Arix Bioscience PLC (LON:ARIX), the early-stage biotech investor, saw its share price take off Thursday on news it is to receive US$185mln following the agreed takeover of portfolio company VelosBio by Merck (NYSE:MRCK) for US$2.75bn.

The price represents a twelve times return on Arix’s original £12mln investment and a gain of £121mln (89p per share) on the £21mln gross value of Arix’s holding in the privately-held company.

In a statement, Naseem Amin, Arix’s executive chairman said: “The trade sale of VelosBio to Merck is a major milestone for Arix, marking the first strategic acquisition from our portfolio, just four years since Arix’s inception.

“This acquisition validates our ability to identify, assess and develop breakthrough biotechnology companies globally and to generate superior returns for our shareholders.”

VelosBio specialises in novel cancer therapies with its lead investigational candidate, VLS-101, currently going through Phase 1 and Phase 2 clinical trials for the treatment of patients with hematologic malignancies and solid tumours, respectively.

Jonathan Tobin, managing director at Arix and a VelosBio director, commented: “We have worked closely with the VelosBio team and our co-investors through the company’s early development and we are incredibly proud of the progress the company has made in such a short period of time.”

Deal validates Arix approach and portfolio

Jefferies added that the VelosBio sale is the first strategic acquisition from Arix’s portfolio, in addition to NAV gains and the removal of all funding concerns.

The US broker added the deal highlights and validates the value of Arix’s assets, particularly the less visible private ones; as well as the management’s capability to execute, therefore should boost investors’ confidence and narrow the discount.

“The substantially strengthened expected cash position of around £179m also provides the group with extra flexibilities for new and existing investments; or potentially some distributions to shareholders.”

Arix shares rose by 64% to 172.5p.


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