One sector that has been popular during the COVID-19 pandemic is biopharma, although given the issues surrounding getting drugs to market it is also fraught with danger for investors. Picking the winners is the key to investment success and luckily there’s a UK-listed closed-ended fund that has a good track record for doing just that, RTW Venture Fund.
“We are one of the largest biotech investment firms in the US and people want to work with those who are successful and we’re fortunate to be among that list,” Roderick Wong (pictured), managing partner and chief investment officer of RTW Investments, told Fundeye.
Since its IPO last October, RTW has been involved in multiple liquidity events for its investee companies. Yesterday iTeos, a clinical-stage biotechnology company developing innovative cancer immunotherapies, completed an oversubscribed IPO valuing the company at $201.1 million, or 1.8-times RTW initial investment in the firm.
“We’re excited about iTeos and the drug they’re going for, one of the more exciting cancer drugs out there. We think it’s the beginning of the journey for Iteos and a great drug target,” said Mr Wong.
An example of some of the problems associated with biotech can be found with RTW’s investment in Milestone, a company involved in innovative cardiovascular medicines. Mr Wong said that the company demonstrates how drug development is not always a ‘straight line’ and can be a ‘difficult journey’. However, RTW has stuck with the firm for over two years since it made its initial investment, a wise choice given recent developments.
Milestone had difficulties at the stage three FDA testing phase for its drug Etripamil, used to treat paroxysmal supraventricular tachycardia (PSVT), or rapid heartbeats. The listed company saw its share price crash as investors feared the drug wouldn’t get to market but RTW kept the faith and invested a further $25 million into the company.
“It’s a good example of if you don’t have investors that are specialists who understand the companies, some valuable drugs might never get to patients,” said Mr Wong. The only other treatment for PSVT is available in hospital emergency rooms whereas Milestone’s treatment is a nasal spray. RTW looked at the trial data, realised some of it could be used for additional FDA testing and now the drug is on course to be available by the first half of 2022. Milestone’s share price appreciated by over 60 percent on the news.
Although RTW is US-headquartered, the company is seeing a lot of innovation in China which Mr Wong views as a ‘world class’ market for drug development. Concerns over intellectual property, patents are a critical part of biopharma, have dissipated in recent years and with its current regulatory construct is now the fastest growing biotech market in the world.
Unlike other venture capital funds that have to exit investments on IPO to pay back their limited partners, RTW has the flexibility to stay involved for as long as is deemed necessary. A gene therapy company that RTW brought to market via a reverse merger, Rocket, still has three RTW employees on the board two years after its float.
“We’re full life cycle investors,” said Mr Wong, adding that the pace the firm has been working at this year is ‘business as usual’. The fund trades at a premium to NAV and issues shares at a premium so is non-dilutive to existing shareholders. There are not many trusts that can make that claim.
