KUALA LUMPUR (Aug 21): Prime Minister Datuk Seri Anwar Ibrahim's order for a comprehensive investigation into Xeraya Capital Sdn Bhd has thrust one of Khazanah Nasional Bhd's lesser-known subsidiaries into the spotlight.

The probe follows governance irregularities flagged by Xeraya's board, according to a Bernama report on Thursday. No further details were provided on what these irregularities were or what they relate to.

Xeraya, with a mandate as a venture capital entity, has been investing in life sciences businesses around the world for over a decade.

In a statement in response to the probe order, Xeraya's board said it takes the concerns raised seriously and that it has already initiated "proactive measures" to review the matters highlighted and strengthen its oversight process.

"The board remains fully committed to cooperating with Khazanah and all relevant stakeholders, and stands ready to provide its complete assistance and support to any review, inquiry or engagement that may be required," it said.

The subsidiary was established in 2012. In a 2020 interview with The Edge, Xeraya chief executive officer Fares Zahir said Khazanah began pursuing the sector as a strategic investment theme around the time when advances in biotechnology, healthcare digitalisation and molecular therapeutics were beginning to accelerate.

At the time, Khazanah decided to carve out a dedicated team to manage smaller, highly specialised biotechnology deals separately from its larger investments. Earlier investments in Spring Hill Bioventures and the Malaysian Life Sciences Capital Fund were subsequently placed under Xeraya.

Fares has led Xeraya since it was first established as a unit of Pulau Manukan Ventures Sdn Bhd, an investment holding vehicle under Khazanah.

Prior to that, Fares headed both Khazanah's life sciences and research units, having earlier worked in investment management and research at Schroders and UBS.

Fares told The Edge in that 2020 interview that Xeraya had about US$500 million (RM2 billion) under management at the time, and was seeking another US$400 million for its fourth life-sciences fund. Among the three funds it oversaw then was the Malaysian Life Sciences Capital Fund II and the Mudharabah Innovation Fund. It managed the latter on behalf of the Ministry of Finance.

At press time, it is unknown what Xeraya's latest AUM is.

Xeraya's website currently lists dozens of direct and indirect investments spanning medical technology, pharmaceutical biotechnology, biorenewables and agricultural technology.

Many of these investments are in overseas companies like precision-medicine and diagnostic firm InterVenn Biosciences, medical-device company focused on pulmonary hypertension Aria CV, biopharmaceutical company specialising in rare lung and cardiovascular diseases Liquidia Corp, and clinical-stage cancer biotechnology company developing drugs that manipulate the chromatin regulatory system Foghorn Therapeutics, to name a few.

One of Xeraya's earlier investments was in German medical-technology company Invendo Medical GmbH, which was acquired by Denmark's Ambu A/S in 2017 in a transaction valued at up to €225 million, compared to its initial average valuation of about €50 million when Xeraya invested. At the time, Xeraya was Invendo's largest venture-capital investor.

Another investee, Rapid Micro Biosystems Inc, was listed on Nasdaq in 2021 at US$20 per share, raising US$158.4 million. Xeraya first invested in the company in 2018 and held an 11.83% stake via Colony Harvest Ltd in its Class A shares before the IPO.

One investee that has drawn scrutiny recently is MiRXES Holding Company Ltd. The Singapore-founded cancer diagnostics company, which was listed in Hong Kong in May 2025, has been dealing with audit and governance concerns. The issue came to light in March this year when MiRXES missed its regulatory deadline to publish its 2025 financial results.

MiRXES disclosed that its auditor, KPMG, had flagged concerns regarding 14 transactions involving roughly US$14.8 million in prepayments to vendors. While US$9.5 million was subsequently recovered from stalled projects, US$5.3 million relating to completed or ongoing work remained unreturned.

Trading in MiRXES shares has been suspended since April 1 amid an independent investigation.

Xeraya recorded a net loss of RM882,417 in FY2021 before returning to the black with a net profit of RM118,594 in FY2022, as revenue grew to RM6.99 million from RM6.55 million, according to the company's filings with the Companies Commission Malaysia.

While net profit rose further to RM516,777 in FY2023, revenue actually saw a steep decline to RM1.71 million.

In FY2024, revenue rebounded to RM3.11 million, and Xeraya posted a net profit of RM484,048. As at end-FY2024, its total assets stood at RM3.18 million, while cash and cash equivalents came to RM658,581.

The probe into Xeraya arrives less than two years after Khazanah and Permodalan Nasional Bhd (PNB) came under scrutiny over their failed investments in FashionValet Sdn Bhd.

Khazanah and PNB invested a combined RM47 million in FashionValet in 2018 — RM27 million and RM20 million respectively — before selling their stakes for RM3.1 million at the end of 2023, resulting in a combined RM43.9 million investment loss.

The failed investments triggered an investigation by the Malaysian Anti-Corruption Commission, which culminated in FashionValet co-founders Datin Vivy Yusof and Datuk Fadzarudin Shah Anuar being charged with criminal breach of trust involving RM8 million in investment funds. Both have pleaded not guilty, with the trial currently underway.

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