Capital Allocation Plans from Prometheus Sale
LEI: 549300Q7EXQQH6KF7Z84
5 July 2023
RTW Biotech Opportunities Ltd
Capital allocation plans from Prometheus Biosciences sale including share buyback
RTW Biotech Opportunities Ltd ("RTW Biotech Opportunities" or the "Company"), a London Stock Exchange-listed investment company focused on identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors, today provides an update on its intended use of proceeds from its holding in previous Prometheus Biosciences, Inc. ("Prometheus"), following its acquisition by Merck.
Completion of Prometheus acquisition by Merck
Further to the Company's 17 April announcement that portfolio company Prometheus Biosciences, Inc. had agreed to be acquired by Merck for $200.00 per share in cash, a 75% premium to the prior closing price, the Company can confirm the acquisition was completed on 16 June. Proceeds from the sale of Prometheus shares subsequent to the announcement have amounted to $92.4 million. Including sales prior to the announcement, total proceeds amounted to $99.1 million on total invested capital of $8.4 million, representing a 11.8x multiple.
RTW Biotech Opportunities first invested in Prometheus in November 2020 as it co-led a private financing round which raised $130 million to advance Prometheus' lead antibody program (PRA023). The Company then increased its holding in Prometheus at its IPO in March 2021, and also participated in a further $500m fundraise in December 2022 (to advance PR023 into Phase 3) in an upsized equity offering priced at $110. At 31 March 2023, just prior to the Merck acquisition announcement, the Company's holding in Prometheus represented 14.8% of NAV amounting to $50.2m.
Roderick Wong, M.D., Managing Partner and Chief Investment Officer at the Investment Manager, said:
"This transaction is a great example of RTW Biotech Opportunities' investment strategy at work. Our ability to invest across the company life cycle provides us with significant advantages. Access to early-stage private assets provides us with access to experimental data that typically isn't shared in the public markets. Investing early also gives us time to build relationships with entrepreneurs and management teams. Given our blended public-private structure, we do not have any structural pressure to exit post-IPO, and typically we aim to increase the size of the most promising investments. It was this flexibility, enabled by our listed investment company structure, that allowed us to build our conviction in Prometheus, which, in turn allowed us to grow our position through multiple inflection points right up to the end."
Use of Prometheus sale proceeds
In light of this significant success in demonstrating the value of the Company's full life cycle investment strategy, the Board has given careful consideration to the Company's capital allocation framework.
The Company's primary focus is to identify and invest in transformative assets with growth potential. With the biotech sector only just recovering from the second deepest and second longest bear market in its history, the Board consider now to be an opportune time to take receipt of such gains. Valuations are attractive, fundamentals have turned around with the maturation of some modalities and companies, and M&A has become a significant tailwind. As a result, the Company will retain an appropriate level of the Prometheus proceeds which it believes can be invested into highly attractive opportunities (across the private, core public and other public portfolios) over the medium term as per the Company's core objective.
Financing conditions in the sector remain tight, however. This environment allows the Investment Manager to flex the transactional capabilities it has built up over the years to help support exciting companies by offering strategic financing solutions including royalty financing. The Board intends to deploy some of the Prometheus proceeds into such opportunities through the Investment Manager's "4010 Royalty Fund". There will be no double-charging as fees will be taken at the Company level only. The Board considers that this presents an attractive uncorrelated, income-generating investment that would complement the core portfolio. The Board intends to limit the Company's royalty investment exposure to approximately 15% of NAV including the current royalty holding in the portfolio.
Share buyback
The Board also believes that distributing a portion of the Prometheus proceeds will help to further demonstrate the life cycle of RTW Biotech Opportunities' invested capital. Given that the Board believes that the discount to NAV per Ordinary Share at which the Company's shares currently trade materially undervalues the Company and its portfolio, it therefore intends to initiate, and implement over time at its discretion, capital returns to shareholders through an NAV-accretive share buyback of up to approximately $10 million (equivalent to c. 7.92 million shares at current mid-market price).
The Board believes that this allocation clearly demonstrates 1) its confidence in the outlook for the biotech sector and the Company's portfolio; 2) capital allocation discipline; and 3) the proven value of the Company's model. Since admission to 31 May 2023, the Company's NAV per Ordinary Share increased by +65.3% versus a
-0.7% return for the Russell 2000 Biotech Index and a +20.6% return for the Nasdaq Biotech Index.
For Further Information:
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RTW Investments, LP |
+44 (0)20 7959 6361 |
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Woody Stileman, Managing Director Krisha McCune, Director, Client Service |
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Buchanan |
+44 (0)20 7466 5107 |
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Charles Ryland |
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Henry Wilson |
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George Beale |
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Numis |
+44 (0)20 7260 1000 |
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Freddie Barnfield |
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Nathan Brown |
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Euan Brown |
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BofA Securities |
+44 (0) 20 7628 1000 |
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Edward Peel |
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Kieran Millar
Cadarn Capital |
+44 (0) 73 6888 3211 |
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David Harris
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Elysium Fund Management Limited |
+44 (0) 14 8181 0100 |
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Joanna Duquemin Nicolle, Chief Executive Officer |
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Sadie Morrison, Managing Director |
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Morgan Stanley Fund Services USA LLC |
+1 (914) 225 8885 |
About RTW Biotech Opportunities Ltd:
RTW Biotech Opportunities Ltd (LSE: RTW & RTWG) is an investment fund focused on identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by a long-term approach to support innovative businesses, RTW Biotech Opportunities invests in companies developing next-generation therapies and technologies that can significantly improve patients' lives.
RTW Biotech Opportunities Ltd is managed by RTW Investments, LP, a leading healthcare-focused entrepreneurial investment firm with deep scientific expertise and a strong track record of supporting companies developing life-changing therapies.
RTW Biotech Opportunities Ltd retains absolute discretion as to the execution, pricing and timing of any share buybacks, subject to the conditions set out in the authority to execute share buybacks approved at the 2023 annual general meeting. Any shares repurchased will be held in treasury. Any repurchase of shares will be announced no later than 7.30 a.m. on the business day following the calendar day on which the repurchase occurred.
Visit the RTW website at www.rtwfunds.com for more information.
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