LEI: 549300Q7EXQQH6KF7Z84
28 March 2024
RTW
Biotech Opportunities Ltd
Annual
Report and Audited Financial Statements for the Year Ended 31
December 2023
Substantial portfolio activity drove strong NAV
performance
RTW Biotech Opportunities
Ltd (the "Group", "RTW Bio" or the "Company"), a London Stock
Exchange-listed investment company focused on identifying
transformative assets with high growth potential across the life
sciences sector, is pleased to announce its Annual Results for the
year ended 31 December 2023.
RTW
Biotech Opportunities Ltd
|
Year-end reporting
period
(01/01/2023-31/12/2023)
|
Previous Year-end reporting
period (01/01/2022-31/12/2022)
|
Admission
(30/10/2019) to
31/12/2023
|
Ordinary
NAV
|
US$399.3
million
|
US$326.1
million
|
US$399.3
million
|
NAV per
Ordinary Share
|
US$1.90
|
US$1.54
|
US$1.90
|
NAV movement per Ordinary
Share
|
+23.5%
|
-10.2%
|
+82.3%
|
Price per
Ordinary Share
|
US$1.40
|
US$1.21
|
US$1.40
|
Share price return
(i)
|
+16.0%
|
-32.0%
|
+34.9%
|
Benchmark returns
(ii)
|
Russell
2000 Biotech
|
+10.6%
|
-31.3%
|
+4.8%
|
Nasdaq
Biotech
|
+3.7%
|
-10.9%
|
+29.4%
|
Portfolio Highlights
|
•
|
During the year ended 31 December
2023, 2 portfolio companies were acquired:
|
|
○
|
Cincor Pharma by AstraZeneca for a
206% premium (including contingent value rights) to the prior
closing price; and
|
|
○
|
Prometheus Biosciences by Merck
for a 75% premium
|
•
|
During the year to 31 December
2023, 6 portfolio companies went public:
|
|
○
|
Mineralys Therapeutics, Acelyrin
Inc., Apogee Therapeutics, and Cargo Therapeutics, completed an initial public offering
(IPO)
|
|
○
|
The average step-up from prior
private holding value to IPO price was 46%
|
|
○
|
Orchestra BioMed went public
through a merger with RTW's SPAC; Tourmaline Bio went public
through a reverse merger
|
•
|
The Group added 7 new
companies to its core portfolio in 2023;
|
|
○
|
Oricell Therapeutics, Cargo
Therapeutics, Allurion Technologies,
Abdera Therapeutics, RTW Royalty Fund, Tourmaline Bio and Basking
Biosciences
|
|
○
|
While exiting 7 core portfolio
companies excluding takeouts: Monte Rosa
Therapeutics, Ventyx Biosciences, Tenaya Therapeutics, Third
Harmonic Bio, C4 Therapeutics, Acelyrin Inc. and Mineralys
Therapeutics
|
•
|
As of 31 December 2023, the Group
held 36 core portfolio companies (2022: 39)
|
|
○
|
12 of which are publicly-listed
(2022: 14)
|
|
○
|
24 of which are privately-held
(2022: 25)
|
•
|
As of 31 December 2023,
66.7% of NAV was
invested in core portfolio companies (2022: 70.9%)
|
•
|
61% (2022: 68%)
of the core portfolio companies' pipeline products are in clinical
stage programmes, and 22% have commercial products (2022:
14%)
|
Post Period-End Highlights
|
•
|
On 9 February, Kyverna
Therapeutics successfully listed on the Nasdaq Global Select
Market, with an upsized IPO, raising $319 million. On the first day
of trading, Kyverna's share price traded up by 36.4% to close at
$30.00 per share. As at 31 December 2023, Kyverna represented 0.45%
of the Company's NAV.
|
•
|
On 13 February, the Company
announced the completion of the recommended all-share acquisition
of Arix Bioscience plc, effected through a scheme of reconstruction
and the voluntary winding-up of Arix under section 110 of the
Insolvency Act 1986.
|
•
|
Further, on 20 February, the
Company issued an unaudited, indicative and estimated pro forma NAV
attributable to ordinary shareholders of the Company as at the
closing of the Arix transaction on 12 February 2024 of US$644.2
million, equivalent to US$1.88 per Ordinary Share.
|
Roderick Wong, MD, Managing
Partner and Chief Investment Officer of RTW Investments LP, the
"Investment Manager" commented:
"We are delighted to report
another strong year for the Group, with a NAV return of +23.5% for
2023, outperforming both the Russell 2000 Biotechnology Index and
the Nasdaq Biotech Index, which returned
+10.6% and +3.7%, respectively.
The NAV per Ordinary Share has grown +82.3% since
our IPO in 2019, from $1.04 to $1.90 as of 31 December
2023.
"The Company's share price has not
kept pace with the strong NAV performance, however, with continued
NAV outperformance in comparison to the market and peers, and with
the sector's fortunes having turned markedly in the fourth quarter
of 2023, we expect the discount to narrow.
"NAV performance in 2023 was
driven by the core public portfolio with a +24.7% contribution to
the NAV. Prometheus Biosciences (+12.6% of NAV) and Rocket
Pharmaceuticals (+8.4% of NAV) accounted for the majority of the
gains. Prometheus was acquired by Merck for US$200.00 per share in
cash, a 75% premium to the prior closing price, whilst Rocket's
share price bounced back strongly this year as it continued to
progress several of its clinical programmes.
"The Group's unique exposure to
companies created by RTW Investments was significantly additive
this year. Rocket's continued clinical progression was rewarded in
2023 after a challenging couple of years for the shares of gene
therapy companies. JIXING had a transformational year by, most
notably, completing the first round of its Series D financing,
which was co-led by RTW and Bayer AG, with whom it also agreed a
strategic partnership.
"During the year, four of our
portfolio companies completed successful IPOs. Most notably, Cargo
Therapeutics (2.0% of NAV) listed on the Nasdaq Global Select
Market in November. The Group co-led its Series A financing round
in March 2023 and anchored its IPO in November. Since listing, the
shares have performed very well, rising by approximately
70%.
"There was a sharp reversal in the
market performance in the final two months of 2023, as interest
rate expectations inflected and a flurry of takeouts helped buoy
sentiment in the biotech sector. The sector's vigorous move off the
bottom is indicative of a re-evaluation after several years of fund
flows out of the sector. With the fundamentals behind M&A
remaining unchanged and a shrinking pool of high-quality assets to
acquire, prospects for the sector's continued recovery look
positive. Financing conditions in the sector may remain tighter
than normal, however, and this environment enables RTW to flex the
transactional capabilities it has built over the years to help
support exciting companies and capture investment opportunities.
With the acquisition of Arix Bioscience recently completed, the
resultant increase in scale should prove well-timed to take
advantage.
For Further Information
RTW Investments, LP
|
+44 (0)20 7959
6361
|
Woody Stileman, Managing
Director
Krisha McCune, Director, Investor
Relations
|
|
Elysium Fund Management Limited
|
+44 (0)14 8181 0100
|
Joanna Duquemin Nicolle, Chief
Executive Officer
Sadie Morrison, Managing
Director
|
|
Deutsche Numis (Joint Corporate
Broker)
|
+44 (0)20 7260 1000
|
Freddie Barnfield
Nathan Brown
Euan Brown
|
|
BofA Securities (Joint Corporate
Broker)
|
+44 (0)20 7628 1000
|
Edward Peel
Alex Penney
|
|
Buchanan (PR & Communications
Adviser)
|
+44 (0)20
7466 5107
|
Charles Ryland
Henry Wilson
George Beale
|
|
Cadarn Capital (Distribution & IR
Partner)
|
+44 (0)73 6888 3211
|
David Harris
|
|
Morgan Stanley Fund Services USA LLC
|
+1 (914) 225 8885
|
RTW Biotech Opportunities at
a Glance
Our
Purpose: Transforming the lives of
millions
RTW Bio'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.
What we do goes beyond short term financial
gain
We invest for the long term,
powering the next generation of breakthroughs in science and
medicine to help transform lives. That's what drives us - the
greater impact we can help create.
Our
global reach
RTW headquarters (US)
RTW global offices (London and Shanghai)
Netherlands: Argenx
Germany, Spain, Switzerland and the
Nordic countries: Rocket Pharmaceuticals, Numab
Ireland: Avadel, GH
Research
Israel: UroGen Pharma
China: JIXING, Nuance,
Oricell
UK: Immunocore, Artios
THE US MARKET
We have a core focus on the US, with
deep coverage of opportunities from academia to mid-size public
companies. We apply a full range of deal execution and company
building capabilities.
THE UK & EUROPEAN
MARKETS
We have identified and invested in
exceptional British and European scientific assets. We look to
contribute to these biotech ecosystems by engaging in creation or
ongoing development of new companies around promising early-stage
assets by partnering with uni-versities and in-licensing academic
programmes, and by providing financial and human capital to
entrepreneurs to advance scientific programmes.
What this means for
investors:
•
|
access to cutting edge research labs
and academic knowledge
|
•
|
access to greater breadth of science
and opportunity
|
•
|
participation in value creation in
local biotech ecosystems
|
THE CHINA MARKET
We are capturing commercialisation
opportunities in China by investing across the venture capital life
cycle: from new company formation to IPO, to bringing successful,
innovative drugs to Chinese patients.
What this means for
investors:
•
|
access to a budding biotech market,
innovation and expertise
|
•
|
an opportunity to be established in
a market with the scope for significant growth
|
Members of the RTW team
2023: 70
2022: 76
The
RTW culture
RTW's priority is unlocking value by
advancing early-stage scientific development to deliver innovative
therapies to patients in need.
At the core of our business is a set
of guiding principles.
COLLABORATION
Leveraging collective
genius
PROGRESS
From research, to innovation, to
reality
HUMILITY
The hunger to learn and
improve
TENACITY
Finding pathways to success while
overcoming obstacles
RIGOUR
Poring over the data
LEADERSHIP
The courage to shape a better
future
The RTW
Difference
RTW connects data,
experience, and talent to bring opportunities into
focus
We identify transformative assets
with growth potential across the life sciences sector. Our approach
is driven by deep scientific expertise with a long-term investment
horizon.
RTW's COMPETITIVE ADVANTAGES
DEEP RESEARCH
We dive into the data to spot
opportunities that others miss. Opportunities, potential, errors,
and risks are all easily overlooked, so we analyse and scrutinise,
applying a unique, repeatable research approach, fine-tuned over
years of successful life sciences investment. We combine the best
data, technology, and scientific insight to unearth
opportunity.
SELECTIVITY
We cast a wide net, but only assets
with high probability of becoming commercially viable products and
those with the greatest potential to revolutionise treatment
outcomes for patients pass the test. We choose partners who care
less about quick wins and more about lasting change.
KNOWLEDGE
We are doctors, academics, and drug
developers; venture capitalists and investment bankers; lawyers,
data scientists and company operators. We work as a team, applying
collective expertise to spark ideas, solve problems, avoid
pitfalls, and build successful companies.
FLEXIBLE SOLUTIONS
Drug development rarely follows a
linear path. Whatever the twists and turns, we have the skills in
house to solve problems and accelerate progress, from providing
capital and infrastructure to advance promising academic
programmes, to forming new companies and taking those companies
public. We carve new pathways, allowing scientists and
entrepreneurs to bring life-changing therapies to
patients.
PEOPLE
Healthcare innovation is hard work,
and easy wins are few and far between. Those who succeed don't lose
sight of why it matters. These are the people we love working with.
We come from many different backgrounds but are united in a mission
to improve people's lives.
LONG-TERM PARTNERS
Bringing
new therapies to patients is a long journey that comes with both
thrilling triumphs and inevitable setbacks. We are hands-on and
fully invested in the success of our partners because their success
is our success. We choose partners who are as passionate about
revolutionising medicine as we are.
Investment Objective and
Investment Policy
Applying deep scientific
expertise with a long-term investment horizon
Investment
Objective
The Group seeks to achieve
positive absolute performance and superior long-term capital
appreciation, with a focus on forming, building, and supporting
world-class life sciences, biopharmaceutical and medical technology
companies. It intends to create a diversified portfolio of
investments across a range of businesses, each pursuing the
development of superior pharmacological or medical therapeutic
assets to enhance the quality of life and/or extend patient
life.
Investment
Policy
The Group seeks to achieve its
investment objective by leveraging the Investment Manager's
data-driven proprietary pipeline of innovative assets to invest in
life sciences companies:
•
|
across various geographies
(globally);
|
•
|
across various therapeutic
categories and product types (including but not limited to genetic
medicines, biologics, traditional modalities such as small molecule
pharmaceuticals and antibodies, and medical devices);
|
•
|
in both a passive and active
capacity and intends, from time to time, to take a controlling or
majority position with active involvement in a Portfolio Company to
assist and influence its management. In those situations, it is
expected that the Investment Manager's senior executives may serve
in temporary executive capacities; and
|
•
|
by participation in opportunities
created by the Investment Manager's formation of companies de novo
when a significant unmet need has been identified and the Group is
able to build a differentiated, sustainable business to address
said unmet need.
|
The Group expects to invest
approximately 80 per cent of its gross assets in the
biopharmaceutical sector and approximately 20 per cent of its gross
assets in the medical technology sector.
The Group's portfolio will reflect
its view of the most compelling opportunities available to the
Investment Manager, with an initial investment in each privately
held Portfolio Company ("Private
Portfolio Company") expected to start in a low single digit
per cent of the Group's gross assets and grow over time, as the
Group may, if applicable, participate in follow-on investments
and/or continue holding the Portfolio Company as it becomes
publicly-traded. It is intended certain long-term holds will
increase in size and may represent between five and ten per cent or
greater of the Group's gross assets.
The Group anticipates deploying
one-third of its capital designated for core private investments
toward early-stage and de novo company formations (including newly
formed entities around early-stage academic licenses and commercial
stage corporate assets) and two-thirds of its capital in mid- to
late-stage ventures.
The Company may choose to invest
in Portfolio Companies listed on a public stock exchange
("Public Portfolio
Companies") depending on market conditions and the
availability of appropriate investment opportunities. Equally, as
part of a full-life cycle investment approach, it is expected that
Private Portfolio Companies may later become Public Portfolio
Companies. Monetisation events such as IPOs and reverse mergers
will not necessarily represent exit opportunities for the Group.
Rather, the Group may decide to retain all or some of its
investment in such Portfolio Companies or the acquiring Company
where they meet the standard of diligence set by the Investment
Manager. The Group is not required to allocate a specific
percentage of its assets to Private Portfolio Companies or Public
Portfolio Companies.
The Group also intends, where
appropriate, to invest further in its Portfolio Companies,
supporting existing investments throughout their lifecycle. The
Group may divest its interest in Portfolio Companies in part or in
full when the risk-reward trade-off is deemed to be less
favourable.
From time to time, the Group may
seek opportunities to optimise investing conditions, and to allow
for such circumstances, the Group will have the ability to hedge or
enter into securities or derivative structures in order to enhance
the risk-reward position of the portfolio and its underlying
securities.
Investment
restrictions
The Group will be subject to the
following restrictions when making investments in accordance with
its investment policy:
•
|
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 (or, in the case of Rocket
Pharmaceuticals, Inc., 25 per cent) of the Group's gross assets at
the time of each such investment;
|
•
|
the Group may not make any direct
investment in any tobacco company and not knowingly make or
continue to hold any Public Portfolio Company investments that
would result in exposure to tobacco companies exceeding one per
cent of the aggregate value of the Public Portfolio Companies from
time to time.
|
Each of these investment
restrictions will be calculated as at the time of investment. In
the event that any of the above limits are breached at any point
after the relevant investment has been made (for instance, upon
successful realisation of economic and/or scientific milestones or
as a result of any movements in the value of the Group's gross
assets), there will be no requirement to sell or otherwise dispose
of any investment (in whole or in part).
Leverage and borrowing
limits
The Group may use conservative
leverage in the future in order to enhance returns and maximise the
growth of its portfolio, as well as for working capital purposes,
up to a maximum of 50 per cent of the Group's net asset value at
the time of incurrence. Any other decision to incur indebtedness
may be taken by the Investment Manager for reasons and within such
parameters as are approved by the Board. There are no limitations
placed on indebtedness incurred in the Group's underlying
investments.
Capital
deployment
The Group anticipates that it will
initially, upon Admission and upon any subsequent capital raises,
invest up to 80% of available cash in Public Portfolio Companies
that have been diligenced by the Investment Manager and represent
holdings in other portfolios managed by the Investment Manager,
subsequently rebalancing the portfolio between Public Portfolio
Companies and Private Portfolio Companies as opportunities to
invest in the latter become available.
Cash
management
The Group's uninvested capital may
be invested in cash instruments or bank deposits pending investment
in Portfolio Companies or used for working capital
purposes.
Hedging
As described above, the Group may
seek opportunities to optimise investing conditions, and to allow
for such circumstances, there will be no limitations placed on the
Group's ability to hedge or enter into securities or derivative
structures in order to enhance the risk-reward position of the
portfolio and its underlying securities.
On an ongoing basis, 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, but may enter into
hedging transactions to hedge individual positions or reduce
volatility related to specific risks such as fluctuations in
foreign exchange rates, interest rates, and other market
forces.
RTW Biotech Opportunities
Ltd's acquisition of Arix Bioscience plc ("Arix")
We are delighted to confirm the
completion of the all-share acquisition by RTW Bio of Arix's
assets, post year end on 13 February 2024. The transaction was
announced on 1 November 2023 and was effected through a scheme of
reconstruction and the voluntary winding-up of Arix under section
110 of the Insolvency Act 1986. We welcome Arix shareholders to the
RTW Bio shareholder register.
The RTW Bio board believes that
the combination has compelling strategic rationale, primarily by
adding capital and scale to our best-in-class platform. This
stronger foundation is expected to generate future growth
opportunities for shareholders. The
combination delivered a meaningful and immediate increase in NAV,
making RTW Bio the second largest full
life-cycle biotech investment company or trust listed on the London
Stock Exchange and the fifth largest listed healthcare company or
trust. Arix's uniquely complementary
portfolio adds diversification benefits, while the significant
proportion of liquid assets provides investment firepower at a
compelling time to be deploying capital
into the life science sector.
The enlarged market
capitalisation, which increased from US$294.9 million as of 31
December 2023 to US$529.9 million following completion, should
improve secondary market liquidity for trading in RTW Bio shares.
RTW Bio may also in the future qualify for inclusion in the FTSE
250, which could further improve the secondary market liquidity of
its shares. The increased scale is expected to deliver a more
efficient cost base, benefiting from the infrastructure of RTW and
a simple, single management fee across a larger asset base. In all,
these benefits could lead to a meaningful re-rating uplift
opportunity for RTW Bio in the medium term.
Acquiring Arix's complementary
life science assets is a step-change accelerator to our vision for
RTW Bio to be a UK-listed fund with meaningful scale that invests
in innovative life science businesses in the UK and globally. We
believe that the scale that this transaction creates should prove
well-timed given the unprecedented life science market conditions,
the accelerating medical innovation, and industry trends that play
into RTW's core strengths. This transaction creates value and
opportunity for both RTW Bio and Arix shareholders and positions
all shareholders for future upside.
Chair's Statement
Investing in tomorrow's
most promising science
I am pleased to report that the
Investment Manager ("RTW") has, once again, achieved an excellent
performance. The Group's NAV returned +23.5% per Ordinary Share
over the twelve months to 31 December 2023, materially
outperforming both the Russell 2000 Biotechnology Index (RGUSHSBT)
and the Nasdaq Biotech Index (NBI) which returned +10.6% and +3.7%,
respectively. The Group's NAV has also outperformed its biotech
benchmarks over three years, much of which was spent in the second
worst bear market in the sector's history.
Since admission in October 2019, the
Group's NAV has significantly outperformed its biotech benchmarks
returning +82.3% versus +4.8% and +29.4% for the Russell 2000
Biotechnology Index and the NBI, respectively. However, the Group's
share price has lagged NAV growth with a +34.9% 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 marginally last year,
albeit less than its largest pre-IPO investing peers. This relative
narrowing is likely reflective of the Group's peer-leading
performance over most time periods and shareholder activity in the
year which has significantly raised the Group's profile to
investors.
2023 Overview and 2024 Outlook
There was an abundance of positive
activity in the portfolio in 2023 despite a more subdued
environment (until the fourth quarter). The Group was able to
benefit from RTW's preferred position in the eyes of biotech
companies and a strong balance sheet to execute both traditional
and creative deals. The Group made seven new private investments
(versus a total of three in 2022), had two take-outs, four IPOs, a
SPAC merger, a reverse merger, and struck two strategic financing
deals. At the end of the period, the Group had thirty-six core
portfolio holdings, a small decrease from thirty-nine last year.
The core portfolio represents 67% of NAV, compared with 71% 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) was reduced to 20% as available cash was increased in
preparation for the purchase of a stake in Arix Bioscience, which
subsequently occurred soon after year end.
The Prometheus Biosciences sale was
the stand-out event of the year. Prometheus was the Group's largest
holding when it was acquired by Merck at a 75% premium to the prior
closing price in the first half. 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
full life cycle investment strategy at work.
The Group's unique exposure to
companies created by RTW was significantly additive this year.
Rocket's continued clinical progression was rewarded in 2023 after
a challenging couple of years for the shares of gene therapy
companies. The company now looks well set to transition to a
commercial stage company in 2024, a significant inflection point.
JIXING experienced two transformational events in the last two
months of the year. Firstly, they completed the first round of
their Series D financing, which was co-led by RTW and Bayer AG,
with whom they also agreed a strategic partnership. Secondly,
JIXING-related company, Cytokinetics, announced the results of its
pivotal Phase 3 clinical trial of Aficamten in patients with
symptomatic obstructive hypertrophic cardiomyopathy. JIXING has an
exclusive license for Aficamten for development and
commercialisation in Greater China. The data are viewed as better
than the incumbent approved drug owned by Bristol Myers called
mavacamten in a drug class that is expected to generate billions of
revenues. JIXING is expected to communicate with the relevant
regulatory authorities for Aficamten's new drug application as soon
as possible with approval expected in the first half of
2025.
From a market perspective, the
Federal Reserve's interest rate pivot and a flurry of takeouts
helped the biotech sector avert what would have been an historic
three down years in a row, with a sharp rally in the last two
months of the year. The sector's vigorous
move off the bottom is indicative of a re-evaluation after several
years of fund flows out of the sector.
With the fundamentals behind M&A remaining unchanged and a
shrinking pool of marquee assets to acquire, prospects for the
sector's continued recovery look promising. Financing conditions in
the sector may remain tighter than normal, however, and this
environment enables RTW to flex the transactional capabilities it
has built over the years to help support exciting companies and
capture investment opportunities.
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, with regular supporting
opinions from two independent third-party valuation firms. The
validation comes when private investments become public companies.
With four IPOs in 2023, we have a reasonable sample to assess the
private portfolio's fair value. With an average step-up from prior
private holding value to IPO price of 46%, we emphasise our
confidence in the Group's portfolio.
The
public portfolio is well placed too with the sector's positive
momentum continuing into 2024. In January and February alone, there
were five IPOs versus twelve for the whole of last year. The sector
indices have started the year well, the smaller cap Russell 2000
Biotech Index in particular. To the end of February, it has
returned +12.0% vs the Nasdaq index's +7.2% and
6.8% for the S&P500.. For RTW
Bio the completion of the Arix Bioscience acquisition on the
12th of February, brings fresh capital and scale at an
opportune time. We reiterate our confidence in the outlook for
2024.
Shareholder Activity and Arix Bioscience
Acquisition
Despite these many positives, the
Company's share price traded at a discount to NAV this year
alongside many of our investment company peers, especially those
that provide growth financing to private companies. In order to
help address this and raise the profile of the Company, we
undertook several significant changes and initiatives throughout
the year. To help generate new demand, we appointed Numis
Securities (now Deutsche Numis) as joint corporate broker and
Cadarn Capital to manage fund distribution and investor relations,
both in April 2023. This followed the Company's rebranding and new
website launch in early 2023. In the second half of the year, we
changed the Company's name from RTW Venture Fund Limited to RTW
Biotech Opportunities Ltd to better reflect the full life cycle
nature of the investment strategy.
We introduced a buyback programme
using the proceeds from the sale of Prometheus Biosciences,
believing it to be a good allocation of capital as the discount to
NAV per Ordinary Share at which the Company's shares were then
trading materially undervalued the Company and its
portfolio.
The most transformational event
came in early November as the Company announced its intention to
acquire the assets of Arix Bioscience via a recommended all-share
offer through a scheme of reconstruction. The scheme was
conditional upon regulatory and Arix shareholder approval, both of
which have since been obtained. We believe that combining
the assets of Arix with the Company's enhances
the Company's position as a leading UK-listed life sciences
fund by adding significant scale. Shareholders in the combined
entity will be in a stronger position to benefit from potential
future value creation through NAV growth, improved secondary market
liquidity, and a potential re-rating uplift of the combined
company's shares. Following this increase
in scale, the Board believes it an appropriate time to recruit an
additional independent director with relevant industry expertise
and is in the process of reviewing potential candidates.
Later in November, the
Company hosted its first London Capital Markets Day which featured
presentations from the senior RTW Investments team members, panels
of eminent guests from academia, HM Government and industry, and
was a great success with over one hundred professional investors
and analysts attending, demonstrating, we believe, that the efforts
undertaken so far to raise the Company's profile are working, and a
solid foundation for a re-rating is in place.
2024 AGM
The Company will hold its Annual
General Meeting on 16 May 2024 to review the annual results and
provide portfolio updates. We would like to dedicate a part of the
meeting to address questions from our shareholders. At the present
time, we anticipate holding it at Royal Chambers, St Julian's
Avenue, St Peter Port, Guernsey. We encourage our shareholders to
share questions at the following email, and we will endeavour to
answer as many as we can:
biotechopportunities@rtwfunds.com.
On behalf of the Board, I would like
to express my gratitude for your continued support as well as
extend a warm welcome to new shareholders from Arix. Wishing you
all the best for 2024.
William Simpson
Chair of the Board of
Directors
RTW Biotech Opportunities
Ltd
27 March 2024
Report of the Investment
Manager
A full life cycle approach
to innovative biotech investing
Executive
summary
Since its 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$399.3 million as of 31 December 2023. The NAV per Ordinary Share
has grown 82.3% from $1.04 to $1.90 as of 31 December 2023.
Disappointingly, the share price has not kept pace with NAV,
returning +34.9% in the same period, as the shares fell to a
discount in early 2022, as did many listed investment trusts in
most sectors, and have remained there since, despite a strong NAV
per Ordinary Share performance. In 2023, the NAV per Ordinary Share
returned +23.5% while the share price returned +16.0%. With
continued NAV outperformance versus the market and peers, and with
the sector's fortunes having turned markedly in the fourth quarter
of 2023, we would expect the discount to narrow.
Table 1. Financial Highlights
RTW Biotech Opportunities
Ltd
|
Year end reporting
period
(01/01/2023-31/12/2023)
|
Previous year end reporting
period (01/01/2022-31/12/2022)
|
Admission
(30/10/2019-31/12/2023
|
Ordinary
NAV - start of period
|
US$326.1
million
|
US$363.0
million
|
US$168.0
million
|
Ordinary
NAV - end of period
|
US$399.3
million
|
US$326.1
million
|
US$399.3
million
|
NAV per
Ordinary Share - start of period
|
US$1.54
|
US$1.71
|
US$1.04
|
NAV per
Ordinary Share - end of period
|
US$1.90
|
US$1.54
|
US$1.90
|
NAV movement per Ordinary
Share
|
+23.5%
|
-10.2%
|
+82.3%
|
Price per
Ordinary Share - start of period
|
US$1.21
|
US$1.78
|
US$1.04
|
Price per
Ordinary Share - end of period
|
US$1.40
|
US$1.21
|
US$1.40
|
Share price return
(i)
|
+16.0%
|
-32.0%
|
+34.9%
|
Benchmark returns
(ii)
|
Russell
2000 Biotech
|
+10.6%
|
-31.3%
|
+4.8%
|
Nasdaq
Biotech
|
+3.7%
|
-10.9%
|
+29.4%
|
(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 2023 was
overwhelmingly driven by the core public portfolio with a +24.7%
contribution to the NAV. This is how the strategy is designed to
function. As full life cycle investors our belief is that in our
sector the vast majority of value creation happens post IPO, so we
leverage the conviction gained working with a company when it is
private to help us decide which are the best to keep post IPO, so
that we can participate in that value creation. Prometheus
Biosciences (+12.6%) and Rocket Pharmaceuticals (+8.4%) accounted
for the majority of the gain. Prometheus was acquired by Merck for
US$200.00 per share in cash, a 75% premium to the prior closing
price. Rocket's share price bounced back strongly in 2023 as it
continued to progress several of its clinical programmes. Most
significantly, they reached an agreement with the FDA on a very
efficient path to registration for its Danon disease gene therapy,
which received RMAT designation in February based on positive
safety and efficacy data from the Phase 1 trial. Cargo Therapeutics
(+2.0%) also deserves recognition. It is one of our most exciting
new investments. We co-led its Series A financing round in March
2023 and anchored its IPO in November. The shares have subsequently
performed very well in the public markets. Avidity Biosciences was
the only material detractor (-3.2%) having reported disappointing
clinical data in myotonic dystrophy, which is a challenging disease
to target. We remain invested in Avidity, believing that the next
two muscle diseases they are targeting may be easier to
address.
The core private portfolio
contributed +1.5% to NAV. Including royalty investments, the
contribution was +3.2%. JIXING was the largest contributor (+1.7%)
having initiated its Series D financing round in November, which
was co-led by RTW and Bayer AG with whom JIXING also agreed a
strategic partnership agreement. Within the royalty segment, RTW
Royalty 2 (Urogen) contributed 1.0% and the investment in RTW
Royalty Fund contributed +0.6%. Neurogastrx (-0.5%) was the only
material detractor in the core private portfolio having suffered a
clinical setback in the first half of the 2023 and was in the
process of winding down. The "other public" segment of the
portfolio contributed -0.7% to NAV.
Since admission, the Group has had
fifty-four core positions. On 31 December 2023, the average
multiple on invested capital (MOIC) of these positions (excluding
Rocket Pharmaceuticals, the only core position to be added to the
portfolio as a publicly traded name) stood at 1.7x. Within that,
the average MOIC of the eighteen exited positions is 2.7x.
Twenty-nine of the positions (i.e. 54%) have generated a positive
return with an average MOIC (for the privates) of 2.7x, while
twenty-four positions have generated a negative return with an
average MOIC of 0.6x, and one position remains valued at cost.
These ratios are roughly in line with our expectations over the
medium to long term, especially when considering nearly two and
half years of the four since our admission have been in a sector
bear market that was particularly punishing for early-stage
companies.
Table 2. Performance of
Rocket Pharmaceuticals from admission to 31 December
2023
|
Share price at
admission
|
Share price at 31 December
2023
|
Share price return
%
|
Rocket Pharmaceuticals
|
US$14.00
|
US$29.97
|
114%
|
Figure 1. Performance drivers as of 31 December 2023 -
Contributions to Ordinary NAV (%)
*Exited position
Key updates for Core
Portfolio Companies during 2023:
Clinical & Commercial
•
|
In January, Rocket Pharmaceuticals announced the addition
of a new cardiac gene therapy programme, 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 Myotonic Dystrophy).
|
•
|
In May, Rocket Pharmaceuticals posted several
positive data updates from their PKD, Fanconi Anaemia, LAD-I and
Danon Disease programmes 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 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.
|
•
|
In September, Rocket Pharmaceuticals successfully
aligned with the FDA on its registrational trial design for its
Danon Disease gene therapy programme. This is a significant
milestone for Rocket and for patients with Danon Disease, as it
brings them closer to a potential therapy for a uniformly fatal,
inherited disease.
|
•
|
In September, Orchestra BioMed was granted FDA
approval to initiate a global pivotal study for BackBeat CNT™ for
the treatment of hypertension in pacemaker patients.
|
•
|
In December, Milestone Pharmaceuticals received a
refusal letter from the FDA to file for a New Drug Application for
Etripamil for the treatment of PSVT. The FDA did not express
concerns about the nature or severity of adverse events. Rather,
the FDA determined that the NDA was not sufficiently complete to
permit substantive review and requested clarification about the
time of data recorded for adverse events in Phase 3 trials.
Milestone has since met with the FDA, with the
latter indicating that the timing of adverse events had minimal
impact on the overall characterisation of Etripamil's safety
profile. To align with the FDA, Milestone will restructure certain
data sets, reformat certain data files and resubmit the NDA.
Milestone expects that this will address the FDA's letter. It
expects a standard review period following resubmission which is
planned for Q2 2024.
|
Financing
•
|
In January, CinCor Pharma announced an agreement to
be acquired by AstraZeneca for US$1.3 billion cash up front. CinCor
shareholders also received a non-tradable contingent value right,
payable upon receipt of FDA approval. Combined, these payments
represented a transaction value of approximately US$1.8 billion and
a 206% premium.
|
•
|
In January, Orchestra BioMed announced the closing
of its merger with RTW's Health
Sciences Acquisition 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, procedureless gastric pill balloon for weight loss.
Earlier that month the company announced its intention to go public
via a business combination that closed in August and included a
PIPE led by RTW Investments and a non-dilutive, synthetic royalty
financing.
|
•
|
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 had 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. The acquisition was completed in
June.
|
•
|
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 July, Apogee Therapeutics went public through
an upsized IPO. It raised US$300 million at $17 per share. The
shares started trading on Nasdaq under the ticker
"APGE".
|
•
|
In September, the Group
participated in the Series D financing of Beta Bionics, a medical technology
company focused on diabetes management. The company raised US$100
million to advance diabetes technology with its iLet Bionic
Pancreas.
|
•
|
In October, Cargo Therapeutics went public through
an IPO raising US$281m. The shares started trading on Nasdaq under
the ticker "CRGX".
|
•
|
In October, the Group participated
in a seed round financing of Basking Biosciences, a clinical stage
company focused on acute thrombosis.
|
•
|
In October, Tourmaline Bio completed its merger
with public company, Talaris Therapeutics, alongside a US$75
million private placement, and the shares started trading on the
Nasdaq under the ticker symbol "TRML".
|
•
|
In November, JIXING completed the first tranche of
its Series D financing. RTW co-led the round alongside Bayer AG
with whom JIXING also agreed a strategic partnership agreement
focused on cardiovascular diseases and ophthalmology in
China.
|
Portfolio breakdown and new
investments
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 (41%) and
publicly-listed (59%) companies.
As of 31 December 2023, the
Group's core portfolio accounted for 67% of NAV (2022: 71%) and
included 36 companies (2022: 39), ranging from biotechnology
companies developing preclinical to clinical-stage therapeutic
programmes, companies developing traditional small molecule
pharmaceuticals, and med-tech companies developing and
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 5 shows the top fifteen portfolio
companies at the end of the reporting period.
Private companies accounted for
17.6% of NAV on 31 December 2023 (2022: 24.6%) and core public
companies accounted for 39.3% (2022: 46.3%). "Core royalties" (9.8%
of NAV on 31 December 2023) was added as a portfolio segment this
year after the announcement of a capital allocation plan in July in
which royalty financing was highlighted as an attractive and
growing area of focus. These investments are cash generative,
providing life sciences exposure that is uncorrelated to the
volatility of the equity markets, and have limited scientific risk
due to their being typically constructed around commercial
products. The decrease in exposure to private investments reflects
the migration of several positions into the core public portfolio
as a result of IPOs (Mineralys, Acelyrin, Apogee, and Cargo), a
SPAC merger (Orchestra BioMed) and a reverse merger (Tourmaline).
These events outweighed the addition of the new private positions
shown in Table 4. The lower exposure to the core public portfolio
reflects the aforementioned sales of Prometheus to Merck and Cincor
to AstraZeneca and the exiting of our holdings in Monte Rosa,
Ventyx, Tenaya, Third Harmonic, C4, Acelyrin and
Mineralys.
Approximately 20% of the Group's
NAV is invested in other publicly listed companies, down from 29.8%
on 31 December 2022. 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-rata 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. When considered alongside
available cash (12.9% on 31 December 2023 vs. -0.7% on 31 December
2022), the total (33.3%) is similar to 31 December 2022 (29.1%).
The increased cash position was in preparation for the purchase of
a stake in Arix Bioscience, which is discussed in more detail
elsewhere in this report.
In July 2023, the Group announced
a share buyback of up to US$10 million as part of a capital
allocation plan to deploy the substantial cash proceeds of the
Prometheus Biosciences sale to Merck. In total, to the end of the
reporting period, the Group had bought back 1,753,791 shares for a
consideration of US$2,089,223, representing 0.8% of share
capital.
As of 31 December 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 that successfully navigate clinical,
regulatory or commercial inflection points.
Looking forward, we expect the
total portfolio sector allocation to remain close to 80%
biopharmaceutical assets and 20% medical technology assets. In line
with 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 the announced capital allocation plan,
royalty investments will be limited to approximately 15% of NAV.
Table 3. NAV capital breakdown as of 31 December 2023 and 31
December 2022
Portfolio segment
|
% of NAV at 31 Dec
2023
|
% of NAV at 31 Dec
2022
|
Core private
|
17.6%
|
24.6%
|
Core public
|
39.3%
|
46.3%
|
Core royalty¹
|
9.8%
|
-
|
Other public
|
20.4%
|
29.8%
|
Available
Cash2
|
12.9%
|
-0.7%
|
Total
|
100%
|
100%
|
1 In the prior annual report,
royalty investments were included in the portfolio segment, Core
private.
2 Prior periods reported the financial statement account "cash
and cash equivalents", while the current period and going forward
will report Available Cash, as defined in the Alternative
Performance Measures.
Table 4. New core investments in 2023
Company name
|
Description
|
%
NAV*
|
Oricell
Therapeutics
|
Preclinical stage pharmaceutical company focusing on multiple
myeloma
|
0.6%
|
Cargo
Therapeutics
|
Clinical
stage biotech company targeting large B-cell lymphoma
|
4.0%
|
Allurion
Technologies
|
Medtech
company with a swallowable, procedureless gastric pill balloon for
weight loss, commercially available in 5 countries, clinical stage
in the U.S.
|
0.1%
|
RTW
Royalty Fund
|
RTW-created royalty dedicated fund that plans to invest in
5-10 royalty assets, thereby obtaining the rights to future royalty
payment streams. Fees will be taken at the
Company level only (i.e. no double charging).
|
6.1%
|
Abdera
Therapeutics
|
Preclinical biopharma company developing radiopharmaceuticals
for lung cancer
|
0.3%
|
Tourmaline Bio
|
Late-stage biotech developing medicines for thyroid eye
disease and atherosclerotic cardiovascular disease
|
0.4%
|
Basking
Biosciences
|
Clinical
stage company developing an RNA aptamer to treat acute
thrombosis
|
0.1%
|
*As of 31 December 2023
Figure 2. Core portfolio breakdown, by (A) Modality, (B)
Therapeutic focus, (C) Clinical stage and (D) Geography as of 31
December 2023. These breakdowns do not include royalty
vehicles.
Table 5. Top fifteen core portfolio
positions as of 31 December 2023
Portfolio
company
|
Description
|
Therapeutic
area
|
Clinical stage of lead
programme
|
Expected
catalysts
|
% NAV
|
Rocket
|
Gene
therapy company for rare paediatric diseases
|
Rare
paediatric diseases
|
Phase
2
|
Fanconi
Anaemia BLA filing Q1 2024; LAD1 approval in Q2
|
17.9%
|
JIXING
|
RTW
incubated company focused on acquiring rights to innovative
therapies for development and commercialisation in China
|
Cardiovascular, Ophthalmology
|
Phase
3
|
Additional Series D tranches in Q1 and Q2
|
7.9%
|
Immunocore
|
T-cell
receptor therapy company focused on oncology and infectious
disease.
|
Oncology
|
Commercial
|
PRAME
data Q2 2024
|
7.4%
|
RTW
Royalty Fund
|
Royalty
dedicated fund that will invest in 5-10 royalty assets, thereby
obtaining the rights to future payment streams
|
Multiple
|
Commercial
|
Refile
Milestone NDA mid-2024
|
6.1%
|
Cargo
|
Biotech
company targeting large B-cell lymphoma
|
Oncology
|
Phase
1
|
Interim
Ph2 data possible in 2024
|
4.0%
|
RTW
Royalty 2
|
Royalty
deal with Urogen for JELMYTO, the first FDA-approved treatment for
low-grade upper tract urothelial cancer
|
Oncology
|
Commercial
|
Quarterly
sales updates
|
3.7%
|
Orchestra
|
Medical
device company focused on developing products for the treatment of
coronary artery disease and hypertension
|
Cardiovascular
|
Pivotal
|
Mid-2024
renegotiate co-development of Virtue programme
|
2.1%
|
Milestone
|
Developing interventions for tachycardias
|
Cardiovascular
|
Registrational
|
Refile
NDA mid-2024
|
2.0%
|
Apogee
|
Biopharma
company developing treatments for inflammation
|
Inflammatory
|
Phase
1
|
Data updates in H1 2024
|
1.8%
|
Beta
Bionics
|
Closed-loop pancreatic system for automated and autonomous
delivery of insulin
|
Type 1
Diabetes
|
Pivotal
|
Aiming
for late 2024 IPO
|
1.7%
|
Tarsus
|
Biotech
company developing therapeutics for ophthalmic
conditions
|
Ophthalmology
|
Commercial
|
Launch
updates quarterly
|
1.5%
|
Avidity
|
Antibody
conjugated RNA medicines
|
Myotonic dystrophy
|
Phase
1
|
Myotonic
dystrophy Ph1 update Q1 2024
|
1.4%
|
NiKang
|
Developing innovative small molecules against promising
molecular targets in oncology
|
Oncology
|
Phase
1
|
Data
updates in Q3 2024
|
1.4%
|
Ancora
|
Medical
device company developing products that target dysfunction of the
left ventricle, the underlying cause of heart failure
|
Cardiovascular
|
Pivotal
|
Complete
US pivotal enrolment YE 2024
|
1.1%
|
Magnolia
|
Medical
diagnostics company that has patented a steripath blood collection
device
|
Inflammation, sepsis
|
Commercial
|
Mid-2024
launch of new low-cost automatic blood diversion device
|
0.7%
|
Table 6. Core portfolio
positions as of 31 December 2023 compared to 31 December
2022
Portfolio
Company
|
Private¹/
Public²
|
Valuation in US$ at
31/12/2023
|
% of Group's net assets at
31/12/2023
|
Valuation in US$ at
31/12/2022
|
% of Group's net assets at
31/12/2022
|
Rocket
|
Public
|
76,751,123
|
17.9%
|
46,982,775
|
13.5%
|
JIXING
|
Private
|
33,851,037
|
7.9%
|
25,225,606
|
7.3%
|
Immunocore
|
Public
|
31,861,831
|
7.4%
|
25,908,924
|
7.4%
|
RTW
Royalty Fund
|
Private
|
25,982,258
|
6.1%
|
-
|
-
|
Cargo
|
Public
|
17,181,097
|
4.0%
|
-
|
-
|
RTW
Royalty 2
|
Private
|
15,873,634
|
3.7%
|
14,074,846
|
4.0%
|
Orchestra³
|
Public
|
9,146,636
|
2.1%
|
4,490,264
|
1.3%
|
Milestone⁴
|
Public
|
8,774,286
|
2.0%
|
2,871,141
|
0.8%
|
Apogee
|
Public
|
7,802,385
|
1.8%
|
2,102,903
|
0.6%
|
Beta
Bionics
|
Private
|
7,283,681
|
1.7%
|
5,633,890
|
1.6%
|
Tarsus
|
Public
|
6,563,082
|
1.5%
|
3,169,037
|
0.9%
|
Avidity
|
Public
|
6,149,783
|
1.4%
|
14,502,829
|
4.2%
|
NiKang
|
Private
|
5,841,773
|
1.4%
|
4,416,891
|
1.3%
|
Ancora
|
Private
|
4,552,449
|
1.1%
|
4,163,943
|
1.2%
|
Magnolia
|
Private
|
2,980,286
|
0.7%
|
2,403,543
|
0.7%
|
Umoja
|
Private
|
2,948,739
|
0.7%
|
2,540,152
|
0.7%
|
Oricell
|
Private
|
2,378,363
|
0.6%
|
-
|
-
|
Encoded
|
Private
|
2,255,099
|
0.5%
|
2,364,636
|
0.7%
|
Kyverna
|
Private
|
1,921,703
|
0.4%
|
1,455,105
|
0.4%
|
Tourmaline
|
Public
|
1,861,346
|
0.4%
|
-
|
-
|
Nuance
|
Private
|
1,789,691
|
0.4%
|
1,622,898
|
0.5%
|
GH
Research
|
Public
|
1,778,970
|
0.4%
|
2,981,309
|
0.9%
|
Numab
|
Private
|
1,723,249
|
0.4%
|
1,768,384
|
0.5%
|
Lenz
|
Private
|
1,677,798
|
0.4%
|
1,449,836
|
0.4%
|
Alcyone
|
Private
|
1,419,169
|
0.3%
|
1,280,484
|
0.4%
|
Abdera
|
Private
|
1,108,396
|
0.3%
|
-
|
-
|
Lycia
|
Private
|
929,092
|
0.2%
|
1,008,626
|
0.3%
|
Artiva
|
Private
|
890,476
|
0.2%
|
880,074
|
0.3%
|
Artios
|
Private
|
760,071
|
0.2%
|
675,895
|
0.2%
|
InBrace⁵
|
Private
|
556,338
|
0.1%
|
649,150
|
0.2%
|
Cincor
|
Public
|
541,706
|
0.1%
|
2,175,674
|
0.6%
|
Basking
|
Private
|
449,058
|
0.1%
|
-
|
-
|
Allurion
|
Public
|
283,948
|
0.1%
|
-
|
-
|
Neurogastrx
|
Private
|
115,353
|
0.0%
|
1,612,974
|
0.5%
|
Prometheus Labs
|
Private
|
105,808
|
0.0%
|
186,504
|
0.1%
|
Yarrow
|
Private
|
64,228
|
0.0%
|
1,001,854
|
0.3%
|
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 31 December
2023
3 Includes shares held in the
initial SPAC vehicle (HSAC2) that merged with Orchestra in January
2023
4 Includes pre-funded
warrants
5 Previously referred to as Swift
Health Systems
Table 7. RTW representation on
portfolio company boards as of 31 December 2023
Portfolio
company¹
|
RTW representative on the
board
|
JIXING
|
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
|
RTW
Royalty 2
|
Matthew
Bieret
|
HSAC 2
Holdings, LLC
|
Rod Wong,
Naveen Yalamanchi, Alice Lee
|
1 In aggregate these represented 28%
of the Group's NAV at 31 December 2023
Table 8. Top 5 "Other Public" portfolio segment holdings as
of 31 December 2023
Position
|
Ticker
|
% of NAV
|
Description
|
Sage
Therapeutics
|
SAGE
|
2.7%
|
Biopharmaceutical company for brain health
disorders
|
Akero
Therapeutics
|
AKRO
|
2.5%
|
Cardio-metabolic biotechnology company developing treatments
for non-alcoholic steatohepatitis
|
Mirati
Therapeutics
|
MRTX
|
2.2%
|
Commercial stage biotechnology company targeting
cancer
|
Axsome
Therapeutics
|
AXSM
|
2.1%
|
Commercial stage biotech focused on CNS
|
PTC
Therapeutics
|
PTCT
|
1.7%
|
Commercial stage biotech making therapies for rare genetic
diseases
|
Private Portfolio Valuations
and Cash Runway Analysis
The core private, core royalty, and
core 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
have benefitted from this discipline as we emerge from a
challenging capital markets environment, with a private portfolio
that is a good size and well-funded.
As of 31 December 2023, the average
cash runway of our core private companies was over two years, which
provides them with sufficient time to focus on clinical development
plans. There are eight companies with less than twelve months of
runway, two of which are RTW company creations, which is by design,
as RTW's funds have the flexibility to inject cash when necessary.
Of the remainder, most have reasonable and well-formed capital
raising plans in place. Only one is in a more challenging financial
position and has been written down in our portfolio to an
insignificant level.
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,
utilising 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. 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 a year in
helping to determine the fair value of each material private
investment. The valuations are also reviewed twice per year by the
Board as part of the interim and annual reporting process and are
subject to the scrutiny of KPMG.
The private portfolio saw a total of
fifty-one valuation adjustments in 2023. At year end, thirteen
positions were marked up by an average of 12.4%; ten were marked
lower by an average of -28.1%. The balance remained at cost given
the recent date of the investment. 70% of the markdowns were
primarily driven by changes to relative comparables or market-based
inputs. 54% of the markups were primarily driven by comparables,
and 46% were primarily driven by idiosyncratic company performance,
a financing round or transaction. At year end, the average time
since the last third-party valuation was 3.7 weeks and with an
average of 1.3 years having elapsed since the last financing
round.
The value of the private portfolio
is best demonstrated by the four portfolio IPOs in the year (which
do not appear in figure 5 because they were public companies or had
since been exited). The average step-up from the prior holding
value to the IPO price was 45.9%. The average multiple on invested
capital to the IPO price was 1.65x.
Figure 3. New core private investments, IPOs and other "Go
Public" events¹ by year since admission
1 Other "Go Public" events include
SPAC mergers and reverse mergers.
Figure 4. Core private portfolio - approximate cash runway as
of 31 December 2023
Figure 5. Core private portfolio on 31 December 2023 - year
to date valuation changes and contributions to
NAV
Table 9. Private Valuation
Statistics for 2023
Statistic
|
2023
|
Number of
revaluations in 2023
|
51
|
Average
time since last third party valuation (weeks)
|
3.7
|
Average
time since last financing round (years)
|
1.3
|
Average
valuation change
|
-5.0%
|
Average
mark-up
|
+12.4%
|
Average
mark-down
|
-28.1%
|
Average
step-up to IPO price
|
+45.9%
|
Average
MOIC to IPO price
|
1.7x
|
Sector review and
outlook
The Federal Reserve's interest rate
pivot and a flurry of takeouts helped the biotech sector avert a
historic three down years in a row with a sharp rally in the last
two months of the year. In October, the sector was close to
recording and setting new lows across most of the key metrics we
track. However, the sector's vigorous move off the bottom gives
clues to how complacent the market had become. For the past year
and a half, selling exposure to the biotech sector was an easy
trade and worked even in the face of strikingly low valuations,
strong innovation, and accelerating M&A. Those caught off-side
the last two months of the year have likely driven this early move.
Capital flows are suggestive of what may be in store for
2024. Flows were consistently negative throughout 2023, with
total outflows the highest in three decades. Generalists have
remained on the sidelines but should that turn, it will be a
significant tailwind for the sector.
Figure 6. Russell 2000
Biotechnology index value
At the same time, the list of
investible assets has declined significantly. In the past
year the acquisitions of Seagen, Horizon, Karuna, Prometheus,
Immunogen, Cerevel, Reata, Televant, Iveric, Mirati, and Rayze
totaled over US$140bn, which amounts to about a third of acquirable
US market cap in the post-mega merger FTC era (i.e. companies with
a market cap below US$25bn). Investors will compete with large
pharma companies for the sector's remaining marquee assets. While
Pfizer and AbbVie have made significant progress on refilling their
pipelines, Bristol and Merck must remain active or face existential
patent cliff risk. Meanwhile, companies like J&J, Roche, and
the obesity giants, Eli Lilly and Novo Nordisk, have over US$200bn
of unused capacity that is growing rapidly due to the
transformation of obesity-related products. In total, large pharma
companies have about US$600bn of dealmaking capacity and premiums
are already indicative of increased competition for assets. For
deals over US$1bn in 2023, the average deal premium was 71%, which
is right at the upper end of historical ranges.
Figure 7. 2023 was the second-best year ever for M&A
value and best ever for volume
Source: Jefferies Report as of 26
December 2023
Despite the end of year rally, 32%
of sub-US$10bn market cap biotech companies in the US still trade
at less than the cash on their balance sheets, down only 3% from
the high. The number of companies has started to decline, which is
healthy. Many of these are companies that never should have made it
out in the last bull market, but importantly, from a market dynamic
perspective, they now represent only a small percentage of the
sector's market capitalisation. Even then, digesting these
companies over the last several years has resulted in an IPO bear
market. Twelve companies IPO'd last year, down from nineteen the
year before and 108 in 2021. We think this is likely the bottom and
expect normalcy to return in 2024 with a slate of promising
companies already in the pipeline.
Figure 8. The US biopharma
financing market is still digesting excess supply from the boom in
2019-2021
Source: Bloomberg and Lazard
Monthly Life Sciences US Equity Issuance Overview as of 29 December
2023.
The most challenged part of the
ecosystem should continue to be companies with smaller products
(sub-US$1bn peak sales). Since the demise of Valeant catalysed the
disappearance of specialty pharma, there are few natural buyers for
sub-scale products, no matter how promising. Lack of investor
interest in such companies is instructive for the FTC, which fails
to understand the positive impact M&A has on promoting
competition and innovation in our sector. Should any midsized
biopharmas with financial flexibility (e.g. Vertex, Regeneron,
BioNTech, or Daiichi) emerge as consolidators for smaller products,
interest could return, although we do not see evidence of this
happening yet.
In 2022, the Inflation Reduction Act
gave Medicare the ability to dictate drug prices for small
molecules nine years post-launch. The drug industry has responded
by shifting innovation away from pills for the elderly. This most
notably impacts targeted oncology and cardiovascular disease. Of
course, these remain the leading causes of death in developed
societies, so it is important to our collective future health to
support policy mitigations and litigation. A win in the courts in
the coming year has the potential to improve the status quo. In
all, there are nine legal challenges to the IRA's Medicare price
negotiations including challenges from the likes of Merck, Novo
Nordisk and Johnson & Johnson.
Fortunately, new modalities, mostly
not subject to government price setting until thirteen years, have
the potential to take medical innovation to new heights. While less
convenient and safe, cell therapy and novel antibody technologies
have shown striking efficacy in multiple cancers. RNA medicines
also have the ability to address some cardiovascular targets and
have matured enough to offer placebo-like safety profiles. Gene
therapy made a strong recovery this year. As the FDA has gained
comfort with the modality, Director of the Center for Biologics
Evaluation, Peter Marks, has led by offering regulatory flexibility
for companies pursuing urgent unmet needs.
Figure 9. The FDA approved 61 novel drugs in 2023, the
highest in history
NME = new molecular
entity
GtX = gene therapy
In total, the FDA approved sixty-one
novel drugs in 2023, the highest number in one year in history.
Drugs from new modalities represented fourteen, one more than last
year. We continue to expect more new highs to be set in the coming
years. This is consistent with our belief that we are living
through a golden age of innovation in our sector, built on a
combination of cheap genetic information and the foundation of new
modalities to address disease. Looking
forward, we are excited about opportunities in several areas.
Within metabolic disease, we eagerly await the first approval for
fatty liver disease. In oncology, we have shifted our emphasis
towards novel antibody technologies (e.g. bispecifics, ADCs,
radioRx) and cell therapy. We expect continued innovation in
neurology, rare disease, and after a wave of historic
breakthroughs, slightly more incremental advances in immunology.
Like gene therapy this past year, we are optimistic RNA medicines
could make a comeback in 2024.
Post period end Arix
acquisition updates and other key portfolio company
events
Following
the end of the period, there was no
shortage of Group-related news.
•
|
In early January, the FCA approved
a new prospectus in relation to the proposed admission of new RTW
Bio shares pursuant to the Arix Bioscience acquisition.
|
•
|
Also in early January, portfolio
company JIXING announced a new strategic partnership with
Bayer AG focusing on cardiovascular diseases and ophthalmology in
China and the initial closing of its Series D preferred stock
financing, co-led by Bayer and RTW Investments.
|
•
|
RTW Bio then completed the
previously announced US$57.1 million acquisition of a
25.5% stake in Arix from a wholly owned subsidiary of
Acacia Research Corporation.
|
•
|
The Board of RTW
Bio announced at the same time its intention to increase
capital returns to shareholders to a total of up to US$30
million, post completion of the Arix acquisition. This total
includes the previously announced share buyback of up to US$10
million. The Board believes that this allocation clearly
demonstrates its confidence in the outlook for the biotech sector
and the Group's portfolio and its capital allocation discipline,
whilst also providing additional liquidity to
shareholders.
|
•
|
The first general meeting and vote
of Arix shareholders was held on 29 January 2024, where the
resolution to approve the acquisition passed with 92% of votes cast
in favour.
|
•
|
On 8 February, core portfolio
company Kyverna Therapeutics announced the pricing of an
upsized US$319 million IPO. As at 26 March 2024, Kyverna
traded on Nasdaq Global Select Market (under the ticker "KYTX") at
US$24.86 per share, up 13.0% from the IPO price of US$22.00 per
share.
|
•
|
The second general meeting of Arix
shareholders was held on 12 February 2024, where 98% of votes were
cast in favour of resolutions to successfully complete the scheme
of reconstruction and voluntary winding up of Arix.
|
RTW Investments,
LP
27 March 2024
RTW's Long-Term
Strategy
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, 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 bringing effective, or in
some cases, even fully curative outcomes to patients.
Build
Build new companies around promising
academic licences
RTW has capabilities to partner with
universities and in-license academic programmes, by providing
capital and infrastructure to entrepreneurs to advance scientific
programmes. Particularly in rare disease, there is often little
existing research and 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 developing potentially curative
treatments.
Support
Supports investment through the full
life cycle
A key part of RTW's competitive
advantage is the ability to determine at which point in a company's
life cycle we should support the target asset or pipeline. As a
full life cycle investor, RTW provides growth capital, creative
financing solutions, capital markets expertise, and guidance.
Taking a long-term, full life cycle approach and having an
evergreen structure enables us to avoid the pitfalls and structural
constraints of venture-only or public-only vehicles. RTW's 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.
Strategy in
Action
CASE
STUDIES
CASE STUDY 1: Cargo
Therapeutics
Learn more about Cargo
Therapeutics,
Home - Cargo Therapeutics
(cargo-tx.com)
NAV
4.0%
2022: N/A
Portfolio company
ownership
>5%
2022: N/A
The need
CAR-T therapy is a relatively new
type of cancer treatment that uses the body's own immune system to
kill cancer cells. Transformative advances have been made by
commercially available CAR T-cell therapies; however, resistance
mechanisms can limit the strength and quality of T-cell response
and contribute to disease progression. Patients whose disease
relapses or is refractory to CD19 CAR T-cell therapy face a median
survival of less than 6 months.
Furthermore, treatments are not
readily available to many of the patients who could benefit from
them due to manufacturing challenges, supply constraints,
unpredictable turnaround time and other logistical
challenges.
Mission
Cargo is a clinical-stage
biotechnology company positioned to advance next generation,
potentially curative cell therapies for cancer patients. Cargo's
programmes, platform technologies, and manufacturing strategy are
designed to directly address the limitations of approved cell
therapies, including limited durability of effect, safety concerns
and unreliable supply.
Status
It was a transformational year for
the company with growth across the business, including expanding
the leadership team and creation of a Scientific Advisory Board,
commencing a Phase 2 clinical trial for CRG-022, and becoming a
publicly traded company. In March 2023, Cargo completed a US$200m
Series A financing round, which RTW co-led. The proceeds from the
financing round were to advance Cargo's autologous CD22 CAR T-cell
therapy candidate, CRG-022, through a pivotal multi-centre Phase 2
trial in patients with LBCL whose disease has relapsed or is
refractory to CD19 CAR T-cell therapy. In November, Cargo
successfully IPO'd on Nasdaq under the ticker "CRGX", raising
US$281.3 million. In the two months from listing to 31 December
2023, Cargo's share price increased by approximately
54%.
Next milestone
Interim results from Cargo's Phase 2
trial are anticipated in 2025.
"We are pleased to continue to
support Cargo Therapeutics in their mission to deliver innovative
CAR-T cell therapy to patients with cancer. Despite the ongoing
challenges in the capital markets, with very little IPO activity,
we continue to see that good companies, such as Cargo Therapeutics,
with innovative technologies and strong management teams can access
the public markets."
Roderick Wong, MD
Managing Partner
CASE STUDY 2: JIXING
PHARMACEUTICALS
Learn more about JIXING
www.jixingbio.com
NAV
2023: 7.9%
2022: 7.3%
Portfolio company
ownership
2023: >5%
2022: >5%
The need
China has a large cardiovascular
disease patient population, with an estimated prevalence of 270
million hypertension (high blood pressure), 5 million cardiac
arrhythmia (i.e. irregular heartbeat, such as PSVT or atrial
fibrillation), and 1.5 million hypertrophic cardiomyopathy
(enlarged heart) patients. It also has an enormous aging
population, with over 400 million people suffering from presbyopia
and 200 million people suffering from dry eye disease.
Mission
Founded by RTW in 2019 and
headquartered in Shanghai, JIXING is a leading cardiovascular and
ophthalmology biotech that partners with other global biotech
companies to develop and commercialise novel, innovative
therapeutics to treat unmet medical needs in China and
beyond.
Status
JIXING's
pipeline now includes 9 assets focused on cardiovascular and
ophthalmology conditions with high unmet need through partnerships
with Cytokinetics, Milestone, LENZ Therapeutics, Oyster Pharma, and
TMS.
In
December 2023, Cytokinetics (CYTK) announced positive topline
results from SEQUOIA-HCM, the pivotal phase 3 clinical trial of
Aficamten in patients with obstructive hypertrophic cardiomyopathy,
and a few days later JIXING announced its own positive results from
the China Cohort trial of the same drug.
Next milestone
JIXING will complete an additional
closing of its Series D financing in Q2 2024.
Operational and Financial
Review for the Year
Innovative asset
growth
MARKET
CAPITALISATION
The
Company's market capitalisation increased from U$257 million at 31
December 2022 to US$295 million at 31 December 2023. The
Company issued no shares in 2023 and repurchased 1,753,791 shares,
so the 15% increase in market capitalisation was due to the 16%
increase in the share price, which was slightly offset by the
decrease in Ordinary Shares outstanding.
ORDINARY
NAV
The Ordinary NAV increased from
US$326 million to US$399 million during the year. The main driver
of the increase was the performance of the core public segment of
the portfolio, notably due to the sale of portfolio company
Prometheus Biosciences to Merck, adding 12.6% to the NAV, and the
share price performance of Rocket Pharmaceuticals, adding 8.4%.
Core private and core royalty investments contributed another ~3%.
The Group returned to positive performance in 2023, which saw the
return of a performance allocation accrual.
An
approximate attribution of the Company's performance is provided
below.
Core
Public
|
+24.7%
|
Core
Royalty
|
+1.7%
|
Core
Private
|
+1.5%
|
Other
Public
|
-0.7%
|
Cash
& Other
|
-3.7%
|
Net
Performance
|
+23.5%
|
NAV PER
ORDINARY SHARE
The +23.5%
increase in NAV per Ordinary Share was driven by the increase in
the Company's ordinary NAV and a slight decrease in Ordinary Shares
outstanding following share repurchases.
PREMIUM /
DISCOUNT
The Company's shares traded on
average at a c.25% discount to NAV due to reduced market demand for
growth and venture capital assets during the reporting period. At
year end, the Company's Ordinary Shares were trading at a 26%
discount to NAV (2022: 21% discount to NAV).
TOTAL RETURN TO SHAREHOLDERS BASED
ON ORDINARY NAV
As the Company has not paid
dividends, the total return for the year of +23.5% (2022: -10.2%)
equates to the increase in NAV per Ordinary Share. Performance
allocation accrual was triggered during the reporting period as the
total shareholder return based on ordinary NAV movements was
positive.
TOTAL RETURN TO SHAREHOLDERS BASED
ON SHARE PRICE
The share price return of +16.0% in
the year compared with the NAV movement of +23.5% was the result of
a decline in demand for growth companies as interest rates
increased in the US and UK. Investors also assumed that private
companies within venture capital portfolios would be subject to
substantial market-based valuation adjustments leading to a
cyclical widening of share price discounts. Companies with the
highest proportion of private growth assets experienced the most
significant widening.
ONGOING CHARGES
The Group's ongoing charges ratio is
1.87% (2022: 1.92%), calculated in accordance with the AIC
recommended methodology, which excludes non-recurring costs and
uses the average NAV in its calculation.
Highlights
Market
Capitalisation as of 31 Dec 2023
2023:
US$295m
2022:
US$257m
2021:
US$378m
Ordinary
NAV as of 31 Dec 2023
2023:
US$399m
2022:
US$326m
2021:
US$363m
Discount
to NAV as of 31 Dec 2023
2023:
-26.0%
2022:
-21.2%
2021:
+4.1%
Ongoing
charges as of 31 Dec 2023
2023:
1.9%
2022:
1.9%
2021:
1.7%
Key Performance
Indicators
Measuring our
performance
The Board
has identified the following indicators for assessing the Group's
annual performance in meeting its objectives:
Financial
KPIs
NAV Growth
PERFORMANCE
Performance of the portfolio companies and cash management
strategy net of all fees and costs
KEY
FACTORS
•
|
Portfolio
performance and progression through clinical trials
|
•
|
Cash
management
|
•
|
Capital
pool and deployment
|
•
|
Scientific and financial risks
|
•
|
Market
context including interest rates and bond yields
|
PROGRESS
Ordinary
NAV
2023:
+23.5%
2022:
-10.2%
During
the reporting period this was largely driven by public companies'
share price performance, most significantly the realised gain from
the Prometheus acquisition by Merck.
FUTURE
INTENT
Achieve
superior long-term capital appreciation; target an annualised total
return of 20% over the medium term
LINK TO
STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO
PRINCIPAL RISKS
Failure
to achieve investment objective
Exposure
to global political and economic risks
Clinical
Development & Regulatory Risks
Total shareholder
return
PERFORMANCE
Delivering value to the shareholders
KEY
FACTORS
•
|
Portfolio
performance
|
•
|
Liquidity
of RTW shares
|
•
|
General
market sentiment
|
PROGRESS
Share
Price Return
2023:
+16.0%
2022:
-32.0%
A
cyclical reduction in demand for growth and venture capital assets
led to the company's share price not keeping up with the increase
in NAV per share, thus widening the discount at which the shares
trade.
FUTURE
INTENT
Achieve
superior long-term capital appreciation; target an annualised total
return of 20% over the medium term
LINK TO
STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO
PRINCIPAL RISKS
Failure
to achieve investment objective
Exposure
to global political and economic risks
Clinical
Development & Regulatory Risks
Premium/Discount to
NAV
PERFORMANCE
The level
of supply and demand for the Company's shares
KEY
FACTORS (in order of impact at year end)
•
|
The
percentage of private growth assets within the Group's
portfolio
|
•
|
Portfolio
performance
|
•
|
Liquidity
of the Company's shares
|
•
|
Increased
visibility with key UK shareholder audience (London office, UK
distribution partner)
|
PROGRESS
Premium/discount to NAV (average during the year)
2023:
-25%
2022:
-13%
FUTURE
INTENT
Return to
a premium to NAV such that total shareholder returns match or
exceed NAV performance
LINK TO
STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO
PRINCIPAL RISKS
Failure
to achieve investment objective
Exposure
to global political and economic risks
Percent of NAV invested in
core portfolio companies
PERFORMANCE
Level of
capital deployment into core portfolio companies
KEY
FACTORS
•
|
Level of
capital deployment and investment pace, as well as availability of
funds to be deployed into new portfolio companies and follow-on
investments
|
PROGRESS
NAV
invested in core portfolio
2023:
67%
2022:
71%
Deployed
into core portfolio companies
FUTURE
INTENT
Identify
transformative assets with high growth potential across the
biopharmaceutical and medical technology sectors
LINK TO
STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO
PRINCIPAL RISKS
Clinical
Development & Regulatory Risks
The
Investment Manager relies on key personnel
Exposure
to global political and economic risks
Non-financial
KPIs
Geographically &
therapeutically diversified portfolio
PERFORMANCE
Measures
the Group's commitment to invest in best-in-class science and
innovative assets worldwide
KEY
FACTORS
•
|
Continue
to diversify within the life sciences sector and support local
biotech ecosystems across the globe
|
PROGRESS
Therapeutic areas addressed
2023:
10
2022:
10
Core
portfolio companies' focus spans multiple therapeutic areas,
treatment modalities and geographies.
FUTURE
INTENT
Continue
investing in and supporting companies developing next generation
therapies and technologies that can significantly improve patients'
lives
LINK TO
STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO
PRINCIPAL RISKS
Clinical
Development & Regulatory Risks
Exposure
to global political and economic risks
Active and robust
pipeline
PERFORMANCE
Delivers
transformational new treatments to patients in need.
KEY
FACTORS
•
|
Balance
and breadth of the pipeline across all clinical stages
|
•
|
Data
readouts and progress through multiple clinical stages
|
•
|
Commercial opportunity and competitive landscape
|
PROGRESS
Core
portfolio companies that have leading programmes in a clinical
stage
2023: 22
of 36
2022: 25
of 39
Capturing
a spectrum of early-stage Phase 1 to late stage Pivotal
FUTURE
INTENT
Progress
towards delivering transformational treatments to patients in areas
of high unmet need.
LINK TO
STRATEGY
Identifying
Engaging
Building
Supporting
LINK TO
PRINCIPAL RISKS
Clinical
Development & Regulatory Risks
Exposure
to global political and economic risks
Imposition of pricing controls
Risk
Management
Applying deep scientific
expertise with a long-term investment horizon
RTW's long-term strategy is anchored
in identifying transformative assets with high growth potential
across the biopharmaceutical and medical technology sectors. Driven
by a deep scientific understanding and a long-term approach to
supporting innovative businesses, we invest in companies developing
next-generation therapies and technologies that have the potential
to significantly improve patients' lives. With this significant
opportunity also comes risk.
RTW's risk framework is overseen by
the Audit Committee under delegation from the Board. Multiple
parties contribute to managing risk, including the Board, the RTW
Investments team, and the Group's advisers.
Risk framework
The risk framework begins with the
Board, who define risk appetite, oversee the process to ensure a
robust assessment of principal risks, consider current and
potential risks, and receive an update from the Investment Manager
at each Board meeting. A risk register is maintained that sets out
principal risks and risk appetite. The RTW team is responsible for
day-to-day operations and oversight of the risk framework. RTW has
a culture of transparency, ensuring that developments are shared
and addressed timely, with the benefit of input from multiple team
members, and reported to the Board as appropriate. The Group relies
on having highly experienced personnel at the Investment Manager to
support and manage issues as they arise.
The Audit Committee oversees and
monitors the risk framework, including reviewing the risk register
regularly to ensure it properly captures principal risks,
continuously identifying potential risks, reviewing the ongoing
operation and effectiveness of the control environment, and
ensuring that proposed actions are implemented by the RTW team.
This process drives continuous improvement in
risk identification and monitoring.
Identifying principal risks
The Board uses both top-down and
bottom-up inputs to evaluate principal risks. Over the past year,
the Board and the Investment Manager had ongoing discussions to
consider the Group's risks. The discussions generated insights into
potential emerging risks and have helped to focus attention on
additional areas for monitoring.
The RTW team carries out a bottom-up
review, considering each portfolio company, as well as internal
operations, both as a specific exercise and on an ongoing basis.
The team also draws on assessments made by management teams of
portfolio companies. These inputs are brought together in the risk
register, which is reviewed by the Audit Committee in detail each
quarter The principal risks identified by the Board are set out
below. These have not substantially changed in the last year. The
Board also monitors future risks that may arise, including the
longer-term risks of changes to US pharmaceutical drug pricing and
US FDA productivity.
Risk management
structure
Board of
Directors
Risk
management leadership; risk appetite
Audit
Committee
Reviews
and monitors the risk framework
RTW Team
Risk
management is integral to the investment process and financial
management
Implementing and monitoring risk controls; risk
reporting
Other
advisers
Risk
identification; risk reporting
Portfolio companies'
management teams
Risk identification and mitigation
Risk appetite
The Board is willing to accept a
certain level of risk in order to achieve strategic goals. As
part of the risk framework, the Board sets the risk appetite in
relation to each of the principal risks and monitors the actual
risk against it. Where a risk is approaching or moves beyond its
target, the Board will consider the actions being taken to manage
it. This year the Audit Committee carried out a detailed
review of the defined risk types, to ensure that they continue to
reflect the understanding of the Board and accurately reflect
relevant risks. Following that review, the Audit Committee advised
the Board that the risk appetite remained appropriate, and the
Board has accepted that assessment.
Principal and Emerging Risks
and Uncertainties
Principal risks and how we
mitigate them
Under the
FCA's Disclosure Guidance and Transparency Rules, the Directors are
required to identify the material risks to which the Group is
exposed and the steps taken to mitigate those risks.
The Group
has five categories of risk in its risk register,
namely:
•
|
Investment Risks
|
•
|
Operational Risks
|
•
|
Governance/Reputational Risks
|
•
|
External
Risks
|
•
|
Emerging
Risks
|
Investment Risks
1. FAILURE TO ACHIEVE THE INVESTMENT
OBJECTIVE
RISK
DESCRIPTION
The Group's target return on net
assets is not guaranteed and may not be achieved. There is
increased investment risk associated with the purchase of the Arix
Bioscience portfolio, but this is being offset by falling interest
rate risk.
RISK CONTROL
MEASURES
The Board will monitor and supervise
the Group's performance compared to the target return, similar
investment funds and broader market conditions. Where performance
is unsatisfactory, the Board will discuss the appropriate response
with the Investment Manager. The Investment Manager's team is
evaluating each investment in the Arix portfolio for suitability,
continued funding, or disposal, and communicating the intended
approach with the Board.
STABLE
STRATEGIC
LINK
Identify
Engage
Support
Operational Risks
2. UNFAVOURABLE TAX
EXPOSURE
RISK
DESCRIPTION
With the recent acquisition of Arix
and the integration of the two portfolios, the Group's structure
has become more complex. Along with this complexity comes potential
for new tax-related risk.
RISK CONTROL
MEASURES
The Group has consulted throughout
the planning and execution of the acquisition transaction with
legal counsel having expertise in corporate structure and tax
matters. The Investment Manager's team that was dedicated to the
transaction project, along with the Board, received advice and
evaluated structural options at every step, benefitting from
internal flexibility and expertise.
INCREASING
STRATEGIC
LINK
Identify
Engage
3. COUNTERPARTY RISK
RISK
DESCRIPTION
The Group has the potential to be
exposed to the creditworthiness of trading counterparties in OTC
derivatives contracts, its prime broker in the event of
re-hypothecation of its investments, and any counterparty where
collateral or cash margin is provided or where cash is deposited in
the normal course of business.
RISK CONTROL
MEASURES
The Group uses Goldman Sachs,
Morgan Stanley, Bank of America Merrill Lynch, JP Morgan and
Jefferies as prime brokers and Cowen, UBS, Bank of America Merrill
Lynch, Goldman Sachs, Jefferies, and Morgan Stanley as ISDA
counterparties. To monitor counterparty risk, the Investment
Manager monitors fluctuations in share prices, percentage changes
in daily, monthly, and annual 5-year CDS spreads and S&P credit
ratings. If a counterparty group share price moves up or down in
excess of 20%, the trader at the Investment Manager is alerted
immediately. In case of an alert, the trader notifies RTW's Chief
Compliance Officer. There has been no disruption in operations with
the Group's counterparties to date. The Group's bankers are an
offshore branch of Barclays Bank PLC and are also included in the
Investment Manager's CDS monitoring program.
STABLE
STRATEGIC
LINK
Identify
Engage
Build
Support
Governance/Reputational
Risks
4. THE INVESTMENT MANAGER RELIES
ON KEY PERSONNEL
RISK
DESCRIPTION
The Investment Manager relies on
the founder of RTW, Roderick Wong M.D. Roderick Wong is a key
figure at the Investment Manager and is extensively involved in
investment decisions.
RISK CONTROL
MEASURES
In the event that Roderick Wong
was to no longer work for the Investment Manager or was
incapacitated, the Board is able to terminate the Investment
Management Agreement within 180 days if a suitable replacement has
not been found and would consider whether it would be appropriate
to wind up the Group and return capital to shareholders, or to
appoint a new Investment Manager.
STABLE
STRATEGIC
LINK
Identify
Engage
Build
Support
5. PORTFOLIO COMPANIES MAY BE
SUBJECT TO LITIGATION
RISK
DESCRIPTION
Portfolio Companies may be subject
to product liability claims. Such liability claims would have a
direct financial impact and may impact market acceptance even if
ultimately rebutted.
RISK CONTROL
MEASURES
The Investment Manager's due
diligence process includes considering the risk that innovative
therapies may have unforeseen side effects, based on the Investment
Manager's extensive sector knowledge and experience, published
research, and publicly available information.
STABLE
STRATEGIC
LINK
Identify
Engage
Build
Support
External Risks
6. EXPOSURE TO GLOBAL POLITICAL AND
ECONOMIC RISKS
RISK
DESCRIPTION
It is anticipated that approximately
75% of investments will be in US companies or licensing agreements
with US institutions, and 25% of investments will be made outside
of the US. The Group's investments will be exposed to foreign
exchange, and global political, economic, and regulatory risks,
including those associated with current conflicts in Ukraine,
Israel/Palestine and the Middle East more broadly. The portfolio
currently has approximately 77% exposure to the US and Canada, 12%
to the UK and Europe, and 11% to the rest of the world, including
3.7% to Israel and none to other Middle Eastern countries, Ukraine
or Russia. Israel
exposure derives from Urogen Pharma, which has
R&D in Israel but is headquartered and maintains its broader team in
Princeton, New Jersey.
RISK CONTROL
MEASURES
The Investment Manager has extensive
experience transacting across the global healthcare marketplace and
will be responsible for identifying relevant events and updating
investment plans appropriately.
INCREASING
STRATEGIC
LINK
Identify
Engage
Build
Support
7.
CLINICAL DEVELOPMENT & REGULATORY RISKS
RISK
DESCRIPTION
New drugs, medical devices and
procedures are subject to extensive regulatory scrutiny before
approval, and approvals can be revoked.
RISK CONTROL
MEASURES
The Investment Manager's due
diligence process includes a rigorous process of assessing
preclinical and clinical assets and their probabilities of success,
utilising scientific, clinical, commercial and regulatory
benchmarks. Additionally, the Investment Manager's process includes
assessing the likely attitudes of regulators towards a potential
new therapy. The due diligence will also consider the unmet need of
the disease and whether the therapy offers advantages over the
current standard of care.
STABLE
STRATEGIC
LINK
Identify
Engage
Build
Support
8. IMPOSITION OF PRICING CONTROLS
FOR CLINICAL PRODUCTS AND SERVICES
RISK
DESCRIPTION
Portfolio company products may be
subject to price controls, price gouging claims, and other pricing
regulation in the US and other major markets. Government healthcare
systems may be major purchasers of the products.
RISK CONTROL
MEASURES
While future political developments
cannot be reliably forecast, the Investment Manager's due diligence
process includes an assessment of political risk and the likely
acceptability of the investee's pricing intentions.
STABLE
STRATEGIC
LINK
Build
Support
9. INFLATION
RISK
DESCRIPTION
The unprecedented level of fiscal
and monetary stimulus that has been applied to the global economy
has caused US inflation to surge to a 40-year high and resulted in
sharp declines in the share prices of technology firms without
current earnings as the cost of capital increased following a
series of rapid increases in interest rates by central
banks.
RISK CONTROL
MEASURES
The creation of value through
innovation in the biotechnology sector outweighs the singular
and/or short-term adjustment to valuation levels arising from
changes in discount rates as a result of rising inflation. The
Investment Manager holds investments that have current earnings and
cash-flows and has significant exposure to Phase 3 products which
have a high probability of achieving cash-flows in the near-term.
Whilst the pace of interest rate increases has moderated in
reaction to reductions in US inflation, it is not possible to say
that this risk is reducing yet, as inflationary pressures
remain.
STABLE
STRATEGIC
LINK
Identify
Engage
Build
Support
Emerging Risks
10.
AVAILABILITY OF CAPITAL
RISK
DESCRIPTION
Funding for smaller public companies
is scarce. The IPO market is at its lowest level in a decade and
follow-on offerings remain below average. With a near record number
of companies trading at less than 1x their
cash balances, the market appears to believe that not all companies
will survive.
RISK CONTROL
MEASURES
The Investment Manager is
experienced in identifying potential in companies that have strong
fundamentals at attractive valuations that create an asymmetric and
attractive risk/reward profile. The Board reviews the financing
status of the Group's private portfolio with the Investment Manager
at least twice each year. Less than 3% of the Group's NAV is
exposed to companies that will need refinancing within the next 12
months and most of these companies have re-financing plans in
place. The acquisition of Arix and the successful sale of
Prometheus Biosciences has added significant working capital to the
Group, which has further mitigated this risk.
REDUCING
STRATEGIC
LINK
Identify
Engage
Build
Support
11. SUSTAINABILITY
REPORTING
RISK
DESCRIPTION
Sustainability reporting standards
are evolving rapidly and investors may require more detailed
sustainability disclosures to maintain or add new positions in our
shares.
RISK CONTROL
MEASURES
The Board monitors sustainability
reporting standards and is advised by the Group's service
providers, including an external sustainability consultant. The
Group has adopted a responsible investment policy in the current
year to formalise its long-standing social investment objective and
approach and also appointed a Sustainability Committee to provide
oversight and advice in relation to the Company's responsible
investment strategy.
STABLE
STRATEGIC
LINK
Identify
Engage
Build
Support
12. LIQUIDITY RISK
RISK
DESCRIPTION
Many investees are not yet at the
stage in their life cycle where they are cash-generative and enjoy
stable, predictable free cash-flow. They have typically raised
significant amounts of cash which are held in bank deposits and
liquid securities to meet operational requirements until their next
planned capital raising round or IPO. There have been several
high-profile bank failures, some of which, but not all, are to some
extent attributable directly or indirectly to rising policy
interest rates and rising long-term yields in response to sustained
inflationary pressures. To the extent that investees keep
their cash on deposit at such banks, there is a risk that they may
suffer a partial or total loss of capital and suffer a consequent
liquidity crisis threatening their ability to continue planned
development.
RISK CONTROL
MEASURES
The Investment Manager closely
monitors counterparty exposures in its portfolio companies.
Exposures to bank failures have been minimal. Portfolio
companies will typically manage their treasury functions on a
prudent basis, spreading exposure over several counterparties
thereby avoiding catastrophic losses from any single failure.
Where the Investment Manager becomes aware of significant risk
concentration, it will engage with investees to encourage more
prudent diversification. The Board also notes that, to date,
regulators have ensured that no depositors have lost funds in such
banking failures although it recognises that this may not
necessarily be achieved in the future.
STABLE
Longer Term Viability
Statement
Realising a robust and resilient
company
ASSESSING THE PROSPECTS OF THE
GROUP
The corporate planning process is
underpinned by scenarios that encompass a wide spectrum of
potential outcomes. These scenarios are designed to explore the
resilience of the Group to the potential impact of significant
risks set out below.
The scenarios are designed to be
severe but plausible and take full account of the availability and
likely effectiveness of the mitigating actions that could be taken
to avoid or reduce the impact or occurrence of the underlying risks
and which would realistically be open to management in the
circumstances. In considering the likely effectiveness of such
actions, the conclusions of the Board's regular monitoring and
review of risk and the Investment Manager's internal control
systems is taken into account.
The Board reviewed the impact of
stress testing the quantifiable risks to the Group's cash flows as
detailed in risk factors 1-5 and concluded that the Group, would
have sufficient working capital to fund its operations in the
following extreme scenario:
(1) The Group incurred
NAV losses of 40% of NAV over a three-year period ending 28
February 2027.
(2) No new capital was
raised.
(3) US$154 million of
private investments were funded from cash and by selling public
portfolio investments over the three-year period ending 28 February
2027.
To provide some context for this
scenario the worst-case annual losses for the NASDAQ Biotech Index
(NBI) in the last 10 years were 8.9% in 2018 and 21.4% in 2016
respectively. The Group's three-year loss scenario exceeds the
cumulative impact of both of these worst-case years of 40.4% spread
over three years. The annualised volatility of the NBI index for
the last 10 years is 25.3% and the index has an annualised return
of 6.9% for this period. An annual loss of 40% or more would
represent a 1.86 standard deviation loss and is only likely to
occur every thirty-two years if the index returns are normally
distributed. Considering this context, a cumulative loss of between
36% and 40% is therefore assumed to be a reasonable stress
test.
The Board considers that this stress
testing-based assessment of the Group's prospects is reasonable in
the circumstances of the inherent uncertainty involved.
THE PERIOD OVER WHICH WE CONFIRM
LONGER TERM VIABILITY
Within the context of the corporate
planning framework discussed above, the Board has assessed the
prospects of the Group over a three-year period ending 28 February
2027. Whilst the Board has no reason to believe the Group will not
be viable over a longer period, given the inherent uncertainty
involved, the period over which the Board considers it possible to
form a reasonable expectation as to the Group's longer-term
viability, based on the stress testing scenario planning discussed
above, is the three-year period to March 2027. This period is used
for the Investment Manager's business plans and has been selected
because it presents the Board and therefore readers of the Annual
Report with a reasonable degree of confidence whilst still
providing an appropriate longer-term outlook.
CONFIRMATION OF LONGER-TERM
VIABILITY
The Board confirms that it has
carried out a robust assessment of the emerging and principal risks
facing the Group, including those that would threaten its business
model, future performance, solvency or liquidity. Based upon the
robust assessment of the principal and emerging risks facing the
Group and its stress testing-based assessment of the Group's
prospects, the Board confirms that it has a reasonable expectation
that the Group will be able to continue in operation and meet its
liabilities as they fall due over the period to February
2027.
On behalf of the Board
William Simpson
Chair
27 March 2024
Engaging with Stakeholders
(Section 172)
Close collaborators and
committed partners
The AIC Code requires that the
matters set out in Section 172 of the Companies Act 2006 are
reported on by all companies, irrespective of domicile, provided
this does not conflict with local company law.
Section 172 recognises that
directors are responsible for acting in a way that they consider,
in good faith, to be most likely to promote the success of the
Group for the benefit of all shareholders. In doing so, they are
also required to consider the broader implications of their
decisions and the Group's operations on key stakeholders, the wider
community, and the environment. Key decisions are those that are
either material to the Group or are significant to any of the
Group's key stakeholders. The Group's engagement with key
stakeholders and the key decisions that were made or approved by
the Directors during the year are described below.
Stakeholder group
|
Methods of engagement
|
Benefits of engagement
|
Shareholders
Continued
access to capital is vital to the Group's longer term growth
objectives, and therefore, in line with its objectives, the Group
seeks to maintain shareholder satisfaction through:
- Positive risk-adjusted returns
- Continuous communication of portfolio updates
- Regular access to Investment Manager commentary on portfolio
decisions and outlook
|
The Group
engages with its shareholders through the issuance of regular
portfolio updates in the form of RNS announcements.
The
Investment Manager hosts mid-year and year end webinars and Q&A
sessions and in 2023 hosted its inaugural Capital Markets Day in
London.
The Group
provides in-depth commentary on the investment portfolio, corporate
governance and corporate outlook in its Annual and Interim Reports
and financial statements.
The Board
receives quarterly feedback from its brokers and distribution
partner in respect of investor engagement and investor
sentiment.
In 2023
the Group appointed distribution and investor relations company
Cadarn Capital to improve the flow of information to current and
potential shareholders.
|
The Group enjoys a supportive
shareholder base that understands the investment strategy as a
result of our active programme of events and meetings.
The Group has built a large pool of
potential investors to support its future growth.
|
Service providers
The Group
works closely with a number of service providers (the Investment
Manager, Administrator, Sub-Administrator, Corporate Secretary,
auditor, third party valuation agents, corporate brokers,
distribution partner, and other professional advisers).
The
independence, quality and timeliness of their service provision is
critical to the success of the Group.
|
The Group
has identified its key service providers and on an annual basis
undertakes a review of performance based on a questionnaire through
which it also seeks feedback.
Furthermore, the Board and its sub-committees engage
regularly with service providers on a formal and informal
basis.
The Group
regularly reviews all material contracts for service quality and
value.
|
Feedback
given by service providers is used to review the Group's policies
and procedures, to ensure open lines of communication, and
operational efficiency.
Performance reviews ensure the Board's confidence that the
Group is being serviced and advised by high quality service
providers. In 2023, the Group appointed Numis as corporate joint
broker and Cadarn Capital as distribution partner.
|
Portfolio Companies
The Group is currently invested in
36 Core Portfolio Companies.
|
The
Investment Manager engages on a regular basis with its portfolio
companies in order to conduct on-going due diligence and to meet
obligations if the Investment Manager holds a board
seat.
|
Honesty,
fairness and integrity of the management teams of the portfolio
companies are vital to the long-term success of the Group's
investments.
|
HM
Government
|
The Group funds assets developed in
UK academic and private sector laboratories, from conception to
commercialisation.
|
By
supporting the local biotech ecosystem in the country where the
Group is listed, UK government policy initiatives are supported and
promoted.
|
Community & Environment
The Group
does not have direct employees and does not anticipate any material
impact to its business model from climate change but aims to be a
good steward, in line with its socially-aligned investment
objective.
RTW
Charitable Foundation was created by the Investment Manager with
the vision to work towards a world free of ultra-rare disease. The
foundation funds research of rare conditions that do not attract
significant outside investment due to limited commercial
opportunity.
|
RTW
Charitable Foundation represents an extension of the Investment
Manager's mission. Its research process helps RTW identify
important causes of human suffering and introduces the firm to
individuals and organisations trying to make a
difference.
|
The Group
and the Directors minimise air travel by making maximum use of
video conferencing for Company related matters.
Acting and investing responsibly
provides the necessary foundation for the long-term sustainability
of investment success.
To
research grant recipients, RTW Charitable Foundation offers
financial support and guidance gleaned from the Investment
Manager's experience in drug development and company building. The
Foundation also offers support to humanitarian causes, initiatives
that raise disease awareness, and programmes with direct local
community impact, including days of action and youth
mentorship.
|
Responsible
Investment
The Group aims to achieve positive
absolute performance and superior long-term capital appreciation,
focusing on forming, building, and supporting world-class life
sciences, biopharmaceutical, and medical technology companies
supporting their pursuit of superior pharmacological or medical
therapeutic assets to enhance quality of life or extend patient
life. The Investment Manager's team of scientists and researchers
work tirelessly to evaluate the science behind thousands of
treatments and potential cures for diseases and conditions in order
to improve quality of life across the globe. As a guiding
principle, they prioritise overall positive impact on patients and
long-term meaningful outcomes to society and believe this is the
foundation of the Group's success.
The Group's social investment
objective directly aligns with Goal 3 of the UN Sustainable
Development Goals ("SDG") whilst having regard to broader
sustainability considerations.
As an investor in novel therapies,
supporting biotech, medical device, and diagnostics development,
the implementation of the above objective occurs in the context of
environmental and social risks and opportunities specific to the
sector.
The Group has adopted a Responsible
Investment policy outlining the Investment Manager's approach to
incorporating environmental and social characteristics into the
investment process, on behalf of the Group. It was designed in line
with guidance from the Principles of Responsible Investment and is
built around the pillars of Governance, Strategy, Risk Management,
and Metrics, which are the pillars of the Taskforce on
Climate-related Financial Disclosures and the International
Sustainability Standards Board. The Board has established a
Sustainability Committee to oversee the Investment Manager's
implementation of the policy.
As a long-term investor, the Group
(via the Investment Manager) seeks to meet regularly with the
management teams of portfolio companies. This approach fosters
long-term relationships with company management teams. This ongoing
dialogue enables open discussions on issues that could affect
long-term returns. Management may be engaged on a variety of
issues, including sustainability matters that present a potential
material risk or an opportunity for the Group.
The Group adopts a positive
screening methodology, implemented by the Investment Manager. At
the origination stage, potential investments are thematically
screened to ensure they align with the sustainable investment
objective and adopted strategy.
Monitoring is also in place such
that the Company can understand the core portfolio's sustainability
impact periodically and inform the engagement strategy to address
it.
The core portfolio of investments
typically makes use of outsourced providers (such as contract
research organisations), as this reduces the scale of physical
presence (e.g., laboratory space). The direct use of natural
resources is therefore limited.
The Investment Manager's operations
are highly concentrated in its primary office space located in a
building that is LEED Gold Certified based on, among other things,
the sustainability of its location, water efficiency, energy and
atmosphere characteristics, use of materials and resources, indoor
environmental quality, and innovation.
The Investment Manager espouses a
strong culture of compliance, risk management and ethical
behaviour. It aims always to act in the best interests of
shareholders, employees and stakeholders. Its corporate code of
ethics addresses the largest areas of risk pertaining to the
alternative asset management industry, including but not limited to
conflicts of interest, anti-bribery, employee investing, insider
trading and political contributions. Furthermore, it seeks to
ensure that investments do not lead to negative impacts on public
health or well-being or contribute to human or labour rights
violations, corruption, serious environmental harm or other actions
which may be perceived to be unethical. It seeks long-term
investment partners that evidence equivalent professional and
ethical rigour.
Consolidated Statement of Assets and Liabilities
as at 31 December 2023 and
31 December 2022
(Expressed in United States Dollars)
|
|
2023
|
|
2022
|
|
|
|
|
|
ASSETS:
|
|
|
|
|
Investments in securities, at fair value (cost at 31 December
2023: $244,056,637; 31 December 2022:
$259,472,596)
|
|
367,611,231
|
|
350,125,577
|
Derivative contracts, at fair value (cost at 31 December
2023: $6,271,193; 31 December 2022:
$2,614,659)
|
|
15,463,820
|
|
21,467,649
|
Cash and
cash equivalents
|
|
2,721,553
|
|
6,966,168
|
Due from
brokers
|
|
57,887,214
|
|
22,195,456
|
Receivable from unsettled trades
|
|
-
|
|
439,798
|
Other
assets
|
|
2,550,609
|
|
345,750
|
|
|
|
|
|
TOTAL ASSETS
|
|
446,234,427
|
|
401,540,398
|
|
|
|
|
|
LIABILITIES:
|
|
|
|
|
Securities sold short, at fair value
(proceeds at
31 December 2023:
$1,399,242; 31 December 2022:
$15,407,927)
|
|
1,197,921
|
|
12,438,334
|
Derivative contracts, at fair value
(proceeds at
31 December 2023:
$nil; 31 December 2022:
$nil)
|
|
8,390,327
|
|
8,926,743
|
Due to brokers
|
|
5,329,681
|
|
25,823,016
|
Payable for unsettled
trades
|
|
-
|
|
5,561,560
|
Accrued expenses
|
|
2,293,541
|
|
866,756
|
TOTAL LIABILITIES
|
|
17,211,470
|
|
53,616,409
|
|
|
|
|
|
TOTAL NET ASSETS
|
|
429,022,957
|
|
347,923,989
|
|
|
|
|
|
NET
ASSETS attributable to Ordinary Shares (shares at
31
December 2023: 210,635,347; 31
December 2022: 212,389,138)
|
|
399,283,811
|
|
326,079,521
|
|
|
|
|
|
NET
ASSETS attributable to Non-Controlling Interest
|
|
29,739,146
|
|
21,844,468
|
|
|
|
|
|
NAV
per Ordinary Share
|
|
1.8956
|
|
1.5353
|
The audited consolidated financial
statements of the Group were approved and authorised for issue by
the Board of Directors on 27 March 2024 and signed on its behalf
by:
William Simpson
Paul Le Page
Chair
Director
See accompanying notes to the
consolidated financial statements.
Consolidated Condensed
Schedule of Investments
as at 31 December
2023
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
Descriptions
|
Number of
Shares
|
|
Cost
|
|
Fair Value
|
|
Percentage of Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Investments in securities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stocks
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
|
Rocket Pharmaceuticals, Inc.
|
2,400,755
|
|
8,188,796
|
|
71,950,627
|
|
16.77
|
|
|
Others*
|
|
|
87,817,542
|
|
121,224,790
|
|
28.26
|
|
|
Total United
States
|
|
|
96,006,338
|
|
193,175,417
|
|
45.03
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
5,570,915
|
|
6,878,343
|
|
1.60
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
6,090,973
|
|
3,974,203
|
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
China
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
|
Ji Xing Pharmaceuticals Ltd.
|
541,205
|
|
216,482
|
|
798,382
|
|
0.19
|
|
|
Others*
|
|
|
402,213
|
|
677,342
|
|
0.16
|
|
|
Total
China
|
|
|
618,695
|
|
1,475,724
|
|
0.35
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
2,953,012
|
|
646,323
|
|
0.15
|
|
|
|
|
|
|
|
|
|
|
|
|
British Virgin
Islands
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
776,929
|
|
477,179
|
|
0.11
|
|
|
|
|
|
|
|
|
|
|
|
|
Cayman
Islands
|
|
|
|
|
|
|
|
|
|
Financials
|
|
|
46,790
|
|
51,001
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
Total common
stocks
|
|
|
112,063,652
|
|
206,678,190
|
|
48.18
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred
stocks
|
|
|
|
|
|
|
|
|
China
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
Ji Xing Pharmaceuticals Ltd.
|
14,177,776
|
|
25,664,114
|
|
33,052,656
|
|
7.70
|
|
Others*
|
|
|
4,110,584
|
|
4,168,056
|
|
0.97
|
|
Total
China
|
|
|
29,774,698
|
|
37,220,712
|
|
8.67
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
Healthcare*
|
|
|
40,654,612
|
|
36,321,860
|
|
8.47
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
1,093,042
|
|
1,854,238
|
|
0.43
|
|
|
|
|
|
|
|
|
|
|
* No
individual investment security or contract constitutes greater than
5 per cent of net assets.
|
|
|
|
|
|
|
|
|
|
|
|
| |
See accompanying notes to the
consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December
2023
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
Descriptions
|
Number of
Shares
|
|
Cost
|
|
Fair Value
|
|
Percentage of Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Investments in securities, at fair value
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible preferred
stocks
|
|
|
|
|
|
|
|
|
|
Switzerland
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
1,729,518
|
|
1,723,249
|
|
0.40
|
|
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
774,317
|
|
760,071
|
|
0.18
|
|
|
|
|
|
|
|
|
|
|
|
Total convertible preferred
stocks
|
|
|
74,026,187
|
|
77,880,130
|
|
18.15
|
|
|
|
|
|
|
|
|
|
|
Investment in private
investment companies
|
|
|
|
|
|
|
|
|
Cayman
Islands
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
4010 Royalty Offshore FNT Fund, LP
|
|
|
23,892,852
|
|
25,982,258
|
|
6.06
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
11,814,933
|
|
15,873,635
|
|
3.70
|
|
|
|
|
|
|
|
|
|
|
Total investment in private
investment companies
|
|
|
35,707,785
|
|
41,855,893
|
|
9.76
|
|
|
|
|
|
|
|
|
|
|
American depository
receipts
|
|
|
|
|
|
|
|
|
|
United
Kingdom
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
|
Immunocore Holdings plc
|
462,249
|
|
11,872,691
|
|
31,580,852
|
|
7.36
|
|
|
|
|
|
|
|
|
|
|
|
|
Netherlands
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
1,331,626
|
|
1,434,221
|
|
0.33
|
|
|
|
|
|
|
|
|
|
|
|
|
Ireland
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
161,953
|
|
198,555
|
|
0.05
|
|
|
|
|
|
|
|
|
|
|
|
Total American depository
receipts
|
|
|
13,366,270
|
|
33,213,628
|
|
7.74
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
See accompanying notes to the
consolidated financial statements.
Consolidated Condensed
Schedule of Investments (continued)
as at 31 December
2023
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
Descriptions
|
Number of
Shares
|
|
Cost
|
|
Fair Value
|
|
Percentage of Net
Assets
|
|
|
|
|
|
|
|
|
Investments in securities, at fair value
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Convertible
notes
|
|
|
|
|
|
|
|
|
Canada
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
7,512,664
|
|
7,566,259
|
|
1.76
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
1,380,079
|
|
417,131
|
|
0.10
|
|
|
|
|
|
|
|
|
|
|
Total convertible
notes
|
|
|
8,892,743
|
|
7,983,390
|
|
1.86
|
|
|
|
|
|
|
|
|
|
|
|
Total investments in
securities, at fair value
|
|
244,056,637
|
|
367,611,231
|
|
85.69
|
|
|
|
|
|
|
|
|
|
|
|
See
accompanying notes to the consolidated financial
statements.
|
Consolidated Condensed Schedule of Investments (continued)
as at 31 December
2023
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
Descriptions
|
Number of
contracts
|
|
Cost
|
|
Fair Value
|
|
Percentage of Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts - assets, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
swaps
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
7,185,030
|
|
1.67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
|
|
Immunocore Holdings plc
|
|
12,498
|
|
|
|
280,979
|
|
0.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
British Virgin
Islands
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
9,793
|
|
0.00
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
swaps
|
|
|
|
|
|
7,475,802
|
|
1.74
|
|
|
|
|
|
|
|
|
|
|
|
Warrants
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
|
|
|
|
|
Rocket
Pharmaceuticals, Inc.
|
|
170,764
|
|
2,565,561
|
|
4,800,495
|
|
1.12
|
|
|
Others*
|
|
|
|
1,242,926
|
|
1,764,580
|
|
0.41
|
|
|
Total United
States
|
|
|
|
3,808,487
|
|
6,565,075
|
|
1.53
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Canada
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
2,462,706
|
|
881,237
|
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
warrants
|
|
|
|
6,271,193
|
|
7,446,312
|
|
1.74
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent value
rights
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
|
541,706
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Total contingent value
rights
|
|
|
|
|
|
541,706
|
|
0.13
|
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative contracts -
assets, at fair value
|
|
6,271,193
|
|
15,463,820
|
|
3.61
|
|
|
|
|
|
|
|
|
|
|
|
|
* No
individual investment security or contract constitutes greater than
5 per cent of net assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
See accompanying notes to the
consolidated financial statements.
Consolidated Condensed
Schedule of Investments (continued)
as at 31 December
2023
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
|
Descriptions
|
|
|
|
Proceeds
|
|
Fair Value
|
|
Percentage of Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold short, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common
stocks
|
|
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
1,353,107
|
|
1,146,920
|
|
0.28
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cayman
Islands
|
|
|
|
|
|
|
|
|
|
|
|
Financials
|
|
|
|
|
46,135
|
|
51,001
|
|
0.01
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total common
stocks
|
|
|
|
|
1,399,242
|
|
1,197,921
|
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total securities sold short, at fair value
|
|
|
1,399,242
|
|
1,197,921
|
|
0.29
|
|
Descriptions
|
|
|
|
Fair Value
|
|
Percentage of Net
Assets
|
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts - liabilities, at fair value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
swaps
|
|
|
|
|
|
|
|
|
United
States
|
|
|
|
|
|
|
|
|
|
Healthcare
|
|
|
|
|
8,390,327
|
|
1.96
|
|
|
Total United
States
|
|
|
|
|
8,390,327
|
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
Total derivative contracts -
liabilities, at fair value
|
|
8,390,327
|
|
1.96
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to the
consolidated financial statements.
Consolidated Condensed Schedule of Investments
as at 31 December
2022
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
Descriptions
|
Number of
Shares
|
|
Cost
|
|
Fair Value
|
|
Percentage 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 per cent of net assets.
|
|
|
|
|
|
|
|
|
|
|
|
| |
See accompanying notes to the
consolidated financial statements.
Consolidated Condensed Schedule of Investments (continued)
as at 31 December
2022
(Expressed in United States Dollars)
|
|
|
|
|
|
|
|
|
Descriptions
|
Number of
Shares
|
|
Cost
|
|
Fair Value
|
|
Percentage 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 per cent of net assets.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
See accompanying notes to the
consolidated financial statements.
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 year 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 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 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 have been calculated on a specific
identification method.
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 31 December 2023, the Group had cash
collateral receivables of $23,793,429 (31 December 2022:
$16,384,706) (see Note 3) with derivative counterparties under the
same master netting arrangement.
Income taxes
The Company and Subsidiary are
exempt from taxation in Guernsey and were each charged an annual
exemption fee of GBP1,200, which has increased to GBP1,600 per
annum with effect from 1 January 2024. 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 consolidated financial
statements. Income tax and related interest and penalties would be
recognised as a tax expense in the 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 31 December 2023 or 31 December 2022.
Use
of estimates
Preparing 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 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 ASU 2022-03 as of 1 January 2023.
At 31 December 2023, the fair value
of the equity securities subject to contractual sale restrictions
is $30,232,777. In accordance with ASU 2022-03, the fair value of
these securities was not adjusted to reflect the contractual sale
restrictions.
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 31 December 2023:
|
|
Level 1
|
Level 2
|
Level 3
|
Investments measured at net
asset value*
|
Total
|
|
|
|
|
|
|
Assets (at fair
value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments in securities
|
|
|
|
|
|
|
Common stocks
|
204,773,131
|
1,000,720
|
904,339
|
-
|
206,678,190
|
|
Convertible preferred stocks
|
1,854,238
|
2,836,628
|
73,189,264
|
-
|
77,880,130
|
|
Investment in private
investment companies
|
-
|
-
|
-
|
41,855,893
|
41,855,893
|
|
American
depository receipts
|
33,213,628
|
-
|
-
|
-
|
33,213,628
|
|
Convertible notes
|
-
|
-
|
7,983,390
|
-
|
7,983,390
|
|
Total investments in
securities
|
239,840,997
|
3,837,348
|
82,076,993
|
41,855,893
|
367,611,231
|
|
Derivative contracts
|
|
|
|
|
|
|
Equity swaps
|
-
|
7,475,802
|
-
|
-
|
7,475,802
|
|
Warrants
|
5,247
|
6,743,593
|
697,472
|
-
|
7,446,312
|
|
Contingent value rights
|
-
|
-
|
541,706
|
-
|
541,706
|
|
Total derivative contracts
|
5,247
|
14,219,395
|
1,239,178
|
-
|
15,463,820
|
|
|
239,846,244
|
18,056,743
|
83,316,171
|
41,855,893
|
383,075,051
|
|
|
|
|
|
|
|
Liabilities (at fair
value)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities sold short
|
|
|
|
|
|
|
Common
stocks
|
1,146,920
|
51,001
|
-
|
-
|
1,197,921
|
|
Total securities sold short
|
1,146,920
|
51,001
|
-
|
-
|
1,197,921
|
|
Derivative contracts
|
|
|
|
|
|
|
Equity swaps
|
-
|
8,390,327
|
-
|
-
|
8,390,327
|
|
Total derivative contracts
|
-
|
8,390,327
|
-
|
-
|
8,390,327
|
|
|
1,146,920
|
8,441,328
|
-
|
-
|
9,588,248
|
* The Group's investment in
private investment companies that are valued at their net asset
value are not categorised 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:
|
|
Level 1
|
Level 2
|
Level 3
|
Investments measured at net
asset value*
|
Total
|
|
|
|
|
|
|
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 categorised 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 year ended
31 December 2023, the Group had net transfers into Level 2 of
$161,322 from Level 3 (for the year ended 31 December 2022:
$4,555,194) and transfers into Level 1 of $12,846,527 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 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 31 December 2023 and 31 December
2022:
|
|
Fair value at 31 December
2023
|
Valuation
techniques
|
Significant unobservable
inputs
|
Range of
inputs
|
|
Assets (at fair
value)
|
|
|
|
|
|
Investments in securities
|
|
|
|
|
|
|
Convertible preferred stocks
|
44,732,084
|
Recent
transaction price
|
n/a
|
n/a
|
|
|
|
19,614,346
|
Discounted cash flow
|
WACC
|
13% -
30%
|
|
|
|
|
and/or
market approach
|
Revenue
multiples
|
2.8x -
4.0x
|
|
|
|
|
|
Market
rate of returns
|
(18%) -
10%
|
|
|
|
8,727,481
|
Probability-weighted expected return method
("PWERM")
|
WACC
Revenue multiples
Market step-up multiple
|
12% -
20%
4.0x
0.7x -
1.8x
|
|
|
|
|
Market
rate of returns
|
(23)% -
10%
|
|
|
|
|
Recovery
rate
|
50%
|
|
|
115,353
|
Liquidation value
|
n/a
|
n/a
|
|
Convertible notes
|
7,566,258
|
PWERM
|
Discount
rate
|
5%
-7%
|
|
|
|
|
|
Expected volatility
|
60%
|
|
|
|
352,904
|
Discounted cash flow
|
WACC
|
26%
|
|
|
|
|
and/or
market approach
|
Revenue
multiples
|
4.0x
|
|
|
|
|
|
Market
rate of returns
|
(3%)
|
|
|
|
64,228
|
Recent
transaction price
|
n/a
|
n/a
|
|
Common
stocks
|
798,531
|
Recent
transaction price
|
n/a
|
n/a
|
|
|
|
105,808
|
Market
approach
|
Revenue
multiples
|
0.5x
-0.6x
|
|
Total investments in
securities
|
82,076,993
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
|
|
|
Warrants
|
697,472
|
Recent
transaction price
|
Expected
volatility
|
38% -
43%
|
|
|
and
option pricing model
|
|
|
Contingent value rights
|
541,706
|
Recent
transaction price
|
n/a
|
n/a
|
Total derivative
contracts
|
1,239,178
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
Fair value at 31 December
2022
|
Valuation
techniques
|
Significant unobservable
inputs
|
Range of
inputs
|
|
Assets (at fair
value)
|
|
|
|
|
|
Investments in securities
|
|
|
|
|
|
|
Convertible preferred stocks
|
50,023,996
|
Discounted cash flow
|
WACC
|
13% -
33%
|
|
|
|
|
and/or
market approach
|
Revenue multiples
|
2.8x -
4.0x
|
|
|
|
|
|
Market
step-up multiple
|
0.7x -
1.5x
|
|
|
|
|
|
Market rate of
returns
|
-30%
- 20%
|
|
|
|
7,908,953
|
Price of
most recent
|
|
|
|
|
|
|
funding
round
|
n/a
|
n/a
|
|
|
Convertible notes
|
8,772,349
|
Discounted cash flow
|
WACC
|
13%
|
|
|
|
|
and/or
market approach
|
Revenue multiples
|
4.0x
|
|
|
|
|
|
Market
step-up multiple
|
0.7x -
1.1x
|
|
|
|
|
|
Market
rate of returns
|
0%
|
|
|
|
1,280,484
|
PWERM
|
Market
rate of returns
Recovery
rate
|
-30%
0% -
50%
|
|
|
Common
stocks
|
1,208,299
|
Discounted cash flow
|
WACC
|
13%
|
|
|
|
|
and/or
market approach
|
Revenue multiples
Market
step-up
multiple
|
0.2x
- 4.0x
0.7x -
1.1x
|
|
|
|
|
|
Market rate of returns
|
-10%
|
|
|
|
2,156,109
|
PWERM
|
Probability of business
|
95%
|
|
|
|
|
|
combination
|
|
|
|
|
149
|
Price of
most recent
|
|
|
|
|
|
|
funding
round
|
n/a
|
n/a
|
|
Total investments in
securities
|
71,350,339
|
|
|
|
|
|
|
|
|
|
|
Derivative contracts
|
|
|
|
|
Warrants
|
315,589
|
Discounted cash flow
|
WACC
|
33%
|
|
|
Market
approach
|
Revenue
multiple
|
4.0x
|
|
|
and/or
option pricing
model
|
Market
rate of returns Expected volatility
|
10%
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 year ended 31 December
2023 were as follows:
|
|
Balance beginning 1 January
2023
|
Realised gains/
(losses)(a)
|
Change in Unrealised gains/
(losses)(a)
|
Purchases
|
Sales
|
Transfers into/(from) Level
3*
|
Ending balance 31 December
2023
|
Assets (at fair
value)
|
|
|
|
|
|
|
|
|
Investments in
securities
|
|
|
|
|
|
|
|
|
Common
stocks
|
3,364,557
|
-
|
(304,109)
|
-
|
-
|
(2,156,109)
|
904,339
|
|
Convertible preferred stocks
|
57,932,949
|
-
|
6,114,014
|
7,595,169
|
-
|
1,547,132
|
73,189,264
|
|
Convertible notes
|
10,052,833
|
-
|
(1,329,981)
|
11,536,901
|
-
|
(12,276,363)
|
7,983,390
|
|
Total investments in
securities
|
71,350,339
|
-
|
4,479,924
|
19,132,070
|
-
|
(12,885,340)
|
82,076,993
|
|
|
|
|
|
|
|
|
|
|
Derivative
contracts
|
|
|
|
|
|
|
|
|
Warrants
|
476,911
|
-
|
21,813
|
321,257
|
-
|
(122,509)
|
697,472
|
|
Contingent value rights
|
-
|
-
|
541,706
|
-
|
-
|
-
|
541,706
|
|
Total derivative
contracts
|
476,911
|
-
|
563,519
|
321,257
|
-
|
(122,509)
|
1,239,178
|
* 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 beginning 1 January
2022
|
Realised gains/
(losses)(a)
|
Change in Unrealised gains/
(losses)(a)
|
Purchases
|
Sales
|
Transfers into/(from) Level
3(b)
|
Ending balance 31 December
2022
|
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 consolidated
statement of operations.
(b) Conversions of preferred stock into common stock.
Changes in Level 3 unrealised gains
and losses during the year for assets still held at year end were
as follows:
|
|
|
2023
|
2022
|
|
|
|
|
|
Common stocks
|
|
|
116,949
|
(664,647)
|
Convertible notes
|
(919,115)
|
420,628
|
Convertible preferred
stocks
|
6,199,338
|
(13,404,700)
|
Contingent value rights
|
|
|
541,706
|
-
|
Warrants
|
|
|
21,813
|
76,306
|
Change in unrealised gains and losses during the year for
assets still held at year end
|
5,960,691
|
(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:
|
|
|
2023
|
2022
|
|
|
|
|
|
Realised gains
|
|
|
127,739,248
|
47,604,728
|
Realised losses
|
|
|
(60,622,155)
|
(41,995,983)
|
Net realised gain on securities, derivative contracts and
securities sold short
|
67,117,093
|
5,608,745
|
|
|
|
2023
|
2022
|
|
|
|
|
|
Change in
unrealised gains
|
|
|
132,672,225
|
112,585,347
|
Change in
unrealised losses
|
|
|
(111,833,730)
|
(152,339,558)
|
Net change in unrealised gain/(loss) on securities,
derivative contracts and securities sold short
|
20,838,495
|
(39,754,211)
|
As at 31 December 2023 the Group had
commitments (subject to completion of certain parameters) to
certain investments totalling $59,732,160 (31 December 2022:
$2,544,486), which was mainly comprised of
a $58,078,670 commitment to Acacia Research Corporation for a stake
of Arix and a $1,107,148 uncalled commitment related to the Group's
investment in 4010 Royalty Fund.
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 31 December 2023, due from
brokers totalled $57,887,214 (31 December 2022: $22,195,456).
Included within due from brokers is $34,093,785 (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 $23,793,429 (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 utilises 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.
Contingent value rights
The Group may receive contingent
value rights during mergers, acquisitions, or divestitures.
Contingent value rights are designed to provide the Group with
additional compensation or benefits contingent upon the occurrence
of specific future events, such as regulatory approvals, milestones
related to product development or commercialization, or the
achievement of certain financial targets. Contingent value rights
are subject to the uncertainty of payout, as their value hinges on
the occurrence of specific events. The Group considers the
uncertainty when determining the fair value of its investments in
contingent value rights.
Volume of derivative activities
The Group considers the average
month-end notional amounts during the year, categorised by primary
underlying risk, to be representative of the volume of its
derivative activities during the year ended 31 December
2023:
|
|
2023
|
|
2022
|
|
|
Long
exposure
|
|
Short
exposure
|
|
Long
exposure
|
|
Short
exposure
|
Primary underlying risk
|
|
Notional
amounts
|
|
Notional
amounts
|
|
Notional
amounts
|
|
Notional
amounts
|
Equity price
|
|
|
|
|
|
|
|
|
|
Equity swaps
|
|
|
64,032,939
|
|
56,046,951
|
|
48,774,292
|
|
56,273,944
|
Warrants(a)
|
|
|
3,963,562
|
|
-
|
|
4,024,470
|
|
-
|
Contingent value rights
|
|
541,706
|
|
-
|
|
-
|
|
-
|
|
|
|
68,538,207
|
|
56,046,951
|
|
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 consolidated statement of assets
and liabilities and consolidated statement of
operations
The following tables identify the
fair value amounts of derivative instruments included in the
consolidated statement of assets and liabilities as derivative
contracts, categorised by primary underlying risk, at 31 December
2023 and 31 December 2022. The following table also identifies the
gain and loss amounts included in the 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 year ended 31
December 2023 and 31 December 2022.
Impact of derivatives on the consolidated statement of assets
and liabilities and consolidated statement of operations
(continued)
|
|
2023
|
Primary underlying risk
|
|
Derivative
assets
|
|
Derivative
liabilities
|
|
Realised
gain/(loss)
|
|
Change in unrealised
gain/(loss)
|
Equity price
|
|
|
|
|
|
|
|
|
|
Equity swaps
|
|
|
7,475,802
|
|
8,390,327
|
|
(2,428,614)
|
|
(11,074,111)
|
Warrants
|
|
|
7,446,312
|
|
-
|
|
(373)
|
|
1,408,458
|
Contingent value rights
|
|
|
541,706
|
|
-
|
|
-
|
|
541,706
|
|
|
|
15,463,820
|
|
8,390,327
|
|
(2,428,987)
|
|
(9,123,947)
|
|
|
2022
|
Primary underlying risk
|
|
Derivative
assets
|
|
Derivative
liabilities
|
|
Realised
gain/(loss)
|
|
Change in unrealised
gain/(loss)
|
Equity price
|
|
|
|
|
|
|
|
|
|
Equity swaps
|
|
|
19,086,329
|
|
8,926,743
|
|
(2,748,269)
|
|
5,894,995
|
Warrants
|
|
|
2,381,320
|
|
-
|
|
-
|
|
(1,293,427)
|
|
|
|
21,467,649
|
|
8,926,743
|
|
(2,748,269)
|
|
4,601,568
|
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 31 December 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
consolidated statement of assets and liabilities to enable users of
the 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 31 December 2023 and 31
December 2022, the Group held financial instruments and derivative
instruments that were eligible for offset in the 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
consolidated statement of assets and liabilities. The following
table presents the potential effect of netting arrangements for
asset derivative contracts presented in the consolidated statement
of assets and liabilities:
Description
|
Gross amounts of recognised
assets
|
Gross amounts offset in the
consolidated statement of assets and liabilities
|
Gross amounts of recognised
assets and liabilities
|
31 December
2023
Gross amounts not offset in
the consolidated statement of
assets and
liabilities
|
|
|
Financial
instruments(a)
|
|
Cash collateral
received(b)
|
|
Net amount
|
Equity swaps
|
|
|
|
|
|
|
|
|
|
|
Cowen
Financial Products, LLC
|
6,235,319
|
-
|
6,235,319
|
|
(286,396)
|
|
-
|
|
5,948,923
|
Jefferies
& Co.
|
1,058,293
|
-
|
1,058,293
|
|
(758,677)
|
|
-
|
|
299,616
|
Morgan
Stanley & Co. LLC
|
129,527
|
-
|
129,527
|
|
(129,527)
|
|
-
|
|
-
|
Bank of
America Merrill Lynch
|
52,663
|
-
|
52,663
|
|
(52,663)
|
|
-
|
|
-
|
|
|
7,475,802
|
-
|
7,475,802
|
|
(1,227,263)
|
|
-
|
|
6,248,539
|
|
|
|
|
|
|
|
|
|
|
|
| |
Description
|
Gross amounts of recognised
assets
|
Gross amounts offset in the
consolidated statement of assets and liabilities
|
Gross amounts of recognised
assets and liabilities
|
31 December
2022
Gross amounts not offset in
the consolidated statement of
assets and
liabilities
|
|
|
|
Financial
instruments(a)
|
|
Cash collateral
received(b)
|
|
Net 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 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 consolidated statement of assets and
liabilities as of 31 December 2023 and audited consolidated
statement of assets and liabilities 31 December 2022:
Description
|
Gross amounts of recognised
liabilities
|
Gross amounts offset in the
consolidated statement of assets and liabilities
|
Gross amounts of recognised
liabilities
|
31 December
2023
Gross amounts not offset in
the consolidated statement of
assets and
liabilities
|
Net amount
|
|
Financial
instruments(a)
|
|
Cash collateral
pledged(b)
|
|
Equity swaps
|
|
|
|
|
|
|
|
|
|
|
Bank of
America Merrill Lynch
|
4,382,764
|
-
|
4,382,764
|
|
(52,663)
|
|
(4,320,957)
|
|
9,144
|
Morgan
Stanley & Co. LLC
|
2,962,490
|
-
|
2,962,490
|
|
(129,527)
|
|
(2,832,963)
|
|
-
|
Jefferies
& Co.
|
758,677
|
-
|
758,677
|
|
(758,677)
|
|
-
|
|
-
|
Cowen
Financial Products, LLC
|
286,396
|
-
|
286,396
|
|
(286,396)
|
|
-
|
|
-
|
|
|
8,390,327
|
-
|
8,390,327
|
|
(1,227,263)
|
|
(7,153,920)
|
|
9,144
|
Description
|
Gross amounts of recognised
liabilities
|
Gross amounts offset in the
consolidated statement of assets and liabilities
|
Gross amounts of recognised
liabilities
|
31 December
2022
Gross amounts not offset in
the consolidated statement of
assets and
liabilities
|
Net amount
|
|
Financial
instruments(a)
|
|
Cash collateral
pledged(b)
|
|
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 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
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 programme. 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 year ended 31 December
2023 the Company did not issue any Ordinary Shares:
|
|
2023
|
2023
|
2022
|
2022
|
|
|
Number
of
Ordinary Shares
|
Number
of
Treasury Shares
|
Number
of
Ordinary Shares
|
Number
of
Treasury Shares
|
|
|
|
|
|
|
As at 1 January
|
|
212,389,138
|
-
|
212,389,138
|
-
|
Share
buyback
|
|
(1,753,791)
|
1,753,791
|
-
|
-
|
As at 31 December
|
210,635,347
|
1,753,791
|
212,389,138
|
-
|
During the year ended 31 December
2023, the Company bought back 1,753,791 Ordinary Shares at an
average price of US$1.19 for a total cost of US$2,093,411,
including transaction costs of $4,178. At the date of approval of
these consolidated financial statements, all 1,753,791 of the
Ordinary Shares were held as treasury shares (31 December 2022:
nil).
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 LLC 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 has been allocated at the
Subsidiary level, and 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 LLC. As at 31
December 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 year ended 31 December 2023 amounted to $4,269,757
(year ended 31 December 2022: $3,751,464) of
which $nil (31 December 2022: $nil) was outstanding at the year
end.
Performance Allocation
The Performance Allocation Share
held by RTW Venture Performance LLC 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 year ended 31 December 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 $5,137,836 in 2023 (31 December 2022: mark
to market loss of $2,476,036), which is included in Performance
Allocation within the consolidated statement of changes in net
assets. There was an allocation of uncrystallized performance
allocation from Ordinary Shareholders to the Performance Allocation
Share Class of $2,756,842 related to the Group's performance in the
period (31 December 2022: $nil).
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 LLC 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.
RTW Venture Performance LLC, an
affiliate of 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 year ended 31 December
2023, the Board did not approve a cash distribution to the
Performance Allocation Share Class (year ended 31 December 2022:
$nil. At the year end the
Performance Allocation Share Class of the Subsidiary is reflected
within the Non-Controlling Interest balance of $29,739,146 (31
December 2022: $21,844,468).
The Investment Manager is also
refunded any research costs incurred on behalf of the
Group.
On 6 July 2023 the Group signed a
$25,000,000 commitment to 4010 Royalty
Fund a private fund created and managed by RTW Investments, LP. The
Group subsequently funded $23,892,852 of this commitment on 20 July
2023 and had a remaining commitment of $1,107,148 at 31 December
2023. No management or performance fees are charged to the Group at
the 4010 Royalty Fund.
One of the Directors of the Group,
Stephanie Sirota, is also a partner and the Chief Business Officer
of the Investment Manager.
As at 31 December 2023, the number
of Ordinary Shares held by each Director was as follows:
|
|
|
2023
|
2022
|
|
|
|
Number
of Ordinary Shares
|
Number
of 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 boards of the following investments: Rocket, Ji Xing,
and Yarrow Biotechnology. As at 31 December 2023, he held
29,693,872 Ordinary Shares in the Group (14.10% 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 year amounted to $177,011 (31 December 2022: $176,722) of
which $50,369 was outstanding at 31 December 2023 (31 December
2022: $48,281) and is included within accrued expenses.
All of the Directors of the
Company are also directors of the Subsidiary and each has served
since the Subsidiary's 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 year ended 31 December
2023, EFML and MSFS charged administration fees of $421,468
(including $212,000 (GBP165,000) in respect of one-off work and
compensation for work performed in prior years) and $251,954
respectively (31 December 2022: EFML charged $93,469 and MSFS
charged $218,534), of which $18,465 and $94,250 (31 December 2022:
EFML $6,484, MSFS $91,099) were outstanding at 31 December 2023,
and were included within accrued expenses.
12. Financial highlights
Financial highlights for the year
ended 31 December 2023 and 31 December 2022 are as
follows:
|
2023
|
2022
|
Per Ordinary Share operating performance
|
|
|
Net Asset Value, beginning of
year
|
$
1.54
|
$
1.71
|
Share buybacks
|
-
|
-
|
Income from investments
|
|
|
Net investment
income/(loss)
|
(0.02)
|
(0.02)
|
Net
realised and unrealised gain/(loss) on securities, derivatives and
foreign currency transactions
|
0.42
|
(0.15)
|
Income/(loss) attributable to
Non-Controlling Interest
|
(0.04)
|
-
|
Total from investment
operations
|
0.36
|
(0.17)
|
Net Asset Value, end of
year
|
$1.90
|
$ 1.54
|
|
|
|
Total return
|
|
|
Total return before Performance
Allocation
|
24.27
%
|
(10.18)%
|
Performance Allocation (excluding
mark to market)
|
(0.80)
%
|
-
%
|
Total return after Performance
Allocation
|
23.47 %
|
(10.18)%
|
|
|
|
|
|
Ratios to average net assets*
|
|
|
Expenses
|
|
|
2.58
%
|
2.47%
|
Performance Allocation (including mark to market)
|
|
2.28
%
|
(1.44)%
|
Expenses and Performance
Allocation
|
4.86 %
|
1.03%
|
|
|
|
|
|
Net investment
income/(loss)
|
(1.38)
%
|
(1.75)%
|
|
|
|
|
|
NAV total return for the
year
|
23.47 %
|
(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
On 13 February 2024, the Group
completed the acquisition of Arix's assets. The transaction was
announced on 1 November 2023 and was effected through a scheme of
reconstruction and the voluntary winding-up of Arix under section
110 of the Insolvency Act 1986.
On 1 February 2024, RTW Biotech UK
Limited, a wholly owned subsidiary of RTW Biotech Opportunities
Operating Limited, was incorporated in the United Kingdom, and has
been used to hold Arix's assets.
From 31 December 2023 to the date of
approval of these consolidated financial statements, the Company
bought back 5,550,000 Ordinary Shares at an average price of $1.33
for a total cost of $7,405,181, including transaction costs of
$14,806. At the point of signing these consolidated financial
statements, all 5,550,000 of the Ordinary Shares were held as
treasury shares.
These consolidated financial
statements were approved by the Board of Directors on 27 March
2024. Subsequent events have been evaluated through this
date.
General Company
Information
Structure
|
Closed-end Investment
Fund
|
Domicile
|
Guernsey
|
Listing
|
London Stock Exchange,
Premium Segment
|
Launch
date
|
30 October
2019
|
Dividend
policy
|
To be
reinvested
|
Management
fee
|
1.25%
|
Performance
fee
|
20% with an 8.0% annualised
and compounded- since-inception hurdle
|
ISIN
|
GG00BKTRRM22
|
SEDOLs
|
BKTRRM2 and
BNNXVW5
|
Tickers
|
RTW (USD) and RTWG
(GBP)
|
LEI
|
549300Q7EXQQH6KF7Z84
|
Website
|
www.rtwfunds.com/rtw-biotech-opportunities-ltd
|
Glossary
unaudited
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.
|
Basking
|
Basking
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
|
HSAC2
|
Health
Sciences Acquisition Corporation 2
|
Immunocore
|
Immunocore Limited
|
Iteos
|
iTeos
Therapeutics, Inc.
|
Ji Xing
or JIXING
|
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
|
OriCell
Therapeutics (Shangha) Co., Ltd
|
Prometheus
|
Prometheus Biosciences, Inc.
|
Prometheus Labs
|
Prometheus Laboratories, Inc.
|
Pulmonx
|
Pulmonx
Corporation
|
Pyxis
|
Pyxis
Oncology, Inc.
|
Rocket
|
Rocket
Pharmaceuticals, Inc.
|
RTW
Royalty 1
|
RTW
Royalty Holdings LLC (royalty deal for
Mavacamten)
|
RTW
Royalty 2
|
RTW Fund
2 (royalty deal for Jelmyto)
|
RTW
Royalty Fund
|
4010
Royalty Fund, a private fund created and managed by RTW
Investments, LP.
|
InBrace
|
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
|
Defined Terms
"Adjusted Net Asset
Value"
|
the NAV adjusted by deducting the
unrealised gains and unrealised losses in respect of private
Portfolio Companies;
|
|
|
"Administrator"
|
means Elysium Fund Management
Limited;
|
|
|
"Admission"
|
means admission of the Ordinary
Shares to trading on the Main Market of the London Stock Exchange
on 30 October 2019;
|
|
|
"AIC"
|
the Association of Investment
Companies;
|
|
|
"AIC Code"
|
the AIC Code of Corporate Governance
dated February 2019;
|
|
|
"AIFM"
|
means Alternative Investment Fund
Manager;
|
|
|
"AIFMD"
|
the Alternative Investment Fund
Managers Directive;
|
"Annual
Report"
|
the Annual Report and audited
financial statements;
|
|
|
"Antibody"
|
a large Y-shaped blood protein that
can stick to the surface of a virus, bacteria, or receptor on a
cell;
|
|
|
"Antibody-Oligonucleotide
Conjugates" or "AOC"
|
molecules that combine structures of
an antibody and an oligo;
|
|
|
"Autoimmune
diseases"
|
conditions, where the immune system
mistakenly attacks a body tissue;
|
"Calculation
date"
|
31 December or, if such date is not
a business day, the previous business day;
|
"Cardiovascular
disease"
|
conditions affecting heart and
vascular system;
|
|
|
"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. All studies done prior to clinical testing in human subjects are
considered preclinical;
|
|
|
"CNS"
|
Central Nervous System
|
|
|
"Companies
Law"
|
the Companies (Guernsey) Law, 2008
(as amended);
|
|
|
"the
Company" or "RTW Bio"
|
RTW Biotech Opportunities Ltd, a
company incorporated in Guernsey as a close-ended Investment
Company. The Company has an unlimited life
and is registered with the GFSC as a Registered Closed-ended
Collective Investment Scheme. The registered office of the Company
is 1st Floor, Royal Chambers,
St Julian's Avenue, St Peter Port, Guernsey, GY1
3JX;
|
|
|
"Core
portfolio"
|
Private companies and public
companies that were initially added to the portfolio as private
investments;
|
|
|
"Corporate
Brokers"
|
Bank of America and
Numis;
|
|
|
"Crohn's
Disease"
|
a condition, in which a part(s) of
digestive tract is inflamed;
|
|
|
"CRS"
|
Common Reporting
Standard;
|
|
|
"Danon
Disease"
|
a rare genetic heart condition in
children, predominantly boys;
|
|
|
"Directors" or "Board"
|
the Directors of the Company as at
the date of this document, or who served during the reporting
period, and "Director" means any one of them;
|
|
|
"DTR"
|
Disclosure Guidance and Transparency
Rules of the UK's FCA;
|
|
|
"EU" or "European Union"
|
the European Union first established
by the treaty made at Maastricht on 7 February 1992;
|
|
|
"Fanconi
Anaemia"
|
a rare genetic blood condition in
young children;
|
|
|
"FATCA"
|
the Foreign Account Tax Compliance
Act;
|
|
|
"FCA"
|
the Financial Conduct
Authority;
|
|
|
"FDA"
|
the United States Food and Drug
Administration;
|
|
|
"FRC"
|
the Financial Reporting
Council;
|
|
|
"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;
|
|
|
"GFSC"
|
the Guernsey Financial Services
Commission;
|
|
|
"GFSC
Code"
|
the GFSC Finance Sector Code of
Corporate Governance as amended in June 2021;
|
|
|
"Greater
China"
|
Encompasses mainland China, Macau,
Hong Kong and Taiwan;
|
|
|
"the
Group"
|
the Company and the
Subsidiary;
|
|
|
"HCM"
or "Hypertrophic
cardiomyopathy"
|
a cardiovascular disease
characterised by an abnormally thick heart muscle;
|
|
|
"ImmTAC®"
|
bi-specific biologic molecules
designed to fight cancer or viral infections;
|
|
|
"Independent
Valuers"
|
Alvarez & Marsal Valuation
Services, LLC and Houlihan Lokey, Inc.;
|
|
|
"Infantile Malignant
Osteopetrosis" or "IMO"
|
a rare genetic bone disease in young
children, manifesting in an increased bone density;
|
|
|
"Investigational New
Drug" or "IND"
|
the FDA's investigational New Drug
programme is the means by which a pharmaceutical company obtains
permission to start human clinical trials;
|
|
|
"Investment
Manager"
|
RTW Investments, LP;
|
|
|
"IPEV"
|
the International Private Equity and
Venture Capital Valuation Guidelines that 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;
|
"IRR"
|
internal rate of return;
|
|
|
"ISDA"
|
International Swaps and Derivatives
Association;
|
|
|
"Latest Practicable
Date"
|
31 December 2022, being the latest
practicable date for valuing an asset for inclusion in this
report;
|
|
|
"Lentiviral
vector or "LVV"
|
based gene therapy - a type of viral
vector used to deliver a gene;
|
|
|
"Leukocyte adhesion
deficiency" or "LAD-I"
|
a rare genetic disorder of
immunodeficiency in young children;
|
|
|
"LifeSci
Companies"
|
companies operating in the life
sciences, biopharmaceutical, or medical technology
industries;
|
|
|
"Listing
Rules"
|
the listing rules made under section
73A of the Financial Services and Markets Act 2000 (as set out in
the FCA Handbook), as amended;
|
|
|
"London Stock
Exchange"
|
London Stock Exchange
plc;
|
|
|
"LSE"
|
London Stock Exchange's main market
for listed securities;
|
|
|
"MAGE-A4"
|
a protein expressed on certain types
of tumours;
|
|
|
"Medtech"
|
medical technology sector within
healthcare;
|
|
|
"Menin"
|
a target for the treatment
development in oncology;
|
"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" or "NAV"
|
the value of the assets of the
Company less its liabilities, calculated in accordance with the
valuation guidelines laid down by the Board;
|
|
|
"New Performance Allocation
Shares"
|
performance allocation shares of
no-par value in the capital of the Subsidiary;
|
|
|
"NewCo"
|
a company incubated by RTW
Investments, LP;
|
|
|
"Notional Ordinary
Shares"
|
Performance Ordinary Shares, in
which receipt of such shares has been deferred;
|
|
|
"Official
List"
|
the official list of the UK Listing
Authority;
|
|
|
"Oligonucleotides" or
"Oligos"
|
short DNA or RNA molecules that have
a wide 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"
|
an invested liquidity pool, selected
to match, on a pro-rated basis, the long investments held in the
Investment Manager's private funds and designed to mitigate the
drag of setting aside cash for future deployment into core
positions;
|
|
|
"Performance Allocation
Amount"
|
an allocation connected with the
performance of the Company to be allocated to the Performance
Allocation Share Class Fund in such amounts and as such times as
shall be determined by the Board;
|
|
|
"Performance Allocation
Period"
|
the First Performance Allocation
Period and/or a subsequent Performance Allocation Period, as the
context so requires;
|
|
|
"Performance Allocation
Share Class Fund"
|
a class fund for the Performance
Allocation Shares or New Performance Allocation Shares to which the
Performance Allocation will be allocated;
|
|
|
"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 of the Subsidiary (with effect from the 1
December 2022 reorganisation);
|
|
|
"Performance Allocation
Shareholder"
|
the holder of Performance Allocation
Shares or New Performance Allocation Shares;
|
|
|
"PFIC"
|
Passive Foreign Investment
Company;
|
|
|
"Pilot
study"
|
a small-scale study;
|
|
|
"PIPE"
|
Stands for private investment in
public equity, when an institutional or an
accredited investor buys stock directly from a public
company below market price;
|
|
|
"POI
Law"
|
The Protection of Investors
(Bailiwick of Guernsey) Law, 2020, as amended;
|
|
|
"PRAME"
|
a cancer-testis antigen (CTA) that
is highly expressed in a broad range of solid and hematologic
malignancies;
|
|
|
"Premium
Segment"
|
Premium Segment of the Main Market
of the LSE;
|
|
|
"PRIority
MEdicines" or "PRIME"
|
to be accepted for PRIME, a medicine
has to show its potential to benefit patients with unmet medical
needs based on early clinical data;
|
|
|
"Prospectus"
|
the prospectus of the Company, most
recently updated in January 2024 and available on the Company's
website (www.rtwfunds.com/rtw-biotech-opportunities-ltd/documents/);
|
|
|
"Pulmonary
conditions"
|
pathologic conditions that affect
lungs;
|
|
|
"Pyruvate Kinase
Deficiency" or "PKD"
|
a rare genetic disorder affecting
red blood cells;
|
|
|
"Radiopharmaceuticals"
|
Pharmaceuticals consisting of a
radioactive compound used in radiation therapy;
|
|
|
"Rare
disease"
|
a disease that affects a small
percentage of the population;
|
|
|
"Registrar"
|
Link Market Services (Guernsey)
Limited;
|
|
|
"RMAT"
|
Regenerative Medicine Advanced
Therapy, an FDA-granted designation for a drug, designed to
expedite development and review processes for promising pipeline
products;
|
"RNA
medicines"
|
a type of biotechnology that uses
RNA to treat a disease;
|
|
|
"RTW"
|
RTW Investments, LP, also referred
to as the Investment Manager;
|
|
|
"RTWCF"
|
RTW Charitable
Foundation;
|
|
|
"Russell 2000 Biotechnology
Index"
|
a stock index of small cap
biotechnology and pharmaceutical companies;
|
|
|
"SEC Rule
144"
|
selling restricted and control
securities;
|
|
|
"SFS"
|
Specialist Fund Segment of the
London Stock Exchange;
|
|
|
"Small
molecule"
|
a compound that can regulate a
biologic activity;
|
|
|
"Sensorineural hearing
loss"
|
a type of hearing loss caused by
damage to the inner ear;
|
|
|
"SPAC"
|
Special Purpose Acquisition
Company;
|
|
|
"Sub-Administrator"
|
Morgan
Stanley
Fund Services USA
LLC;
|
|
|
"the Subsidiary" or
"OpCo"
|
RTW Biotech Opportunities Operating
Ltd;
|
|
|
"Tachycardia"
|
a heart rhythm disorder;
|
|
|
"TIGIT"
|
a target for a checkpoint antibody
development in immune-oncology;
|
|
|
"TL1A"
|
a target for the treatment of
inflammation associated with inflammatory bowel disease
(IBD);
|
|
|
"Type 1
Diabetes" or "TD1"
|
a type of insulin
resistance;
|
|
|
"Total shareholder
return"
|
a measure of shareholders'
investment in a company with reference to movements in share price
and dividends paid over time;
|
"UK AIFMD"
|
refers to a domestic regime of laws
regulating the management and marketing of alternative investment
funds and fund managers in the UK, which generally maintains the
rules set out in the European Union's AIFMD as implemented at the
end of the transition period following Brexit;
|
|
|
"UK Code"
|
the UK Corporate Governance Code
2018 published by the Financial Reporting Council in July
2018;
|
|
|
"UK-Guernsey
IGA"
|
The UK-Guernsey Intergovernmental
Agreement for the Automatic Exchange of Information;
|
|
|
"Ulcerative
Colitis"
|
an inflammatory bowel disease that
causes sores in the digestive tract;
|
|
|
"US GAAP"
|
US 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;
|
|
|
Alternative Performance
Measures unaudited
APM
|
Definition
|
Purpose
|
Calculation
|
Available
Cash
|
Cash held
by the Group's Bankers, Prime Brokers and an ISDA
counterparties.
|
A measure
of the Group's liquidity, working capital and investment
level.
|
Cash and
cash equivalents, Due from brokers, Receivable from unsettled
trades and other miscellaneous current assets, less Due to brokers,
Payable for unsettled trades and other miscellaneous current
liabilities on the Statement of Assets &
Liabilities.
|
NAV per
Ordinary Share
|
The
Group's NAV divided by the number of Ordinary
Shares.
|
A measure
of the value of one Ordinary Share.
|
The net
assets attributable to Ordinary Shares on the statement of
financial position (US$399.3 million) divided by the number of
Ordinary Shares in issue (210,635,347) as at the calculation
date.
|
Price per
share
|
The
Company's closing share price on the London Stock Exchange for a
specified date.
|
A measure
of the supply and demand for the Company's shares.
|
Extracted
from the official list of the London Stock
Exchange.
|
NAV
Growth
|
The
percentage increase/decrease in the NAV per Ordinary share during
the reporting period.
|
A key
measure of the success of the Investment Manager's investment
strategy.
|
The
quotient of the NAV per share at the end of the period (US$1.90)
and the NAV per share at the beginning of the period (US$1.54)
minus one expressed as a percentage.
|
Share
price growth/Total Shareholder Return
|
The
percentage increase(decrease) in the price per share during the
reporting period.
|
A measure
of the return that could have been obtained by holding a share over
the reporting period.
|
The
quotient of the price per share at the end of the period (US$1.40)
and the price per share at the beginning of the period (US$1.21)
minus 1.00 expressed as a percentage. The measure excludes
transaction costs.
|
Share
Price Premium (Discount)
|
The
amount by which the ordinary share price is higher/lower than the
NAV per ordinary share, expressed as a percentage of the NAV per
ordinary share.
|
A key
measure of supply and demand for the Company's shares. A
premium implies excess demand versus supply and vice
versa.
|
The
quotient of the price per share at the end of the period (US$1.40)
and the NAV per share at the end of the period (US$1.90) minus one
expressed as a percentage.
|
Multiple
on Invested Capital (MOIC or MOC)
|
The
multiple that measures value that an investment has
generated.
|
A measure
to evaluate performance of the realised and unrealised
investments.
|
The ratio
between initial capital invested in a portfolio company and current
(as of 31 December 2023) value of the investment. It is a gross
metric and calculation is performed before fees and
incentive.
|
Extended
Internal Rate of Return (XIRR)
|
The
percentage or single rate of return when applied to all
transactions in a portfolio company.
|
A measure
of return which is used when multiple investments have been made
over time into a portfolio company.
|
The rate
also expressed as a percentage that calculates the returns on the
total investment made with increments through a given period (from
initial investment date to 31 December 2023).
|
Ongoing charges ratio
|
The
recurring costs that the Group has incurred during the period
excluding performance fees and one off legal and professional fees
expressed as a percentage of the Group's average NAV for the
period.
|
A measure
of the minimum gross profit that the Group needs to produce to make
a positive return for shareholders.
|
Calculated in accordance with the AIC
methodology detailed on the web link below:
https://www.theaic.co.uk/sites/default/files/documents/AICOngoingChargescalculation.pdf
|
Ongoing Charges
|
|
|
2023
|
2022
|
|
|
|
US$
|
US$
|
|
|
|
|
|
Fees to
Investment Manager
|
|
|
4,269,757
|
3,751,464
|
Legal and
professional fees
|
|
|
749,328
|
1,008,629
|
Administration fees [1]
|
|
|
673,422
|
312,003
|
Research
costs
|
|
|
474,511
|
742,738
|
Audit
fees
|
|
|
341,500
|
329,557
|
Directors' remuneration
|
|
|
177,011
|
176,722
|
Other
expenses
|
|
|
687,805
|
357,429
|
Total
expenses
|
|
|
7,373,334
|
6,678,542
|
|
|
|
|
|
Non-recurring expenses
|
|
|
(453,231)
|
(487,786)
|
Total ongoing
expenses
|
|
|
6,920,103
|
6,190,756
|
|
|
|
|
|
Average NAV
|
|
|
369,419,055
|
322,418,512
|
|
|
|
|
|
Annualised ongoing charges
(using AIC methodology)
|
|
|
1.87%
|
1.92%
|
[1]
|
The Administration fees include
US$212,000 (GBP165,000) in respect of
one-off work and compensation for work performed in prior years
(see note 11), which is included in the non-recurring
expenses.
|
--
ENDS --