's Avenue Les Banques Glategny Esplanade
St Peter Port St Peter Port St Peter Port
Guernsey Guernsey Guernsey
GY1 3JX GY1 4BZ GY1 1WR
Sub-Administrator UK Legal Advisers to Principal Bankers
the Group
Morgan Stanley Fund Services Herbert Smith Freehills Barclays Bank PLC,
USA LLC LLP Guernsey Branch
2000 Westchester Avenue, Exchange House Le Marchant House
1(st) Floor
Purchase, NY 10577 Primrose Street Le Truchot
United States of America London St Peter Port
EC2A 2EG Guernsey
Corporate Brokers Registrar GY1 3BE
BofA Securities Link Market Services (Guernsey)
Limited
2 King Edward Street Mont Crevelt House Independent Valuers
London Bulwer Avenue Alvarez & Marsal Valuation
Services LLC
EC1A 1HQ St Sampson 600 Madison Avenue,
8th Floor
Guernsey New York, NY 10022
Numis Securities* GY2 4LH United States of America
45 Gresham Street
Houlihan Lokey, Inc.
London Public Relations 245 Park Avenue, 20(th)
Floor
EC2V 7BF Buchanan New York, NY 10167
107 Cheapside United States of America
London
EC2V 6DN
-------------------------------- ---------------------------
* On 5 April 2023, Numis Securities was appointed as a corporate
broker and financial adviser to the Group.
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END
IR NKBBDABKDCCD
(END) Dow Jones Newswires
September 13, 2023 02:00 ET (06:00 GMT)
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