Our successful fund has now for two years invested in companies that continuously works to significantly improve the treatment of patients worldwide and has at the same time provided solid returns to its shareholders. We like to call this Impact Investing. Do Good - Do Well!
May 25 marks the two year anniversary of the Arctic Aurora LifeScience Fund and our never-ending task of identifying the most promising companies with new therapies that addresses key unmet medical needs for patients worldwide. It has been two exciting years where we have had the privilege of witnessing many key clinical breakthroughs that have substantially changed patient outcomes and quality of life. Through our careful selection and investment process the medical progress has also meant solid return for our investors, making us confident with the continued application of our investment strategy. Since inception, the fund’s USD class has delivered a 26.5% return which is 18.5% better than the fund’s benchmark index (corresponding numbers for the NOK class 22.4% and 18.1% respectively).
Small and midcap biotech companies has been a particular value driver for the fund during the two years. In particular, picking out biotechs that develop promising new cancer treatments has been a major contributor to our return. The equity with the highest value in the portfolio, Array Biopharma, is one such example where we note a 320% rise since our first investment in the company. After a string of good clinical data from Array, the company cranked up investor confidence a notch further earlier this year with the announcement of late-stage clinical data in a particular type of melanoma that doubled median survival time among the patient in the trial that received Array’s treatment combination compared to standard of care. In all, 11 AALS portfolio companies have seen share prices rise more than 100% over the fund’s lifetime.
We have witnessed big pharma giants battle it out in the emerging field of immune-oncology, where a new class of drugs awaken the patient’s own immune system to fight cancers. Roche, Merck, Pfizer, Bristol-Myers Squibb and AstraZeneca are all trying to match their agents with the best combinations in order to get an edge in the competition. Merck seems to be the current winner in the all-important lung cancer field with Roche gaining ground behind them. Meanwhile Bristol and AstraZeneca had some spectacular failures.
The theme of large cap pharma and biotech acquiring smaller biotechs to gain access to the most innovative treatments is another important factor behind the fund’s return. Kite Pharma, the fund’s higher absolute value contributor is a prime example of this. Kite took immune-oncology to the next level by developing a treatment whereby patient’s own immune cells where modified in labs in order to identify and kill cancer cells and then reintroduced into the patient. The technique rendered spectacular response rates in certain blood cancer types. Gilead, the large cap biotech company, saw Kite’s technology as a way to reinvigorate its product pipeline and bought the company in late 2017 with a sizeable market premium. Not long after another big biotech player, Celgene, acquired Kite’s close competitor Juno Therapeutics in a similar deal.
Both Kite and Juno utilized maturing tools to insert new genes into cells. These methods are now applied, not only in isolated human cells, but are also being directly injected into human tissue whereby correcting many difficult genetic diseases that until now have been impossible to treat. The first gene therapy product was approved early 2018. Spark Therapeutics managed to insert a healthy gene in patients with a particular mutation that otherwise led to early life blindness. Many more gene therapies are in clinical development and new technologies have emerged that facilitate precision correction of faulty genes that further opens up the possibilities to treat a wide range of diseases. We are happy to see continued increased efforts into rare diseases, both with many new products entering the market and plenty of late-stage drug candidates that are proving themselves in clinical trials.
Life-styles factors, demographic shifts and the emergence of new technology that spurs medical innovation continue to drive the value of the life science sector. We in the Aurora LifeScience team will keep on carefully monitoring the progress made in the field in order to maintain the high bar of performance and execution we have set in these initial two years.
Arctic Aurora LifeScience is an equity fund investing in global biotechnology and pharmaceutical companies. The fund is run by former portfolio manager in the Swedish AP3 Fonder, Ulrica Bjerke, as well as Dr. Torbjørn Bjerke, both with 20 years of experience from the market. Arctic Aurora LifeScience was launched in May 2016 with both hedged and un-hedged share classes.
Past performance in Arctic Aurora LifeScience is no guarantee for future returns. Future returns depend on the market, fund manager skill, fund risk level, costs, among others. Performance in the fund may at times be negative and may for this fund vary considerably within periods.