RTW Biotech Opportunities Ltd (RTW) Earnings Call Transcript & Summary

Good afternoon, good morning and good evening to you all, and thank you for joining the RTW Venture Fund 2022 Interim Results Presentation. My name is Woody Stileman. I'm Managing Director at RTW on the Strategic Partnerships team, and I'm responsible for Marketing, Investor Relations activities for the RTW Venture Fund. I'm joined here by 2 of my colleagues, who many of you know well already. We have Stephanie Sirota here, who's our Chief Business Officer at RTW and is a Director of the Venture Fund; and Alexandra Taracanova, who has a dual role at RTW now, covering both Investor Relations and Academic Partnerships. Given that we recently hosted a media webinar in August, which many of you attended or received the recording of, we thought we'd devote most of the time today to a Q&A session. So we'll start with the interim results followed by a company and portfolio overview, finishing with a few minutes on the market backdrop and the emerging greenshoots that we see. And please send in your questions through the Q&A function, as they come up, and we'll read them out and answer them all at the end. Starting with the interim results for 2022. On the 30th of June 2022, the NAV stood at $265.7 million, giving an NAV per ordinary share of $1.25. This represented a 26.8% decline from the beginning of the year. Over the same period, the large-cap NASDAQ Biotech Index declined by 21%, and the small-cap Russell 2000 Biotech Index declined by 39%. Since admission [ from ] 30th of June '22, the NAV per ordinary share has increased by 20% compared to an 11% increase for the NBI and a 16% decline for the Russell 2000 Biotech Index. And over the last 6 months, we've invested in 2 new private companies. Those are Lenz Therapeutics and Mineralys. We've had one of our core private companies, CinCor, IPO-ed very successfully. And we sold our royalty holding in a drug called mavacamten to Bristol Myers Squibb. We also exited 3 core public companies at an average exit multiple of 2.03x. The period ending portfolio was made up of 41 core positions, of which 26 were privately held and 15 were publicly listed. Overall, the portfolio was invested 31% in core private names; 31% in core public, which we originally invested in the private domain; and 34% in other public companies, which have been carefully selected by us, matching on a pro rata basis the long investments of our other funds. This slide puts our NAV performance, including the August NAV, which we just published this morning, in the context of the share price performance since inception and versus the NBI and the Russell 2000 Biotech Index. We show the NBI because it's the broadest sector index. However, given our SMidCap focus, the Russell 2000 is really the most appropriate comparator for us. And aside from, once again, repeating that since February 2021, as you can see on this chart, the biotech sector has suffered its second deepest and longest bear market in history. It's worth highlighting, I think, just 2 things. Firstly, despite that market backdrop, our NAV has still generated a 40% return since admission. Now unfortunately, our share price has not matched the NAV progression and has returned plus 10% to the opening price this morning. So we currently trade at about a 20% discount to NAV in contrast to an average premium since admission of about 3%. Secondly, you can see that we've started to perform significantly better over the last few months with a 20% increase in the NAV from the trough in May. Once again, the share price has lagged a bit, but we're increasingly confident that we've reached a turning point for the sector and for the portfolio. And I'll return to why we're cautiously optimistic in a minute. But first, Stephanie and Alexandra will give us a quick commentary on the company and portfolio review. Stephanie, over to you.

Thanks, Woody. Hi, everyone. Thanks for joining us today. So just a quick reminder. Some of you have heard me talk about and reference this slide before, but just a quick reminder of what you get when you invest in the RTW Venture Fund. Firstly, you're investing in a company that's powering breakthrough therapies that transform patient lives. We do this by focusing the efforts of our now 81-person team on investing in innovative biotech and medtech companies with clear pathways to delivering approved medicines and medical technologies to patients. The RTW Venture Fund benefits from that same philosophy and process that has generated considerable returns for investors in our flagship fund since 2009. Within that, the private investments have historically generated even better returns. And here, RTW Venture shareholders get a 2x the size allocation versus investors in our hedge funds. Next slide, please. Now this slide puts the venture fund into the wider RTW context. So we currently manage 3 funds. Alongside RTW Venture sit our 2 hedge fund products, Flagship and Innovation. Firm-wide AUM as of August 31 was over $5.5 billion. And you can see the breakdown in the boxes on the top. Having taken in nearly $1 billion of net inflows so far this year and with an exciting business development pipeline for the rest of the year, we're in a very strong position to take advantage of the clinical opportunities we see. It's worth briefly mentioning too that we support a charitable foundation. With this, we can fund the research into therapies that are not always commercially viable because their end market may be too small, quite often very rare terminal pediatric diseases. By doing so, we can make a difference and learn about novel therapies at the same time. The foundation also tries to educate and influence stakeholders to create a healthier health care ecosystem as well as providing a humanitarian aid like regular charity. Next slide, please. So there's a lot going on, on this slide, but the key message is that our SR sector has grown, so too have the needs of the businesses within it. We believe that in order to truly maximize returns for our shareholders, it's important for us to go beyond public equity investing and to always think about how we can better serve the scientists and entrepreneurs. We think about capital solutions we can offer biotech and medtech companies, such as alternate paths to go in public like SPACs and reverse mergers, rescue and distress financings and recaps, royalty-backed development fundings, geographic licensing agreements, et cetera. The breadth of our capabilities has increasingly helped us to find our competitive advantage and win market share. In fact, at the investment manager level, we will soon be launching 2 new private funds to capitalize on our strong competitive position and an exciting opportunity set. We believe that the venture fund will benefit from these fund launches as increased scale and visibility will attract even more opportunities. Those 2 opportunities include royalty fund, the opportunity which we'll touch on a bit later in the presentation; and a dedicated company creation fund. Next slide, please. Speaking of which, we'd like to first update you on our company creation efforts. Despite being the top detractor this year with a contribution of negative 5.3%, Rocket, a company we founded in 2015, and is now one of the top 5 largest gene therapy companies in the world, actually reported that both their LAD and Fanconi programs have recently crossed the bar set by their registration endpoints. And we're expecting news on 2 other clinical programs later this year and in Q4. Probably more importantly, after a year of concerns over the safety of gene therapies, this past May, bluebird bio received 2 unanimous FDA panel votes in support of their 1T bio products for beta-thalassemia and CALD despite these 2 products, having shown some of the most concerning safety issues. We think this sends a clear message to FDA that doctors want gene therapies available for their patients. Producing, pipeline building and operational execution have both been great. We most recently added presbyopia product from Lenz, a private company which we also made a direct equity investment. And now we have close to 100 employees based in Beijing and Shanghai. We were planning to IPO Ji Xing later this year, but it's obviously not the right time from a capital markets perspective. So we've delayed that and have marked down the valuation accordingly. Instead, we will look to fund a Series D round possibly later this year and may also look to bring in potential syndicate partners. The good news is that the competition for licensing deals has declined. In fact, we have some very exciting assets in the business development pipeline, including some that could take the company really to the next level. Yarrow, our third company creation, is still in very early stage, and we look forward to updating you in due course. Before I pass over to Alexandra to go into detail on some parts of the portfolio, we wanted to show you what the portfolio looks like as a whole. You can see on this slide that we work hard to create a portfolio of meticulously sourced innovative biotech and med-tech companies that are diversified across modalities and disease areas, public and private, and increasingly across security type with addition of royalties in the last couple of years. We have companies across the developmental stage from preclinical to commercial. And of course, there's a wide range across modalities and therapeutic areas. And we expect the number of line items in both modalities and disease areas to increase. So it's been an incredibly challenging 18 months, but we think that our firm is structurally sound, our team is structurally sound, excited for what we're looking at. And our firm's strength positions us better now than ever before in this less competitive environment due to the value disruption in our space. We're confident that we will benefit from plentiful value opportunities we see. With that, I'm going to pass it over to Alexandra.

Thank you, Stephanie, and hello, everyone. As Woody already mentioned, our performance was -- declined by 27% for the first 6 months of 2022, clearly not numbers that we would be excited to report. However, we wanted to provide a deeper insight into where the contributions and detractions came from. The majority of the decline was driven by the public names, and the waterfall chart breaks down even further the individual names. Only 2 public names made a positive contribution in the first half of the year. So let's go to the next slide to cover the main headlines. So on to our -- here are the top 5 winners and losers from the core portfolio, public and private, for the first half of the year. So let's start on the left with our contributors. So our royalty assets have been key contributors this first half of the year, especially royalty #1 for mavacamten, which was sold at about 3x step-up, and we will return to our royalties in a minute. Immunocore has performed well as the KIMMTRAK drug blew past our consensus estimates in its first quarter of the launch for uveal melanoma, which is a tumor type which previously had no available therapies. You might also have seen that we recently increased an investment in Immunocore when we participated in the $140 million PIPE alongside a handful of other investors. As a firm, we have been supporting Immunocore since its Series A back in 2015, and I'm excited to share another example of a U.K. successful story. Another name, CinCor, IPO-ed in January and the shares have performed well since then. We originally invested in their Series B round in October of 2021. Another company, Magnolia Medical, raised $46 million in February through a growth equity financing round, which we co-led, and valuing the company at the premium to our previous mark after venture funds initially invested in it in July 2021. So looking on the right to our losers, C4 Therapeutics, which is a targeted protein degradation company, they reported first -- Phase I first-in-human clinical data back in April of this year, which were unfortunately negative. Tenaya is a preclinical stage gene therapy company working on HCM, which is a genetic heart condition. And it is getting ready to initiate clinical studies by year-end. There was no data update here, but the company mostly suffers from the market value distractions in the sector, particularly alongside other gene therapy names. And then Avidity. You have heard us mention Avidity multiple times in the past. It is an RNA antibody conjugate company solving how to deliver RNA to muscles. So this is historically a tough space. Same as Tenaya, no company-related updates that caused the detraction but all due to market movement. Next slide, thank you. So before going a little more into some of the current drug transactions and core names, we wanted to address the private portfolio from cash and valuation perspective. And this is a significant area of interest and questions that we have received throughout this year. What you can see is that our private portfolio is well funded. Here is a cash runway analysis as of June 30. So at end of the reporting period, we had 26 companies in our private portfolio, 22 have a cash burn that we can approximate. Their average cash runway is 32 months and approximately have more than 2 years. We only have six companies that have less than a year, 2 of which are RTW new company creations. So that is by design. Of the remaining four, 2 are in more challenging financing positions, which brings me actually to the next slide. So this chart shows valuation changes of the private portfolio at the end of June. It is important to note that our valuation committee takes a fair value approach to marketing our private portfolio, doing so on a monthly basis and with involvement of third-party valuation company. So proverbially, we do not kick the can down the road. So despite the previous waterfall slide showing a contribution of about 1.3% from our core private portfolio, we have, to some degree, marked down 75% of the portfolio. You can see from the color coding of the bars that the majority of these write-downs are due to non-company-specific factors, such as lower comps and market. Only 3 of the markdowns are due to some idiosyncratic factors like delayed financing grounds. On the other hand, all of our markups, 18% of the portfolio, have some tangible company-specific reasoning, like the sales of our royalty investment in mavacamten, which is investment #2 in this chart, or the markup of our stock founders shares, investment number one, after we recently progressed towards a combination, and we will return to both transactions in a minute. So before finishing on the private portfolio, it is important to note that the private securities we own have some degree of downside protection given their general seniority in the capital structure. It is more junior securities in the capital structure that will absorb the majority of losses in a markdown situation. So for example, the company that I mentioned earlier, that is in a more challenging financial position, it is represented as #23 in the blue. We have marked it down year-to-date by about 20%, but the junior securities would have taken a bigger hit. So that leaves me to that. We are able to negotiate this position because we lead half of our private financing rounds. So in summary, the private portfolio is in good shape. It is well funded, and we have been there and active in our evaluation of the individual holdings. So I will pass to Stephanie to tell you more about recent transactions.

Next slide. So coming back to this reference. It's the slide that I talked about and the many wide-ranging skills and capabilities certainly on the financial side that we think complements the deep work that we do in science. Here's an example of RTW's breadth of offerings and how it actually helps us win deals, royalty and otherwise, to further generate returns for our shareholders. So this is a groundbreaking transaction with Cytokinetics, a San Francisco-based company. We were able to sign as a single counterparty, providing them with $250 million of committed capital to a promising mid-stage cardiovascular company focused on rare cardiomyopathy. With the internal capabilities we have, we were able to get a great complicated transaction done in record-breaking time. So within 4 weeks, we did a deal that had four components to it: A $50 million equity investment, a regional partnering deal with the venture fund's portfolio company, Ji Xing, to allow for greater China rights and commercialization of their product; an $85 million purchase of future royalties to be received from the sales of mavacamten; and a $90 million of clinical trial funding to fund Phase III clinical trials for CK-274. So the reason that this worked is because the single-party counterparty transaction could meet their time frame. We were able to do this quite quickly rather than having multiple parties negotiate four different transactions simultaneously, and that was quite differentiating from other parties that wanted to take individual parts of this transaction. We could, in effect, derisk the execution and simplify a process that would have taken potentially 6 months involving these multiple transactions. Not only that, the company was impressed with and quite satisfied that RTW was fully aligned with their goals. Now let's just chat about mavacamten, which is under RTW royalty holding number one. In April, we sold mava to Bristol Myers Squibb after its Phase III readout. We entered this royalty before FDA approved the drug. We achieved a 3x return on our initial investment, which generated over 100% IRR for our investors. It's fair to say that this ranks among one of the most successful royalty transactions in recent history. The transaction demonstrates a few qualities that makes RTW unique in this asset class. So it's deep knowledge of a therapeutic area, recognizing first-in-class disruptive technologies, sophisticated ability to underwrite around no risks to capture upside, and then unique expertise in specialized transactions like royalties that we have in-house at RTW. So we're not only excited about the outcome of this deal, but also the ability to continue to provide even more innovative financing alternatives to companies with the launch of our dedicated royalty fund. A lot of these companies are asking about royalties, and we're receiving a lot of inbound demand because though they are big checks, they are less costly than equity and less dilutive to existing shareholders of these companies. This is one of the rare times that if we know a company is launching a drug or just got an NDA approval, we can transact on a deal where we were going to generate mid- to high-teens IRR conservatively. And the company would like that outcome because the equity option would otherwise cost them 40% to 50%. So long-standing royalty investors simply are focused on these kinds of deals because they're looking to do larger ticket sizes without other complicated components to a deal, or simpler, to simply underwrite certainty from an existing commercial product. Royalty deals, however, are more capital intensive compared to our traditional private venture investments, which is why we're launching a dedicated royalty fund to capture that opportunity. And in our view, this increased capacity will enable us to attract more opportunities which will be shared with RTW Venture Fund around a clear allocation policy, which we do with all of our private investments already. Alexandra, back to you.

Thank you, Stephanie. And along with highlighting our recent transactions, we also wanted to highlight our portfolio company as well. So today, we're highlighting Immunocore. So this is a U.K.-based success story, and we have already mentioned it in our presentation, but most of you have heard of Immunocore, which is a leading Oxford-based T cell receptor company focused on oncology and infectious disease. As I mentioned earlier, we have been investing in Immunocore since Series A back in 2015, and have been supporters of each follow-on round IPO and just recently applied this summer. So venture fund started gaining exposure to Immunocore since Series B that we did in 2019, right before our funds launched, and it currently holds 7% position for the fund. So Immunocore calls their technology ImmTAC. So these are new bispecific biologic that combine T cell receptor targeting an anti-CD3 effector function. So basically, you have an enhanced binding between cancer and immune cells and then that effector function piece works to kill the tumor. So Immunocore's ImmTAC has been approved earlier this year and it's a first-in-class TCR therapy as well as the first therapy approved for metastatic uveal melanoma, which is a type of eye cancer. We are delighted to see Immunocore executing a successful launch of the drug, and we'll touch upon its progression and catalyst momentarily. And given market environment this year, Immunocore very much represents a public name that we would want to own. It's innovating technology is now validated within a proved product, it has a strong cash position, which provides business stability, and its pipeline is expanding in other indications. So we can go to the next slide. So we have a full catalyst calendar for the rest of the year and below are a select few to highlight. Excitingly, some of them already had a positive readout in Q3. So back to Immunocore that we just touched already, that we mentioned that the launch has been going very successfully. They also just shared proof-of-concept data from their next program, which is called PRAME in September. The checkmark is yellow as so far as the launch is going well. However, the first in-human Phase I data at ESMO in Paris just this past weekend was a bit of a mixed bag, showing responses in melanoma and ovarian cancer, but not in lung, endometrial, and breast cancer. So you have seen some of the detraction in the stock itself already now in September post interim results. Additional positive data came from our 2 hypertension focused companies, CinCor and Mineralys, both reported positive Phase II data in August. And then autoimmune disease company focused on -- Ventyx, which shared positive Phase I data this quarter. The program is focused on addressing inflammation via TYK2 target, which is a regulator of innate and adaptive immunity. Additionally, Bristol Myers just received FDA approval for their TYK drug. So this is the same class, which was a positive breakthrough for Ventyx as well. So far so good. And the catalysts that have not happened yet. So let's cover them as well. So Rocket is expected to share its Danon program update later this month. So you have heard us talk about Rocket quite a bit and their Danon program, which is a gene therapy program that aims to treat genetic heart failure in kids and adults, and they expect to share further details on the rest of the programs for Fanconi, LAD-1 and PKD later this year. Avidity is one of the first ones to try to bring RNA medicine into the muscle. And there are two very large genetic muscular dystrophies that have very high unmet need, and they will share proof-of-concept data in Q4. Milestone will report data from their second Phase III in the fall. They narrowly missed on their first Phase III trial 2 years ago. We worked with them to support this new study, which included a PIPE investment and a geographic licensing deal for Ji Xing. It's a good example of the kind of rescue financing that we can do, and this is something that just Stephanie was talking about in terms of creative financial solutions. And another name working on autoimmune inflammatory conditions, but going after a different target, is Prometheus and this is expected to report Phase I data update in Q4. So all in all, planted to look forward and from the bottom-up perspective. For a sector perspective, though, I will hand it over to Woody. Woody, please take it away.

Thanks, Alexandra. I'll just try and get through these slides quite quickly, so that we've got as much time for questions as possible. But as I mentioned earlier, and you can see on this chart, the Biotech index has experienced the second longest and second deepest drawdown since ever really. But the prior largest was the bursting of the genomics bubble back in 2000. So the Russell 2000 Biotech Index has declined by 70%. And you can see just a small rally at the end on the right there, it's about 30% in the last 9 weeks. And I suppose that sounds pretty good, but due to negative compounding, there is obviously a long way to go. And this has really brought valuations down to crisis levels at the end of June. So just once again, using the NBI, which is the broadest view of the space, we use price to sales. So at the end of June, the price-to-sales ratio was 4.5x, which is equal to the spring of 2009, i.e., during the global financial crisis. And you can see that peak valuations were 23.2x in the genomics bubble, which is just over 5x where they are today. Incidentally, for those that have watched the treasury yields and think about that 10-year treasury yields that then were up towards the 5% to 6% range as opposed to the 3% to 4% range that we have now. So higher rates doesn't necessarily preclude higher valuations in biotech. This slide looks at the number and percentage of companies trading at less than 2x or less than the cash on their balance sheets. And so the smallest companies, which is generally where we invest, those are the ones that have generally been hit the hardest. And here, we like to use cash multiples. So at the end of June, 65% of the sub-$10 billion market cap companies in the biotech sector were trading at less than 2x cash and a record high 34% were trading -- their market cap was less than the cash on their balance sheet. So really very distressed valuations in the mid-cap space in the sector. And really, the biggest corporate behind this apparent distress is in smaller companies and in newly publicly listed companies after a boom in recent years, which culminated in 108 IPOs last year. And as a result, the number of public biopharma companies has increased by 82% since 2015. But many of these newly minted public companies are now trading at levels significantly below the IPO price, and many of them are trading at below cash. So obviously, since then, issuance has somewhat dried up, as you can tell from the cadence of the IPOs in our portfolio as well. So this year issuance has plummeted to just 13 in the first half of the year. And really, that sounds terrible. But if you look back to '08 and '09, it was 3 and 4, respectively. So it's bad, but it's not as bad as it was in crisis time, which is when valuations were at this sort of level. And private financing on the right there of the slide is also down. And what you can't see here is that it's heavily skewed towards Series A, which thanks to very large new vintage funds, are doing okay. In fact, the pace of early-stage financing is roughly consistent with last year, which is a positive sign that VCs are finding some good early-stage science, which is good. But the funding gap may appear in later-stage privates in the coming quarters, and we think that's especially likely for those companies that are too early in their clinical development or built on unproven science. But that all being said, and talking of funding gaps, actually, sector cash runway, which we talked about earlier in the context of our own portfolio, actually looks okay. So if you look back to 2015, the last sort of significant correction for the biotech market was in 2016. So just before that, average cash balances stood at about $123 million. Today, average cash balances stand at double that, at $235 million. Cash burn rates have gone up too. So the runways are about the same. So about 3 years is the average for the market and roughly corresponding to our own portfolio. And this, to some degree, gives the IPO market some time to heal. And we're just beginning to start seeing companies test the water on the IPO market. In fact, one of our core portfolio companies, Third Harmonic, is leading the way, I think, today. So what are the greenshoots that we're seeing? The most significant one, apart from obviously the valuations, is in M&A. And it's too early to be absolutely sure that we've seen the bottom for the sector, but there are reasons for optimism on top of the valuation. So first, we're starting to see some very meaningful M&A. In fact, Q2 was the biggest quarter for M&A since 2018, 4 years ago. In total, there were 14 deals, nine public and five private, which was up 280% quarter-on-quarter and year-on-year. So a big jump. And it's been heavily rumored, and we think it's likely true, although they're taking some time to agree on a price at the bottom there that Merck are looking to acquire Seagen. And if that deal does happen, that means that year-to-date public M&A or significant public M&A value has reached nearly $70 billion. And that's about 20% of the total public market cap of companies below $25 billion, which are the sellers to the large pharma companies. And in our view, this is a big deal. It moves the needle and it could recatalyze or is beginning to recatalyze the start of a virtuous cycle for the sector. But a question that we receive a lot is, I suppose, is that enough? And does the historically large number of companies trading below cash, as I mentioned earlier, mean that the sector is going to start dealing with these sort of distressed companies and bad ideas over the next couple of years? And is this dead money? And we don't think so, and here's why. And that is because the sum of all of those companies, we said it was 30-something percent on a names basis. But on a market cap basis, it's only about 3%. So in other words, from a financial perspective, the bad ideas have been written down. And from a sector perspective, this is more than offset by the 20% recirculation of M&A capital that we mentioned earlier. Now that being said, just turning to the right-hand side of the chart here, that doesn't mean from a sector perspective things are perhaps looking a little more secure. But really, from an individual fund perspective, I suppose one needs to think about who might be the winners and losers from that. And the firms who, in theory, we think, should do better through that are ones that are stock pickers that have a focus on mid-cap proof-of-concept -- so companies that have a proof of concept, i.e., companies that aren't overly focused on the baggage and operational challenges that come with being a young struggling company who's thinking about where their next financing round, where it might come from. And as well, the investment managers should have the capital and bandwidth to invest in the small and private companies that they really love without having to rely on syndicate partners who may or may not be struggling. So those are the greenshoots. One of the things that we highlighted on our recent midyear webinar was that the drug pricing reform had come back on the table. And we're pleased to say that since then it's passed without too much concern. In fact, we labeled it as the most significant near-term risk and we were quite active or trying to be active in changing some of it. And as you can see on the bottom there, we published some papers to try and change the course of it, or at least parts of it. And that is a link which we will provide later with the presentation. But whilst we were unsuccessful in changing those parts of the bill, we're pleased to report that the drug pricing reform package that formed part of the Inflation Reduction Act did pass without too much concern. And the impact is largely limited to a handful of large pharma companies and biotechs who have successful products that are already being sold or soon to be sold into the Medicare population or for small biotech companies that have high expectations of sales into that cohort. But there are two things that matter from our perspective for innovative biotech investors. The first is that incremental investment will be directed away from small molecule drugs where the pre-price negotiation window has come down to 9 years versus 13 for biologics. And sadly, some diseases can only be addressed by small molecules. So those patients will suffer over the long term, especially when one considers how successful targeted oncology has been in recent times. But I suppose the political calculation is that patients won't care about a drug that they didn't know that they might have. So the second observation from a biotech investor perspective is that we believe that these additional revenue headwinds for large pharma companies, on top of the patent cliffs that we've spoken about before, which kick in, in 2026, can only be remedied by more M&A, thus accelerating the recent trends, which we believe has just started. So with that, that's the end of our presentation. Now we're going to open up to questions. [Operator Instructions] But Stephanie is going to read out the questions and address those or direct them accordingly. Thanks, Stephanie.

Thank you, Woody. Okay. So let's get started. First question. In the beginning of the fund, the plan, as we had laid it out, was that cash was invested in the hedge fund and be deployed into private opportunities. Is that still the plan to continue to fund private and draw down the hedge fund investment? So let me just reframe that slightly. The cash has never been invested in the RTW hedge funds, but it has been invested in a portfolio of liquid names that parallel the same names that are in the hedge funds. So yes, that is indeed our effective cash management strategy, to invest the undeployed portion of the portfolio into liquid public names, really giving you a full life cycle exposure to the broad range of what we do and enabling us to, I think, best take advantage of cycles where there might be great deep value opportunities to be found in the public markets, fewer private opportunities available such as now. And then on the flip side, there are other moments in time where we can quite easily draw down and sell some of those liquid public positions to put to work into new private companies. Next question is we -- I think we might have covered this in one of the slides, but we referenced that the NBI had declined to a 4.5 price to sales, which was equal to the level post the global financial crisis. What was the ratio that the index traded prior to the global financial crisis? It peaked at over 20x price to sales versus a more modest peak in recent years. So that earlier 22x peak was at the height of the genomics and into that level in 2000. There was a more modest peak in recent years, which was the summer of 2015, when the price to sales reached about 10x. Okay. So Woody, I'm going to give you a couple of questions now. Why don't we address, if valuation is attractive, has management been buying the stock?

Yes is the answer. And we have a small window every month where we can buy the stock. And we will plan to continue to do so.

Management -- I'll add to that. Management had been actively buying stock when we were trading -- when the share price was trading at a premium to NAV. We are not able to issue new shares at a discount. And there are moments in time where management might have non-public information around a portfolio company and, therefore, might be restricted. Woody, are there any tools that we can realistically employ to help reduce this discount?

Yes. Thanks, Stephanie. I'll take that one, and also, I'll take another one at the same time because I think they're related. And it relates to the volume of the stock and the limited volume that there is. So yes, there are actions that one can take. And I mean, there is a provision for us to buy back stock to protect a discount or at the discretion of the Board. Now the reason I brought up the next question is that, that would obviously have a detrimental impact on the underlying liquidity of the stock and reduce the share count. So using that provision is something that we would have to or the Board would have to consider very closely. And really, there's only been two short periods of time, both this year, where the stock has traded towards a 20% discount to NAV. The last was in May and early June. And quite soon after that, it returned to a 3% premium, and it has since fallen back to a bit of a discount. But the onus for us at the investment manager level right now is to drive the NAV. We firmly believe that we're increasingly confident that the biotech sector has turned. The prospects for our investments are extremely good. So we want to continue that NAV progression that started back in June and continue to show that in the NAV prints on a monthly basis. And our view is that if we continue to do that, then the discount should narrow and the share price should follow the NAV upwards. So yes, to your question, there are things that we can do on buying back shares, but it's something that we would have to very seriously consider, especially when we consider that it's only been 2 very short periods of time where we traded at a discount. In terms of the volume, what can we do on that? I suppose this year has been, given the things that we talked about earlier on issuances, it has been a quieter than normal time. And with less news, there's less activity in the market that people react to and buy the stock up. So I'd suggest that once activity picks up, once the performance of the stock picks up, there will be increased volume. I joined the firm a little over 5 months ago now, based here in London, one of my jobs is to help find liquidity where it's needed and generate some news flow and get out there and see investors and tell the story more actively than we were able to do in the past with Stephanie and Alexandra in New York, and obviously a good chunk of that being during COVID as well. So we are cognizant of the volume, and we're making efforts to improve it, starting with me being here.

Thanks, Woody. I'll take this one. So can we address what is our desired percentage of listed holdings in the core portfolio? And will we hold anything successful post-IPO indefinitely? Or do we aim to sell at a specific point? So the way that we think about ownership of anything in our portfolio is based on upside and downside and what risk reward looks like. So at any point in time, and that may be well past the IPO, what we want to achieve is -- this is a moving target, but what we do want to achieve is full or close to full value recognition. If it takes a while to get there after an IPO, which is generally the case, then we are willing to be patient. So it's hard to put a specific percentage or a specific number on how many holdings we think should be in the private bucket or in the post-IPO core holdings bucket, but we want to be opportunistic and hang on to the companies that we believe still have runway. What kind of signals in sector M&A would give us the most encouragement on the market sentiment? So I mean, these days, given the softer capital markets and softer IPO system that we're seeing, M&A is really the only irreversible value creation. So we are seeing there have been some terrific deals. There are other deals that are in the rumor mill at the moment, so there's not really anything specific that we're looking at, but we do expect to see a lot of that big balance sheet that pharma is sitting on now, to continue to buy great mid-cap companies that are below that kind of $25 billion market cap, some of which are in our portfolio. So we think that any deal because of what it delivers, the irreversible value creation is helpful to the sector and now in turn helps sentiment. Given the NewCo and the royalty funds that RTW is planning to launch, how are investment opportunities be allocated across the RTW enterprise? And why raise these funds versus having larger positions in targeted companies in this listed fund? Well, as we've seen, particularly over the last couple of years, because of the constant need for fundraising and for capital for private biotech companies, a lot of times, lead investors, the companies themselves are willing to continue to raise and syndicate ownership across a broader syndicate and then push some of those companies into the public space sometimes far too early, before the science has been validated, in order to access that bigger pool of capital that waits in sort of the public capital markets realm. What we like to do, and the reason that we've contemplated and we're planning to launch a dedicated vehicle to support our new co-creations is so that we have a pool of capital that is enabling us to fund and maybe perhaps keep some of these NewCos that we incubate, keep them private for longer without the need of syndicating too early, and certainly without the need of pushing them forward too early. As for the royalty funds, these are long duration and very capital-intensive deals. The demand that we are seeing far exceeds the amount of money we have in this fund. So if we were going to scale this fund considerably, then we certainly would be very happy to have royalties as part of this portfolio, but the capital needs certainly could not be met with the size of this product at this point in time. We're working on the allocation policy as we do already have one between hedge funds and the venture fund. So we expect to come up with another hard-coated policy vis-à-vis the new funds that we launched. I'm looking at sense around timing.

I think we've got time for one more.

Do you want to take one, Woody? Is there anything that -- we will get back to anyone whose questions we have not answered.

I'll take a question on ESG and sustainability, because that's obviously something that is at the forefront of mostly European investors' minds. And it's certainly something that the Board and we are considering ourselves. We are in the process of drafting a policy and consulting with consultants about what the appropriate policy and subsequent action is for us. At this point, we feel that we sort of tick the boxes without going through the sort of tick the box process that somewhat to be labeled as sort of ESG fund or sustainable fund requires, i.e., we are active investors. We are investing in drugs and therapies that are changing people's lives. We have a very diverse workforce. And we also have a charity, which we support, that funds that many, many good causes. So whilst we haven't gone through the check box exercise at this moment in time, we are considering what to do next, and we'll look forward to reporting to you on that in due course. But I think we're actually running up against the end of our time here. So I just...

One more, Woody, if that's okay? So the M&A catalyst is mostly around approved or nearly approved therapies. And the biggest discounts are found in the earlier clinical stage companies where our investments are more in the latter group. Is it possible that later stage valuation companies recover more robustly than the earlier stage? So actually, we are quite sort of diversified across stage from preclinical to commercial. In fact, a couple of our largest public investments do have approved products. U.K. company that we highlighted, Immunocore, is on track with their first product launch. So I think that we have ample exposure to companies that potentially could be M&A targets for pharma. So I wouldn't be concerned. And on the earlier stage of companies that we are invested in, as Alexandra pointed out, there are a number of interesting catalysts that we see. So we will wait for some of these idiosyncratic news events to hopefully positively impact M&A. And Woody, why don't you...

Thanks, Steph. I think we're done. And for those questions that we haven't been able to get to because we've run out of time, then we will come back to you either on e-mail or give you a call. But just before we go, I want to leave you with one last chart. As you know, investing in biotech is a long-term game, which is why we at RTW take a patient full life cycle approach from company creation through venture crossover and into the public markets, as Stephanie just referenced. And this graph shows the long-term since-inception performance of the RTW flagship fund against the index of health care investment trust peers of the RTW Venture Fund, which is also shown in orange index to the peer group at its admission. Now since launch in 2009, the flagship fund has outperformed that investment trust index by 3.75x or 3.74x. And it's important to note, however, that this is not an identical strategy to the RTW Venture Fund. The flagship fund is mostly public equity long short with an average net exposure of 55%. But as many of you well know, it's informed by the same philosophy, process and people. For the first 3 years since submission, the RTW Venture Fund has faced the second worst drawdown in biotech history, but all the while innovation has sustained at record levels and valuations are now extremely attractive. So in our opinion, the long-term outlook for the sector looks very enticing indeed, and we hope you agree. Many thanks to you all for taking the time, and we look forward to updating you again soon. In the meantime, I'm always open to having a conversation. So please do get in touch. But that's all from us. Thank you very much.