Arix Bioscience (LON: ARIX) said its portfolio company Artios Pharma Limited ("Artios"), which develops precision medicines for treating cancer, has signed a global three-year strategic research collaboration to discover and develop multiple precision oncology drugs.
Arix is the largest shareholder in Artios, with a 12.7% interest on a fully diluted basis.
The global venture capital company told investors that as part of the agreement, Artios will receive a payment of US$30 million in the form of both upfront and near-term payments.
Artios is collaborating with Merck KGaA, a leading science and technology company, which will have the right to opt into exclusive development of compounds on up to eight targets.
Both companies will leverage Artios' proprietary nuclease targeting discovery platform to jointly identify multiple synthetic lethal targets for precision oncology drug candidates.
If Merck KGaA chooses to exercise the option, subject to double digit option fees, Artios will be eligible to receive up to US$860 million per target, in addition to up to double digit royalty payments on net sales of each product commercialised by Merck KGaA, the company noted.
Subject to certain conditions, the company said Artios has opt-in rights for joint development and commercialisation with Merck KGaA for the programmes. The collaboration does not include Artios' lead programmes, Polθ and ATR inhibitors, for which Artios will retain all rights.
"Artios is a global powerhouse in DDR. Together with Merck KGaA's significant expertise and R&D resources, the collaboration will identify and develop precision oncology medicines targeting nucleases,” said Jonathan Tobin, MD at Arix and an Artios Board Director.
He added, “It is a testament to its leadership team and strategy in developing a unique discovery platform of novel DNA repair nuclease inhibitors and targets, which will bring real impact to cancer patients."
Shares in Arix Bioscience have soared by over 100% since the beginning of September 2020 to open 12.70% higher this morning at 177.5p following the announcement.
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Research by Hardman and Co. said that “strong interim results, which saw the NAV rise 24% to £251.0m, highlighted the enormous disconnect between this and its share price. ARIX has prioritised 11 companies in the portfolio on which to focus its resources and expertise.”
The investment research firm highlighted that these portfolio companies have “a number of important value inflection points - mostly clinical events - over the next 12-18 months.”
Not only did results for 1H20 exceed market expectations, but as at 30 June 2020, ARIX had £44m of cash to support existing portfolio companies, early-stage companies, and operations.
Arix refocused and streamlined the business by significantly reducing net operating costs by over 35% to an annual run rate of around £5m by the end of 2021 down from £8m in 2019. Pre-tax profit therefore turned positive to £48.96m compared to a loss in 1H19 of £44.81m.
During the 1H20 period, Arix’s portfolio companies raised $392m of working capital, while since its inception, ARIX has deployed £149m into its portfolio, realised £13m through opportunistic divestments, and generated an IRR of 20% (realised and unrealised).
Arix’s portfolio continues to make ‘strong progress’, with a number of companies reaching important clinical milestones and completing further financing rounds at higher valuations.
‘With a number of upcoming clinical events, ARIX has set an aspirational target to make an annual IRR of 15%-25%, and produce an NAV of £500m by the end of 2023,’ said Hardman.
Looking ahead, Arix cited potential for M&A, strategic partnerships and other financing events which could significantly increase the value of its companies, and in turn its NAV.
‘Whilst the development of important new medicines always carries risk, over the next three years we expect to see at least two additional IPOs across the portfolio and at least two exits.’
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