Biotech venture capital firms across Europe have warmly received the launch of a €235M (£200M) UK government initiative to support the growth of promising late-stage life sciences companies.
The UK’s Life Sciences Investment Programme opened to applications from fund managers this month, with the aim of providing €235M in late-stage capital and attracting at least €469M (£400M) more in private investment.
The program sets out to compensate for the scarcity of science-focused venture capital (VC) and other funds in the UK that support late-stage companies, broadly defined as those raising a Series B and later.
Funding will be made through British Patient Capital (BPC) – the commercial arm of the government-owned British Business Bank that invests in venture and growth equity. The bank intends to contribute between €59M (£50M) and €117M (£100M) to funds with a minimum target size of €293M (£250M), providing up to 33% of the total commitment alongside private investors.
In addition, the Life Sciences Investment Programme expects to channel investments from the United Arab Emirates’ sovereign fund Mubadala Investment Company, which committed an initial €937M (£800M) to the UK life sciences sector in March this year.
Tim Haines, chairman at the VC firm Abingworth – a previous BPC recipient – said the initiative was great news for the UK life sciences sector, bringing in more capital and putting it into the hands of experienced investors.
“They are targeting in particular later-stage opportunities where there sometimes is a shortage of ‘scale-up’ capital, so as part of a plan to generate a number of world-beating UK-based businesses, this makes a lot of sense,” said Haines.
“More generally it is a 10-year strategy that seeks to build on the UK’s world-leading biotech and life sciences sector by exploiting the UK’s capabilities in genomics and data research.”
He added: “The vision also seeks to emulate the success of the UK’s extraordinary response to the Covid-19 pandemic in vaccine development, manufacturing, therapies, and diagnostics.”
The initiative could be particularly vital in the post-Brexit landscape, said Antoine Papiernik, Managing Partner at the Paris-based VC firm Sofinnova Partners. Currently, the UK is the largest life sciences hub in Europe, with just over a third of all companies in the sector.
“While BPC has already been active for a number of years, this program comes at the right time to boost the ecosystem of biotech financing, especially at the later stages of the financing value chain,” he told me.
UK companies can no longer easily access EU lending in forms such as the European Investment Fund (EIF). The EIF pumped an impressive €12.9B into European companies last year, 26% more than 2019’s total. Earlier this year, the EIF also announced its participation in Belgium-based V-Bio Ventures’ €78M V-Bio Fund 2, and invested €30M in Netherlands-based BioGeneration Ventures’ €140M BGV IV.
“This program will help make up for this gap,” said Papiernik. “It will also encourage non-UK-based funds to do more in the UK, which can only be a good thing for the entire European biotech ecosystem.”
Papiernik said his company would likely apply and pointed out that its London office already included senior partners in the Sofinnova Crossover Fund, which invests in later-stage opportunities.
“Obtaining BPC’s support as an investor in the Sofinnova Crossover Fund would certainly help expand our UK strategy,” he noted.
The UK government support is broadly reflective of what is available elsewhere in Europe, where biotech VC firms and other investors are experiencing a surge in fundraising.
In France, a report from the economist Philippe Tibi found that French technology companies struggle with a shortage of cash to help them scale up. The findings triggered an initiative that has led to institutional investors pledging a €6B investment in technology companies by the end of 2022.
“In the Tibi Initiative, the French government has strongly encouraged local institutions, insurance companies, and large mutual funds to invest a larger part of their assets in later-stage growth funds across sectors, including life sciences specialists like Sofinnova Partners,” said Papiernik, whose Crossover Fund qualified for the initiative.
He added that the German state-owned investment and development bank KFW had been very active at investing in funds, including non-German ones, to encourage their investment in Germany.
“So, we can see that these types of initiatives actually work to boost investments in venture capital funds dedicated to life sciences, and hence increase the investments in underlying biotech companies.”
Cover image from Elena Resko