Rtw Biotech Regulatory News (RTW)

 LEI: 549300Q7EXQQH6KF7Z84

31 March 2022

RTW Venture Fund Limited

Annual Report and Audited Financial Statements for the Year Ended 31 December 2021

Record number of portfolio company IPOs, providing strong valuation step-ups

RTW Venture Fund Limited ("RTW" or the "Company"), a London Stock Exchange-listed investment fund focused on identifying transformative assets with high growth potential across the life sciences sector, is pleased to announce its Annual Results for the year ended 31 December 2021.

Financial Highlights - further deployment progress

(i) Total shareholder return is an alternative performance measure.

(ii) As the Company's December NAV was not published until mid-January and the portfolio enjoyed an exceptionally strong month of performance in December the Company's share price is shown as being at a discount to the December 31 NAV even though its shares traded at a premium to the published November NAV during December.

(iii) Source: Bloomberg.

Portfolio Highlights - deployment progress continues:

· As of 31 December 2021, the Company held 42 core portfolio companies (2020: 22)

o 17 of which are publicly-listed (2020: 9)

o 25 of which are privately-held (2020: 13)

· Of these, 21 new core portfolio companies were added during the period

· 44/55 or 80% of core/total portfolio companies' pipeline products are in clinical stage programmes (2020: 25/33)

· As of 31 December 2021, two-thirds of NAV was invested in core portfolio companies and one-third of NAV was invested in non-core portfolio holdings.

· During the year to 31 December 2021, 9 portfolio companies (Ventyx, Pyxis, Tenaya, Monta Rosa, Biomea Fusion, Prometheus, Landos, Immunocore and GH Research) launched an initial public offering (IPO)

o Average 1.9x step-up from the initial time of investment to IPO (2020: 1.8x)

· During the period, RTW successfully migrated to the Official List of the FCA and to trading on the Premium Segment of the London Stock Exchange

Roderick Wong, MD, Managing Partner and Chief Investment Officer of RTW Investments, LP (the "Investment Manager") commented:

"I am pleased to report a resolute performance for RTW Venture Fund for 2021, during a time of heightened turbulence across all markets, especially for the biotech sector. The Company made considerable progress and outperformed the Russell 2000 Biotech Index by a noticeable margin, proving our strong track record of identifying transformative assets with high growth potential.

During 2021, the Company achieved a number of significant milestones, including almost doubling the number of portfolio companies to 42 with 22 added during the course of the year. No less than 9 portfolio companies completed IPOs, leading to an average 1.9x increase in valuations across those companies. Additionally, RTW successfully migrated to the Official List of the FCA and to trading on the Premium Segment of the London Stock Exchange, which we hope will further enhance the Company's liquidity, profile and pave the way for potential future index inclusions.

We believe that there remains significant demand for reliable capital to support the discovery and development of scientific innovation globally, and that the biotech sector remains extremely attractive following a historically significant de-rating of the small cap biotech sector. The sell off has been so extreme that it has now resulted in the highest number of biotech companies trading at less than 2x cash in history, opening up an exciting range of opportunities for us to identify high quality companies through our science led approach.

We look ahead to 2022 with optimism and look forward to providing shareholders with regular updates as we progress."

For Further Information

About RTW Venture Fund Limited:

RTW Venture Fund Limited (LSE: RTW & RTWG) is an investment fund focused on identifying transformative assets with high growth potential across the life sciences sector. Driven by a long-term approach to support innovative businesses, RTW Venture Fund invests in companies developing next-generation therapies and technologies that can significantly improve patients' lives.

RTW Venture Fund Limited 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.

Visit the RTW website at www.rtwfunds.com for more information.

Chairman's Statement

I present the 2021 annual results for RTW Venture Fund Limited (the "Company") and am pleased to report that significant milestones were achieved during the last year.

2021 Overview

Building upon the considerable achievements and extraordinary growth in 2020, the Company and RTW continued executing their strategy in 2021. In spite of the COVID-19 pandemic and market volatility in the biotech sector, the Investment Manager remained focussed on the science-led fundamentals and valuation of the underlying companies and demonstrated an accelerated pace of capital deployment by investing in 21 new portfolio companies, compared with 15 in the previous financial year. This enabled the Company to continue to build its portfolio of innovative biotechnology and medical technology companies and providing solution-driven financing strategies at various points in the individual life cycles of these companies.

Despite market volatility in the biotech sector, the Company share price, which fell by 5.3% over the year, significantly outperformed its benchmark, the small-cap heavy Russell 2000 Biotech Index, which fell by 26.9% over the same period while slightly lower than the large-cap heavy Nasdaq Biotech Index which returned +0.6% for the reporting period. From 31 December 2020 to 31 December 2021, the NAV declined by 12.8% from US$375.3 million or US$1.96 per Ordinary Share to US$363.0 million or US$1.71 per Ordinary Share. The largest detractor to the NAV was the share price performance of Rocket, which fell heavily in line with the gene therapy sector as a whole as investors priced in delays to clinical trials. This was partially offset by the better performance of our private companies, particularly JIXING, and the IPOs of Landos, Immunocore, Prometheus, GH Research, Monte Rosa, Tenaya, Ventyx and acquisition of Inivata.

At the beginning of the year, the Company portfolio included 22 core portfolio companies, of which 13 were privately held and nine were publicly listed. All core portfolio companies were initiated as private investments by the Investment Manager. During 2021, the Company added a further 21 portfolio companies, one of which, Inivata, was later acquired by a third-party, bringing the total number of core portfolio companies to 42, representing c. two-thirds of NAV at the end of the year.

As in previous periods, to mitigate any drag on performance due to excess cash awaiting deployment into new private assets, the Company currently has c. one-third of NAV in a high-quality portfolio of listed companies or non-core portfolio assets selected by the Investment Manager, to be representative of positions that are also held in their other investment funds.

Share Issuance

During the reporting period our corporate broker, J.P. Morgan Cazenove, reported significant demand from prospective shareholders, which was reflected in the fact that the Company's share price has traded at an average premium to NAV of c. 10% since its admission. Under our Articles and in accordance with UK Listing rules, the Company has the authority to issue new shares of up to 20% of the outstanding share capital in any rolling twelve-month period without filing an updated prospectus, provided the shares are issued on a non-dilutive basis at a premium to NAV. In response to market demand in 2021, the Company issued a further 20,873,403 shares, an 11% increase in the total outstanding shares of the Company and raising an additional US$44.1 million net of expenses. The share issuance was also modestly accretive to NAV, contributing c. 1% to the NAV growth per Ordinary Share.

Migration to the Premium Listing of the Main Market of the LSE

As stated in the 2020 Annual Report, the Board intended to raise the profile of the Company with a view to broadening its shareholder base by means of exploring a migration to the Premium Listing of the Main Market of the London Stock Exchange.

I am pleased to report that the Company successfully completed the migration and was admitted to listing on the Official List of the FCA and to trading on the Premium Segment of the London Stock Exchange plc's Main Market on 6 August 2021. The application for admission was approved by a shareholder vote at the extraordinary general meeting held on 30 July 2021. The Company also introduced an additional market quote for the shares on the London Stock Exchange denominated in GBP under ticker "RTWG". There were no changes to the legal form or nature of the Ordinary Shares nor to the reporting currency of the Company's financial statements, which will remain in US Dollars.

The Board believes that the Premium Segment of the Main Market is the most appropriate platform for the continued growth of the Company by increasing RTW Venture Fund's profile, broadening its shareholder register, adding a Sterling denomination, and facilitating the Company's potential eligibility for inclusion in the FTSE UK Index Series.

Outlook

Even with COVID-19 and war in Ukraine remaining pressing issues worldwide, the Company is looking ahead with optimism and confidence. As a full life-cycle investor, our Investment Manager also invests in public biotech and medtech securities trading at attractive levels. We can take advantage of valuation disparities between small and mid-cap and large-cap companies in the sector and the overall biotech sector correction in 2022. The Investment Manager believes that there remains significant demand for reliable capital to support the discovery and development of scientific innovation globally, and that there is an opportunity to grow their footprint in the UK and EU as an active local participant in the biotech ecosystem. The Investment Manager therefore intends to grow the Company's portfolio by attracting demand from new shareholders to assist in the financing of an exciting pipeline of new ideas. These are based upon the Company's strategy of founding, investing, and supporting companies developing next-generation therapies and technologies that can significantly improve patients' lives. Accordingly, the Board expects the Company to deliver strong performance over the long term and creating value for shareholders.

AGM

The Company will hold its Annual General Meeting (AGM) on 21 June 2022 to review the annual results and provide portfolio updates. We would like to dedicate a part of the meeting to address questions from our shareholders. At the present time, we anticipate holding the AGM in a virtual format, although COVID-permitting it may be held in person at Royal Chambers, St Julian's Avenue, St Peter Port, Guernsey. However, we encourage our shareholders to share your questions here and we will endeavour to answer as many as we can: RTWVentureFund@rtwfunds.com.

On behalf of the Board, I would like to express my gratitude for your continued support and wish you and your families a healthy, safe, and prosperous 2022. I look forward to updating you further at the time of our interim results later in the year.

William Simpson

Chairman of the Board of Directors

RTW Venture Fund Limited

30 March 2022

Report of the Investment Manager

Executive summary

We present the year-end results of the Company as of 31 December 2021. Since its listing on the London Stock Exchange in October 2019, the Company has achieved NAV growth of 64.4% from US$168.0 million, or US$1.04 per Ordinary Share, to US$363.0 million, or US$1.71 per Ordinary Share as of 31 December 2021. For the reporting period, the NAV attributable to Ordinary Shares declined by 12.8% from US$375.3 million NAV or US$1.96 per Ordinary Share as of 31 December 2020. This compares with a decline in the Company's Russell 2000 benchmark of 26.9%. From Admission to 31 December 2021, the share price has returned 71.2%.

Table 1. Financial Highlights

(i) Total shareholder return is an alternative performance measure.

(ii) As the Company's December NAV was not published until mid-January and the portfolio enjoyed an exceptionally strong month of performance in December the Company's share price is shown as being at a discount to the December 31 NAV even though its shares traded at a premium to the published November NAV during December.

(iii) Source: Bloomberg.

RTW Investments, LP (the "Investment Manager", "us", "we"), a leading healthcare-focused entrepreneurial investment firm with a strong track record of supporting companies developing life-changing therapies, created the Company as an investment fund focused on identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by our deep scientific understanding and a long-term approach to building and supporting innovative businesses, we invest in companies developing transformative next-generation therapies and technologies that can significantly improve patients' lives.

As of 31 December 2021, c. two-thirds of NAV was invested in core portfolio companies, a similar figure to 31 December 2020 despite an increase in share capital and reflecting the Company's long term target portfolio allocation range. Core portfolio companies typically begin as private investments, reflecting the key focus of the Company's strategy. However, our investment approach is defined as full life cycle and therefore involves retaining our private investments well beyond their IPO, hence our core portfolio consists of both privately-held and publicly-listed companies.

The Company also invested approximately a third of its NAV in publicly listed, non-core portfolio assets in order to mitigate any 'cash drag' effect pending eventual re-investment in core portfolio opportunities as they arise. The non-core portfolio assets were selected by us and are also held in our other funds. The investments represented in this portfolio are similarly categorized as innovative biotechnology and medical technology companies developing and commercializing potentially disruptive and transformational products.

Over the year, our listed core holdings produced the majority of our losses and our private core holdings produced the majority of our gains. In 2021, the NAV per Ordinary Share declined by 12.8%. The main contributors to the NAV per Ordinary Share decrease were Rocket, Frequency, Avidity, Athira, Pulmonx and Tarsus, contributing c. 25% to the decline. These mark to market losses were offset by the performance of our private companies, particularly JIXING and IPOs of Landos, Immunocore, Prometheus, GH Research, Monte Rosa, Tenaya, Ventyx and acquisition of Inivata, together contributing c. 12.3% to the NAV growth. Share issuance at a premium to net asset value contributed c. 1.2% and the balance of our performance is made up of operating expenses and a performance allocation fee credit.

Figure 1. Performance drivers as of 31 December 2021

[chart]

On listing, the Company's core portfolio included six companies, four of which were developing clinical-stage therapeutics and two med tech companies developing transformative devices. Since listing, the Company has added 36 companies to its portfolio and has had one position acquired, with 15 additions in the 2020 financial year and 21 in 2021. Portfolio companies added in the 2021 are listed below.

Our 2021 new investments include:

As of 31 December 2021, the portfolio included 42 companies that were diversified across treatment modalities, therapeutic focus, and clinical stage of their programs (Figure 2A-C). While the portfolio remains dominated by US-based companies (Figure 2D), we are committed to adding UK and EU-based companies in an effort to support the best assets globally and foster local biotech ecosystems where we see attractive opportunities.

Figure 2. Portfolio breakdown, by (A) modality, (B) therapeutic focus, (C) clinical stage and (D) geography as of 31 December 2021

(A) [chart] (B) [chart]

(C) [chart] (D) [chart]

Key updates for Portfolio Companies during 2021:

Clinical

· In April 2021, iTeos shared a positive preliminary Phase 1 data update for its TIGIT antibody EOS-448 program in adult patients with advanced solid tumors, indicating EOS-448 was generally well tolerated with no dose-limiting toxicities observed and showed preliminary signs of clinical activity as a monotherapy, including a partial response in a melanoma patient, and stable disease in multiple patients.

· In May 2021, Rocket shared positive data updates to its lentiviral vector (LVV)-based gene therapy programs for the treatment of Fanconi Anaemia (FA) and (2) Leukocyte Adhesion Deficiency-I (LAD-I), and (3) Pyruvate Kinase Deficiency (PKD). Rocket also announced that the FDA had put a clinical hold on its adeno-associated virus (AAV)-based gene therapy for Danon disease, a devastating, paediatric heart failure condition. The hold was not triggered by safety concerns and patient enrollment resumed in Q3 2021.

· In June 2021, Tarsus announced positive results of Saturn-1 pivotal trial evaluating TP-03 for the treatment of demodex blepharitis. The Saturn-1 Phase 2b/3 trial met all primary and secondary endpoints, and demonstrated significant, clinically meaningful outcomes with no serious treatment-related adverse events and no treatment-related discontinuations.

· In August 2021, Immunocore announced acceptance of its Biologic License Application for tebentafusp in metastatic uveal melanoma with the FDA and EMA, with the PDUFA action date set for February 23, 2022. Immunocore received FDA approval for Kimmtrak (tebentafusp) in January 2022 ahead of the expected PDUFA date.

· In October 2021, Avidity announced that the FDA had granted Fast Track Designation to its lead program, AOC 1001, for the treatment of myotonic dystrophy type 1 (DM1). Fast Track Designation enables more frequent interactions with the FDA to expedite the development and review process for drugs intended to treat serious or life-threatening conditions and that demonstrate the potential to address unmet medical needs.

· In November 2021, Rocket provided a positive incremental data update on its adeno-associated virus (AAV)-based gene therapy for Danon disease Overall, it showed stabilization or improvement in functional and biomarker metrics.

Financing

· In 2021, nine portfolio companies (Landos, Immunocore, Prometheus, Biomea Fusion, Monte Rosa, GH Research, Tenaya, Ventyx and Pyxis Oncology) launched an initial public offering (IPO) with an average 1.9x valuation step-up from the initial time of investment to IPO, followed by an additional average +15% performance on the first day of trading.

· In May 2021, JIXING announced an exclusive licencing agreement with Milestone to develop and commercialize etripamil, a novel calcium channel blocker designed to be a rapid-response therapy for episodic cardiovascular conditions, in China. Following this announcement, the Company participated alongside our other investment vehicles in a Series B financing round.

· In May 2021, NiKang Therapeutics completed a US$200 million Series C financing round. The Company alongside other vehicles managed by the Investment Manager participated in the financing round.

· We seeded our latest new company creation Yarrow Biotechnology, a biotech developing antisense oligonucleotide-based therapeutics for disorders with high unmet need. In May 2021, Yarrow announced a licensing agreement with ProQR for its antisense oligonucleotide technology (ASO) to develop and commercialize potential therapies for an undisclosed CNS target. 

· In June 2021, iTeos and GSK announced a deal on development and commercialization of iTeos' EOS-448 TIGIT targeting antibody, under which iTeos is to receive a US$625M upfront payment in addition to potential milestones, and royalty payments on ex-US sales up to US$1.45B in development and commercial milestones.

· In June 2021, Inivata announced that NeoGenomics, Inc (NASDAQ: "NEO") had completed its acquisition of the company, the intention of which had previously been announced on 5 May 2021. NeoGenomics exercised its option to acquire the remaining Inivata equity interest for US$390 million after it had previously made a US$25 million minority equity investment.

· In August 2021, JIXING announced an exclusive license and collaboration agreement with Oyster Pharma to develop and commercialize OC-01 (varenicline) and OC-02 (simpinicline) nasal sprays for the treatment of signs and symptoms of dry eye disease for patients in Greater China. Following this announcement, the Company participated alongside our other investment vehicles in a Series C financing round.

· In December 2021, JIXING announced an expansion of its collaboration with Cytokinetics by entering into an exclusive license and collaboration agreement to develop and commercialize omecamtiv mecarbil for the proposed treatment of heart failure with reduced ejection fraction (HFrEF) in Greater China.

Portfolio performance and updates

The Company's share price has traded at an average premium of c. 10% since inception (Figure 3A). The Company's overall returns since inception have outperformed its biotech benchmarks, generating an overall return of c. 71% vs c. 35% by the small and mid-cap heavy Russell 2000 Biotechnology Index and vs c. 40% by the large-cap heavy Nasdaq Biotechnology Index (Figure 3B note: the reporting period for this chart is 30 October 2019 to 31 December 2021). In 2021, the Company's share price declined by c. 5%, whilst the Nasdaq Biotechnology Index returned c. 1% and the Russell 2000 Biotechnology index returned c. -27% for the same period, respectively. Source Bloomberg.

Figure 3. RTW.L share price performance (A) and returns (B) as of 31 December 2021

(A) [chart]

(B)  [chart]

Rocket's share price declined by 60%, which made it the main detractor from the NAV per Ordinary Share this year (c. -22%). The FDA put Rocket's Danon program on clinical hold in early May 2021 in order to ensure adequate safeguards for patients in its clinical study. The trial was allowed to resume in August 2021 (for context, this was a fast resolution). The company also shared an update from the first five patients dosed in November 2021. While the data suggest four patients have been stable over their one to two years on study, investors expressed concern that a lack of improvement in certain measurements may make phase 3 trial design more challenging. Despite these points, Rocket remains among the top 3 largest independent gene therapy companies by market capitalisation. 

In context to this, it is worth noting that it was a challenging year for gene therapy as a subsector. Of 30 publicly traded gene therapy companies, the median decline has been 54%, with only three companies up on the year, no drug approvals (the total remains at two), and no public acquisitions. Recent setbacks have spanned safety, efficacy, and CMC (chemistry, manufacturing and controls):

Figure 4. Gene therapy setbacks

[chart]

We believe the companies best positioned to overcome these near-term challenges will be those who have chosen to focus on therapies for severe diseases with limited options and that also have meaningful commercial potential. Rocket's talented team and programs have been committed to this mission from the start, and we remain optimistic for both our existing programs and new opportunities. 

As of 31 December 2021, nine portfolio companies, which included Landos, Immunocore, Prometheus Biosciences, Biomea Fusion, Monte Rosa, GH Research, Tenaya, Ventyx and Pyxis Oncology had gone public via an IPO with an average 1.9x step-up from the initial time of investment to IPO and an average private holding period of 0.7 years, followed by an additional average c. 15% performance on the first day of trading.

Table 2. Core portfolio companies IPOs in 2021

*Immunocore originated as a Series A investment with the Investment Manager

Table 3. Performance of core private and public portfolio investments as of 31 December 2021

\* These positions originated in the portfolio as private companies and since have gone public; as of 31 December 2021, Monte Rosa, GH Research, Tenaya, Pyxis and Ventyx were under 180-day lock-up provision; **Acquired; ^Exited the position; ^^Milestone is a public company, the Company holds private warrants.

Table 4. NAV capital breakdown

*Other includes liabilities such as other payables and accrued expenses.

As of 31 December 2021, our top five holdings of non-core portfolio assets represented c. 7% of NAV and consisted of: Alnylam (ticker: "ALNY"), a leading RNA medicine company, Natera (ticker: "NTRA"), a clinical genetic testing company, Masimo (ticker: "MASI"), a medtech company developing innovative non-invasive patient monitoring technologies, Thermo Fisher Scientific (ticker "TMO"), a leading scientific service provider, and Cytokinetics (ticker: "CYTK"), a clinical-stage biotechnology company developing innovative treatments for cardiovascular conditions. We expect to deploy the capital invested into non-core portfolio assets into private companies as new opportunities arise.

Table 5. Overview of portfolio companies' valuations* as of 31 December 2021

* Valuations for Private Portfolio Companies on a fair market value basis as of 31 December 2021. The valuations of Rocket, Avidity, iTeos, Athira, C4 Therapeutics, Milestone, Pulmonx, Tarsus, Landos, Immunocore, Prometheus Biosciences, Biomea, Monte Rosa, GH Research, Tenaya, Pyxis and Ventyx have been calculated using market capitalization based on their publicly quoted market prices as of 31 December 2021. **In accordance with the Company's valuation policy, the Company applies a discount to its investments in Private Portfolio Companies which become Public Portfolio Companies that are subject to customary post-IPO lock-up provisions. ^Also includes Level 1 securities purchased at or after portfolio company IPO.

As of 31 December 2021, two members and one employee of the Investment Manager served on the board of directors of Rocket and two members and three employees served on the board of directors of Landos, JIXING, NiKang, Visus, Alcyone, RTW Royalty #1 and #2, and Yarrow, which in aggregate represented 30.3% of NAV of the Company.

Migration to the Main Market of the London Stock Exchange

We are pleased to report that RTW Venture Fund was admitted to the Premium Segment of the Main Market on 6 August 2021 and introduced an additional market quote denominated in GBP under ticker "RTWG". To satisfy the diversification requirements that we agreed with the UK Listing Authority, we reduced our position in Rocket and brought it under 25% of NAV, while adding to the position in our private fund, making RTW overall a net-buyer of the security. To note, the sale of Rocket shares by the Company to reduce the position from c. 33% to c.25% did not result in any crystalized losses, as at the time of the Company's IPO Rocket's share price was $14 and at the time of sale on 11 May 2021 was $40, representing c.186% uplift.

We believe the Premium Segment of the Main Market is the most appropriate platform for the continued growth of the Company. We look forward to continuing to advance our presence in the UK and are honoured to bring access to private markets and bespoke negotiated opportunities to an even broader investor base now being listed on the Premium Segment. We also believe that by maintaining a strong presence and providing much needed capital to late-stage venture companies, we are doing our part in fostering a stable and well capitalized investment ecosystem, which we believe will in turn benefit UK companies and support further innovation.

Summary of Portfolio Companies with at least 1.0% position of NAV as of 31 December 2021:

As of 31 December 2021, the Company's portfolio included 42 companies, ranging from biotechnology companies developing preclinical to clinical-stage therapeutic programs, companies developing traditional small molecule pharmaceuticals, and med-tech companies developing or commercializing transformative devices. We selected the Company's portfolio companies based upon our rigorous assessment of scientific and commercial potential, opportunities to positively impact value, and with regard to the valuation of the assets at the time of investment. The table below includes portfolio companies and their catalysts that had ≥1.0% position size at the end of the reporting period.

Table 6. RTW Venture Fund portfolio summary of catalysts (core portfolio holdings >1.0% of NAV) as of 31 December 2021

Sector review and outlook

Significant biotech sector underperformance, attractive valuations, high innovation… By some measures of market performance, 2021 was small-cap biotech's worst calendar year since the financial crisis over a decade ago. The small-cap heavy Russell 2000 Biotech Index finished down -27%, just ahead of 2008's -31%. Only 2002's drop of -54% was significantly worse. This performance is most striking compared to the broader markets. The S&P500 finished +27%, making small-cap biotech's 54% underperformance the largest in history (second largest was 1998's 42%) (Figure 5).

Figure 5. Russell 2000 Biotech Annual Performance

[chart]

Overall valuations for the Nasdaq Biotechnology Index (NBI) and SPDR S&P Biotech (XBI) have now returned to the historical average (Figure 6). This continues to be coupled with historically low interest rates and historically high innovation.

Figure 6. Historic sector valuations

[chart]

Despite market performance, 2021 was a strong year for innovation. The FDA managed through COVID resource constraints to approve 60 new drugs, topping last year's 59. Approvals by modality include: RNA for three, novel antibody technologies for three, and cell therapies for two. mRNA firmly established itself as the preferred modality for Covid vaccines, and Intellia demonstrated human proof-of-concept for in vivo CRISPR, unlocking another new modality in the battle against disease.

2022 Outlook. Most of the headwinds that we faced over the course of 2021 have either resolved or are far along in the process. In fact, we are hopeful that 2022 will transition to tailwinds, such as a return to business as usual at the FDA, multi-year clarity on drug pricing (should some form of the Build Back Better bill pass), and a resurgence in M&A. Regarding M&A, 2021's total deal volume of $109B is down from $169B in 2020 and is the second lowest in the last eight years. We speculate that the mix of more attractive valuations, growing pressure from the coming wave of patent expirations and an explosion of Covid related cash will be a potent recipe for deal making in 2022. 

Figure 7. Biopharma M&A and Deal Capacity

[chart]

Figure 8. US Biotech IPOs

 [chart]

IPO performance struggled this year under the weight of an all-time high 108 offerings. The average declined ~31% from offer date to YE 2021, after several years of easy gains for crossover investors. Activity had already begun to slow, with 60% of the year's IPOs taking place in the first half, and the number of deals in Q4 starting to approach the run-rate that existed before the mid-2020 boom. The number of small and relatively illiquid public companies that have had poor aftermarket performance has resulted in the highest number of companies trading at

Figure 9. US Biotech Companies under $10 Billion Market Cap

[chart]

We think the primary market risks that bear watching sit largely outside of healthcare and revolve around equities and the dynamic between inflation and interest rates, and overall market volatility due to war in Ukraine. Regardless of what happens to equities generally, we are quite optimistic the historically large performance gap between biotech and the broader markets will narrow.

Executing on our strategy. We are scientists and entrepreneurs who aspire to change the lives of patients through innovation, and purposeful investing is at the heart of everything we do. We power breakthrough therapies that transform the lives of millions. Maximizing value realization from transformative products takes time, and we believe it is critical to be involved and invested in such companies throughout various stages of their development and ultimately distribution to patients. In the instances where our research leads us to find that a company doesn't exist, we have the capability, human power, and funding to create a company de novo to advance an asset we believe is worth building a business architecture around.

As a full life-cycle investor, we recognize the importance of providing growth capital along with the support of an experienced team, if and when it is needed, at any critical inflection point in an asset's life cycle. Scientific development rarely follows a linear path and nor do we, which is why we are always thinking about the optimal way to support a company. This can be achieved through providing growth capital, creative financing solutions, capital markets expertise, or guidance through investing our time and sharing our collective experience as directors and stewards of tomorrow's most exciting and disruptive companies.

Taking a long-term full lifecycle approach and having a true evergreen structure enables us to avoid pitfalls of structural constraints of venture-only or public-only vehicles. Our focus is on becoming the best investors and company builders we can be, delivering exceptional results to shareholders and making an impact on patients' lives.

As we look ahead to 2022 and beyond, based on the breadth of opportunities we have been seeing and continue to see, we expect our efforts will translate into further capital commitments. The last 24 months have been very active, as we have added fifteen new companies in 2020 and twenty-one in 2021 to the Company's growing portfolio, and we foresee continuing with a similar investing pace in 2022. In 2021 and continuing in 2022, we are particularly focused on attractive opportunities within small and mic-cap public biotech companies given asymmetric risk / reward profiles of strong fundamentals and decreased valuations.

Primary areas of focus remain in genetic medicines, small molecule, antibody and next generation antibody therapies, targeted protein degradation, rare diseases, targeted oncology, and medical technologies. We are excited by advancements we are witnessing in neurology, ophthalmology, immunology, muscular dystrophies, and cardiovascular and pulmonary diseases.

We have always emphasized the important point that exciting innovation is taking place globally. Building upon our strong reputation in the U.S., we aim to strengthen our presence with new offices in London and Shanghai to further expand our presence and grow roots in these two strategic geographies. We are as keen on exploring scientific programs coming out of the UK and Europe as we are for those discovered and developed in the U.S. labs. We intend to continue to build inroads and have been actively cultivating deeper relationships in the UK.

We believe there is a significant demand for reliable capital providers, such as ourselves, to continue to support scientific innovation and development of transformative therapies for patients. With that in mind, we intend to grow the Company's portfolio, by attracting new shareholders to assist in the financing of an exciting pipeline of new ideas. We expect the split to remain close to 80% biopharmaceutical assets and 20% across medical technology assets. In line with prior guidance, we anticipate two-thirds of the core portfolio investments will be made in mid to later stage venture companies and one-third of the investments focused on active company building around the discovery and development or licensing and distribution of promising assets.

Key Portfolio Company Events Post Period End

On 6 January 2022, CinCor announced pricing of its US$193.6 million IPO, by offering 12.1 million shares at US$16.00 per share. The shares began trading on Nasdaq Global Market on 7 January 2022 under ticker "CINC". Since IPO CinCor shares have traded down 4.4% as of 23 March 2022.

The Company's investments in CinCor remains under 180-day lock-up provision.

In January 2022, the biotech sector has experienced a further selloff driven by investor fears over inflation and interest rates. The selloff resulted in a NAV per Ordinary Share decrease of 14% as of 31 January 2022. In February 2022, Russia invaded Ukraine, which resulted in further turmoil and uncertainty in the global markets. The Company's NAV per Ordinary Share further declined by 2% as of 28 February 2022. The Company does not have any portfolio companies in the affected regions.

RTW Investments, LP

30 March 2022

Our Long Term Strategy

Transforming the lives of millions

Our long-term strategy is anchored in identifying sources of transformational innovations by engaging in a deep scientific research and rigorous idea generation process, which is complemented with years of financial investment, company building, transactional, and legal expertise.

Identify

Identify transformational innovations

We have developed expertise through our comprehensive study of industry and academic efforts in targeted areas of significant innovation. Thanks to the genome, there is more clarity around the causes of disease. Coupled with new exciting modalities that can address genetic diseases in a targeted way, drug innovation is accelerating.

Engage

Engage in deep research and unlocking value

We developed repeatable internal processes combining technology and manpower to comprehensively cover critical drivers of innovation globally. We seek to identify biopharmaceutical and medical technology assets, ascertained through rigorous scientific analysis that have a high probability of becoming commercially viable products and can dramatically change the course of treatment and in some cases bring effective and/or full curative outcomes to patients.

Build

Build new companies around promising academic licences

We have the capabilities to partner with universities and in-license academic programs, by providing capital and infrastructure to entrepreneurs to advance scientific programs. Particularly working in rare diseases, often areas with little existing research and treatment options, means that forming a rare disease-focused company is a way of shining a light on this space and creating a roadmap to eventually developing a curative treatment.

Support

Support full lifecycle investment

A key part of our competitive advantage is the ability to determine at what point in a company's life cycle we should support the target asset or pipeline. As a full lifecycle investor, we can provide growth capital, creative financing solutions, capital markets expertise, or guidance through investing our time and sharing our collective experience as directors and stewards of tomorrow's most exciting and innovative companies. Taking a long-term full lifecycle approach and having a true evergreen structure enables us to avoid pitfalls of structural constraints of venture-only or public-only vehicles. Our focus is on becoming the best investors and company builders we can be, delivering exceptional results to shareholders and making a positive impact on patients' lives.

Our Strategy in Action

Identify transformational innovations

RTW focuses on identifying transformational innovations across the life sciences space, specifically backing scientific programs that have the potential to disrupt the prevailing standard of care in their respective disease areas.

Avidity

4.3% of NAV

2020: 3.9%

Portfolio company ownership

2020:

The need

It is estimated that about 40,000 Americans suffer from myotonic dystrophy, a rare genetic muscular dystrophy with no approved treatments.

Mission

Avidity is developing antibody oligonucleotide conjugate (AOC™) therapeutics, which combines the tissue selectivity of monoclonal antibodies and the precision of oligonucleotide-based therapeutics to overcome barriers to the delivery of oligonucleotides and target genetic drivers of disease.

Status

Avidity's lead program is in clinical trials for myotonic dystrophy (MD) and has discovery efforts underway to address additional diseases of the muscle.

Next milestone

Avidity is expected to share its preliminary Phase 1 clinical trial data for its lead program in myotonic dystrophy in H1 2022.

We believe the best way to create value is by solving unmet needs

As the global life sciences market experiences rapid growth, our strategic focus on addressing unmet patient needs has led to multiple opportunities for value creation.

Key achievements

Core portfolio companies

42

2020: 22

New companies added in 2021

21

2020: 15

Therapeutic areas addressed by core portfolio

10

2020: 9

Key statistics

Therapeutics

c.86%

2020: c.80%

Medtech

c.14%

2020: c.20%

Portfolio companies' pipeline products are 

in clinical stage programs

44/55

2020: 25/33

Priorities for 2022

As we look ahead to 2022, based on the breadth of opportunities we have been seeing and continue to see, we expect our efforts will translate into further capital commitments. The past year has been very active, and we foresee continuing with a similar investing pace in 2022.

Primary areas of focus remain in genetic medicines, small molecule, antibody and next generation antibody therapies, rare diseases, targeted oncology, and medical technologies. We are excited by advancements we are witnessing in neurology, ophthalmology, immunology, muscular dystrophies, and cardiovascular and pulmonary diseases.

Link KPIs

5 Diversified portfolio across multiple therapeutic areas, treatments modalities and geographies 

6 Active and robust pipeline

Link principal risks

3 The Investment Manager relies on key personnel

4 Portfolio Companies may be subject to litigation

6 Clinical Development & Regulatory Risks

8 COVID-19

Innovation Boom

We are living in an era where we are witnessing innovation accelerating at a breakneck speed with unparalleled opportunities for value creation.

The growth of new drug modalities has been dramatically accelerating. Whilst small molecules dominated drug development for over 30 years, antibodies and proteins grew quite gradually for about 20 years. Over the most recent decade the number of modalities has doubled, and furthermore in the first two years of this decade we added as many new modalities as in the previous ten years.

[chart]

We are seeing validated technologies, such as those derived from DNA and RNA science, that can effectively deliver therapeutic solutions across large swaths of diseases, resulting in companies with highly efficient development engines.

We believe there is an opportunity to offer attractive risk-adjusted returns to shareholders by building companies that possess unique and heretofore unrecognized growth opportunities that will benefit by capitalization, proactive skilled management, and supportive and sustainable governance practices.

Cheap genetic information

Cheap genetic information has revolutionized the discovery process, which is yielding validated drug targets at an unprecedented rate. According to the National Human Genome Research Institute, the approximate cost to sequence a human genome fell to less than $1,000 in 2020. This reduction in cost has fuelled tremendous productivity. According to data from the United States Patent and Trademark Office, the number of drug patents has inflected upward since 2010, which is translating into more new drugs in company pipelines. Technological applications are also creating platforms of addressable diseases, increasing bandwidth, and enabling companies to target more diseases with superior scientific accuracy and safety profiles than in previous generations of drug development.

Market leaders

Market valuation and growth

Although genetically validated targets can sometimes be addressed by existing traditional approaches, such as small molecules and antibodies, in specific tissues it is hard to beat the speed and ease in which DNA and RNA based medicines can be developed. Gene therapies also carry the potential for a one-time cure and RNA medicines for infrequent injections. The market for genetic medicine has been growing. According to Capital IQ, the cumulative market capitalization of the genetic medicine companies has increased from $9.4B at the end of 2014 to $202.8B by the end of 2021. Genetic medicine includes companies that use in vivo and ex vivo gene therapy, genetic editing, sRNA and mRNA based technologies to develop new treatments.

Looking at just 2021, the FDA approved 60 new drugs, topping the previous year's 59. Approvals by modality include: RNA for three, novel antibody technologies for three, and cell therapies for two. Additionally, mRNA firmly established itself as the preferred modality for COVID vaccines, and Intellia demonstrated human proof-of-concept for in vivo CRISPR, unlocking another new modality in the battle against disease.

Our strategy in action

Engaging in deep research and unlocking value

RTW's team is comprised of individuals with medical and advanced scientific training and legal and banking experience, enabling a deeply differentiated approach to research, idea generation and strategic investment.

JIXING

6.6% of NAV

2020: 1.3%

Portfolio company ownership

2020:

The need

We formed JIXING in early 2020, borne out of a two-year study of innovation, biotechnology, and access to healthcare in China. JIXING is a Shanghai-based biotechnology company focused on the development and distribution of innovative US and European drugs in the Chinese market.

Mission

JIXING will leverage clinical development and commercial expertise in the United States and Europe to bring global innovative medicines to Chinese patients.

Status

JIXING's pipeline now includes five assets focused on cardiovascular and ophthalmology conditions with high unmet need through partnerships with Cytokinetics, Milestone, and Oyster Pharma. RTW further capitalized JIXING by providing Series B and C funding.

Next catalyst

By working closely with the JIXING team we look to in-license additional late-clinical stage or commercial stage assets into its growing pipeline and provide further capital for business operation expansion.

How we approach research and investment

We seek to identify biopharmaceutical and medical technology assets, ascertained through rigorous scientific analysis, that have a high probability of becoming commercially viable products and can significantly improve patients' lives.

Key achievements

Medical conference meetings attended

147

2020: 115

Private investments

25

2020: 16

Key statistics

Medical conference presentations attended

3,480

2020: 2,000

Poster presentations captured

6,500

2020: 3,400

Priorities for 2022

Continue expanding institutional data library and research coverage to track and source the most promising assets globally.

- Private investments deal pace in line with 2020-2021

- Two-thirds of the deals to be in mid-late stage venture and one-third in new company creation and early stage venture

Link KPIs

1 NAV growth

2 Total shareholder return

3 Premium/discount to NAV

4 Percent of NAV invested in core portfolio companies

6 Active and robust pipeline

Link principal risks

1 Failure to achieve investment objective

2 Counterparty Risk

3 The Investment Manager relies on key personnel

4 Portfolio Companies may be subject to litigation

5 Exposure to global political and economic risks

7 Imposition of pricing controls for clinical products and services

Leveraging RTW's research process for differentiated idea generation

Our competitive advantage is anchored in our internal idea generation process, which we have refined over the years. In our focus areas we aspire to achieve a level of research depth consistent with those making permanent capital decisions, which means we are generally comparing ourselves to the work done within large biotech and pharma companies. The process begins with attending over 100 medical meetings worldwide each year. Medical conferences are where all meaningful scientific data are first shared with the scientific community. Over the years we have built our institutional level database library, enhanced by technology and data science. This effort leads us to some of the most promising assets, where we then seek out the companies or academics behind the projects. Externally, we also generate ideas in traditional ways, too. We place high value on building long-term relationships with management teams and scientists, and enjoy working with our investment firm peers and other players in our community.

We like to use the analogy that we are organized much like a business development team at a large biotech company. Across our team we have doctors, scientists, and drug development expertise, along with bankers, lawyers and operators who can execute.

Our rigorous approach to deal sourcing involves deep research in areas of expertise.

The research coverage is structured based on a modality (i.e. gene therapy, RNA medicine, small and large molecules, medtech) or a therapeutic area (i.e. rare disease, cancer, immunology, neurology) with a collaborative, consensus-building approach of gaining the most comprehensive knowledge, leading to conviction on the most likely transformational therapies.

We leverage our proprietary in-house research developed over fifteen years of operating in the life sciences sector. RTW has developed repeatable internal processes combining an institutional data library, technology, and manpower to comprehensively cover critical drivers of innovation.

Work with management teams and syndicate partners.

We believe in developing long-term relationships with great entrepreneurs and scientists who are as passionate about medicine as we are, and working closely with our peers to support companies at any stage of their lifecycle.

Actively engaging our wide network of doctors, academics and universities for promising new academic work. We continue to cultivate relationships with entrepreneurs, principal investigators, and academic institutions to allow for a wide range of intelligence gathering of investment opportunities.

An investment strategy built for the future

The well-roundedness of the RTW team, strengthened by strong ties across industry, academia and banking platforms, gives it the ability to source viable prospective target businesses, capitalise them, and ensure public-market readiness.

Identify an area of transformational innovation

We have developed expertise through our comprehensive study of industry and academic efforts in targeted areas of significant innovation. We distill opportunities across healthcare through three distinct lenses: disease areas, scientific technologies, and genetic analysis.

Identify value and assets that answer the unmet need

We apply a rigorous approach to idea screening, analysis, and capital commitment. The process starts with the careful tracking of transformational events. Examples of such events include clinical data, regulatory decisions, product launches, competitive entrants, intellectual property disputes, industry transformations, distressed situations, and corporate change. Our analytical approach incorporates the study of historical data gathered from scientific literature, regulatory agencies, medical meetings, management teams, and internal expertise.

Select assets with high odds of becoming approved therapies

We assign probabilities to various outcomes and use conservative valuation techniques to assign valuations to the various scenarios.

Identify how RTW can maximize value

Opportunities for financial engineering or active involvement are also considered, such as royalties, SPACs, structured deals, distress financing, and company formation.

Our strategy in action

Build new companies around promising academic licenses

RTW engages in new company formation around promising academic licenses. We are well-placed to offer support to early-stage life sciences companies and NewCos. RTW's business and operations teams consist of members with financial, capital markets, legal, regulatory, tax, and accounting expertise and enforces a strong compliance culture.

Rocket

13.3% of NAV

2020: 41.1%

Portfolio company ownership

2020:

The need

Rocket is a clinical-stage platform biotechnology company advancing an integrated and sustainable pipeline of genetic therapies for rare childhood disorders.

Mission

Rocket's mission is to develop first-in-class and best-in-class, curative gene therapies for patients with devastating diseases. Rocket was born out of a year-long study in gene therapy. In late 2015, Rocket was formed around a single academic license from a European academic institution. RTW helped Rocket hire a world-class management team, including CEO Dr. Gaurav Shah and COO Kinnari Patel, and continued to identify additional targets and licensed four more academic programs.

Status

Five products in clinical trials (2020: five)

Two programs in registration- enabling Phase 2 (2020: one)

Medium-term milestones

First global submission

Platform and pipeline expansion

How we build new companies

RTW's business and operations teams consist of members with financial, capital markets, legal, regulatory, tax, and accounting expertise and enforces a strong compliance culture.

Key achievements

New company creation

1

2020: 1

In-licensing deals for JIXING and Yarrow

4

2020: 1

Funding rounds backed by RTW in JIXING and Yarrow in 2021

3

2020: 1

Key statistics

In depth study of China biotech sector before newco creation

2 years

Longstanding expertise in genetic diseases and oligotherapeutics

10+ years

Total newco creations

3

Priorities for 2022

Continue due diligence efforts to in-license additional assets into JIXING and Yarrow pipeline.

Start a new company creation in the UK.

Link KPIs

5 Diversified portfolio across multiple therapeutic areas, treatments modalities and geographies

Link principal risks

3 The Investment Manager relies on key personnel

We leverage collective genius

We leverage our proprietary "data-first" research process to source the highest quality assets across the US, UK, and Europe, and complement the scientific rigour with years of financial investment, company building, and transactional expertise. RTW has a world class infrastructure for supporting new company creation. Because we have always made exciting assets the driver of what we work on, over the years we developed the skills and brought in the talent needed to support companies regardless of stage. This has made its way into our own firm DNA, and most of us actually enjoy being creative on the business side nearly as much as we enjoy science.

Our research approach is collaborative and consensus-based, led by the team with industry and academic backgrounds, which sets the tone for exceptional research. We believe that true value creation takes time and solving for patients' unmet needs endures volatile markets.

We have expanded our new ventures team with experienced venture capitalists and drug developers, as well as capabilities in data science technology to enhance data management. Our business team, complemented by experienced investment bankers and ex consultants, focuses on building targeted academic relationships in areas of high yield science, managing the capital markets process and syndicate building, and becoming a thought leader in the broader healthcare ecosystem.

Core portfolio companies added in 2021: 21

2020: 15

Core portfolio businesses supported in 2021

24

2020: 22

The US Market:

RTW has a core focus on the US, with deep coverage of opportunities from academia to mid-size public companies. The US Portfolio Companies reflect a larger pool of opportunities created by the most robust venture and capital markets ecosystem.

What this means for investors:

- access to a robust pool of private and public opportunities

- access to venture and capital markets that support innovation

The UK & European Market:

RTW has identified and invested in exceptional British and European scientific assets. It wishes to contribute to these biotech ecosystems by injecting capital where needed. It intends to engage in NewCo creation around promising early-stage assets by partnering with universities and in-licensing academic programs as well as through its proprietary in-house efforts; and providing financial and human capital to entrepreneurs to advance scientific programs in development.

What this means for investors:

- access to cutting edge research labs and academic knowledge

- access to much greater breadth of science and opportunity

- participation in value creation in local biotech ecosystem

The China Market:

RTW plans to capture commercialization opportunities in China by investing across the venture capital lifecycle from new company formation to IPO to bring successful innovative Western drugs to Chinese patients.

What this means for investors:

- access to Chinese budding biotech market, innovation and expertise

- an opportunity to establish themselves in a new market with the scope for significant growth

Our strategy in action

Support investments throughout the lifecycle

Drug development is not a linear process. There are advancements and setbacks, and we are structured to maximize value creation at any point beginning with company creation to late stage venture and into publicly traded markets. We let the fundamentals and not market movements dictate our investment.

Immunocore

2.9% of NAV

2020: 1.7%

Portfolio company ownership

2020:

The need

Immunocore is a UK-based publicly traded biotechnology pioneering the development of a novel class of T-cell receptor (TCR) bispecific immunotherapies designed to treat a broad range of diseases, including cancer, infectious and autoimmune disease. Immunocore originated with the Investment Manager as a private company when RTW participated in a $320M Series A round in July 2015, subsequently supporting Immunocore in Series B and C rounds, as well as through its IPO in February 2021.

Mission

Immunocore is developing tebentafusp, a novel bispecific T cell receptor (TCR) therapy for uveal melanoma, a rare and aggressive form of melanoma that affects the eye. In addition, the company is advancing ImmTAX, its proprietary platform technology of bispecific molecules that have the potential to overcome the limitations of the natural immune system allowing a patient's own T cells to recognise and kill the infected or cancerous cells via an immune activating effector function.

Status

Tebentafusp was in registrational status as YE 2021 and approved in January 2022.

Four additional programs in clinic: two Phase 1 trials in oncology and two Phase 1 trials in infectious disease (Hepatitis B and HIV).

Next catalyst

Kimmtrak (tebentafusp), a first-in-class TCR therapy, received FDA approval for uveal melanoma in January 2022.

How we support companies through the lifecycle

We are full life cycle investors supporting scientists and entrepreneurs at any stage where we identify opportunity, from academic programs in need of industry sponsorship all the way to mature publicly traded companies.

Key achievements

Number of portfolio company IPOs

9

2020: 6

Together NAV contribution in 2021

8%

2020: 15%

Key statistics

Average step-up from the time of investment to IPO

1.9x

2020: 1.8x

NAV in aggregate of 9 (2020: 5) portfolio companies where we have a board seat

c.30%

2020: c.48%

Priorities for 2022

Continue supporting existing portfolio companies based on their capital needs, as well as continue expanding our creative financial solutions tool kit.

Link KPIs

4 Percent of NAV invested in core portfolio companies

5 Diversified portfolio across multiple therapeutic areas, treatments modalities and geographies

Link principal risks

5 Exposure to global political and economic risks

Progressing research to innovation to reality through collaboration, excellence and consensus.

We support companies through the ups and downs of the often challenging journey to bring therapies to patients.

True value realization from transformative products takes time, and in order to capture that value, it is critical to be involved and invested in such companies throughout the various stages of their development and ultimately distribution to patients. Scientific development rarely follows a linear path and nor do we, which is why we are always thinking about the optimal way to support a company.

As a full-life cycle investor, RTW has achieved multiple successful transaction milestones and provided creative financial solutions, including successfully creating new companies around academic licenses, supporting those companies along the life cycle by taking them public through reverse mergers, recapitalizations, SPACs, and offering royalty-backed funding.

RTW has earned a constructive reputation of being deeply knowledgeable in science, supportive to entrepreneurs and aligned with the companies for the long term, until the maximum value of those underlying assets can be achieved. This has become an earned privilege for us.

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Progress through clinical trials

44% of portfolio companies have progressed to the next stage of their clinical trials in 2021.

[chart]

*excludes commercial stage portfolio companies and companies added in 2021.

Our Business Model

A business model built for the future

Transformational innovations

Our long-term strategy is anchored in identifying sources of transformational innovations by engaging in a deep scientific research and rigorous idea generation process, which is complemented with years of financial investment, company building, transactional, and legal expertise.

What we need to create value

Experienced team

A collaborative team of doctors, academics, drug developers, coupled with seasoned venture capitalists, investment bankers, lawyers and operators with a strong compliance culture.

Deep scientific expertise

We developed repeatable internal processes combining technology and manpower to comprehensively cover critical drivers of innovation globally to identify biopharmaceutical and medical technology assets that have a high probability of becoming commercially viable products and can dramatically change the course of treatment outcomes to patients.

Full life cycle investing

Taking a long-term full lifecycle approach and having a true evergreen structure enables us to avoid pitfalls of structural constraints of venture-only or public-only vehicles.

Global reach

Our Priority is to unlock value by advancing early-stage scientific development and delivering innovative therapies to patients in need.

How we create value

Our purpose drives everything we do

Identify transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by our deep scientific understanding and a long-term approach to supporting innovative businesses, we invest in companies developing next-generation therapies and technologies that can significantly improve patients' lives.

Invest in relationships

We focus on identifying transformational innovations and unmet needs across the life sciences space, specifically backing scientific programs that have the potential to disrupt the prevailing standard of care in their respective disease areas.

Deep scientific expertise

We believe in developing long-term relationships with great entrepreneurs and scientists who are as passionate about medicine as we are, and working closely with our peers to support companies at any stage of their lifecycle.

Support through the lifecycle

A key part of our competitive advantage is the ability to determine at what point in a company's life cycle we should support the target asset or pipeline. As a full-life cycle investor, we can provide growth capital, creative financing solution, capital markets expertise, or guidance through investing our time and sharing our collective experience as directors and stewards of tomorrow's most exciting and disruptive companies.

Value creation

Patient benefits

Innovation is the best medicine. We believe solving unmet patients' needs is the best way to create value.

· RTW's top 10 most successful investments since inception commercialized 10 drugs.

Shareholder

Privileged access to private markets and bespoke negotiated opportunities.

· 71% (2020: 81%) total shareholder return since inception

Portfolio companies

We support teams trying to solve the inevitable setbacks that occur when introducing a first in class or disruptive therapy.

· 66% (2020: 69%) of NAV deployed into 42 (2020: 22) core portfolio companies

RTW Charitable Foundation

Founded as the charitable foundation arm of RTW, RTWCF partners with organizations conducting disease research and championing humanitarian causes.

· 9 rare disease grants awarded across 6 countries

· 12 community organizations and research partners have been supported in responding to COVID needs in New York City

New Company Creation

[chart]

Portfolio Review

Seeking gene therapy cures

Rocket's pipeline is comprised of first-in-class gene therapies that incorporate both adeno-associated viral vector (AAV) and lentiviral vector (LVV) approaches to gene therapy. They are platform agnostic and choose each program's gene therapy platform based on what is most practical for the disorder being targeted.

Rocket

Market Cap 2021

$1.4B

2020: $3.5B

NAV invested

13.3%

2020: 41.1%

Portfolio company ownership

2020:

The need

Rocket is a clinical-stage company advancing an integrated and sustainable pipeline of genetic therapies for rare childhood disorders.

Mission

Rocket's mission is to develop first-in-class and best-in-class, curative gene therapies for patients with devastating diseases.

Status

- Five programs are in the clinical trials

- Two programs in registration- enabling Phase 2

Medium-term milestones

- First global submission

- Platform and pipeline expansion

Identifying unmet patient need

We seek to invest and build companies developing transformative therapies. Thanks to genome, disruptive innovation of new modular technologies, such as RNA medicine and gene therapy, can address targets undruggable before by older modalities like small molecules and antibodies.

Forming and building Rocket

Rocket was born out of more than a year-long study in gene therapy. In late 2015, Rocket was formed around a single academic license from a European academic institution. RTW hired a world-class management team, including CEO Dr. Gaurav Shah, COO Kinnari Patel, and CMO Dr. Jonathan Schwartz, and continued to identify additional targets and licensed four more academic programs.

Supporting Rocket through the lifecycle

RTW completed two private financings, syndicating both the Series A and Series B rounds, and took Rocket public through a reverse merger in January 2018. We believe opportunities exist to license additional gene therapy academic assets into the Rocket pipeline in the future. In addition to our board representation in the company, Rocket's generous pipeline diversification of now five clinical programs creates an attractive risk reward opportunity, giving us comfort in owning an outsized position in the company.

Developing first in class gene therapies

Five of Rocket's clinical programs include four lentiviral vector-based gene therapies for the treatment of:

- Fanconi Anemia, a difficult to treat genetic disease that leads to bone marrow failure and potentially cancer;

- Leukocyte Adhesion Deficiency-I, a rare genetic disorder of immunodeficiency in young children;

- Pyruvate Kinase Deficiency, a rare genetic disorder affecting red blood cells;

- Infantile Malignant Osteopetrosis, a rare, severe monogenic bone resorption disorder characterized by skeletal deformities, neurologic abnormalities and bone marrow failure;

- and an adeno-associated virus-based gene therapy for Danon disease, a devastating, paediatric heart failure condition.

Rocket's goal is to have all five clinical program become approved first-in-class gene therapies. The company is aspiring to become the next "Genentech of gene therapy" and we are looking forward to supporting them on this journey.

Catalysts

Fanconi Anemia (LVV) Q3 2022

Leukocyte Adhesion Deficiency-I (LVV) Q2 2022

Danon Disease (AAV) H2 2022

Pyruvate Kinase Deficiency (LVV) H2 2022

Infantile Malignant Osteopetrosis (LVV) TBD

Portfolio review

Disruptive science, driven by heart

JIXING is a leading biotechnology company committed to bringing innovative science and medicines to underserved patients in China

Latest funding round in 2021

Series C

2020: Series A

NAV invested

6.6%

2020: 1.3%

Portfolio company ownership

2020:

Pipeline assets in 2021

5

2020: 1

The need

We formed JIXING in early 2020, borne out of a two-year study of innovation, biotechnology, and access to healthcare in China. JIXING is a leading biotechnology company headquartered in Shanghai committed to bringing innovative science and medicines to underserved Chinese patients with serious and life-threatening diseases.

Mission

Backed by RTW, JIXING partners with global biotechnology companies to develop and commercialize novel, innovative therapeutics to treat unmet medical needs in cardiovascular and ophthalmic diseases. With a strong and further developing asset pipeline, industry leading talent, and patient-centric focus, JIXING is dedicated to deliver a meaningful and lasting impact on patients in Greater China.

Status

JIXING's pipeline now includes 5 assets focused on cardiovascular and ophthalmology conditions with high unmet need through partnerships with Cytokinetics, Milestone, and Oyster Pharma. RTW further capitalized JIXING by providing a Series B and C funding.

Named Joseph Romanelli, a former President of Merck's operations in China and a 25-year pharmaceutical industry veteran, as a new CEO of JIXING.

Next catalyst

By working closely with the JIXING team we look to in-license additional late-clinical stage or commercial stage assets into its growing pipeline and provide further capital for business operation expansion.

[chart]

Portfolio review

Opening up unrealised potential

Yarrow is an RTW-incubated company developing antisense oligonucleotide (ASO) therapeutics for severe, genetically defined CNS diseases.

Latest funding round in 2021

Seed

NAV invested

0.1%

Portfolio company ownership

Pipeline assets in 2021

1

Recent advances have enabled and derisked development of ASO therapeutics for CNS diseases. Next generation sequencing has improved diagnosis and patient pool access. Whilst fundamental understanding of CNS biology has made big strides thanks to improved sequencing, biochemistry, and imaging techniques, allowing the deciphering of molecular mechanisms that cause a disease. Furthermore, improved potency and performance through widened medicinal chemistry repertoire and better molecular understanding, as well as and increases number of tractable CNS genetic targets resulted in substantial improvements in ASO therapeutics design.

The need

There are 100+ genetically-defined CNS diseases tractable antisense with oligonucleotide (ASO) therapeutics. However, only 7 monogenic CNS diseases have ASOs in development or approved. Genetically-defined CNS diseases provide a vast opportunity for new, innovative ASO therapeutics.

Mission

Yarrow is developing ASO therapeutics for severe, genetically defined CNS diseases. Yarrow was founded and incubated by the RTW team in New York and is rooted in the firm's longstanding expertise and commitment to solving genetic diseases and oligotherapeutics.

Status

Yarow in-licenced its first ASO asset from ProQR. RTW capitalized Yarrow by providing seed funding.

Next milestone

By working closely with the Yarrow team, we look to expand Yarrow's internal R&D capabilities, in-licence additional assets into the growing pipeline and further capitalize its business and team expansion.

Operational and Financial Review for the year

The Company's market capitalisation grew from U$360 million to US$378 million during year. This was driven by equity issuance and offset by a decline in the Company's share price.

The Ordinary NAV of the Company declined from US$375.3 million to US$363.0 million during the year. The main driver of the decline was the share price performance of publicly-listed portfolio companies, this was partially offset by issuance of 20.9m shares.

The 12.8% decline in NAV per Ordinary Share was primarily driven by the performance of Rocket share price and the Company's other public portfolio companies. There was also a small positive contribution of approximately 1% from equity issuance at a premium to NAV during the year and a reduction in the performance allocation accrual.

Premium / discount

The Company's shares traded on average c. 10% premium due to market demand during the reporting period. At the year end, the Company's Ordinary Shares were trading at a 4.1% premium to NAV (2020: 4.1% discount to NAV). The Company's NAV for December 2020 moved sharply higher but was reported in January 2021 resulting in the shares trading at a discount to the unpublished December NAV in December 2020 and recovering to a premium to the published December 2020 NAV during 2021.

As the Company has not paid dividends, the negative total return for the year of -12.8% (2020: +54.3%) equates to the decline in NAV per Ordinary Share. There was no performance allocation triggered during the reporting period as the total shareholder return based on ordinary NAV movements was negative.

The negative share price return of -5.3% in the year compared to the NAV movement of -12.8% was the result of the Company's shares moving from a discount to a premium. Nevertheless, the Company's shares traded at a premium to NAV throughout the majority of the period.

Ongoing Charges

The Company's ongoing charges ratio is 1.78%, calculated in accordance with the AIC recommended methodology, which excludes non-recurring costs and uses the average NAV in its calculation.

The Board has identified the following indicators for assessing the Company's annual performance in meeting its objectives:

Risk Management

Our long-term strategy is anchored in identifying transformative assets with high growth potential across the biopharmaceutical and medical technology sectors. Driven by our deep scientific understanding and a long-term approach to supporting innovative businesses, we invest in companies developing next-generation therapies and technologies that can significantly improve patients' lives. With this significant opportunity also come the risk.

Our risk framework is overseen by the Audit Committee under delegation from the Board. Everyone participates in managing the risks, including the Board, the RTW team, the Company's other advisers, and our portfolio companies.

Risk framework

Our risk framework begins with the Board, where the Board defines risk appetite, oversees the process to ensure a robust assessment of principal risks, considers the key risks and potential future risks, and receives an update at each Board meeting. A risk register is maintained that sets out our principal risks and risk appetite. The RTW team is responsible for day-to-day operation and oversight of the risk framework. The RTW team has a culture of transparency, ensuring that any developments are shared and addressed effectively with the benefit of input from the whole team, and reported to the Board where appropriate. We rely on having highly experienced personnel to support and manage issues as they arise.

The Audit Committee oversees and monitors the risk framework, including reviewing the risk register to ensure it properly captures the principal risks, overseeing the framework for identifying risks (including potential future risks), reviewing the ongoing operation and effectiveness of our control environment to manage the principal risks we face on an annual basis, and ensuring that any actions identified are taken forward by the RTW team. This review process provides a focus to drive continuous improvement in our risk processes.

Identifying principal risks

We evaluate our principal risks on an ongoing basis and using both top-down and bottom-up inputs. We also continuously assess for future risks that could have a potential impact. During the year the Board and the Investment Manager had ongoing discussions and reviews to consider the current and potential risks of the Company. We were pleased that our principal risks substantially capture our key strategic risks to the success of our business model. The discussions also generated insights into a range of potential emerging risks and has helped to focus attention on additional areas for monitoring by the Board and the Investment Manager.

The RTW team carries out a bottom-up review, considering each of our life science companies and our internal operations, both as a specific exercise and on an ongoing basis through our regular monitoring of our portfolio companies. In doing this we draw on the underlying assessments by the management teams of each of our life science companies. These inputs are brought together in our risk register, which is reviewed by the Audit Committee in detail each year. The principal risks identified by the Board are set out below. These have not substantially changed in the last year. The Board also monitors future risks that may arise, including: the longer-term risks of changes to US pharmaceutical drug pricing; US FDA productivity and impact of the COVID-19 pandemic; and potential long-term impact of the COVID-19 pandemic on the biotech sector and portfolio companies.

Risk management structure

Board of Directors

Risk management leadership; risk appetite

Audit Committee

Review and monitor the risk framework

RTW Team

Risk management is integral to the investment process and financial management Implementing and monitoring risk controls; risk reporting

Other advisers

Risk identification; risk reporting

Portfolio companies' management teams

 Risk identification and mitigation

Risk appetite

The Board is willing to accept a level of risk in managing our business to achieve our strategic goals. As part of the risk framework, the Board reviews the risk appetite in relation to each of the principal risks, and monitors the actual risk against that. Where a risk is approaching or outside the target risk, the Board will consider the actions being taken to manage the risks. The Audit Committee this year carried out a detailed review of the defined risk types, to ensure it continues to reflect the understanding of the Board and accurately reflected the risks we take. Following that review the Audit Committee recommended to the Board that the risk appetite remained appropriate, and the Board has accepted that recommendation.

Principal and Emerging Risks and Uncertainties

Under the FCA's Disclosure Guidance and Transparency Rules the Directors are required to identify the material risks to which the Company is exposed, and the steps taken to mitigate those risks.

The Company has five categories of risks in its risk register namely:

· Investment Risks

· Operational Risks

· Governance/Reputational Risks

· External Risks

· Emerging Risks

Longer Term Viability Statement

Assessing the prospects of the Company

The corporate planning process is underpinned by scenarios that encompass a wide spectrum of potential outcomes. These scenarios are designed to explore the resilience of the Company to the potential impact of significant risks set out below.

The scenarios are designed to be severe but plausible and take full account of the availability and likely effectiveness of the mitigating actions that could be taken to avoid or reduce the impact or occurrence of the underlying risks and which would realistically be open to management in the circumstances. In considering the likely effectiveness of such actions, the conclusions of the Board's regular monitoring and review of risk and the Investment Manager's internal control systems is taken into account.

The Board reviewed the impact of stress testing the quantifiable risks to the Company's cash flows as detailed in risk factors 1-5 above and concluded that the Company, would have sufficient working capital to fund its operations in the following extreme scenario:

(1) The Company incurred NAV losses of 39% of NAV over a three-year period ending 28 February 2025.

(2) No new capital was raised.

(3) $110m of private investments were funded from cash and by selling public portfolio investments.

To provide some context for this scenario the worst-case annual losses for the NASDAQ Biotech Index (NBI) in the last 10 years were 8.9% in 2018 and 21.4% in 2016 respectively. The Company's three-year loss scenario exceeds the cumulative impact of both of these worst-case years of 28.3% spread over three years. The annualized volatility of the NBI index for the last 10 years is 25% so an annual loss of 40% or more is only likely to occur every twenty years if the index returns are normally distributed. As there have been no consecutive losing years for the NBI in recent history a cumulative loss of between 28.3% and 40% is therefore assumed to be a reasonable stress test.

The Board considers that this stress testing-based assessment of the Company's prospects is reasonable in the circumstances of the inherent uncertainty involved.

The period over which we confirm longer term viability

Within the context of the corporate planning framework discussed above, the Board has assessed the prospects of the Company over a three-year period ending 28 February 2025. Whilst the Board has no reason to believe the Company will not be viable over a longer period, given the inherent uncertainty involved, the period over which the Board considers it possible to form a reasonable expectation as to the Company's longer term viability, based on the stress testing scenario planning discussed above, is the three year period to February 2025. This period is used for the Investment Manager's business plans and has been selected because it presents the Board and therefore readers of the Annual Report with a reasonable degree of confidence whilst still providing an appropriate longer term outlook.

Confirmation of longer term viability

The Board confirms that it has carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity.

Based upon the robust assessment of the principal and emerging risks facing the Company and its stress testing-based assessment of the Company's prospects, the Board confirms that it has a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the period to February 2025.

On behalf of the Board

William Simpson

Chairman

30 March 2022

Engaging with Stakeholders (Section 172)

Section 172 of the Companies Act 2006 applies directly to UK domiciled companies. Nonetheless the AIC Code requires that the matters set out in section 172 are reported on by all companies, irrespective of domicile, provided this does not conflict with local company law.

Section 172 recognises that directors are responsible for acting in a way that they consider, in good faith, is the most likely to promote the success of the Company for the benefit of its shareholders as a whole. In doing so, they are also required to consider the broader implications of their decisions and operations on other key stakeholders and their impact on the wider community and the environment. Key decisions are those that are either material to the Company or are significant to any of the Company's key stakeholders. The Company's engagement with key stakeholders and the key decisions that were made or approved by the Directors during the year are described below.

Environmental, Social and Community Issues

As an investment company, the Company does not have any employees or physical property, and most of its activities are performed by other organisations. Therefore, the Company does not combust fuel and does not have any greenhouse gas emissions to report from its operations, nor does it have direct responsibility for any other emission producing sources.

Responsible Investing

The Board believes that all companies have a duty to consider their impact on the community and the environment. Three of the four Directors, the Administrator, Company Secretary and external auditor are all based in Guernsey and Board meetings are held in Guernsey, thus negating the need for long commutes or flights to/from Board meetings, and thereby minimising the negative environmental impact of travel to/from Board meetings.

The Investment Manager's approach to investment in life sciences companies is comprised of goals and principles that are aligned specifically with our mission to power breakthrough therapies that transform the lives of millions, to find cures for diseases, and improve quality of life. RTW invests in and supports companies developing life-transforming therapies and technologies for patients afflicted with disease and disability. As a guiding principle, we prioritize overall positive impact on patients and long-term meaningful outcomes to society. We believe that staying aligned with RTW's founding principles is the foundation of our success and enables us to make socially conscious and responsible investments in life sciences companies.

RTW Charitable Foundation

RTW has also created the RTW Charitable Foundation so that we can apply our work in the community and help patients in instances when there is limited potential for commercial gain. While improving human health on a global scale is its own fulfilment, RTWCF allows RTW to bring hope to those with the rarest of diseases but whose suffering we find no less affecting. 

Statement of Assets and Liabilities

as at 31 December 2021 and 31 December 2020

(Expressed in United States Dollars)

The audited financial statements of the Company were approved and authorised for issue by the Board of Directors on 30 March 2022 and signed on its behalf by:

William Simpson Paul Le Page

Chairman Director

See accompanying notes to the financial statements.

Condensed Schedule of Investments

as at 31 December 2021

(Expressed in United States Dollars)

See accompanying notes to the financial statements.

Condensed Schedule of Investments (continued)

as at 31 December 2021

(Expressed in United States Dollars)

Condensed Schedule of Investments (continued)

as at 31 December 2021

(Expressed in United States Dollars)