Biotech

q2 2015 investor letter
michael calore
t: (617) 778-2518
e: mcalore@racap.com
ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd
ra capital management, llc
15 july 2015
20 park plaza, suite 1200 | boston, ma 02116
index and ra capital healthcare fund, lp net performance (includes predecessor account)1:
35.0%
ra capital fund
ibb
30.0%
28.6%
russell 2000
s&p 500
25.0%
21.7%
Performance (%)
20.0%
15.0%
13.2%
11.1%
10.0%
9.4%
8.7%
7.5%
6.6%
4.3%
5.0%
5.1%
4.4%
2.3%
1.0%
1.0%
1.3%
6.4%
4.8%
4.6%
1.1% 0.8%
1.2%
0.4% 0.3%
0.0%
-1.2%
-2.8%-2.6%
-1.8%
-5.0%
-1.9%
-10.0%
Annualized Since Inception
Q1
Apr-15
May-15
net performance summary1:

Q1 2015 apr-2015 may-2015 jun-2015 q2 2015
YTD
ytd
-1.8%
-1.2%
4.4%
5.1%
4.6%
6.4%
ibb healthcare
13.2%
-2.8%
9.4%
1.1%
7.5%
21.7%
russell 2000
4.3%
-2.6%
2.3%
0.8%
0.4%
4.8%
s&p 500
1.0%
1.0%
1.3%
-1.9%
0.3%
1.2%
23.0%
june 30 2015
6.5%
endowments and
foundations
ra capital fund
performance attribution2:
gp
(active
participants)
3.0%
ra capital
management, llc
fund of
funds
june 30 2015
gross long
98%
total long equity
16.5%
gross short
35%
total privates
5.8%
total gross
133%
total shorts
-9.9%
net
62%
total options/warrants
-4.8%
private investments
18%
total attribution
7.7%
(% of NAV)
Q2
approximate firm level investor breakdown3:
ra capital fund
ra capital fund
exposure2:
Jun-15
61.5%
family office
and high-net
worth
individuals
6.0%
pensions
jun 30 2015
3
ra capital management, llc (firm) - aum
firm aum-january 13
$1.08B
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
$4M
$4M
$13M
$14M
$26M
$70M
$191M
$240M
$114M
$140M
$180M
$294M
$838M
$999M
1 Net returns reflect the payment of management fees, performance allocations and other expenses for the RA Capital Healthcare Fund, LP (the RA Capital Fund or Fund). The inception of the
RA Capital Fund was on October 1, 2004 and the RA Capital Healthcare International Fund, Ltd. (the Offshore Fund) commenced in 2006. Performance from January 1, 2002 - September 30,
2004 reflects a separate account (Account) managed by Peter Kolchinsky prior to the launch of the Fund, using substantially the same investment strategy as the Fund, net of all actual trading
expenses, and assuming a 2% management fee and a 20% performance allocation. The Account was audited by Deloitte & Touche. The Fund returns illustrated assume a Fund limited partner
invested in the Account on January 1, 2002 and participated in all of the Funds private investments and new issues. The actual returns of a limited partner will vary from the returns illustrated and
will depend on the limited partners date of investment in the Fund, and level of exposure to the Funds private investments and new issues. All annual returns are compounded and assume the
reinvestment of any dividends paid. Returns for 2015 are based on unaudited financial information.
Indices are shown for comparison purposes only, are not subject to management fees, are long-only, do not utilize leverage and with the exception of IBB are not available for direct
investment. Comparison of the Funds performance to any index has inherent limitations because such index may experience volatility or possess characteristics that differ materially from the
Fund. Please refer to Appendix A for important disclosures regarding the indices and data presented herein. Past performance is not necessarily reflective of future results.
2 A
ttribution & exposure may vary among Fund investors depending on the extent to which such investor has exposure to the Funds private investments. Attribution listed does not include cash
related items such as financing costs (e.g. short borrow costs), management fees and other expenses.
3 The

Approximate Firm Level Investor Breakdown and Firm AUM is for RA Capital Management, LLC (Firm), is approximate and incorporates and includes the value of a separately-managed
institutional account, which comprised approximately 17% of the Firms total AUM as of June 30, 2015. The institutional accounts inception was in September 2009. Firm AUM for 2002 and 2003 is
for the Account managed by Peter Kolchinsky prior to the formal launch of the Firm in September 2004.
q2 2015 investor letter | 1

15 july 2015
michael calore
t: (617) 778-2518
dear investor:
q2 by the numbers
The RA Capital Healthcare Fund, LP (the Fund) returned +5.1% net in June, +4.6% net in the second quarter, and is now up +6.4 % net YTD,
though performance may vary depending on each LPs exposure to privates (stated performance assumes participation in all privates).4 The
Fund finished the quarter with approximately 62% net long exposure and $1.08 billion of firm AUM. Since the strategy inception in 2002, we have
annualized at +28.6% net.5
Compared to
The healthcare ETF IBB was up +1.1% for the month and is up 21.7% YTD through June. The Russell 2000 was up +0.8% and S&P was down -1.9%
for the month, and are now up +4.8% and +1.2% YTD, respectively.6
attribution
This quarter, public longs contributed 16.5% to the Funds performance, and privates contributed 5.8%; shorts detracted -9.9%, and options/
warrants detracted -4.8%.
back office update

We welcome to our back-office Christopher Wolf as Chief Financial Officer. Christopher will be working closely with both the Investment and
Operations groups to ensure the institutional quality of the funds infrastructure. Prior to joining, Christopher was CFO at HighVista Strategies for
over 10 years, Manager of Investment & Treasury Operations at the Williams College endowment, and CFO at Abrams Capital.
our view of the life science sector entering a new era of biology
We have experienced a significant shift in valuations in the small-, mid-, and large-cap companies over the last several years. It is natural to
ask what is driving this increase and whether it is sustainable. Outside observers of the sector read the charts, whether common indices or
specific stocks, and anticipate a reversion to some mean, which fundamentally anchors their notion of fair value to the past. Thats a reasonable
approach if the companies and their assets are essentially the same as they were in the past. But they are not.
In just about every important way, our sector and the companies that compose the indices that track our sectors value couldnt be more
different, stronger, and more compelling than they were at any point in the past. Looking to the past instead of seeing the present state of
individual companies may cause one to overlook that the biotechnology sector has finally become the engine of breakthroughs that insiders
have long imagined it could be.
Furthermore, investors are not the only ones whose sentiment and capital allocation decisions influence the sectors valuations. There are
now many biotech drugs on the market generating revenues, and those dollars flow back into more drug development, much of it being done
by smaller companies. More than ever, pharma and a growing number of large cap biotechnology companies are investing their cash flows
into the acquisition of small- and mid-cap development-stage drug companies. Understanding the motivations and needs of these strategic
investors is as important as or even more important than understanding the psychology of purely financial investors.
Large-cap biopharma executives regularly visit our offices to explore our maps with us and brainstorm what drugs and technologies could
enable them to stay competitive in their chosen disease areas. When we recently asked a top pharma business development executive why
his company had not made more acquisitions in 2008-2011 when valuations were far lower, he said that they simply were not all that inspired
by the science, describing the pickings as relatively anemic. Back then breakthroughs were very rare, whereas now his team is flooded
with genomics-guided science and drug candidates that make a big difference in tackling the diseases that interest his company. As for the
recently higher valuations, he explained that the possibility of falling behind in the scientific arms race represents a kind of existential threat that
ultimately trumps valuation sensitivity. This data-driven mindset is evident in the continued high pace of M&A and development-stage dealmaking, even as valuations have climbed.
4 Please see footnote 1 and the accompanying text.

5 Please see footnote 1 and the accompanying text.
6 Indices

are shown for comparison purposes only, are not subject to management fees, are long-only, do not utilize leverage and with the exception of IBB are not available for direct

15 july 2015
michael calore
t: (617) 778-2518
Indeed, with just one years worth of their cash flows, the top 20 pharma and biotech companies could acquire at a significant premium all
public biotech companies that currently have a valuation under $1B.7 With another few years of cash flows, they could acquire the rest. The
point is that prices that seem high to financial investors are affordable to cash-generating giants focused on their long-term competitiveness.
Some smaller biotechs that pharma neglected to acquire in the past due to valuation sensitivity are now large, revenue-generating companies
in their own right, such as Incyte, Biomarin, Vertex, and Alexion. To pharma, they represent lessons of what might have been.
Waiting for a better entry point makes sense when investing in individual companies, especially if one continuously tracks, as we do, their
individual accomplishments and fundamentals versus their valuation. But, in our view, sitting out of biotechnology at this stage in its evolution
will very likely end up being one of those decisions that investors who try to time sector-entry will regret. Regardless of volatility, we think that
current valuations for many companies (though not all) will look comparatively modest in three years, five years, and 10 years.
the indices cannot go back to where they were

Four years ago Gilead paid $11B for Pharmasset, an 89% premium to the pre-announcement market value, boosting several indices that
included Pharmasset. Gilead now generates greater than$10B cash flow per year from selling the drug it secured in that acquisition, driving
share buybacks and further acquisitions. Gilead, too, is a big portion of a number of indices and its regular share buybacks have been ratcheting
up those indices. Alexion acquired Synageva for $8B, boosting the indices that included Synageva. Biogen is generating billions each year;
those dollars are destined to either buyback stock, be issued as dividends, or more likely buy smaller companies, in all cases resulting in actual
cash in investors pockets where previously there were just stock certificates. AbbVie recently paid $21B to acquire Pharmacyclics; there is no
taking that back.8
The climb in the indices is therefore not just due to an inflation in sentiment that may deflate again. A considerable portion of the climb has
been due to realized value creation in the form of cash flows, which strengthen balance sheets, enable buybacks, and fuel acquisitions of
constituents.
And yet, there is plenty of room for sentiment swings; valuations in our sector are never precise, given all the probability adjustments that go into
any valuation metric that one employs. A 10 or 20% adjustment is a rounding error to our sector, and there will no doubt be downswings along
the way. But, our experience has been that whenever our sector has suffered sharp corrections, many generalist investors and some specialists
who were on the sidelines stayed on the sidelines, unable to originate the conviction that is necessary to buy falling stocks. To take advantage
of a correction, it seems that one has to be in the thick of things at the time of the correction. We maintain some short exposure at all times
precisely so that, during a correction, we can generate cash to deploy into compelling longs, both the ones we already own and others that we
keep an eye on.
are drug costs sustainable?

The media sometimes reports that drugs are going to bankrupt the system and that drug prices are unsustainable. Yet, the vast majority of
healthcare costs are actually spent on visits to doctors, procedures at hospitals, and nursing care that drugs can help to mitigate (vaccines
prevent disease, antibiotics cure infections, statins and new agents reduce heart attacks, eye drops prevent blindness from glaucoma, asthma
medications prevent life-threatening exacerbations, etc.). Branded drugs represent ~1.4% of US GDP (similar to the combined spend on
cigarettes and fast food) and less than 10% of total healthcare spending.9
Despite their public stance, insurance companies have limited incentives to contain drug costs. They just do not want big increases from one
year to the next. Insurance companies can manage their P&L perfectly well if all healthcare costs rise steadily and predictably. By law, they only
get to keep a maximum of 15% or 20% (depending on insured group size) of the insurance premiums, with the rest going to reimbursing claims;
so the bigger the pie grows, the more that 15-20% represents in absolute dollars.
Employers should care about healthcare costs, but they routinely chose higher cost plans as a signal that they care about their employees.
There are better ways for employers to save money than being seen as reducing drug options for their employees.
7 Source: RA Capital Analysis

8 Source: Bloomberg
9 Source: www.imshealth.com and www.statista.com

15 july 2015
michael calore
t: (617) 778-2518
Increasingly, we will see multiple companies come to market with similar types of drugs. In theory, this could lead to price competition and
some fear outright price wars. But price wars work when price is not an indicator of quality; when it comes to healthcare, consumers worry that
the cheaper product, unless virtually identical, might be worse in some meaningful way and therefore go the other way.
For example, AbbVie launched a cheaper but less slightly less convenient drug (multiple pills taken twice a day taken for 12 weeks) that cures
Hepatitis C just as effectively as Gileads more convenient single pill taken once a day for 8-12 weeks. AbbVie offered insurance plans a deep
discount to offset its products perceived disadvantages, which prompted Gilead to also drop its price somewhat, though not to AbbVies levels.
Many employers insisted that their insurance carriers cover Gileads pill even though limiting the formulary to AbbVies drug would have saved
them money. In the end, dropping the price did not result in AbbVie making it up in volume; Gileads product maintained the lions share.
Healthcare is complex and neither consumers nor even many doctors always know which differences matter. Therefore, unless two drugs are
interchangeable at the pharmacy (i.e., there is a generic version of a branded drug), the healthcare system struggles with forcing utilization of
the cheaper option.
One interesting example of what Congress is doing about drug costs is in the area of antibiotics. Currently, antibiotics are used on a costeffective basis by hospitals since they have to pay for them out of their own budgets. That has led to a decade or more of low investment in new
antibiotic development (indeed, a useful example how the industry reacts to market signals). Congress is now working to create a new law that
will allow hospitals to off-load the cost of some new antibiotics on insurance companies and government and allow them to actually get paid
a percentage of the cost of the antibiotics, just as with oncology drugs. Based on our history with oncology drugs, this means that a company
could charge $100,000 for an antibiotic and a hospital would actually want to use it more than if it cost $50! To be fair, the law (which Congress
will vote on any day now) is not without some safeguards against such abuses, but it certainly promises to liberalize antibiotic drug pricing. This
is meant as an intentional inducement to the biotechnology industry to create more antibiotics, which has generated several billion dollars of
market capitalization in the last few years, arguably a small price to pay to increase the worlds access to new antibiotics.
Drugs, as well as diagnostics and some medical devices, will likely represent a growing segment of the economy and will contribute to
inflation. While it may sound provocative to some, the idea that in 30 years drugs might represent even 6% of GDP, more than 4x higher than
today, is not untenable if, on average, we are keeping our health until our 90s and not unaffordable if we can remain gainfully employed into
our 70s. As basic needs and wants are met, consumers, on average, increase their consumption of luxury goods; it is not unreasonable for the
biotechnology industry to complete for those dollars by actually delivering greater health and longevity.
We believe strongly that, as long as biotechnology continues to generate advances for patients, this innovative segment of the overall
healthcare systems will have the support and engagement of patients, physicians, entrepreneurs, investors, and Congress.
the quality of drugs is improving

The industry is fundamentally doing its job of creating more and better therapeutics. Diseases that appeared to represent small markets in the
past when patients did not live long are now far more substantial as they become chronically managed (e.g., CLL, CML, diabetes). Revenues
are increasingly coming from biologics, which have longer tails because they cant go generic as easily as small-molecule drugs do once their
patents expire. Put all this together and what we see are more drugs with higher pricing for longer periods of time justifying higher valuations.
In some cases, patients are being cured, whether of Hepatitis C with novel drug cocktails or beta-thalassemia with gene therapy. Cures justify
higher prices; curing patients with Hepatitis C for $55k/patient is far more cost effective than merely managing HIV+ patients indefinitely at
a cost of $25k/patient/year, but getting paid upfront for a cure also has a higher NPV (and reduced risk of competitors down the road). To
mitigate the sticker shock of a high-priced cure, there may emerge novel payment mechanisms that spread the value of a cure over several
years, but the value captured by innovators (or their larger-cap acquirers) will remain significant.
Multiple drugs are now being combined in synergistic ways to yield ever better outcomes for patients, which enables the cost-effectiveness
argument to be made not by lowering cost but by increasing effectiveness. Indeed, its hard to imagine treating a cancer patient with three
complementary drugs each sold by a separate company priced at $100,000/year for a total cost of $300,000/year. Rather, the model that
is emerging is that companies are developing their own version of all three types of drugs so they can launch wholly-owned combination
regimens that they can price at a bundled rate of maybe $150,000/year, dominating any other companies that dont have the complete
solution set with which to negotiate with payers. This concept of selling a solution set is familiar to anyone who has studied anything from
the car industry to how Apple has built out its product lines, but its new to the biotech/pharma sector and is a big part of why the future will
not be like the past. The redefinition of product from being a single drug to an entire drug regimen or even treatment pathway is something
that we have written about both in our investor letters and in professional publications and is an important driver of big pharmas constant asset
consolidation strategy and our investment philosophy.

15 july 2015
michael calore
t: (617) 778-2518
better science and funding of multiple parallel shots on goal has reduced risk
Biotech is transitioning out of an era of seemingly unpredictable binary events. It used to be very hard to make a novel molecule or antibody.
Entire companies, like Amgen and Genzyme, were founded around a single, laboriously engineered molecule they created in-house. By
comparison, the ease with which new drugs are generated today is astounding. There are now many teams skilled enough to generate several
drug candidates to spec on a modest budget and rapid timelines; the question is less of whether they can make a drug but whether they can
apply it to the right disease in the right way, which today makes an understanding of biology and genomics more important than chemistry
or molecular engineering. Previously, we had to learn by trial-and-error. Now genomics-driven insights enable scientists and investors to
anticipate how intervening in complex biologic systems by inhibiting or activating a particular factor will result in a desired therapeutic effect.
Genomics offers a kind of x-ray vision into the inner workings of cells and organisms, including humans, allowing R&D to be incrementally more
productive every year and is particularly common in the orphan genetic disease space.
Genomics has enabled breakthroughs in large, chronic diseases, too, an example of which is the emerging PCSK9 inhibitor class of drugs. Large
genomics studies found people with rare mutations in both copies of their PCSK9 gene had extremely low levels of cholesterol, 90% lower
risk of heart disease, and no evidence that the mutations caused any problems. This finding encouraged many companies to develop PSCK9
inhibitors (including one of our portfolio companies), which indeed have proven very safe and profoundly lower cholesterol; the first of these new
drugs will be on the market shortly. The competition in this sector means that drug prices will likely be kept in check, though differences among
the drugs means that some are likely to get more of the pie than others; the company that we invested in has a PCSK9 inhibitor that may be
given as infrequently as once every three months, which we think patients would much prefer to the next-best once-monthly options.
As mentioned above, many companies now define themselves by the disease they aim to solve and will develop or acquire multiple different
drugs with which they can increase the odds that something will work. This solution development strategy costs more money than single drug
development, but the higher odds of success also make it more compelling. In many cases, we would rather invest $30M in a $100M funding
round knowing that a company will be able to take three shots on goal than put any money towards a $30M round to fund just one shot.
One of the benefits of taking multiple shots on the same goal is that clinical trial binaries do not necessarily pose existential threats to solution
development companies; many things have to go wrong to permanently impair such a company. Achillion was a good example of a company
with four drugs against HCV at various stages of development; when the most advanced one was put on clinical hold by the FDA towards the
end of 2013 due to a toxicity, the stock dropped because some investors thought the company was defined by its lead drug candidate and
could no longer compete in HCV, but we bought more shortly thereafter because we knew the company had many more opportunities to still
succeed. Over the subsequent year, Achillion advanced other HCV candidates into the clinic and showed that they were still competitive.
The new era we are in does come with new risks. For example, the principles of solution development dictate that a company cannot ever
stop innovating. If a company develops a good drug, other competitors are close behind. Being the first to market with one drug means
that a company has to acquire other complementary or better technologies to keep offering patients a better solution. Vertex taught the
industry this lesson by being the first to bring a new HCV drug to market but failing to bring in the right other agents with which to create a
better combination treatment. Within a few years of a billion dollar launch of its HCV drug, Vertex was supplanted by Gilead, which brought a
combination pill to market that offered patients a better, faster cure, pushing Vertex entirely out of the HCV arena. Vertex learned a lesson in its
next incarnation as a cystic fibrosis company and now has multiple different CF agents in development and on the market, with AbbVie a distant
second.
In the immune-oncology (IO) space that is yielding absolute miracles compared to anything that we had a right to expect, BMS and Merck were
first to market with anti-PD-1 antibodies. But these are only cornerstones for the acquisition of other complementary technologies, which BMS
has started to make as they compete against AstraZeneca, Roche, and others that have similar agents. When we bought stock of Bavarian
Nordic in October 2014, for example, we anticipated that an immuno-oncology company would want to partner its late-stage prostate cancer
vaccine for combination with IO antibodies, which came true five months later in March 2015 when BMS paid them $60M upfront with significant
future milestones and royalties .
The need to constantly improve instead of just relying on one successful product is beneficial for both patients and for investors. A significant
portion of our strategy is to fund emerging companies that will someday fill the pipeline gaps of larger companies. As with the Bavarian Nordic
example, there is a science-based, chess-like logic to solution development that our TechAtlas division is dedicated to deciphering. Our
maps are designed to predict how companies will mix and match technologies based on the underlying science to develop the best possible
solutions to particular healthcare problems. They have helped us understand the needs of big pharmaceutical companies, which in turn factors
into our investment decisions and guidance regarding portfolio prioritization that we offer to our portfolio companies.
michael calore
t: (617) 778-2518
15 july 2015
summary
In the last quarter, we have made investments in an Alzheimers company about to enter Phase 3 testing, a preclinical gene editing company,
a company with a best-in-class (in our assessment) drug for constipation that is ready to enter Phase 3 testing, a company with a remarkable
device for opening hardened blood vessels, and many others.
While we certainly think there are many companies currently overvalued (which has often been true in the past), supported by generalist
enthusiasm and an underestimation of both drug development risk and competitive risks, we invest in a fraction of all companies. What
happens at the tail of the bell curve is highly idiosyncratic and it is the low-consensus-ness of our portfolio that has allowed us historically to be
less correlated with the markets. We did well during our first ten years (2002-2011), a period when the sector was rocky but ended essentially
flat (as measured by the ETF IBB from 2002-2011). We then continued to do well as the sector found its footing these last several years. Our
returns are not without volatility, but our methodology has generated considerable alpha over time.
We adapt to the sector as it evolves. What remains constant is that we work methodically, that pharma companies continue to recycle their
cash flows into development companies as they compete with one another, and that we and everyone we know will eventually be a patient and
therefore a customer of our sector. These were good reasons to practice investing in the best, under-appreciated biotechnology companies
back in 2002 when we first started, and these arguments remain true today. We expect they will remain true for at least the next several
decades.
As we get better at treating heart disease or cancers (some can actually be cured and others are becoming chronic diseases), patients may then
go on to battle glaucoma or diabetes. Biotechnology exists to prevent and fight these diseases, and while we have made huge progress, the
path ahead is incalculably long. Especially because we are scientists at heart, fascinated by how breakthroughs are achieved and not just their
impact, we are privileged to explore what lies ahead, now with a stronger team than ever before.
As we noted last quarter, the investment landscape is ripe with opportunity and we are currently accepting new capital from new and existing
Fund investors. We welcome the opportunity to schedule a call or meeting with any institution interested in learning more about our Fund,
strategy or organization. Michael Calore, Director of Investor Relations, can be reached directly at 617-778-2518 and mcalore@racap.com.
Best regards,
peter kolchinsky
rajeev shah
tomas kiselak
andrew levin
Managing Director &

Portfolio Manager
Managing Director &

Portfolio Manager
Managing Director
Managing Director
michael calore
t: (617) 778-2518
15 july 2015
firm overview:
RA Capital Management, LLC is an investment advisor based in Boston specializing in the life-sciences and drug development sectors. We
are comprised of professionals with training in biology, chemistry, and medicine and also have industry and business development experience
at the executive and board levels. We invest in companies with promising technologies and products. Our goal is to achieve a superior
understanding of data, experimental/trial design, regulatory process, and commercial potential. When appropriate, we can offer our portfolio
companies leads on in-licensing opportunities and strategic partnerships, as well as insight into the demands of the public markets.
ra capital fund monthly net performance (includes predecessor account)10

jan
feb
mar
apr
may
jun
jul
aug
sep
oct
nov
dec
ytd
2015
2.8%
-2.1%
-2.4
-1.2%
4.4%
5.1%
6.4%
2014
12.8%
2.7%
2.0%
-7.9%
0.8%
15.6%
-6.2%
2.9%
-1.7%
2.7%
-0.1%
5.6%
30.5%
2013
7.7%
-1.3%
6.5%
8.5%
1.0%
11.3%
5.1%
2.2%
-1.9%
6.1%
6.6%
5.4%
73.5%
2012
10.6%
2.1%
4.5%
-1.5%
2.9%
6.0%
1.3%
-2.5%
5.1%
-1.1%
2.2%
-2.0%
30.3%
2011
1.1%
-5.3%
2.6%
4.5%
1.7%
1.9%
1.1%
-6.5%
-9.0%
7.6%
13.6%
2.0%
14.0%
2010
3.2%
0.5%
8.5%
9.3%
-4.8%
-6.9%
4.3%
5.1%
5.3%
2.3%
5.6%
14.9%
56.2%
2.2%
ra capital fund
2009
ibb
-15.2%
-0.9%
-40.0%
19.5%
0.0%
5.1%
-0.1%
3.8%
-4.4%
-0.3%
0.9%
-35.3%
-2.9%
-3.4%
-5.4%
0.5%
8.2%
10.6%
10.7%
5.0%
7.4%
-22.3%
1.7%
5.4%
11.0%
russell 2000
2008
s&p 500
2007
4.8%
17.1%
-3.0%
0.3%
-1.1%
2.5%
-0.2%
-0.5%
1.2%
0.6%
-0.3%
1.1%
23.5%
2006
12.0%
14.3%
10.1%
7.7%
-3.0%
-3.7%
-0.2%
3.9%
0.4%
3.0%
-2.4%
11.1%
64.7%
2005
-3.7%
-1.2%
-8.6%
4.9%
5.7%
7.8%
5.1%
11.2%
0.7%
-2.4%
1.2%
0.0%
20.8%
2004
9.9%
2.3%
-2.3%
6.0%
-3.8%
-1.1%
-12.8%
10.4%
7.9%
1.5%
7.5%
-12.1%
10.5%
2003
1.8%
-2.2%
3.4%
23.6%
16.8%
20.2%
-1.4%
5.0%
14.6%
17.1%
4.0%
6.6%
175.0%
2002
-1.1%
3.3%
-1.7%
-2.0%
-9.5%
-12.7%
4.1%
0.2%
-1.7%
14.6%
9.4%
0.2%
0.0%
portfolio management & research:
summary points11:
-- Managed long/short healthcare strategy since 2002.
-- Portfolio constructed with the objective to provide positive absolute returns, be resistant to
recession, and weather a prolonged freeze of capital markets.
-- typical exposure:
-- 80-100% Gross Long
-- 20-60% Gross Short
-- 40-75% Net Long
-- Liquidity: 90% of fund (excluding private investments) can be liquidated typically within
30 trading days
-- PM and research team have extensive training in science/medicine and are experienced
in conducting the efficient/deep diligence necessary for investing in public healthcare
companies.
-- Powerful core database with proprietary risk/value metrics.
selected ra capital fund terms11:

Minimum Investment:
$2,000,000
Contribution Dates: Monthly
Withdrawal Dates:
Quarterly with 90 days notice
Withdrawal Provisions: 1-year
soft lock
(3% penalty if within 1 year)
Management Fee: 2%
Performance Fee: 20% on all
appreciation over High Water
Mark
Investor Communication:
Monthly and Annual Reports
Structure: Master Feeder
(Delaware/Cayman)
fund service providers:

Legal Counsel:
domestic/onshore: Morgan, Lewis &
Bockius LLP
offshore: Maples & Calder
Auditor: KPMG, LLP
Prime Brokers: Fidelity & Goldman Sachs
Fund Administrator:
SS&C Technologies, Inc.
Peter Kolchinsky, Ph.D |

portfolio manager & managing director (2004 - present)
-----
Harvard University, PhD - Virology

Cornell University, BA - Biology
Board of the American Fertility Association (2013 - )
Board of Global Science and Technology for the National
Academies of Sciences (2009 - 2012)
-- Authored e-book, Entrepreneurs Guide to a Biotech Startup

Rajeev Shah |
portfolio manager & managing director (2004 - present)
-- Cornell University, BA - Chemistry
-- Altus Pharmaceuticals - Senior Project Leader (2001-2004)
Tomas Kiselak | managing director (2011 - present)
-- Amherst College, BA - Neuroscience & Economics
Andew Levin, PhD | managing director (2015 - present)
-- Harvard University-Massachusetts Institute of TechnologyJoint MD/PhD Program- Bioengineering
-- Princeton University, BS - Mechanical Engineering
-- H.I.G Capital - Vice President, BioVentures Team (2012-2015)
-- Clinton Health Access Initiative - Director, Pharmaceutical
Sciences (2010-2012)
10 Net returns reflect the payment of management fees, performance allocations and other expenses for the RA Capital Healthcare Fund, LP (the RA Capital Fund or Fund). The inception of
the RA Capital Fund was on October 1, 2004 and the RA Capital Healthcare International Fund, Ltd. (the Offshore Fund) commenced in 2006. Performance from January 1, 2002 - September
30, 2004 reflects a separate account (Account) managed by Peter Kolchinsky prior to the launch of the Fund, using substantially the same investment strategy as the Fund, net of all actual
trading expenses, and assuming a 2% management fee and a 20% performance allocation. The Account was audited by Deloitte & Touche. The Fund returns illustrated assume a Fund limited
partner invested in the Account on January 1, 2002 and participated in all of the Funds private investments and new issues. The actual returns of a limited partner will vary from the returns
illustrated and will depend on the limited partners date of investment in the Fund, and level of exposure to the Funds private investments and new issues. All annual returns are compounded
and assume the reinvestment of any dividends paid. Returns for 2015 are based on unaudited financial information.
11 P
lease refer to the Funds confidential Private Placement Memorandum (PPM) for a more complete and detailed description of its terms and RA Capital Management LLC, the Funds advisor.
In the case of any inconsistency between the terms contained herein and the Funds confidential PPM, the terms of the PPM shall control. This is not an offer or the solicitation of an offer to
purchase an interest in the Fund. Any such offer or solicitation will only be made by means of a confidential PPM to be furnished to
qualified investors upon request.
michael calore
t: (617) 778-2518
15 july 2015
ra capital fund performance vs. indices (through 6/30/2015)12:

$30,000.00
$29,000.00
$28,000.00
$27,000.00
$26,000.00
$25,000.00
$24,000.00
28.6%
net annualized return:
2.78
sortino ratio:
28.1%
alpha since 1/1/02 vs. s&p:
0.53
beta since 1/1/02 vs. s&p:
ra capital fund
ibb
$23,000.00
$22,000.00
russell 2000
s&p 500
Agitation
B-cell Cancer
CAR-T
Gene Therapy
HAE
HBV
HCV
Parkinsons
PBC
RNAi
$21,000.00
$20,000.00
$19,000.00
$18,000.00
$17,000.00
$16,000.00
$15,000.00
restructured
$14,000.00
$13,000.00
Cystinosis
HCV
HIV
LAL
Lung
Cancer
Narcolepsy
Pain
RSV
initial
raise
$12,000.00
$11,000.00
$10,000.00
$9,000.00
$8,000.00
$7,000.00
Flu
HIV
Migraine
Obesity
Stroke
$6,000.00
$5,000.00
$4,000.00
$3,000.00
$2,000.00
HIV
Incontinence
Constipation
Fibromyalgia
Migraine
Nephropathy
PAH
Fibroids
FSD
Migraine
PAH
Anemia
BPH
HCV
Hypotension
Pain
Prions
Spasticity
Veno-Occlusive
Disease
Allergy
Cystic Fibrosis
Manufacturing
Onychomycosis
Prostate Cancer
Stroke
Antibiotic
Carcinoma
Duputrens
Flu Vaccine
HCV
Prenatal Testing
Diabetes
HCV
Hot Flashes
Lung Cancer
Migraine
Narcolepsy
Pulmonary Fibrosis
Anticoagulation
Dupuytrens
Gout
HIV
Prostate Cancer
Schizophrenia
$1,000.00
$-
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
Listed indications representative of major investment themes.
ra capital fund net performance (includes predecessor account through 6/30/2015)9:

2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
0.0%
175.0%
10.5%
20.8%
64.7%
23.5%
11.0%
-35.3%
56.2%
14.0%
30.3%
73.5%
30.5%
6.4%
2899.1%
28.6%
ibb healthcare
-45.8%
45.8%
4.8%
2.4%
0.7%
5.5%
-12.3%
15.2%
14.8%
11.7%
32.1%
65.5%
33.8%
21.7%
312.0%
11.1%
russell 2000
-20.5%
47.3%
18.4%
4.6%
18.4%
-1.6%
-33.8%
27.2%
26.9%
-4.2%
16.3%
38.8%
4.9%
4.8%
207.3%
8.7%
s&p 500
-22.1%
28.7%
10.9%
4.9%
15.8%
6.2%
-37.0%
26.5%
15.0%
2.1%
16.0%
32.4%
13.7%
1.2%
135.6%
6.6%
ra fund
cumulative annualized
12 Net

returns reflect the payment of management fees, performance allocations and other expenses for the RA Capital Healthcare Fund, LP (the RA Capital Fund or Fund). The inception of
the RA Capital Fund was on October 1, 2004 and the RA Capital Healthcare International Fund, Ltd. (the Offshore Fund) commenced in 2006. Performance from January 1, 2002 - September
30, 2004 reflects a separate account (Account) managed by Peter Kolchinsky prior to the launch of the Fund, using substantially the same investment strategy as the Fund, net of all actual
trading expenses, and assuming a 2% management fee and a 20% performance allocation. The Account was audited by Deloitte & Touche. The Fund returns illustrated assume a Fund limited
partner invested in the Account on January 1, 2002 and participated in all of the Funds private investments and new issues. The actual returns of a limited partner will vary from the returns
illustrated and will depend on the limited partners date of investment in the Fund, and level of exposure to the Funds private investments and new issues. All annual returns are compounded
and assume the reinvestment of any dividends paid. Returns for 2015 are based on unaudited financial information.
2015

15 july 2015
michael calore
t: (617) 778-2518
appendix a:
Any views expressed herein are those of the authors as of the date
indicated and are subject to change, without notice, based on market
and other conditions RA Capital Management LLC has no duty or
obligation to update the information contained herein.
RA Capital Management, LLC makes no representation, and it should
not be assumed, that past investment performance is reflective of
future results. An investment in the RA Capital Fund is speculative
and involves a high degree of risk.
Certain information contained herein concerning economic trends
and/or data is based on or derived from information provided by
independent third-party sources. RA Capital Management LLC
believes that the sources from which such information has been
obtained are reliable; however, it cannot guarantee the accuracy of
such information and has not independently verified the accuracy or
completeness of such information or the assumptions on which such
information is based.
This letter, and the information and data contained herein, is not an
offer or solicitation for the purchase or sale of any security and should
not be construed as such. Such an offer will only be made by means
of a confidential Private Placement Memorandum to be furnished
to qualified investors upon request. References, either general or
specific, to securities and/or issuers are for illustrative purposes
only and are not intended to be, and should not be interpreted as,
recommendations to purchase or sell such securities.
This letter contains proprietary and confidential information and
may not be copied, used for an improper purpose, reproduced,
republished, or posted in whole or in part, in any form without the prior
written consent of RA Capital Management LLC.
The iShares Nasdaq Biotechnology ETF (IBB) seeks to track the

investment results of an index composed of biotechnology and
pharmaceutical equities listed on the NASDAQ.
The Russell 2000 Index measures the performance of the smallcap segment of the U.S. equity universe. The Russell 2000 Index is a
subset of the Russell 3000 Index representing approximately 10% of
the total market capitalization of that index. It includes approximately
2000 of the smallest securities based on a combination of their
market cap and current index membership. The Russell 2000 is
constructed to provide a comprehensive and unbiased small-cap
barometer and is completely reconstituted annually to ensure larger
stocks do not distort the performance and characteristics of the true
small-cap opportunity set.
The S&P 500 Index includes a representative sample of 500 largecap companies in various industries within the U.S. economy. The S&P
500 index is generally considered to be a proxy for the total equity
market.
The S&P 500 Health Care Index comprises those companies included
in the S&P 500 that are classified as members of the GICS health care
sector.
The Sortino Ratio is a modification of the Sharpe ratio that
differentiates harmful volatility from general volatility by taking into
account the standard deviation of negative asset returns, called
downside deviation. The Sortino ratio subtracts the risk-free rate
of return from the portfolios return, and then divides that by the
downside deviation. A large Sortino ratio indicates there is a low
probability of a large loss.
michael calore
t: (617) 778-2518
15 july 2015
top fund long contributions year-to-date (positive and negative)13:

top long contributors
company
top long detractors
% gained
(of average nav)
company
% lost
(of average nav)
DRUG
4.8%
DRUG
-2.3%
DRUG
2.3%
DRUG
-1.4%
DRUG
2.1%
DRUG
-0.7%
DRUG
2.1%
DRUG
-0.4%
DRUG
1.8%
DRUG
-0.4%
DRUG
1.5%
DRUG
-0.3%
DRUG
1.4%
DRUG
-0.3%
DRUG
1.3%
DRUG
-0.1%
DRUG
1.1%
DRUG
-0.1%
DRUG
1.1%
DRUG
-0.1%
13 T
he tables above represent the Funds long positions only and are calculated by dividing each positions net gains or losses by the Funds average NAV year-to-date. Therefore, these trades
may have resulted in a larger or smaller impact on reported performance during the period when the gains or losses were sustained. Since the investment adviser does not devote significant
resources to pursuing an alpha-generated short strategy, short positions that contributed positively or negatively to the Funds performance are not presented.

Biotech

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Biotech

Uploaded by

Copyright:

Available Formats

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

net performance summary1:

total long equity

approximate firm level investor breakdown3:

ra capital management, llc (firm) - aum

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

back office update

4 Please see footnote 1 and the accompanying text.

q2 2015 investor letter | 2

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

the indices cannot go back to where they were

are drug costs sustainable?

7 Source: RA Capital Analysis

q2 2015 investor letter | 3

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

the quality of drugs is improving

q2 2015 investor letter | 4

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

q2 2015 investor letter | 5

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

Managing Director &

Managing Director &

q2 2015 investor letter | 6

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

ra capital fund monthly net performance (includes predecessor account)10

portfolio management & research:

selected ra capital fund terms11:

fund service providers:

Peter Kolchinsky, Ph.D |

Harvard University, PhD - Virology

-- Authored e-book, Entrepreneurs Guide to a Biotech Startup

q2 2015 investor letter

ra capital healthcare fund, l.p. | ra capital healthcare international fund, ltd

ra capital management, llc

20 park plaza, suite 1200 | boston, ma 02116

ra capital fund performance vs. indices (through 6/30/2015)12:

net annualized return:

alpha since 1/1/02 vs. s&p:

beta since 1/1/02 vs. s&p:

Listed indications representative of major investment themes.

ra capital fund net performance (includes predecessor account through 6/30/2015)9:

q2 2015 investor letter | 8

q2 2015 investor letter

4 Please see footnote 1 and the accompanying text.

7 Source: RA Capital Analysis