Earlier this year I mentioned Arix Bioscience in my FT column as a cheapish way to buy into the biotech VC space, alongside RTW Ventures and Syncona.

Well, Arix has certainly had a few upheavals since then, including a management change.

This it put out a management update which didn’t contain that many surprises.

  • Arix has invested in Disc Medicine, which is developing novel therapies to treat serious and debilitating haematological disorders
  • Arix has also invested in Pyxis Oncology which listed on the US Nasdaq on 8 October 2021.
  • Another exit in the works for Aris is its portfolio company Aura Biosciences, which is developing a novel treatment for primary choroidal melanoma, and which has also filed its intention to IPO on the Nasdaq in the coming weeks.
  • The Board has been strengthened, most recently with the addition of Sir Michael Bunbury as Senior Independent Director, whilst the Investment Team has been expanded, with Mark Chin re-joining Arix in July 2021.
  • “The Board has therefore decided to cease its share buyback programme, announced on 15 March 2021, with immediate effect. The cancellation of the share buyback programme will enable Arix to pursue greater value creation through investment into the most innovative biotech companies”.

I’m still happily invested in this biotech fund and if Arix were to re-rate to the premium RTW is on, then there’d be a very significant upside from here.

Arix currently trades at 139.5p a share equating to a market cap of £180m. The funds NAV is £378m (with cash of £112m).  By contrast RTW Venture trades at 190c on a premium of 6.4%.

Go figure…Arix looks horribly under valued compared to RTW.

Uranium higher

Another of my FT favourites is an investment in Uranium – and by default nuclear power – via AIM listed Yellow Cake, which has soared in value. This week brought news (hat tip to Nick Lawson at Ocean Wall) that Kazatomprom will participate in a physical uranium fund, ANU Energy OEIC Ltd established on the Astana International Financial Centre (AIFC).

The Fund will hold physical uranium as a long-term investment with its initial purchases financed through the founders’ round investment totalling US$50 million, sourced from Kazatomprom at 48.5%, National Investment Corporation of the National Bank of Kazakhstan (NIC) at 48.5%, and Genchi Global Limited (the Fund Manager) at 3%.

Once the Fund is operating, a second stage of development is expected to be carried out through an additional public or private offering, with the timing and details to be determined by market conditions. At the second stage, the Fund is expected to raise capital of up to US$500 million from institutional and/or private investors, with the proceeds to be used for additional uranium purchases.

The killer stat : According to Lawson at Ocean Wall the aggregate US$550m at current spot pricing would equate to c. 10.5% of current market supply or c. 11.9m lbs. Uranium production is forecast to be 125m Ibs this year i.e c. 18% in buying capacity represented by the $1.5bn SPUT ATM. 

Below is a good chart illustrating SPUT’s buying since mid August vs the annual U production last year of the world’s biggest mines.

Oil over $100 in 2022

Last but by no means least, sticking with the commodities theme, oil. Here’s the key takeaway from a monthly note issued by the long short energy team at Westbeck Capital.

  • “While our $85 front Brent target has just been reached, we now expect the current rally to continue with a look into the $90s likely before year-end. We expect another big leg up in oil demand through Q4 as Asia re-opens post Delta, inbound international flights into the US resume, gas-to-oil switching gathers pace, while aggressive buying of diesel generators in China & India to fight gas and coal shortages will also likely contribute. In fact, we expect demand to increase more than supply as OPEC+ is likely to stick to its +400kbd monthly production increase, ignoring US pressure and higher prices. The current large deficit could increase further, potentially taking already depleted global petroleum inventories to critically low levels by year-end / underpinning higher prices still.”

The Westbeck team now reckon there’s “increasing odds that a price spike might be required to regulate oil demand over the next 24 months as inventories first, then spare capacity, are exhausted  (similar to what is happening in natural gas and coal today). Meanwhile, surging shale cost inflation suggests minimal fundamental downside to back end prices. Oil equities also remain very attractive, in our view (even though they look overbought on a ST basis). …This is the start of a new energy bull cycle / not the end – there is a lot to play for still.”

I’d agree with that analysis and have been increasing my energy positions on the basis of $100 oil in 2022.