# Arix Bioscience: Hitting the jackpot

- Link: https://www.directorstalkinterviews.com/arix-bioscience-hitting-the-jackpot/412936531
- Published: 2020-11-10T08:32:26+00:00
- Author: Amilia Stone

**Arix Bioscience plc** (LON:ARIX) is a listed global venture capital (VC) company
that presents an opportunity for institutional and retail investors to participate
in the high risk-return profile of early-stage biotech investing. ARIX minimises
risk through a combination of an expert investment team and portfolio diversification.
Along with its 2020 interim results, management provided the market with some aspirational
targets for the next three years, which would see the NAV double to ca.£500m. News
that Merck & Co is to acquire portfolio company, VelosBio, for $2.75bn cash, giving
ARIX >12x return on its investment, will help to smash these targets.

 * **Strategy:** ARIX sources investments from an established network and a strong
   scientific reputation. The portfolio is diversified by therapeutic area, treatment
   modality, stage of discovery/development and geography to balance the risk-reward
   profile. Value is realised when ARIX successfully exits its investments.
 * **Acquisition of VelosBio:** Major pharmaceutical company, Merck & Co (MRK), 
   has announced the acquisition VelosBio for $2.75bn cash, to boost its position
   in oncology and provide it with another breakthrough technology in this field.
   The transaction, subject to approval under the Hart-Scott-Rodino Antitrust Improvements
   Act, is expected to close by the end of 2020.
 * **Return on investment:** VelosBio was introduced to ARIX by its strategic partner,
   Takeda Ventures. ARIX co-led the company’s Series A funding round in 2018, committing
   $11m/£8.6m, and made a further investment of $4.0m/£3.2m in VelosVio’s Series
   B in July 2020. ARIX is expecting to receive $185m/£142m for its stake, representing
   a 12.3x return.
 * **Market reaction:** Although the market responded favourably to this news, with
   the shares rising 55%, this equates to an increase in market capitalisation of
   only £74m compared with the £121m valuation uplift from the VelosBio consideration,
   and has expanded the discount to NAV from 31% to 34%. This suggests that the 
   shares have much further to go.
 * **Investment summary:** The principal reason that ARIX Bioscience has been trading
   on a discount to its NAV has been the “lack of a track record”. Management tried
   to allay the market’s concern with its interim results when it highlighted the
   portfolio’s IRR of 20% since inception and set itself some ambitious targets 
   for the next three years. The trade sale of VelosBio means that these targets
   should be easily met and the market should be giving far more credit to the company.

[DOWNLOAD THE FULL REPORT](https://www.hardmanandco.com/wp-content/uploads/2020/11/ARIX-Hitting-the-jackpot-6-Nov-2020.pdf)

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