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Arix Biosciences - venture capital firm flies under the market's radar


Here we take a closer look at Arix Biosciences PLC (LON:ARIX), a listed venture capital company that doesn’t appear to be receiving the recognition it deserves

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Quick facts: Arix Bioscience PLC

Price: 108 GBX

Market: LSE
Market Cap: £146.4 m
  • Invests in potentially disruptive life sciences businesses
  • Provides more than just funds
  • Multiple inflexion points

What Arix does

Arix is a venture capital company that invests in disruptive growth companies with the potential to significantly increase in worth as they progress through clinical trials and conduct financing rounds at higher valuations.

It aims to provide more than just capital when it invests. Arix will take a board seat and play an active role to support portfolio companies. It also brings to the party scientific and commercial experience to help navigate clinical and operational hurdles.

The firm’s PLC balance sheet enables it to take a longer-term view than non-listed peers that might have a set investment horizon. It can therefore provide investee businesses with the flexible, patient capital they require to grow.

Arix describes itself as being “unconstrained by institution, geography or stage of company development”. It therefore has the ability to source the best life science innovation without restriction.

Major investments

As at the end of last year, the gross portfolio was worth £175mln, up from £54mln. The net asset value, which is closely monitored by the market, was £270mln, or 200p a share, a rise of 48p from a year ago. Arix also revealed in its last results a net £70mln upward revaluation of the portfolio, primarily driven by investments core portfolio firms Autolus Therapeutics, LogicBio, and Harpoon Therapeutics.

Since the prelims were published at the end of March, the company has made further investments.

It increased its stake in investee company Aura Biosciences after backing the latter’s £31mln (US$40mln) Series D financing round. It did so by committing £3.4mln, taking its holding in the ocular oncology specialist to 7.7%.

It also agreed to invest another £3.8mln in Autolus Therapeutics PLC (NASDAQ:AUTL) as part of the latter’s IPO. The share purchase will keep Arix’s stake in Autolus at 7.5%, which is valued at £62.6mln.

Inflexion points

Looking ahead, investee companies have 26 clinical trials underway, with 19 expected to provide a clinical read-out. In other words, there are 19 potential value inflection points for Arix.

What the brokers say

“We continue to see Arix at current levels to be a good buying opportunity, with largely transparent valuations, trimmed cash opex and multiple catalysts ahead,” said Jefferies on April 29. Its price target is 270p.

“The shares trade at a around a 23% discount to our estimated 'core' NAV (portfolio carrying values + net cash) for Arix at 189p per  share, providing an attractive entry point to the stock, in our view,” said Stifel on April 10. “Arix has had a busy start to 2019, so far investing around £18m into its portfolio, continuing to put its capital work in the right areas.” Stifel reckons the stock is worth 285p. The share price as of May 7 was 153p.

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