Private equity strong in life sciences

Private equity may not have had the best 2015, but not every sector suffered. We found that life sciences enjoyed significant growth last year. But what was the driving force behind this, and how much of it is down to one or two particularly active funds?

Nothing negative

The number of private equity-backed deals into life sciences increased from 32 to 41 in 2015 – a 28% growth rate. Indeed, companies within the sector completed more than twice the number of private equity-backed fundraisings last year than they did back in 2012. But among companies outside of the space, the number of private equity-backed fundraisings dropped from 456 to 400 – a 12% decrease.

What’s the secret?

Frankly, these figures don’t come as a total surprise. Since 2011, private equity has been the most prominent backer of UK life sciences companies. Private equity firms have participated in almost twice as many fundraisings (131) as government-backed funds (68) – the fund type which has participated in the second highest number of equity deals into the space.

Unlike other sectors, where crowdfunding platforms have arguably muscled in on private equity’s share of the market, just 2% of all life sciences deals have ever been crowdfunded. As always, this could be due to a myriad of reasons. But we know that the work of fast-growth life sciences companies can be difficult for the layman (in this case the average crowd investor) to understand, and require higher than average capital intensity.

Despite this, Europe’s first health and biotech equity crowdfunding platform Capital Cell launched in December 2014, in Barcelona. In its own words, the platform is ‘building a global meeting point for companies and researchers working, fostering and financing tomorrow’s medical science’, and is open to global investors of any size.

Indeed Chris Mayo, from the primary markets London stock exchange group, says: ‘equity financing is the right sort of capital for these companies… be that angel investment, crowdfunding, venture capital, private equity or a stock market listing’.

5 biggest P.E-backed investments into life sciences, 2015

Woodford funds were particularly active in 2015, backing 17% of all life sciences deals. Of the 5 biggest equity investments into the sector during 2015, Woodford funds were involved in 4.

Immunocore – In July, Oxfordshire-based Immunocore completed a £206m equity deal with a cohort of investors including CF Woodford Equity Income Fund, Woodford Patient Capital Trust, Eli Lilly & Co, and the Malin Corporation. The pharma company is developing drugs to treat, amongst other diseases, cancer.

Mereo BioPharma – London-based biopharmaceutical company Mereo BioPharma completed its first equity fundraising in July. The company, which focusses on rare and specialist diseases, secured $119m* venture-stage investment from CF Woodford Equity Income Fund, Woodford Patient Capital Trust, and Invesco Perpetual.

Oxford Nanopore – We’ve looked at Oxford Nanopore in our last two instalments of The Deal, but the spin-out continues to grab headlines. Oxford Nanopore has the largest valuation of any privately listed company, at £930m. In July, the company received £70m investment in a round led by Woodford Patient Capital Trust.

Autolus – Camden pharma company Autolus is developing T-cell immunotherapy products to battle cancer. In March last year, the company secured £40m co-investment from CF Woodford Equity Income Fund, and Perceptive Bioscience.

Kymab – Cambridge-based Kymab is developing ‘fully human monoclonal antibody drugs’. Backed in the past by the Bill & Mellinda Gates Foundation, Kymab completed a $50m* R&D deal with Woodford Patient Capital Trust, and Malin Corporation in May.

*Notes:

– We use the umbrella term ‘Private Equity’ to refer to venture capital firms and buyout firms. Whenever a firm of either type has participated in an equity fundraising we have counted that towards our numbers.

– For Mereo BioPharma and Kymab our verified amounts are lower than the announced amount. There are many potential explanations for this, for example: some of the funding will follow in a later tranche; or some of the funding was in the form of debt and/or a grant. In this instance we have used announced amounts.