Biopharma specialists RTW Venture Fund has seen another of its portfolio companies float, Avidity, which is a provider of gene therapies. This is the latest of a growing list of cutting edge medical companies that RTW has invested in which have gone through an IPO.
Stephanie Sirota (pictured), a partner at RTW, told Fundeye that advancements in medicine are unparalleled ‘and we’re just getting started’. She added that since the first genome was sequenced in 2001 at a cost of hundreds of millions of dollars, the price has dropped substantially spiking a huge increase in the number of patents filed and thereby creating venture opportunities.
One of RTW’s early successes which predates the fund floating on the London Stock Exchange in October last year was its involvement in Rocket Pharma. The fund licensed five gene therapy to start the business which floated via a reverse merger in January 2018 and soon received $73 million in a public funding round.
Despite the name, Ms Sirota is keen to point out the differences between RTW and venture capital funds. “we don’t like the traditional venture capital model, you’re under pressure to deploy in a certain timeframe which might not be the optimum time to make your investments. You are also then faced with making business decisions which might not be the best long term decisions,” she said.
She describes RTW’s closed-ended fund model as being ‘full cycle investing’ which means the fund can be with a company at an early stage, getting it ready for IPO and then also take it through the public cycle where Ms Sirota said is where a lot of the value of the company is created.
For investors seeking life science exposure, there is of course a more established trust on the markets, Syncona. Similarly to RTW, the trust also trades on premium, a rarity in the current climate and Ms Sirota said we ‘appreciate the type of work they do’ and given its premium status ‘encouraged us to think this is a viable structure’. However, Ken Rumph, analyst at Jefferies, views Syncona’s premium of around 9.5 percent as a negative considering there are other trusts trading at deep discounts on the market.
For RTW, it’s perhaps the global footprint of the fund that gives investors a greater scope to realise value than similar life science funds. While Ms Sirota said that the best opportunities are found in the US, the UK and Europe there is a growing appetite for ground breaking treatments in China, which has tightened up its intellectual property laws so is a more desirable market for biopharma companies than it was as recently as a decade ago.
RTW can aid companies that perhaps don’t have the manpower to enter a market such as China by itself, which is still dominated by the mega cap pharma firms such as Roche and Pzifer. “We believe the opportunity in China is to build a company that can be build a bridge between great Western assets and commercialising it in China,” said Ms Sirota.
Pharma companies were perhaps tainted in 2016 when presidential nominee Hilary Clinton attacked Valiant over its drug pricing policies. Hedge fund don Bill Ackman got particularly stung by that debacle although according to Ms Sirota, her fund held a short position on the company at the time despite most limited partners backing Pershing Square’s trade. The problem was in her words, ‘people didn’t know who we were’. This seems likely to change as the fund has a steady pipeline of projects which it is often raising equity to fund, while maintaining a premium to NAV status.
RTW is not involved in anything that’s working on vaccine for COVID-19 but in the crisis brought about by the pandemic, ‘it’s apparent that healthcare is where you want to be’ said Ms Sirota. Having launched with a share price of $1.04 and market cap of $158 million, its current valuation of almost $180 million given the market conditions suggests that healthcare is an attractive sector in this ‘Black Swan’ market.
