HBM Healthcare Investments — Top 10 holding Viela Bio to be taken out for $3bn

HBM Healthcare Investments (SIX: HBMN)

Last close As at 28/03/2024

207.00

4.00 (1.97%)

Market capitalisation

EUR1,413m

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Research: Investment Companies

HBM Healthcare Investments — Top 10 holding Viela Bio to be taken out for $3bn

HBM Healthcare Investments (HBMN) is set to receive $92.75m through the takeover of portfolio holding Viela Bio by Horizon Therapeutics, a c 47% uplift on the value of the position at 31 December 2020 and a 53% premium to the closing share price on 31 January 2021. In our view, the takeover (which is expected to complete during the current quarter) further validates HBMN’s private/public approach, with the price paid representing a c 4x return on the fund’s initial pre-IPO investment of $20m in Q219. Taking into account a further $9.5m invested at Viela Bio’s IPO in October 2019, the overall profit is c 220%. We calculate the value of the deal to represent an uplift of c 1.4% on HBMN’s NAV per share.

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Investment Companies

HBM Healthcare Investments

Top 10 holding Viela Bio to be taken out for $3bn

Investment companies
Biotech and healthcare

4 February 2021

Price

CHF318.00

Market cap

CHF2,213.3m

AUM

CHF2,033.3m

NAV*

CHF292.14

Premium to NAV

8.9%

*Including income. At 31 January 2021.

Yield

2.4%

Shares in issue

7.0m

Code

HBMN

Primary exchange

SIX

AIC sector

N/A

52-week high/low

CHF318.00

CHF149.97

CHF302.91

CHF202.2

*Including income.

Gearing

Net cash at 31 Dec 2020

7.0%

Fund objective

HBM Healthcare Investments (formerly HBM BioVentures, renamed in 2012) is a Swiss investment company that aims to generate long-term capital gains by investment in private and public companies in the human medicine, biotech, medtech and diagnostic sectors, and related areas. It invests worldwide, predominantly in later-stage private companies (either directly or through funds) and publicly listed holdings, many of which began as private equity investments.

Analysts

Sarah Godfrey

+44 (0)20 3681 2519

Mel Jenner

+44 (0)20 3077 5720

HBM Healthcare Investments is a research client of Edison Investment Research Limited

HBM Healthcare Investments (HBMN) is set to receive $92.75m through the takeover of portfolio holding Viela Bio by Horizon Therapeutics, a c 47% uplift on the value of the position at 31 December 2020 and a 53% premium to the closing share price on 31 January 2021. In our view, the takeover (which is expected to complete during the current quarter) further validates HBMN’s private/public approach, with the price paid representing a c 4x return on the fund’s initial pre-IPO investment of $20m in Q219. Taking into account a further $9.5m invested at Viela Bio’s IPO in October 2019, the overall profit is c 220%. We calculate the value of the deal to represent an uplift of c 1.4% on HBMN’s NAV per share.

Key takeaways

First major portfolio news of 2021 builds on record of 10 IPOs and six takeovers in 9M21.

Price paid represents almost 4x return on HBMN’s initial investment in 2019.

HBMN continues to back private and public companies developing innovative treatments for rare diseases, more of which may prove attractive takeover targets for larger biotech and pharma firms.

First major deal of 2021 for HBMN portfolio

Horizon Therapeutics, a Nasdaq-listed, Ireland-headquartered biopharmaceutical company focusing on rare and rheumatic diseases, announced on 1 February that it had agreed an all-cash takeover of HBMN portfolio company Viela Bio, valuing the firm at $3.05bn. Viela Bio has an FDA-approved product for the treatment of the rare disease neuromyelitis optica spectrum disorder (NMOSD), as well as a promising pipeline of candidates in other autoimmune and inflammatory disorders. HBMN first bought into the company in Q219 when it was still private, adding a further $9.5m to the $20m initial investment at Viela Bio’s Nasdaq IPO in October 2019. As a dual public and private equity strategy, HBMN tends to keep hold of its private investments after their stock market debuts; at 31 December 2020, nine of HBMN’s top 10 listed investments had originated in the private portfolio.

The Viela Bio deal – which we calculate to have a c 1.4% positive impact on HBMN’s NAV per share – is the first major deal in the portfolio in 2021, but builds on an extremely active first nine months of FY21 (ending 31 March), with 10 IPOs and six takeovers of portfolio companies. HBMN remains committed to its earlier-stage portfolio, with six new private investments in the last quarter of 2020 alone helping to replace those that have left the portfolio through acquisition or moved into the listed segment through IPO. At 31 December 2020, the overall portfolio was invested broadly as follows: 60% in listed equities (two-thirds of which began as private investments), 15% directly in private companies, 7% in private equity funds, and 15% in cash and equivalents. The management team continues to target a higher proportion in private companies, although given the high level of M&A and IPO activity, so far in FY21 the faster pace of private investment has only been sufficient to maintain the status quo.

General disclaimer and copyright

This report has been commissioned by HBM Healthcare Investments and prepared and issued by Edison, in consideration of a fee payable by HBM Healthcare Investments. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

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New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

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Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

General disclaimer and copyright

This report has been commissioned by HBM Healthcare Investments and prepared and issued by Edison, in consideration of a fee payable by HBM Healthcare Investments. Edison Investment Research standard fees are £49,500 pa for the production and broad dissemination of a detailed note (Outlook) following by regular (typically quarterly) update notes. Fees are paid upfront in cash without recourse. Edison may seek additional fees for the provision of roadshows and related IR services for the client but does not get remunerated for any investment banking services. We never take payment in stock, options or warrants for any of our services.

Accuracy of content: All information used in the publication of this report has been compiled from publicly available sources that are believed to be reliable, however we do not guarantee the accuracy or completeness of this report and have not sought for this information to be independently verified. Opinions contained in this report represent those of the research department of Edison at the time of publication. Forward-looking information or statements in this report contain information that is based on assumptions, forecasts of future results, estimates of amounts not yet determinable, and therefore involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of their subject matter to be materially different from current expectations.

Exclusion of Liability: To the fullest extent allowed by law, Edison shall not be liable for any direct, indirect or consequential losses, loss of profits, damages, costs or expenses incurred or suffered by you arising out or in connection with the access to, use of or reliance on any information contained on this note.

No personalised advice: The information that we provide should not be construed in any manner whatsoever as, personalised advice. Also, the information provided by us should not be construed by any subscriber or prospective subscriber as Edison’s solicitation to effect, or attempt to effect, any transaction in a security. The securities described in the report may not be eligible for sale in all jurisdictions or to certain categories of investors.

Investment in securities mentioned: Edison has a restrictive policy relating to personal dealing and conflicts of interest. Edison Group does not conduct any investment business and, accordingly, does not itself hold any positions in the securities mentioned in this report. However, the respective directors, officers, employees and contractors of Edison may have a position in any or related securities mentioned in this report, subject to Edison's policies on personal dealing and conflicts of interest.

Copyright: Copyright 2021 Edison Investment Research Limited (Edison).

Australia

Edison Investment Research Pty Ltd (Edison AU) is the Australian subsidiary of Edison. Edison AU is a Corporate Authorised Representative (1252501) of Crown Wealth Group Pty Ltd who holds an Australian Financial Services Licence (Number: 494274). This research is issued in Australia by Edison AU and any access to it, is intended only for "wholesale clients" within the meaning of the Corporations Act 2001 of Australia. Any advice given by Edison AU is general advice only and does not take into account your personal circumstances, needs or objectives. You should, before acting on this advice, consider the appropriateness of the advice, having regard to your objectives, financial situation and needs. If our advice relates to the acquisition, or possible acquisition, of a particular financial product you should read any relevant Product Disclosure Statement or like instrument.

New Zealand

The research in this document is intended for New Zealand resident professional financial advisers or brokers (for use in their roles as financial advisers or brokers) and habitual investors who are “wholesale clients” for the purpose of the Financial Advisers Act 2008 (FAA) (as described in sections 5(c) (1)(a), (b) and (c) of the FAA). This is not a solicitation or inducement to buy, sell, subscribe, or underwrite any securities mentioned or in the topic of this document. For the purpose of the FAA, the content of this report is of a general nature, is intended as a source of general information only and is not intended to constitute a recommendation or opinion in relation to acquiring or disposing (including refraining from acquiring or disposing) of securities. The distribution of this document is not a “personalised service” and, to the extent that it contains any financial advice, is intended only as a “class service” provided by Edison within the meaning of the FAA (i.e. without taking into account the particular financial situation or goals of any person). As such, it should not be relied upon in making an investment decision.

United Kingdom

This document is prepared and provided by Edison for information purposes only and should not be construed as an offer or solicitation for investment in any securities mentioned or in the topic of this document. A marketing communication under FCA Rules, this document has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

This Communication is being distributed in the United Kingdom and is directed only at (i) persons having professional experience in matters relating to investments, i.e. investment professionals within the meaning of Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the "FPO") (ii) high net-worth companies, unincorporated associations or other bodies within the meaning of Article 49 of the FPO and (iii) persons to whom it is otherwise lawful to distribute it. The investment or investment activity to which this document relates is available only to such persons. It is not intended that this document be distributed or passed on, directly or indirectly, to any other class of persons and in any event and under no circumstances should persons of any other description rely on or act upon the contents of this document.

This Communication is being supplied to you solely for your information and may not be reproduced by, further distributed to or published in whole or in part by, any other person.

United States

Edison relies upon the "publishers' exclusion" from the definition of investment adviser under Section 202(a)(11) of the Investment Advisers Act of 1940 and corresponding state securities laws. This report is a bona fide publication of general and regular circulation offering impersonal investment-related advice, not tailored to a specific investment portfolio or the needs of current and/or prospective subscribers. As such, Edison does not offer or provide personal advice and the research provided is for informational purposes only. No mention of a particular security in this report constitutes a recommendation to buy, sell or hold that or any security, or that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person.

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

Frankfurt +49 (0)69 78 8076 960

Schumannstrasse 34b

60325 Frankfurt

Germany

London +44 (0)20 3077 5700

280 High Holborn

London, WC1V 7EE

United Kingdom

New York +1 646 653 7026

1185 Avenue of the Americas

3rd Floor, New York, NY 10036

United States of America

Sydney +61 (0)2 8249 8342

Level 4, Office 1205

95 Pitt Street, Sydney

NSW 2000, Australia

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