Edison Issues Initiation on Arix Bioscience (ARIX)

We are initiating coverage on Arix Bioscience following its February 2017 IPO that raised £113m. Arix is a new transatlantic life sciences portfolio company drawing from managerial expertise at all levels of the pharma industry to engage in opportunities ranging from seed investing to public equity. It draws on a network of deal sources established through agreements with academia, life science accelerators, other funds, and through partnerships with big pharma. The company is trading at a modest 11% premium to our initial asset valuation of £172m or 179p/share.

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Using a risk-adjusted NPV analysis, we arrive at a valuation of Arix's assets (£133.2m cash, £27.3m portfolio, £11.4m other assets) of £172m or 179p/share. The value of the portfolio is nearly 100% above the cash spent to date (£13.7m). The stock trades at an 11% premium to this value, which is modest considering the strength of the company's management and platform, as well as the quality of the deals. We expect to update our valuation with the announcement of new deals.

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