Participants

Daniel Raffaele Trolio; Executive VP, CFO & Treasurer; Horizon Technology Finance Corporation

Gerald A. Michaud; President & Director; Horizon Technology Finance Corporation

Megan N. Bacon; Director of IR & Marketing; Horizon Technology Finance Corporation

Robert D. Pomeroy; Chairman & CEO; Horizon Technology Finance Corporation

Bryce Wells Rowe; Senior Research Analyst; B. Riley Securities, Inc., Research Division

Christopher Whitbread Patrick Nolan; EVP of Equity Research; Ladenburg Thalmann & Co. Inc., Research Division

Ryan Lynch; MD; Keefe, Bruyette, & Woods, Inc., Research Division

Presentation

Operator

Greetings, and welcome to Horizon Technology Finance Corporation Third Quarter 2023 Earnings Call.
(Operator Instructions)
As a reminder, this convention is being recorded. It is now my pleasure to introduce your host, Megan Bacon, Director, Investor Relations and Marketing.
Thank you, Ms. Bacon. You might start.

Megan N. Bacon

Thank you, and welcome to Horizon Technology Finance Corporation’s Third Quarter 2023 Conference Call. Representing the corporate at present are Rob Pomeroy, Chairman and Chief Executive Officer; Jerry Michaud, President; and Dan Trolio, Chief Financial Officer.
I want to level out that the Q3 earnings press launch and Form 10-Q can be found on the corporate’s web site at horizontechfinance.com.
Before we start our formal remarks, I remind everybody that in this convention name, the corporate will make sure forward-looking statements, together with statements with regard to the longer term efficiency of the corporate. Words comparable to believes, expects, anticipates, intends or comparable expressions are used to establish forward-looking statements. These forward-looking statements are topic to the inherent uncertainties in predicting future outcomes and situations.
Certain components may trigger precise outcomes to vary on a cloth foundation from these projected in these forward-looking statements, and a few of these components are detailed within the danger issue dialogue within the firm’s filings with the Securities and Exchange Commission, together with the corporate’s Form 10-Okay for the 12 months ended December thirty first, 2022. The firm undertakes no obligation to replace or revise any forward-looking statements, whether or not on account of new info, future occasions or in any other case.
At this time, I want to flip the decision over to Rob Pomeroy.

Story continues

Robert D. Pomeroy

Welcome, everybody, and thanks in your curiosity in Horizon. As we at all times do on our quarterly calls, I’ll replace you on our efficiency and our present general working surroundings. Jerry will then talk about our enterprise improvement efforts, our portfolio occasions and our markets. And Dan will element our working efficiency and monetary situation. We will then take some questions.
We had a powerful quarter from the standpoint of Net Investment Income, with NII considerably exceeding our quarterly distributions. However, our internet asset worth as of the top of the quarter was negatively impacted by adversarial occasions in our portfolio, which resulted in markdowns within the honest values.
Our adviser Horizon Technology Finance Management and its expertise and knowledgeable group stay targeted on our portfolio’s credit score high quality. As we navigate by way of the confused macro surroundings and maximize the worth of our portfolio over the long term.
Turning to our particular outcomes for the quarter. We generated internet funding revenue of $0.53 per share, effectively in extra of our declared distribution stage, due largely to increased rates of interest on our floating fee debt funding portfolio in addition to decrease incentive charges earned by our adviser. Dan will additional talk about the influence of incentive charges on NII in his remarks.
Based on our outlook in our undistributed spillover revenue of $1.23 per share as of September thirtieth, our Board declared common month-to-month distributions of $0.11 per share by way of March of 2024, in addition to an extra particular distribution of $0.05 per share for the fourth consecutive 12 months, payable in December.
We achieved a portfolio yield of over 17% on our debt investments for the quarter, as soon as once more at or close to the highest of the BDC business. We raised $14 million of fairness from our at-the-market program at a premium to NAV, additional enhancing our funding capability. Our portfolio at quarter finish stood at $729 million, rising modestly from June thirtieth. We completed the quarter with a dedicated and authorized backlog of $202 million offering us with a strong base of alternatives to thoughtfully develop our portfolio. As a reminder, most of our funding commitments are topic to our portfolio firms assembly sure key milestones.
Finally, we ended the quarter with a internet asset worth of $10.41 per share. The largest influence on our NAV was a results of our honest worth markdown of our debt funding in Evelo Biosciences, which Jerry will present extra element about. We proceed to work intently with and help not solely Evelo however all of our portfolio firms as we concentrate on bettering our general credit score profile and maximizing restoration.
We proceed to hunt high-quality new investments to develop our portfolio regardless of the difficult macro surroundings. As we shut out 2023, we’re hopeful that the volatility within the macro surroundings will ease and the unfavorable credit score cycle will enhance. Our group stays targeted on credit score high quality and executing on our funding technique in an effort to create further worth for our shareholders over the long run.
With that, I’ll now flip the decision over to Jerry and Dan to present you extra particulars and shade on our efficiency. Jerry?

Gerald A. Michaud

Thanks, Rob, and good morning, everybody. Our portfolio grew barely from the prior quarter to $729 million as of September thirtieth, on account of our cautious method to new originations, within the face of ongoing macroeconomic and VC headwinds. Our portfolio measurement was impacted partially resulting from our portfolio markdowns.
In the third quarter, we funded 8 debt investments totaling $88 million, together with debt investments to 4 new portfolio firms and 4 current portfolio firms. While we preserve a wholesome pipeline, we count on to stay selective in originating debt investments throughout the the rest of 2023.
Our onboarding yield of 13.9% throughout the quarter stay close to our historic highs, persevering with to replicate the upper rate of interest surroundings in our markets in addition to our pipe — our self-discipline in structuring and pricing transactions which we count on to supply sturdy internet funding revenue.
During the quarter, we skilled 1 mortgage prepayment, 2 refinanced loans, and 1 partial paydown totaling $38 million in pay as you go principal. We count on prepayments to stay muted within the fourth quarter of 2023 in comparison with our historic ranges given the weak IPO and M&A markets. Our debt portfolio yield of 17.1% continues to validate structuring our investments with floating rates of interest and a rising rate of interest surroundings. We once more generated one of many highest debt portfolio yields within the BDC business. As of September thirtieth, we held warrant fairness positions in 99 portfolio firms with a good worth of $42 million.
As a reminder, structuring investments with warrants and fairness rights is a key element of our enterprise debt technique and a possible generator of shareholder worth. In the third quarter, we closed $178 million in new mortgage commitments and approvals and ended the quarter with a dedicated and authorized backlog of $202 million in comparison with $159 million on the finish of the second quarter. We consider our dedicated backlog with most of our funding commitments topic to our portfolio firms, reaching sure key milestones supplies a strong base as we search to prudently develop our portfolio. We additionally proceed to work intently with all of our present portfolio firms to navigate the uneven macro surroundings.
Unfortunately, our portfolio firm, Double Biosciences had 2 unfavorable trial outcomes throughout 2023, together with a failed Phase IIa trial for its psoriasis drug, 29 23 in October. As a end result, within the third quarter, we recorded a major unrealized loss on our Evelo debt funding. We creatively restructured our debt funding within the prior quarter and proceed to diligently work in direction of reaching further recoveries on our funding.
Subsequent to the top of Q3, Horizon acquired an extra money paydown of $11 million for Evelo, with the $5 million paydown Horizon acquired from Evelo early within the third quarter, Horizon has acquired a complete of $16 million in principal repayments on its Evelo debt investments in 2023. In addition, we’re working intently and collaboratively with the corporate because it seeks strategic alternate options to maximise the worth of its core expertise platform.
Overall, we’re intently monitoring all of our portfolio firms and are working with their administration groups, buyers and different stakeholders to help them within the difficult macro and enterprise capital surroundings. As of September thirtieth, 87% of our debt portfolio consisted of three 4-rated debt investments in comparison with 90% as of June 30. Our 5 2-rated debt investments at September thirtieth are barely increased than the 4 2-rated debt investments in Q2. We even have two 1-rated debt investments on the finish of Q3, which signify 2.3% of our whole debt portfolio.
Turning now to the enterprise capital surroundings. According to PitchBook, roughly $37 billion was invested in VC-backed firms within the third quarter of 2023 and in comparison with $46 billion in Q3 of 2022 and $87 billion within the third quarter of 2021. VC exercise ranges stay beneath appreciable stress as VC investments in new portfolio firms made in 2021 and the primary half of 2022 are considerably overvalued within the present financial market. As a end result, the flexibility of VC-backed firms to boost new capital is difficult, mixed with a nearly closed superb market in our muted M&A market, VC-backed expertise and life science firms are discovering it more and more tough to boost a lot wanted capital to fund operations and development.
On a constructive notice, judging from our wholesome pipeline, we consider there’s vital variety of alternatives to spend money on high quality firms looking for capital, notably debt capital to fill their ongoing wants. We consider enterprise lenders, particularly public BDCs stay greatest positioned to fill this want, however the alternative is tempered by the present general market situations. In phrases of VC fundraising, solely $9 billion was raised within the third quarter, and the market is now on tempo to file a 9-year low, whereas the avenue to public exits continues to be largely closed. VC’s dedicated capital from their LPs stays elevated to the quantities raised throughout the good occasions and the reluctance to spend money on the present market.
While we count on this to proceed within the close to time period, the quantity of sideline capital does present VCs with the flexibility to help their well-performing portfolio firms till improved exit markets emerge. VC-backed exit exercise improved within the third quarter as whole exit worth for the quarter was $36 billion, pushed primarily by the [Extacart] and [Klaviyo] IPOs. However, their inventory costs have underperformed submit IPO, and their IPOs haven’t supplied the momentum that the market sought for brand spanking new IPO issuances.
The M&A marketplace for venture-backed firms additionally remained at historic lows throughout Q3. There was a possible constructive indicator for M&A within the life science market with massive pharma firms sitting on historic excessive ranges of money and with blockbuster medicine coming off patent safety within the subsequent 4 years. Big pharma must — want for brand spanking new medicine and potential blockbusters may result in vital M&A exercise with massive pharma firms shopping for smaller improvement firms with medicine within the scientific pipeline in an effort to restock their very own drug pipelines.
In phrases of market situations for brand spanking new enterprise mortgage funding, we count on a difficult surroundings to proceed into a minimum of the early portion of 2024. Accordingly, Horizon will preserve a practical and cautious method to new funding alternatives by specializing in preserving the worth and high quality of its present portfolio. When the worldwide financial and funding surroundings stabilizes and the enterprise capital ecosystem improves, we consider Horizon’s strong repute and long-term market presence will enable us to reaccelerate its portfolio development to the brand new high-quality enterprise debt loans.
A key baseline for future prudent portfolio development is our dedicated, authorized and awarded backlog, which as of at present stands at $227 million. And our advisers pipeline of recent alternatives, which as of at present stands at over $1 billion. To sum up, we proceed to sharply concentrate on credit score high quality and offering our portfolio firms with help and different options when vital to make sure optimum outcomes for our portfolio, the place there are engaging high-quality firms in search of enterprise debt options we’ll look to thoughtfully add to our pipeline and backlog with a watch towards prudently rising our portfolio.
Based on present portfolio measurement and yield, we consider we stay effectively positioned to generate strong NII for our shareholders and extra long-term shareholder worth. With that, I’ll now flip the decision over to Dan.

Daniel Raffaele Trolio

Thanks, Jerry, and good morning, everybody. During the third quarter, the yield generated from our debt investments as soon as once more produced NII that greater than lined our distribution. In addition, we proceed to strengthen our stability sheet by way of our ATM program, efficiently and accretively elevating an extra $14 million of capital, offering us with capability to prudently make new investments.
As of September thirtieth, we had $80 million in out there liquidity and consisting of $47 million in money and $33 million of funds out there to be drawn beneath our current credit score amenities. Currently have $25 million excellent beneath our $150 million KeyBank credit score facility and $181 million excellent on our $250 million New York Life credit score facility, leaving us with ample capability to develop the portfolio.
Our debt-to-equity ratio stood at 1.27:1 as of September thirtieth and netting out money on our stability sheet, our leverage was 1.12:1, which was under our goal leverage of 1.2:1. Based on our money place and our borrowing capability on our credit score amenities, our potential new funding capability at September thirtieth was $241 million. For the third quarter, we earned whole funding revenue of $29 million, a rise of 25% in comparison with the prior 12 months interval. Interest revenue on investments elevated primarily on account of the upper common measurement of our debt funding portfolio for the quarter and will increase within the variable rates of interest on our debt funding.
Our debt funding portfolio on a net-cost foundation stood at $117 million as of September thirtieth, a 2% improve from June thirtieth, 2023. For the third quarter of ’23, we achieved onboarding yields of 13.9% in comparison with 13.6% achieved within the second quarter. Our mortgage portfolio yield was 17.1% for the third quarter in comparison with 15.9% for final 12 months’s third quarter. Total bills for the quarter had been $11.6 million in comparison with $12 million within the third quarter of ’22. Our curiosity expense elevated to $7.1 million from $5.3 million in final 12 months’s third quarter resulting from a rise in common borrowings and better rates of interest on our borrowings.
Our base administration price was $3.2 million, up from $2.8 million in final 12 months’s third quarter resulting from a rise within the common measurement of our portfolio. We had no performance-based incentive price within the third quarter in comparison with an incentive price of $2.8 million for final 12 months’s third quarter. This was because of the deferral of incentive charges in any other case earned by adviser within the quarter beneath our incentive price cap and deferral mechanism. The deferral was pushed by unrealized and realized losses on our portfolio.
Net funding revenue for the third quarter of ’23 was $0.53 per share in comparison with $1 per share within the second quarter of 23 and $0.43 per share for the third quarter ’22. The firm’s undistributed spillover revenue as of September thirtieth was $1.23 per share. We anticipate that the scale of our portfolio, the rise in our portfolio’s rates of interest, together with our predictive pricing technique will allow us to proceed producing NII that covers our distributions.
As we’ve got stated beforehand, whereas we count on to expertise repayments by way of the top of the 12 months, we nonetheless consider prepayments can be under our historic ranges given the present surroundings.
To summarize our portfolio actions for the third quarter, new originations totaled $88 million, which had been offset by $9 million in scheduled principal funds and $38 million in principal prepayments, refinancing and partial paydowns. We ended the quarter with a complete funding portfolio of $729 million. Given the macro surroundings, we count on to stay selective within the close to time period with respect to originations. At September thirtieth, the portfolio consisted of debt investments in 56 firms with an combination honest worth of $680 million. And a portfolio of warrant, fairness and different investments in 102 firms with an combination honest worth of $49 million.
Based upon our portfolio outlook, our board declared month-to-month distributions of $0.11 per share for January, February and March 2024 and a particular distribution of $0.05 per share payable in December of 2023. We stay dedicated to offering our shareholders with distributions which might be lined by our internet funding revenue over time. Our NAV as of September thirtieth was $10.41 per share in comparison with $11.07 as of June thirtieth, 2023, and $11.66 as of September thirtieth, 2022. The $0.66 discount in NAV on a quarterly foundation was primarily resulting from our paid distributions, realized losses and changes to honest worth, partially offset by internet funding revenue.
As we have persistently famous, 99% of the excellent principal quantity of our debt investments, their rate of interest at floating charges with coupons which might be structured to extend as rates of interest rise with rate of interest flooring. As of at present, 95% of our debt portfolio will profit from further will increase within the prime fee.
This concludes our opening remarks. We’ll be pleased to take questions you will have at the moment.

Question and Answer Session

Operator

Thank you. (Operator Instructions) The first query comes from the road of Bryce Rowe with B. Riley Securities.

Bryce Wells Rowe

Let’s see, I needed to begin on simply the extent of spillover, clearly, it is rising. You’ve paid a particular dividend right here for a number of consecutive years. Any solution to sort of take into consideration sort of sizing that spillover up and the way you are desirous about managing it given the rise in spillover.

Daniel Raffaele Trolio

Good morning, Bryce. Just we have a look at the distribution each quarter with our Board members and taking consideration the exercise within the portfolio and the revenue that it is producing and clearly, the spillover. At these ranges, we’ll proceed to try this and have a look at it by way of the regulatory necessities of distributing that. So, nothing sure at present.

Bryce Wells Rowe

That’s useful. I assume you have acquired time to sort of determine that out, however I used to be simply curious if there was an replace there. Next query. Just needed to ask about a few portfolio firms that I assume you have seen a change in among the maturity date. One gained the Nextcar, you have acquired a maturity date of — truly, it was yesterday, and that was moved up. Any replace you’ll be able to present there sort of given the scale of that funding? And then additionally needed to ask about Nexii Building. Any replace on that specific funding?

Gerald A. Michaud

This is Jerry. So because it pertains to Nextcar, that firm does proceed to boost capital within the market. And there they’d be in an attention-grabbing place if there have been higher exit markets. And that was their expectation together with loads of different firms, VC-backed firms, with the exit markets simply not there for them. So they proceed to boost capital, proceed to get inside help from buyers they usually’re in a really dynamic market there within the automobile sort of subscription, rental enterprise, and it’s a rising platform. But till exit markets sort of open up, they’ll proceed to be internally funded.
And we will proceed to work with them to assist them get to a greater exit alternative, and that is sort of the place we’re.

Bryce Wells Rowe

And then, Danny, if you happen to may simply contact on Nexii constructing as effectively.

Daniel Raffaele Trolio

Nexii sort of comparable state of affairs, very attention-grabbing product, good demand for his or her product, tough markets within the sort of development space proper now. They do have abroad contracts that they’re plugged into. And so once more, I believe in higher exit markets, it will be alternatives for this firm to do one thing much more thrilling. But proper now, they simply proceed to be internally funded. They truly did get an outdoor funding, I believe, within the third quarter from institutional buyers. So we proceed to work intently with them. And once more, hopefully, to get to a greater market the place they are often extra opportunistic in how they’re desirous about financing the enterprise.

Bryce Wells Rowe

Excellent. Thank you for the commentary. I’ll hop again in queue for some others to take an opportunity. Thanks.

Operator

Next query comes from the road of Christopher Nolan with Ladenburg Thalmann.

Christopher Whitbread Patrick Nolan

For Evelo, had been there any incremental investments made within the fourth quarter?

Gerald A. Michaud

No, no.

Christopher Whitbread Patrick Nolan

And on the decision, you stated there was $16 million of repayments within the third quarter.

Gerald A. Michaud

So within the third quarter, the corporate accomplished a pipe transaction. They raised $25 million largely from inside buyers led by flagship who has about $140 million or had about — I believe it is greater than that now invested within the firm. And when that transaction closed, we acquired a $5 million paydown and we transformed $5 million of our debt to fairness which on the time gave us about an 11% possession place within the public firm. And the expectation or the hope was actually that the scientific trial for psoriasis would have turned out higher. We had been very disillusioned. Obviously, the corporate was very disillusioned within the outcomes of that. But as soon as they introduced that the outcomes of that trial that did not meet its endpoints, the corporate paid down an extra $11 million, which we truly simply acquired final week. So we acquired $16 million in pay down for the reason that third quarter, and mixed with what we acquired right here within the — early within the fourth quarter.

Christopher Whitbread Patrick Nolan

And then I noticed on the Q that for Evelo, you additionally marked down your fairness positions. Do these pipe transactions, ought to we count on additional write-downs in fairness out of your perspective? Or do you assume insiders stepping up will stabilize your fairness funding?

Gerald A. Michaud

Yes, I believe we even have a notice in our Q that we filed a subsequent occasion that we consider that we’ll be marking down the fairness within the fourth quarter as effectively.

Christopher Whitbread Patrick Nolan

And then I assume a comply with query. Were there any new nonaccrual investments within the fourth quarter?

Daniel Raffaele Trolio

So from the third quarter, there have been a few completely different names, and you may see them on the scheduled investments, the names which might be on nonaccrual they usually had been new names. One identify dropped off and a few names did get tagged as nonaccrual for the quarter, Evelo being one in every of them and Robin being one other.

Christopher Whitbread Patrick Nolan

Yes, I’m asking for the fourth quarter up to now.

Daniel Raffaele Trolio

Fourth quarter up to now, no.

Operator

(Operator Instructions). Next query comes from the road of Ryan Lynch with KBW.

Ryan Lynch

Following up on Bryce’s query on Nextcar and Nexii. I do not need to essentially lump these investments collectively as a result of there are 2 completely different conditions. But I had sort of comparable questions on each of these. Number one, I believe you — I consider you stated they’re each proceed to be funded — internally funded. I assume what does that imply? Because I’d assume that each of those are nonetheless unfavorable money flowing companies.
So I’d simply love to listen to what precisely which means. And then additionally what drove the decline in honest values for these companies? Because it appears like the best way you describe them, each — and once more, I do know they’re completely different firms, however sort of the best way you describe it each, is that the basics of the enterprise appear to be doing nice or perhaps as anticipated, however the exit alternatives have actually deteriorated simply given market dynamics. So was the weak point and the potential of sort of general exit markets, the driving force of the decline in valuation or was one thing else transferring that decrease this quarter?

Gerald A. Michaud

Honestly, it’s a little bit exit markets and alternatives to fund the expansion that will in any other case could be out there to them. So in different phrases, they’re working okay. They are — once more, the buyers proceed to help the businesses to a level, however actually exterior capital is required in some type or form, which means public providing and M&A or a big enterprise capital or crossover fund, I believe, in most likely each of those circumstances.
And so that they’re working — that is the place they’re spending loads of their time proper now. It’s on looking for that proper exit alternative in a market the place exit alternatives are actually tough. And so that they’re getting funded as a result of the buyers see that there’s worth within the firm. and the potential for a constructive exit nonetheless actually exists. But they — I believe this is not simply — these 2 firms, I believe, throughout the enterprise capital group most firms actually are spending in an inordinate period of time determining fundraising methods.
I believe we supplied some knowledge on enterprise capital fundraising within the third quarter. Again, it was down pretty considerably. Part of the difficulty is that most of the firms that had been funded in 2020, 2021, actually first half of 2022, the valuation of these firms is — on this market, they’re considerably overvalued. And so it is exhausting to herald new funding or appeal to new funding in that sort of state of affairs. So the place there could also be operationally development alternatives, it is tough to reap the benefits of these when capital is so constrained.
And so to get — perhaps to get to the final a part of your query. So not understanding when these markets are going to show, we’ve got to be, as we’re taking a look at our debt funding, we’ve got to be very sober about what occurs if these markets proceed to be as tight as they’re, which means exit markets and VC flows. We must be very sober about how we worth these belongings.

Ryan Lynch

So it is primarily associated to the exit markets and simply the flexibility for these firms within the particular industries that they are in to fund operations, however not essentially something occurring particular with these companies deterioration? Is {that a} sort of a simplified model of what we’re speaking about?

Gerald A. Michaud

Yes, quite simple as a result of the actual fact of the matter is when it’s tough to boost capital, it’s tough for firms to make operational selections primarily based on the necessity for extra capital that is probably not there. So that does influence your capacity to make — which in a superb market can be fairly easy operational selections, it makes it harder to try this. And that — once more, that is simply not nearly these 2 firms. That’s throughout the board.

Ryan Lynch

And then the opposite query I had was on Evelo, clearly, a disappointing end result with that, up to now. I’m simply curious, as you sort of look again on that funding, I perceive it is nonetheless sort of an ongoing funding, however as loads of the, loads of the outcomes have already taken place at this level. What classes have you ever discovered from that funding, particularly that can inform your selections going ahead on the way you spend money on? And then sort of a second half on that, that was an funding that was a pre-revenue place within the life sciences space that was reliant on these scientific trials, the approval in addition to I do know you guys had a giant majority supporter in that funding. But what share would you say of your life sciences investments are pre revenues and reliant on scientific trials?

Gerald A. Michaud

I haven’t got these actual numbers in entrance of me. But to get to the sort of core of your query, each time we underwrite a life science firm, it is a drug improvement firm, clearly burn money with ongoing scientific trials. What you search for is a broad-based expertise platforms. You search for a pipeline that has not only one drug candidate addressing one indication. You search for a number of drug candidates addressing a number of indications. Those are all there once we underwrote the deal, and also you additionally search for a powerful investor base, which the corporate had. And I’m not — I’m simply — I’m not making an attempt to justify something by some means. But traditionally, that is how we’ve got at all times underwritten life science drug firms.
And typically, what occurs is as these drug candidates transfer by way of scientific trials, the businesses are capable of increase extra money, particularly the general public ones within the public market. and proceed transferring different medicine by way of the clinic. So even when one in every of them fails, there’s nonetheless a broad pipeline. There continues to be quite a few potential worth within the belongings. And to simplify this and actually I’m simplifying it. The acceleration of how shortly every one in every of these scientific trials got here to fruition, I believe that was most likely one of many issues that we might have a look at. It’s not simply do you could have an incredible pipeline, however the place are these medicine within the scientific trials, it isn’t that we did not have a look at that, perhaps that ought to have been a larger focus. And it actually ought to have been a larger focus, given what occurred within the general life science market during the last 4 quarters, the place funding is actually dried up. And that features IPOs. It consists of follow-on fairness for public firms. It consists of VC funding. And an absence of massive pharma shopping for up these firms, which is often a major wave that they find yourself exiting the market.
So sure, there are some issues we’re actually going to have a look at right here. We do produce other life science firms in our portfolio. They’re in drug improvement phases. None of them, as I sit right here at present, all of them appear to be pretty effectively funded going ahead aside from IMV, which we have already targeted on. So that’s one thing we’ll have a look at. Right now, the place — I acquired to inform you the place we’re laser-focused on serving to the corporate attempt to create as a lot worth as they will with their underwriting platform expertise going ahead. And I believe, hopefully, by the top of the fourth quarter, we might have one thing extra to report on that. But proper now, it’s totally early in that course of. They simply introduced 10 days in the past that the — they’d — their 29 39 drug for psoriasis failed, they usually had been going to search for strategic alternate options. So we’re actually early in that course of.

Ryan Lynch

One final one which I had. I believe each in your ready feedback and your press launch, you form of talked about remaining selective in originating new investments within the the rest of 2023. I’d assume that there is nonetheless actually whole lot alternatives on the market, however I’d assume that the — sort of the touch upon remaining selective is to cut back leverage ranges on the BDC? Is that sort of what — is that sort of the driving force behind remaining selective is which you can sort of get leverage ranges right down to a decrease stage? And if that’s the case, the place would you prefer to see leverage ranges finally find yourself at?

Gerald A. Michaud

Well, let me simply deal with it from the advertising and marketing facet after which Dan might have some feedback. From the advertising and marketing facet, actually, we’ve got to — you must be actually conscious of the place market situations are proper now, notably relative to enterprise capital funding the sorts of firms that they enterprise capitalists are nonetheless investing in, they’re nonetheless leaning ahead on the place are these firms, the place are these markets. So you have acquired — on the advertising and marketing facet, you bought that. And there are actually good alternatives there as a result of there are an exit — actually good exit markets for these sorts of firms. So firms which might be performing rather well, persevering with to get — appeal to capital — that is nice. But we’re — anybody who comes into the market and says, we count on to be public subsequent 12 months, that is most likely not — if that is their objective, and that is their exit technique, that is most likely not one thing that in at present’s market, we might contemplate being excited by.
And I’ll let Dan converse to the leverage facet of this. But… .

Daniel Raffaele Trolio

As we talked about, we’re internet of money at 1.12. So that is under our goal leverage. So we’re comfy the place we’re at present. Being selective, I’d agree with Jerry, it is extra simply available on the market dynamics and the offers we’re taking a look at.

Operator

There are not any additional questions at the moment. I want to flip the decision again to Robert Pomeroy, Chairman and CEO, for closing feedback.

Robert D. Pomeroy

Thank you all for becoming a member of us this morning. We recognize your continued curiosity and help in Horizon. We stay up for talking with you once more quickly. This will conclude our name.

Operator

This concludes at present’s teleconference. You might disconnect your strains at the moment. Thank you in your participation.