Shares in venture capital vehicle focused on breakthrough biotech Arix Bioscience (ARIX) surged 11.8% to 176p on Thursday after one of its portfolio companies announced a three-year collaboration with German pharma group Merck KGaA.

Portfolio company Artios Pharma is a global leader in DNA damage response (DDR) science which is one of the most promising and validated approaches to fighting cancer. Arix is the largest shareholder owning 12.7% of the company.

The companies are looking to leverage Artios’ proprietary platform to identify multiple targets for the development of precision cancer drugs.

As well as a $30 million upfront payment Artios is eligible to receive $860 million for every target identified in addition to double-digit percentage royalty payments on commercialised products.

Artios will also have an opt-in right for joint-development and commercialisation programmes.

Today’s announcement follows quickly on the heals of last month’s $2.75 billion sale of VelosBio to US pharma company Merck which represented a 12 times return for Arix’s £12 million investment and generated proceeds of $185 million.

Jefferies commented, ‘with Arix still trading on a significant discount despite the Velos deal's boost to NAV and cash, more validation from another early-stage asset should attract more interest and narrow the discount.’

At September’s interim update Arix said it anticipated more portfolio crystallisations over the next two to three years with at least two exists and two to three companies going down the initial public offering (IPO) route.

The medium-term goal is to achieve a net asset value of £500 million by 2023.

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Issue Date: 03 Dec 2020