Public offers of portfolio holdings at significant upside to carrying values
Swiss-listed healthcare investment specialist HBM Healthcare Investments (HBMN) has seen a material increase in NAV from the initial public offerings of two of its private portfolio holdings, ObsEva and Anaptys Biosciences. Both companies listed on the US NASDAQ exchange on 26 January.
ObsEva is a Swiss-based reproductive health specialist, in which HBMN first invested the equivalent of $9.9m in November 2015. Following the IPO, HBMN owns 2.4m shares in the company, valued at $28.1m. The shares closed at $11.68 on 30 January, compared with an average cost to HBMN of $7.52, an increase of 55%. The fund bought an extra 550,000 shares at the IPO price of $15 to maintain its holding in the company at c 8%.
Anaptys Biosciences, a San Diego-based company with a platform technology for developing antibodies, first entered the HBMN portfolio in July 2015 when the fund bought 940,000 shares for $7.0m. Following the IPO HBMN owns c 1m shares in the company, valued at $17m. The shares closed at $17.53 on 30 January, compared with the IPO price of $15 and an average cost to HBMN of $7.69, an increase of 127%. The fund now owns c 5% of the company, compared with 6.6% before the IPO.
Between them the two IPOs have added CHF2.30 to HBMN’s NAV per share, an increase of 1.6%.
HBMN has also published its quarterly report for the last three months of 2016 (the third quarter of the 2016/17 financial year). NAV per share was down 4.3% after a period of volatility in listed healthcare companies around the US election, while the share price was up 1.3% (all in CHF terms).
Within the public portfolio, Ophthotech reported disappointing Phase III results in wet AMD, which detracted from short-term returns. HBMN had held the position since Ophthotech was a private company, producing annualised returns of c 40% for the fund throughout the holding period. Having steadily taken profits from Ophthotech, HBMN had reduced its holding by c 90% by the time of the disappointment, and the fund has now fully exited the position. Advanced Accelerator Applications’ share price declined after a delay in approval for its new treatment for neuroendocrine tumours; however, with approval still expected to occur, HBMN’s managers say they expect the stock to bounce back.
In the private portfolio, Interventional Spine’s sale of its expandable cage technology to a subsidiary of Johnson & Johnson resulted in an upward revaluation of the holding, while Iconic Therapeutics was written down in value, and Tensys Medical was written off.
One new investment was made during the period, with $8.2m committed to San Diego-based neurological specialist Neurelis. So far $5.5m of this investment has been completed, representing 11% ownership of the company.
Read our latest research on HBM Healthcare Investments here.
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