Arix Bioscience Share Discussion Threads

[sev22] 11/8/2022 17:02

A Ben Graham recovery play. A venture capital company that invests in early-stage biotechnology businesses is being valued modestly above its cash pile even though it holds a valuable portfolio of unlisted and listed investments that could deliver strong returns. August 10, 2022 By Simon Thompson Arix Bioscience (ARIX:115p), a global venture capital company that holds a diversified portfolio of unlisted and listed investments in early-stage biotechnology businesses, is the laggard in my 2021 Bargain Shares portfolio after investor sentiment was hit by falls in the share prices of its Nasdaq-quoted holdings. In the latest interim accounts, the group reported £33.9mn of negative valuation movements in its listed holdings, offset in part by £8mn of foreign currency gains due to sterling weakness against the US dollar. However, with cash of £131mn backing up 88 per cent of Arix’s market capitalisation of £149mn, this means that a £37.5mn listed portfolio of 18 Nasdaq stocks, £56.2mn unquoted portfolio, and £1.9mn of other investments, are in the price for 80 per cent below their combined carrying valuations at 30 June 2022. Of course, investors may be concerned that Arix’s unlisted holdings are being overvalued. However, chief executive Robert Lyne points out that they are valued at cost or the most recent externally-priced funding round, and then referenced to current public valuations of comparable companies, where applicable, to ensure that valuations remain robust in the context of the decline in public biotech markets over the last 12 months. There is even hidden value. Exploit Arix’s valuation anomaly: *Net asset value falls from £255mn to £228mn (176p a share) in first half of 2022. *£25mn net downward portfolio movement due to decline in public biotech markets. *Cash of £131mn (101p a share) underpins 88 per cent of Arix’s market capitalisation. *Investee company Disc Medicine to merge with Gemini Therapeutics. A good example of the valuation process is Arix’s valuable 8.8 per cent stake worth £25.3m in Artios,, a private company that is developing precision medicines for the treatment of cancer. Artios has attracted the attention of big pharma, having entered a research collaboration with Novartis to discover next-generation DNA damage response targets to enhance its Radioligand Therapies (‘Five investment company bargains’ 8 April 2021). The closest listed comparable to Artios is $500mn market capitalisation Repare Therapeutics (RPTX:NSQ), a Nasdaq-quoted clinical-stage precision oncology company, which has a 44 per cent higher valuation even though Lyne believes Artios has more advanced programmes. Artios raised $153mn in an oversubscribed funding round last summer, so is well funded, and expects to announce data from its Phase 1b dose expansion study in the first half of 2023. Lyne also points out that Arix’s portfolio companies collectively raised over $776mn of funding last year, so are financed to progress to their respective clinical data points, potentially important catalysts for future valuation uplifts. Sensibly, the board are taking a prudent approach, having exited public positions where the directors no longer had confidence that the companies could deliver the superior returns targeted, and deliberately being cautious about making new private investments. Instead, they have turned their attention to the value in listed companies, focusing on those developing novel therapeutics that are of interest to large pharmaceutical companies, and which have scope to generate positive clinical data in the medium-term. As part of this strategy, Arix has created a small Public Opportunities Portfolio (POP) of 12 Nasdaq holdings, investing £14.5mn in the first half this year. These businesses are funded through to their milestones, thus reducing the risk of dilutive new fundraisings, and announced five positive data read-outs in the first half of 2022, which has underpinned their valuations. This small portfolio is showing a profit, reversing a small decline in the first half. Arix’s deep share price discount to book value also ignores the fact that there has been a strong recovery in the value of some of its larger listed holdings since the half-year end. For instance, investee company Aura Biosciences (AURA:NSQ) listed its shares at $14 on Nasdaq last autumn. The holding was valued at £20mn at the end of last year, and £17.6mn at 30 June 2022. However, Aura’s stock price has rallied 30 per cent to $18.36 in the past 10 weeks, valuing the holding at £22.9mn (17.6p a share), and adding 4p a share to Arix’s last reported NAV per share. Aura is a clinical-stage oncology company that is developing a novel technology platform based on virus-like drug conjugates to target and destroy cancer cells selectively, while activating the immune system to create long lasting anti-tumour immunity. It has made encouraging progress this year, presenting updated safety results that support the value of its technology in patients with early choroidal melanoma. The company is on track with its Phase 2 suprachoroidal study and a final decision on route of administration will be made later this year. Moreover, another holding, Disc Medicine, a clinical-stage company focused on developing novel therapies to treat serious and debilitating hematologic disorders, is merging with Gemini Therapeutics (NSQ:GMTX) in an all-stock transaction. The enlarged group will focus on advancing Disc’s pipeline of hematology programs. Disc has secured commitments from a syndicate of healthcare investors, including Arix, for a $53.5mn concurrent financing which means that the merged group will have cash of $175mn to advance Disc’s pipeline through multiple clinical studies. It also provides a cash runway into 2025. Last autumn, Arix invested £8.1mn in Disc Medicine and the stake was valued in its interim accounts at £9.1mn. Arix’s share price is little changed since I last updated my portfolio (‘2021 Bargain Portfolio Review’, 17 February 2022’), and I maintain the view that bottom fishers should be well rewarded buying at these levels. BUY.

[ohisay] 11/8/2022 07:29

https://www.youtube.com/watch?v=pv-XaqZR8C4

[spectoacc] 11/8/2022 06:50

He's nothing if not predictable. I make a rule of selling into his ramps, but still underwater on ARIX so it'll need to be a decent boost :)

[ohisay] 11/8/2022 01:11

Suddenly this is looking really good value again.Expect ST in IC to pick up on the presentation and after hours developments .. EDIT ..And here it is ..https://www.investorschronicle.co.uk/ideas/2022/08/10/a-ben-graham-recovery-play/

[hpcg] 10/8/2022 19:43

I guess improved sentiment in the US is helping here by proxy, given where the assets are. The downside underpinning of the cash pile was helpful for refreshing the investor base I imagine.

[riskonricky] 10/8/2022 18:44

Disc Medicine merger with Gemini Therapeutics - in case you missed it after the results.

[ohisay] 10/8/2022 14:55

Interesting Investor Meet presentation . In discussing Artios they think the best US comparator company suggests a carrying value double that they assume in the NAV. I'm not surprised the market seems to like the presentation .

[hugepants] 08/8/2022 16:17

or could be because Aura(NASDAQ: AURA) up 23% the last 5 days

[hugepants] 08/8/2022 13:36

spec, This stock has nothing to do with cats but maybe this modest rise is due to results and investor presentation on wednesday.

[spectoacc] 08/8/2022 13:33

A twitch. Or possibly the sun just bloating the cat. Either way, welcome.

[pen13] 30/7/2022 10:52

Ye of little faith. Why not read the portfolio on ARIX website (excellent). They are funding early stage companies e.g Lead on Sorriso's 1st funding round $31M last December and £100 does not go far when funding the winners to complete Ph3 trials and commercialise. ARIX is a buy and hold. It's cash will almost certainly be gradually spent on possible winners. But there's no guarantee. You either support the management to do the right thing or find yourself something else to speculatee on.

[makinbuks] 22/7/2022 12:49

£1.01 of cash

[lennonsalive] 22/7/2022 08:53

Unfortunately just a really badly run company that wasted cash on share buy backs, rather than buying or investing the money wisely. But I suspect the management don't care as long as they getting paid each month

[spectoacc] 21/7/2022 12:59

Bought SYNC 160p ish, ARIX 114p ish, interesting to see how they've diverged since. Thought ARIX's cash would have protected them more.

[ohisay] 17/7/2022 05:13

Fair point..Still cash here is around 100p per share . And interesting presentation partly relating to that point from end June. https://arixbioscience.com/insights/investor-meet-company-presentation

[hpcg] 27/6/2022 11:04

I've seen some people calling the bottom in XBI too. I don't know, on a 5 year chart it looks like a firm line of support, but on the other hand it benefits from, and requires, risk capital more than any other sector.

[ohisay] 09/6/2022 09:25

Yes good to see the cash backing spelt out . They should have done the monthly NAV reporting a long time ago ..arguably share price would not be quite as low as it is if they'd done it earlier. Of course Biotech in the US hasnt done at all well since the beginning of last year: though I see a lot of suggestions recently suggesting its bottomed out. I've added a few of these (Arix) as they seem to have changed tack recently in going for semi established companies rather than IPO's. https://seekingalpha.com/symbol/XBI/charting?axis=percentage&compare=XBI,SP500TR,PPH&interval=1Y&metric=priceReturn&series=line

[spectoacc] 09/6/2022 08:42

I like the clear way ARIX are now presenting the NAV - be good if that was taken up by others, rather than just the "NAV: 177p".

[jay083] 31/5/2022 11:40

https://www.ft.com/content/1854f495-1138-42f5-aa57-3ec52d782bbd#comments-anchor Interesting piece on biotech in general

[spectoacc] 31/5/2022 10:20

Been a decent biotech rally (or dcb more likely). ARIX has singularly failed to partake in it.

[spectoacc] 10/5/2022 08:42

Short-term impact perhaps. I'd usually sell into any ST tip or comment, but not this time, nothing to realise yet ;)

[value hound] 10/5/2022 08:40

I think the mkt cap is too big for Simon T's tip to have a real impact; much larger than most of his others.

[ohisay] 10/5/2022 08:36

Yes I think the Artios holding keeps him hopeful. https://www.investorschronicle.co.uk/ideas/2022/05/09/bargain-shares-a-ben-graham-contrarian-value-play/ Moreover, it’s not as if the unlisted holdings are worthless. Half that portfolio is invested in Artios, a leading DNA Damage Response (DDR) company that is developing a pipeline of precision medicines for the treatment of cancer. Artios has a research collaboration with drug giant Novartis to discover and validate next-generation DDR targets to enhance Novartis' Radioligand Therapies. I have great hopes for Artios (‘Five investment company bargains’ 8 April 2021). Large pharmaceutical companies have historically outsourced much of the research and development of new drugs to smaller companies, often start-ups, which are faster and more agile in making cutting-edge medical breakthroughs. Bearing this in mind, analysts forecast that big US and European pharma groups could have $500bn to deploy on acquisitions in the coming years, providing a clear path to exit for biotech companies that do succeed. Arix’s diversified portfolio offers such exposure

[frazboy] 09/5/2022 18:34

An ST tip isn't having its usual impact at the moment! In saying that I realise he's been a fan of this for a while.