Eventide Healthcare & Life Sciences Fund

Transcription

1 Eventide Healthcare & Life Sciences Fund Presentation June 30, /4/17 Eventide Asset Management, LLC. 1

2 Eventide Funds: At A Glance Founded in 2008 Headquartered in Boston, MA Vision: to offer high performance values-based asset management to individuals, financial advisors, and institutions. Mutual funds: Eventide Gilead Fund Eventide Healthcare & Life Sciences Fund Eventide Multi-Asset Income Fund $1.81B in net assets under management 8/4/17 Eventide Asset Management, LLC. 2

3 Eventide Healthcare & Life Sciences Fund A: ETAHX C: ETCHX I: ETIHX N: ETNHX FUND OBJECTIVE Seeks to provide long-term capital appreciation ABOUT THE FUND A diversified mutual fund representing our "best ideas" for long-term capital appreciation in the healthcare and life sciences sectors ( 80%). Concentrates investments in the drug-related industries ( 25%). May invest in illiquid securities (<15%). BENCHMARK S&P 500 Index MORNINGSTAR CATEGORY Health SECONDARY BENCHMARK S&P Biotechnology Select Industry Index (Former: Healthcare Blended Index) LIPPER CATEGORY Health/Biotech TOTAL ASSETS $357MM (Inception date: December 27, 2012) Healthcare and life sciences companies include those companies that derive or are expected to derive 50% or more of their revenue from healthcare and life science products and services including, but not limited to, biotechnology, pharmaceuticals, diagnostics, life science tools, medical devices, healthcare information technology, healthcare services, synthetic biology, agricultural and environmental management, and pharmaceutical manufacturing products and services. These companies include smaller development-stage companies. The S&P 500 is an index created by Standard & Poor s of American stocks with the largest market capitalization. It is not an investment product available for purchase. The Healthcare Blended Index is composed of equal parts of the S&P 400 Healthcare Index and the S&P 600 Healthcare Index from Fund inception on 27 December, The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The secondary index for the Fund changed from the Healthcare Blended Index to the S&P Biotechnology Select Industry Index on April 1, This change was made because the Adviser believes that the composition of the S&P Biotechnology Select Industry Index better reflects the risks and opportunities of the Fund s portfolio. The performance of both indices will be shown for a period of one year. Thereafter, the performance of the Healthcare Blended Index will no longer be shown on the Summary sheet. The volatility of the indices may be materially different than that of the Fund, and investors should not expect the Fund to achieve the same results as the indices listed 8/4/17 Eventide Asset Management, LLC. 3

4 Fund Distinctives DEEP DOMAIN EXPERTISE IN HEALTHCARE, BIOTECH, AND PHARMA Investment team experience in all aspects of space: COMBINED EXPERIENCE: Venture capital 10 YEARS Public markets 9 YEARS Physician Scientist 4 YEARS 3 YEARS FOCUSED ON EARLY DEVELOPMENT- STAGE COMPANIES Lowest median market capitalization of any biotech mutual fund. CREATING COMPELLING VALUE FOR PATIENTS AND SOCIETY Targeting large unmet medical needs, rare and orphan diseases. ACCESS TO UNIQUE OFFERINGS Investing in IPOs, mezzanine financing offerings, and up to 15% in private investments. 8/4/17 Eventide Asset Management, LLC. 4

5 Investment Team Finny Kuruvilla, MD PhD CIO, Lead Portfolio Manager ROLE Dr. Kuruvilla serves as the CIO for Eventide Funds, Lead Portfolio Manager on the Eventide Gilead Fund, and Lead Portfolio Manager on the Eventide Healthcare & Life Sciences Fund. Agustin Mohedas, PhD Research Analyst Colin Delaney Director of Portfolio Operations, Product Specialist ROLE Dr. Mohedas is primarily responsible for evaluating and monitoring new and existing healthcare investment opportunities in the portfolios. ROLE Mr. Delaney serves as Director of Portfolio Operations and is a Product Specialist for the Advisory Services team at Eventide. 8/4/17 Eventide Asset Management, LLC. 5

6 Our Investment Philosophy We believe high-quality companies, where we have a differentiated view from the market, and that trade at a discount to intrinsic value, offer superior long-term riskadjusted returns. 8/4/17 Eventide Asset Management, LLC. 6

7 Investment Process IDEA GENERATION First understand the big picture fundamentals. Identify most attractive investment themes and companies best positioned for participation. QUALITATIVE ANALYSIS Look for high quality companies through assessment of competitive advantages, management teams, and value creation. FINANCIAL ANALYSIS Look for companies with current financial strength and long-term potential of profitability. VALUATION ANALYSIS Measure intrinsic value. Identify companies with the most attractive upside potential and highest long-term probability of gain vs. loss. RISK MANAGEMENT Construct portfolio with goals of high internal diversification and low market correlation. MACRO POSITIONING Adjust portfolio risk exposure during company binary events. EVENTIDE HEALTHCARE & LIFE SCIENCES FUND Our best ideas. Continue to monitor investment case. Adjust estimates, price targets, conclusions and position sizes, to reflect changes in the fundamentals. 8/4/17 Eventide Asset Management, LLC. 7

8 Idea Generation Start with themes. First understand the big picture fundamentals within Healthcare. FACTORS: Scientific and medical advances Changes in the standard of care of diseases Unmet medical needs Value proposition to patients Total addressable market size Identify themes from our own due diligence. DILIGENCE: Staying current on relevant scientific and medical literature Attending scientific and medical conferences Speaking with expert physicians Engaging key opinion leaders within industry Discern most attractive themes. Identify companies best positioned for participation. 8/4/17 Eventide Asset Management, LLC. 8

9 Secular Investment Themes 1. Gene Therapy/Editing 2. Central Nervous System (CNS) 3. CAR-T 4. Immunotherapy/Oncology (I/O) 5. Rare and orphan diseases 8/4/17 Eventide Asset Management, LLC. 9

10 Qualitative Analysis Look for high-quality companies. SUSTAINABLE COMPETITIVE ADVANTAGES + Best-in-class assets + Unique technology platforms + Strong intellectual property SOURCES: SEC filings (annual reports, quarterly reports, proxies, 13F filings to check for institutional holdings particularly from peers we respect) GREAT MANAGEMENT TEAMS CREATING COMPELLING VALUE Press releases Conference calls Regular meetings with company management teams Speaking with physicians that treat patients Attending medical conferences Management has done it before High degree of integrity Incentives aligned with shareholders (high level of insider ownership without significant selling) Targeting large unmet medical need Focused on value creation for key stakeholders 8/4/17 Eventide Asset Management, LLC. 10

11 Business 360 Business 360 is a proprietary evaluative framework to help us find companies that are creating compelling value. QUALITIES: Targeting large unmet medical need Focused on value creation for key stakeholders CREATING VALUE Business 360 is a qualitative analysis of companies around value creation for key stakeholder relationships: especially customers, society, and employees. ADDING VALUE We believe value creation is an underappreciated source of alpha, providing essential insights into true business vitality, competitive advantage, and long-term sustainability and growth. 8/4/17 Eventide Asset Management, LLC. 11

12 Financial Analysis Look for companies with current financial strength and long-term potential for profitability. Analyze current financial strength: QUALITIES: Well capitalized ( 1 year of cash remaining) to reach key milestones (clinical trial data release, FDA indication, product launch) Clean capital structure (no warrants or heavy debt burden) No history of ill-conceived and/or poorly executed financings (extremely dilutive) Analyze the potential for future profitability: FACTORS: Current financing needs (i.e., dilution) Total addressable market (based on epidemiology) Penetration rate (based on competition for target product profile) Pricing (based on comparables) Lifespan of sales (based on IP) Compare our estimates to market consensus to assess opportunity. 8/4/17 Eventide Asset Management, LLC. 12

13 Valuation Analysis Look for companies with most attractive value and potential. Measure intrinsic value through Discounted Cash Flow analysis. Build DCF model using forecast assumptions and then probabilityadjust the calculated net present value based on our qualitative assessment of the company. Compare our estimates with market consensus to assess opportunity. Identify companies with the most attractive upside potential and highest long-term probability of gain vs. loss. We believe the best way to measure the intrinsic value of a company is with Discounted Cash Flow valuation analysis. This takes into account the magnitude, timing, and risk of future free cash flows, discounted to today based on the company s cost of capital. It also takes into account the sustainability of its competitive advantages (reflected in the fade rate). 8/4/17 Eventide Asset Management, LLC. 13

14 Portfolio Construction, Risk Management Construct portfolio, manage for risk. Concentrated portfolio of best ideas, approximately companies (based on conviction level and asymmetry of gain vs. loss) Manage risk through high internal diversification and consummate knowledge of holdings. Devote 50% of time to actively monitoring portfolio holdings, scrutinizing investment case, and building conviction through circling diligence. Adjust positioning for company-specific binary events. Adjust estimates, price targets, conclusions and position sizes, to reflect changes in fundamentals. 8/4/17 Eventide Asset Management, LLC. 14

15 Sell Discipline Investment thesis failure. No longer meets Eventide s B360 criteria. Price target achieved. More attractive use of capital elsewhere. 8/4/17 Eventide Asset Management, LLC. 15

16 Biotech Investment Checklist Compelling data (i.e., differentiated efficacy, toxicity, or route of delivery) ideally from a wellcontrolled clinical trial or, if preclinical, the molecular target or animal model is well-validated and translatable into humans. Targeting a large unmet medical need that with conservative assumptions yields a probabilityadjusted NPV that is significantly higher (i.e., 100%) than the current valuation. Undervalued due to a identifiable market inefficiency (e.g., company is a new issue and not well-known) that over time will correct itself and trade closer to its intrinsic value. Well-capitalized (i.e., 1 year of cash beyond key milestones with conservative assumptions on enrollment, etc.) or will be well-capitalized after the current financing. Clean capital structure without a heavy debt burden or a significant amount of outstanding warrants and no history of bad financings. Great management team that has done it before (e.g., many years of industry experience or a successful track record of running biotech companies), has a high degree of integrity (i.e., no associations with low-tier investment banks), and is aligned with shareholders (i.e., strong insider ownership without significant selling). 8/4/17 Eventide Asset Management, LLC. 16

17 Composition 2. Companies valued at greater than $10 billion are Large Cap; those at less than $1 billion are Small Cap. Portfolio Composition is subject to change at any time, and should not be considered investment advice. 3. Industry Allocation is subject to change at any time, and should not be considered investment advice. 8/4/17 Eventide Asset Management, LLC. 17

18 Return Performance is historical and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. To obtain the most recent month-end performance information and a current Eventide Healthcare & Life Sciences Fund prospectus please call the fund, toll free at EVEN (3836). Eventide Healthcare & Life Sciences Fund 3 Benchmarks 1 Year 3 Year 5 Inception 5 Class N 25.19% 10.57% 21.10% Class A without load 25.09% 10.51% 21.01% Class A with 5.75% load 17.89% 8.34% 19.43% S&P500 TR Index % 9.61% 15.02% S&P Biotechnology Select Industry TR Index % 14.76% 24.31% Healthcare Blended Index % 17.82% 23.85% 2. These charts compare the Eventide Healthcare & Life Sciences Fund Class N s performance to index performance over the periods shown. Performance will differ for other fund classes, based upon fees and commissions. Eventide Healthcare & Life Sciences Fund expenses: Class A, Total Expenses 1.60%; Class C, Total Expenses 2.35%; Class I, Total Expenses 1.35%; Class N, Total Expenses 1.55%. The Growth of $10,000 Chart assumes the Fund s inception date of 27 December 2012 for the indices.3. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Because of ongoing market volatility, Fund performance may be subject to substantial short-term changes. 4. The S&P 500 is an index created by Standard & Poor s of American stocks with the largest market capitalization. It is not an investment product available for purchase. The Healthcare Blended Index is composed of equal parts of the S&P 400 Healthcare Index and the S&P 600 Healthcare Index from Fund inception on 27 December, The S&P Biotechnology Select Industry Index represents the biotechnology sub-industry portion of the S&P Total Markets Index. The secondary index for the Fund changed from the Healthcare Blended Index to the S&P Biotechnology Select Industry Index on April 1, This change was made because the Adviser believes that the composition of the S&P Biotechnology Select Industry Index better reflects the risks and opportunities of the Fund s portfolio. The performance of both indices will be shown for a period of one year. Thereafter, the performance of the Healthcare Blended Index will no longer be shown on the Summary sheet. The volatility of the indices may be materially different than that of the Fund, and investors should not expect the Fund to achieve the same results as the indices listed. 5. Performance figures for periods greater than 1 year are annualized. Annualized since inception returns assume an inception date of 27 December Performance is historical and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the data quoted. Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. To obtain the most recent month-end performance information and a current Eventide Healthcare & Life Sciences Fund prospectus please call the fund, toll free at EVEN (3836). 8/4/17 Eventide Asset Management, LLC. 18

19 Market Risk 4. Source: Morningstar, Inc. (2017). All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Previously, this summary sheet sourced market risk data from Zephyr StyleADVISOR. Other updates to this summary sheet include information intended to help investors assess performance and risk factors associated with the Fund s benchmarks. The performance and risk factor comparisons are against the S&P 500 Total Return Index ( Index ). Alpha is a measure of performance on a risk-adjusted basis. It takes the volatility (price risk) of a fund and compares its risk-adjusted performance to the Index. Any excess return of the fund relative to the return of the Index is a fund s alpha. Beta is a measure of the volatility of a fund relative to the Index. A beta greater than 1 is more volatile than the Index. R-Squared measures how a fund s performance correlates with the Index s performance and it can help assess how likely it is that beta is statistically significant. Standard Deviation of return measures the amount of variation in historical performance from period to period. 5. Annualized since inception market risk details assume inception date of 1 January 2013 and not Fund s actual inception date of 27 December 2012, as only full month data is included in the market risk calculations. 8/4/17 Eventide Asset Management, LLC. 19

20 Contact For Fund platform availability inquiries or to initiate a sales agreement, please contact Harry Nelson at hnelson@eventidefunds.com or , x53. To speak with a sales agent of the Fund, please contact Jeffrey Cave at jcave@eventidefunds.com or , x57. For Fund literature or prospectus, please contact info@eventidefunds.com. 8/4/17 Eventide Asset Management, LLC. 20

21 Important Information Mutual Funds involve risk including the possible loss of principal. The Funds ethical values screening criteria could cause it to under-perform similar funds that do not have such screening criteria. The Funds can have risk related to option investing. There are special risks associated with investments in foreign companies including exposure to currency fluctuations, less efficient trading markets, political instability and differing auditing and legal standards. Because of ongoing market volatility, the Funds performance may be subject to substantial short-term changes. The Eventide Gilead Fund & Eventide Healthcare & Life Sciences Fund can invest in smaller-sized companies which may experience higher failure rates than larger companies and they normally have a lower trading volume than larger companies. The Funds can also have risk associated with the biotechnology and pharmaceutical industry in which these companies may be heavily dependent on clinical trials with uncertain outcomes and decisions made by the U.S. Food and Drug Administration. The Funds can invest in private companies. Private investments include various risks including but not limited to lack of liquidity, capital commitment risk, and valuation risk. Private companies may not be financially profitable and have uncertain futures, thus subject to additional risks. Investors in the Gilead Fund should be aware that companies in the technology industries have different risks including but not limited to products becoming obsolete, and entrance of competing products. 8/4/17 Eventide Asset Management, LLC. 21

22 Important Information Investors in the Eventide Multi-Asset Income Fund should be aware that interest rates are at historic lows and may change at any time based on government policy. In general, the price of a fixed income security falls when interest rates rise. A rise in interest rates may result in volatility and increased redemptions, which in turn could result in the fund being forced to liquidate portfolio securities at disadvantageous prices. Longer-term securities may be more sensitive to changes in interest rates. The intermediate-term bond portion of the Fund s portfolio may represent 0% to 100% of the Fund s portfolio with an average duration of between two and eight years. The Eventide Multi-Asset Income Fund may invest in other funds. If other funds are utilized, such underlying funds are subject to investment advisory and other expenses, which will be indirectly paid by the Fund. As a result, your cost of investing in the Fund will be higher than the cost of investing directly in underlying funds and may be higher than other mutual funds that do not invest in underlying funds. The Fund may invest, directly or indirectly, in junk bonds. Such securities are speculative investments that carry greater risks than higher quality debt securities. There are unique risks associated with REITs, MLPs, preferred stocks, convertible bonds, BDCs, and yieldcos that are covered in the Fund's prospectus and SAI. The Fund is a new mutual fund and has a limited history of operations for investors to evaluate. An investor should consider a fund's investment objectives, risks, charges and expenses carefully before investing or sending money. This and other important information can be found in the prospectus, which can be obtained at or by calling EVEN (3836). Please read the prospectus carefully before investing. Eventide Mutual Funds are distributed by Northern Lights Distributors, LLC, Member FINRA, which is not affiliated with Eventide Asset Management, LLC. 8/4/17 Eventide Asset Management, LLC. 22

23 C R E A T E V A L U E Eventide Asset Management, LLC One International Place, Ste Boston, MA EVEN (3836) E V E N T I D E F U N D S. COM 8/4/17 Eventide Asset Management, LLC NLD-8/1/

24 Appendix 8/4/17 Eventide Asset Management, LLC. 24

25 Investment Team Bios Finny Kuruvilla, MD PhD Chief Investment Officer, Portfolio Manager, Managing Partner Finny Kuruvilla serves as the CIO for Eventide Funds, lead Portfolio Manager on the Eventide Gilead Fund, and Portfolio Manager on the Eventide Healthcare & Life Sciences Fund. Dr. Kuruvilla has a unique background in healthcare, statistics, and investing. Concurrent with Eventide, from 2008 through 2016, he was a Principal at Clarus Ventures, a leading healthcare and life sciences venture capital firm. Prior to joining Eventide, from , Dr. Kuruvilla was a research fellow at the Broad Institute of Harvard and MIT, and from , Dr. Kuruvilla was a clinical fellow at the Brigham and Women s Hospital and Children s Hospital Boston and a postdoctoral scientist at MIT. He holds an MD from Harvard Medical School, a PhD in Chemistry and Chemical Biology from Harvard University, a master s degree in Electrical Engineering and Computer Science from MIT, and a bachelor s degree from Caltech in Chemistry. Agustin Mohedas, PhD Research Analyst Agustin Mohedas serves as a Research Analyst for Eventide. He is primarily responsible for evaluating and monitoring new and existing investment opportunities in the portfolios. Prior to joining Eventide, Dr. Mohedas was an investment analyst at RA Capital where he focused on evidence-based investing in small- and mid-cap life science equities. Dr. Mohedas holds a BS in Biomedical Engineering from Texas A&M University and a PhD in Medical Engineering Medical Physics from the Harvard-MIT Division of Health Sciences and Technology. In his doctoral research, Agustin developed small molecule compounds to treat fibrodysplasia ossificans progressiva, a rare and devastating genetic disorder. Colin Delaney Director of Portfolio Operations, Product Specialist Colin Delaney serves as Director of Portfolio Operations and is a Product Specialist for the Advisory Services team at Eventide. In his role in Portfolio Operations, Mr. Delaney works closely with the Fund's Portfolio Managers and the investment team to help implement their investment strategies. In his role as Product Specialist, Mr. Delaney acts as a link between Eventide's investment team and our client Advisors, helping them understand the portfolio's investments and strategies. Prior to Eventide, Mr. Delaney was a Senior Vice President at Jefferies LLC, where he served as a sales trader and client relations manager. In nearly 15 years at Jefferies, he was able to participate in a broad range of investment activities giving him a deep and wide understanding of the complete investment process. Mr. Delaney has a degree in Economics from St. Lawrence University. 8/4/17 Eventide Asset Management, LLC. 25

26 Our Investment Philosophy We believe high-quality companies, where we have a differentiated view from the market, and that trade at a discount to intrinsic value, offer superior longterm risk-adjusted returns. GREAT MANAGEMENT TEAMS Management has done it before High degree of integrity Incentives aligned with shareholders (high level of insider ownership without significant selling) SUSTAINABLE COMPETITIVE ADVANTAGES + Best-in-class assets + Unique technology platforms + Strong intellectual property CREATING COMPELLING VALUE Targeting large unmet medical need Focused on value creation for key stakeholders 8/4/17 Eventide Asset Management, LLC. 26

27 Our Investment Philosophy We believe high-quality companies, where we have a differentiated view from the market, and that trade at a discount to intrinsic value, offer superior longterm risk-adjusted returns. A great company that we think will sustain superior returns for longer than the market anticipates (or fade period is more gradual than the market expects). A company that we think can improve its returns more than the market expects. Market overreaction to a temporary negative. Market underreaction to a positive change. Underfollowed stocks. 8/4/17 Eventide Asset Management, LLC. 27

28 Our Investment Philosophy We believe high-quality companies, where we have a differentiated view from the market, and that trade at a discount to intrinsic value, offer superior long-term risk-adjusted returns. We believe the best way to measure the intrinsic value of a company is with Discounted Cash Flow valuation analysis. This takes into account the magnitude, timing, and risk of future free cash flows, discounted to today based on the company s cost of capital. It also takes into account the sustainability of its competitive advantages (reflected in the fade rate). 8/4/17 Eventide Asset Management, LLC. 28