Andrew Aldridge from Deepbridge Capital explains why a management team needs vision and experience to sort the wheat from the chaff for investment in life sciences
At this time, it is very difficult to extrapolate the UK economy and the sectors that make it up, from the political questions that are being asked and (hopefully) the solutions that will eventually be brought forward.
I don’t wish to dwell on this but, at a time when political minds have been focused so much on the UK’s membership of the EU and the leaving of that organisation, it has undoubtedly been difficult to generate certainty and confidence amongst the business community of this island. Even as I write, we remain mired in those questions and until we have the answers then there are going to be large swathes of businesses opting for a ‘holding pattern’ approach.
However, life and business must go on, and advisers will know only too well that the need for quality advice and recommendations do not simply stop in a politically uncertain time. If anything, the need to plan and prepare for any eventuality becomes even more important to clients as they want to ensure they have their financials and investments in a strong place.
In that sense, let’s look at those areas where the UK is incredibly strong and, not coincidentally, where the UK Government is seeking to provide excellent support for those businesses who operate therein. One of those sectors is undoubtedly that of life sciences – if you wanted a recent example then the Government recently announced an investment of £133m in treatments for arthritis and cancer, as well as gene based therapies for diseases including dementia and Parkinson’s.
You can fully understand why such intervention, research and the improvement of treatment, diagnosis and care options for these diseases are so important to any Government. These are major killers in this country and the Government appears focused on accurate diagnoses and early interventions – indeed it’s also providing £50 million into NHS diagnostic services to support the work currently ongoing in digital pathology and imaging with artificial intelligence.
And there’s absolutely no doubt that the UK, and the large numbers of companies active in this space, often lead the way in this area, however there is only a certain amount of Government funding to go around and therefore private investment is absolutely vital. Many of the great leaps forward in life sciences come via private companies and this is where an investment manager like Deepbridge comes in.
We have two main areas of investment and they tend to cross-fertilise so to speak because they’re technology and life sciences. Concentrating on the latter, we operate here because there is a great deal of innovation, experience and expertise in this sector and we’re not simply talking about medical technology or treatments. Life sciences covers a huge number of sub-sectors from genetics to neuroscience, from biochemistry to drug discovery, so you can see why this is of interest to our business and why we are constantly seeking to present investment opportunities to our adviser client base.
The problem of course is that you can’t simply magic up investment experience in this sector overnight – you have to know where to look, what you’re looking for, what the potential might be (not just in this country but right across the globe), you need the contacts and relationships, and – rather importantly – you need to be able to sort the management wheat from the chaff because you might well have the most ground-breaking product and service known to man but if you don’t have a management team with vision, nous and business acumen, then the likelihood is that you will fail.
And, again, that’s where a sector-experienced manager like Deepbridge can make all the difference because, even with the best will in the world, those individuals who tend to be active in their particular life sciences field are not necessarily those who can see the full commercial potential of what they are doing, or indeed how they can monetise it and ensure its success.
In a very true sense, our involvement with such a company is perhaps less about the funding that we’re able to provide – which, don’t get me wrong, is important – but more about the business expertise we can deliver, the solutions we can offer and the pathway we can outline which will make their activities a success. Indeed, often on the Board of such companies you’ll have a mixture of academics and commercial representatives, which is clearly important, but that mix might also need a ‘third-party’ to help with strategy and with end delivery
This is why we have a specific life sciences team, completely focused on and experienced with such businesses, and who have partner relationships with Universities, hospital trusts, science parks and the like, right across the country – and overseas. This allows us to identify investee companies at a very early stage and it means we have the understanding and skill-set to take these businesses from initial idea through to a successful exit for our investors.
And the opportunity here can be significant, which is why this is a key area for Deepbridge. Back in 2015, and according to a 2017 PWC report, the life sciences contributed £30.4 billion to the economy and that has grown over the last four years; plus, it’s estimated that
around half a million jobs in the UK are supported by the industry. Given the ‘knowledge intensive’ focus of the Enterprise Investment Scheme currently, that’s incredibly important and we want to work with businesses which are able to grow and deliver that job creation which is so vital to the UK economy and the Treasury coffers.
However, the other caveat is that, whilst offering potentially lucrative opportunities, such investments carry high risk – these are unquoted companies and early-stage companies. What we try to do at Deepbridge is, to some degree, mitigate risk by having a specialist team of experts who fully understand this fascinating sector, and to coin a phrase, have ‘been there and bought the t-shirt.’ You really can’t underestimate that experience and, with that in place, we believe that investment opportunities (and potential successes) within the life sciences sector can continue to be appealing to investors and financial advisers, whilst providing investors with the potential tax incentives available via the Enterprise Investment Scheme.
Andrew Aldridge is Partner, Head of Marketing at Deepbridge Capital