A Supercharged Charitable Investment Fund To Nurture UK's Biotech Ecosystem
Executive Summary
The UK’s largest medical charities, the Wellcome Trust and Cancer Research UK, have backed the formation of a bulked-up £1bn long-term investment fund from the bringing together of Syncona, the CRT Pioneer Fund and BACIT, with the aim of building a self-sustaining UK biotech ecosystem.
Proposals to develop a £1bn life sciences investment fund that will be large enough to support start-up UK biotech companies long-term, and help in building the UK life sciences ecosystem with substantial standalone businesses at its apex, have been broadly welcomed.
The fund, dubbed a “UK life sciences champion”, might also help in attracting the attention of institutional investors who are not specialist biotech investors, and have been put off by the speculative nature of biotech investing over previous decades.
“The new £1bn listed fund will provide a real boost to UK biotech over the coming years," the BioIndustry Association’s CEO Steve Bates told Scrip. "Having a new pool of patient capital will aid our most promising and innovative companies and facilitate their scale up."
Bates was also upbeat about the potential of the new BACIT (the Battle Against Cancer Investment Trust) fund to motivate non-biotech investors. "The backing of an expert fund such as Syncona, founded by the Wellcome Trust, will provide both financial and scientific validation, which helps biotech companies to leverage new sources of capital from outside the sector and its pool of specialist investors,” Bates said. (Also see "Wellcome Trust Launches £200 million “Evergreen” Investment Fund" - Pink Sheet, 2 Jan, 2013.)
The UK-based biotech community has always puzzled over its inability to build biotech “champions”, medium or large-sized companies that are able to sustain a local ecosystem of smaller companies, despite the excellence of academic and clinical research in the country.
The head of MedCity, Sarah Haywood, noted the proposed fund would bring the benefits of scale to UK and Europe’s biotech companies. “The ability to build a relationship with a solid long-term fund backed by reputable institutions provides a great opportunity for companies,” she commented on the sidelines of the BioEurope autumn meeting in Cologne, Germany. MedCity is a collaboration between three major academic centers in London and the Mayor of London to facilitate investment, entrepreneurship and industry.
“Larger funds bring larger investments and longer-term investments, and patient capital options for companies,” Haywood said. The news also provides a fillip to industry when there is some uncertainty due to Brexit. The biotech community is extremely resilient, it weathered the financial crisis in 2008, and it will adapt however Brexit finally looks like, she remarked.
Under the plans announced Nov. 7, the Wellcome Trust-backed evergreen investment fund Syncona LLP will combine with the London Stock Exchange-listed investment fund, BACIT, which will also acquire Cancer Research UK’s interest in its £70m venture capital life sciences fund, The CRT Pioneer Fund. In return, the two charities will receive shares in BACIT.
BACIT is also expected to acquire Syncona’s and the CRT Pioneer Fund’s investment teams, and the new fund will be managed by Martin Murphy, currently CEO of Syncona. The amalgamation is subject to approval by BACIT shareholders in the coming months, and under the plans, the Wellcome Trust will become BACIT’s largest shareholder. It is hoped the arrangement will “capture the full value of UK science for shareholders”, Syncona said.
First-Look Rights
When the changes are completed, BACIT intends to invest £100m a year into life science opportunities until all of its capital has been invested, including putting around 25% of its funds in oncology projects. When the CRT Pioneer Fund is fully committed, BACIT will receive “first look” rights into potential investment opportunities at Cancer Research UK. The CRT Pioneer Fund already has proprietary access to potential new therapies being developed by the UK's Institute of Cancer Research and the rest of the Cancer Research UK network.
The investment strategy of the new fund will be focused. It intends to hold and finance its life science investment over the long term, with a view to building standalone companies capable of achieving valuations in excess of £1bn.
But in keeping with BACIT’s current investment philosophy, the new fund will continue to make an annual donation to charity of equal to 0.3% of the net asset value of the company, each year. BACIT was founded in 2012 as a “fund of funds” by a group of City investors who wanted to be pro-active in the fight against disease. (Also see "UK medical research in line for new City fund of funds windfalls" - Scrip, 1 Oct, 2012.) Led by CEO Tom Henderson, the funds in which BACIT invests waive their fees, the management team is unpaid, and charities are assured of a constant donation stream to help them in their long-term planning.
The enlarged company will also have the scale to fulfil the original vision of Syncona of establishing high-value standalone businesses from the best life science innovation. The UK “needs a deep pool of expert, long-term capital that can support companies from inception through to product commercialization,” Murphy said in a statement. “Combining BACIT allows Syncona to provide those companies with greater ongoing support as they grow, and to make further investments in the life science space.”
Syncona was set up in 2012-13, as a fund that would not only invest in new companies, but would also keep a cash reserve for follow-on rounds as needed. Syncona’s most recent new company startup is Achilles Therapeutics Ltd., in which Cancer Research UK and the new London-based Francis Crick Institute have also invested. Achilles is evaluating truncal neo-antigens as targets for vaccine or cell therapies. (Also see "Achilles Therapeutics Targets The Root Of Cancer" - Scrip, 2 Nov, 2016.)
Other companies formed by Syncona include the engineered T-cell company Autolus Ltd. (Also see " Engineered T-Cell Company Raises $56m And Lands New CEO " - Scrip, 3 Mar, 2016.), the gene therapy company Freeline Therapeutics, and the inherited retinal disease company NightstaRx Ltd. (Also see "NightstaRx Boasts Advantage Over Spark In Inherited Retinal Disease" - Scrip, 12 Nov, 2015.).