Currently there is no venture capital fund solely focused on investing in early stage biotech therapeutics in the UK. This is about to change with the launch of a new fund from o2h Ventures. GBI City Editor Neil Martin talks to co-founder and CEO Sunil Shah about why now is such an exciting time in the biotech space.
o2h Ventures is raising a therapeutics fund to invest into early stage innovations with a view to license, or sell to larger pharmaceutical companies.
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The background to the fund’s launch is that there has been a dramatic shift in the way that pharma companies view their drug research. They have been closing down their own research and development departments, and now look to source their innovation externally. They view biotech as a way of buying-in the innovation that they need.
“They are now buying much earlier and paying top dollar if they like the science,” says Sunil (pictured above).
Sunil explains further: “Humanity is entering an unprecedented era of innovation in genomics, chemical biology, biotechnology, proteomics, and epigenetics, allied with advancements in new technology that are leading to new drug therapeutics.
“The big pharmaceutical companies have learned the hard way that the most exciting research is not always found in-house and are now increasingly externalising the acquisition of research ideas from early stage companies. The demand for the most exciting companies has led to a surge in valuations. The biotech sector indexes have recently witnessed some spectacular gains in the USA and in the UK.”
Serial entrepreneur
Sunil describes himself as a serial entrepreneur, having begun his career in the Life Sciences team at PA Consulting Group and then moving on to co-found two companies in the information technology and life sciences sector. The second of these companies was acquired by Piramal Enterprises in 2011.
Sunil co-founded o2h Ventures with his brother Prashant. The firm is headquartered in Hauxton, Cambridge, UK. o2h Ventures Ltd is authorised by the FCA and invests primarily in Cambridge, UK.
Both Sunil and Prashant will lead the new fund, and are experienced entrepreneurs and investors in the biotech space. One of the fund’s strengths is in its access to pipeline based upon its grassroots working relationships. Sunil believes that their business model will result in improved growth outcomes with incubation in Cambridge, leading to faster decision making allied to plug-in research capabilities from India.
Sunil again: “The UK has a rich scientific heritage and is home to some of the most important regional biotech clusters in Europe. Cambridge, Oxford and London are hotbeds of academic research, big pharma and experienced entrepreneurs.
“Other UK centres are in varying stages of maturity but the success and energy of the big three are inspiring Nottingham, Bristol, Edinburgh, UEA, Sheffield and Manchester to step out and step up.
“National treasures such as the NHS, Wellcome Trust, Structural Genomics Consortium, Francis Crick Institute and Cancer Research UK all serve to enrich the research ecosystem.
Investment rationale
Traditionally, EIS funds have not backed therapeutics because of the perceived larger capital requirements, difficulties in assessing the technical barriers and the longer time horizons to exit. Yet now, with large pharmaceutical companies licensing innovation externally (often getting involved early in the development and in a highly competitive market for these sought after assets), and considering the tax relief that the EIS scheme offers, it makes for a highly interesting investment rationale.
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The team at o2h Ventures has developed unparalleled access to the most exciting scientific ideas and talents in the UK. A clearly differentiated position has been achieved through its live working relationships fostered over many years working as a discovery services company giving it far earlier access than competitors to the most promising companies.
o2h Ventures has built a unique integrated model for early stage companies. It includes the possibility of offering companies incubation in o2h SciTech Park, Cambridge, UK and/or the option to jump-start their research activity from o2h Discovery in Ahmedabad, India.
A tight investment focus on therapeutics enables o2h Ventures to concentrate on a clear market position versus UK competitors that have a wider scope.
Sunil believes their edge in the market is their deal flow, which reflects having worked with the biotech sector for the last 15 years. They have many active and live collaborations with early stage biotech companies.
Rigorous process
o2h has developed a rigorous process to evaluate its seed stage investments. The team starts out by screening companies that meet simple criteria of having a clear novel transformative drug therapeutic focus. The investment evaluation committee will assess each project for its scientific tractability in conjunction with accomplished scientific advisors.
The evaluation process includes an analysis of the rationale of the preclinical target rationale, IP position, path to and through the clinic, as well as understanding of the skill and determination of the team to navigate and overcome difficult hurdles.
For anyone keen to back the biotech sector, the new fund from o2h Ventures will require attention.
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