BIA City and Finance Update November 2017
November has been a busy month for the UK’s Biotech financing community. There was the outcome of the Patient Capital Review and the Industrial Strategy and a new series of incentives to invest in innovative companies, as well as “Jefferies” week in London, consisting of a number of events over a four day period focused on investing in Life Sciences businesses. All this activity shows that the UK remains a hub of highly innovative Life Sciences businesses, to be given a further boost by government policy to nudge investment into the space.
For a briefing on the changes that are happening with MiFID II and the implications for communication with investors, tune into the BIA’s MiFID II webinar on 5th December. Details below.
Across Europe, the investment industry is preparing for the introduction of a revised Markets in Financial Instruments Directive (MiFID II) on 3rd January 2018. The biggest change under the new rules will be the requirement for fund management companies to explain clearly to their investors how much of their money is spent on research. This will inevitably impact how companies in the healthcare sector communicate with investors. The question facing both sides is not only how to value investment research, but who will ultimately pay for it? Will smaller companies still see the same level of investor access and research? Listen in to our webinar on 5th December at 10am to learn more about these new regulations, the direct impact for investors and biotech companies, and advice on how to proceed. With expert comments from Consilium and Covington.
Government Nudges investment
November allowed the government to help nudge additional investment to innovative companies, focusing on Life Science companies, through the Patient Capital Review, the Life Sciences Industrial Strategy and the Accelerated Access programme.
A critically important initiative for the Biotech financing community came in the budget on 22nd November: the outcome of the Patient Capital Review. There will be around £20bn to support investment in innovative companies over the next ten years. The BIA was pleased to see that a number of its key suggestions which it made in response to the request for views were taken up by the Chancellor. In particular, “Knowledge-intensive Companies” – a definition the BIA worked hard to achieve for the industry – will benefit from tax changes and changes to investment schemes. Read More detail here.
The month ended with details from the Life Sciences Industrial Strategy, announced by the government on 27th November. The white paper announces four grand challenges that “reflect global trends that will shape our future and industries where the UK has an edge”, including health technologies to tackle the ageing population. The government is also placing R&D at the centre of its plan to boost UK productivity by working with industry to increase R&D spending to 2.4% of GDP by 2027, and bringing more investment to the sector including through the measures announced with the Budget and the Patient Capital Review. More details are available here and here.
Meanwhile, the city was interested in the announcement in early November of the government’s new fast-track route into the NHS for “breakthrough” medicines and technologies for conditions such as cancer, dementia and diabetes. This followed a review of submissions made by organisations such as the BIA. The new Accelerated Access programme means that certain therapies could be available up to four years earlier than would have originally been the case. What’s more, the government is earmarking £86m to support innovators. Of this, £35m will be given over four years for digital products developed by SMEs, and £6m for MedTech, diagnostics and pharmaceutical products from SMEs. Andrew Witty, the former CEO of GSK, will lead the group deciding which therapies will win “breakthrough” status. Read the government’s release here, and the BIA’s comment here.
What does this mean for UK biotech?
The government has recognised that it needs to put in place fiscal policies that will improve the attractiveness of certain sectors – those that are innovative and seen as important to the long-term growth of the UK economy. They include the UK’s life sciences sector.
The investing community welcomes these new policies as mitigating some of the risks of an investment in the sector, and there should be an increase in the available funding base. There are a number of changes to investment schemes, that the investing community still needs to digest. However, the expectation is that there will be an increase in available money for both early and scale-up investing. How much is yet to be seen.
These changes bode well for those seeking to fund, and could help with the problems of access to scale-up capital in the UK for life sciences businesses.
Deal of the Month: “Jefferies” week
The week of 13th November saw the investment community from the UK, Europe and the US, along with many life sciences businesses of all shapes and size and geography descend on London. Though not strictly “a deal”, now dubbed “Jefferies” week, this week of November is the UK’s equivalent to “JP Morgan” in early January and should lead to numerous deals.
Jefferies, a global investment bank, ran its annual global healthcare conference in London. This year was the 8th such conference. Statistics are still to come from 2017, but the 2016 event saw 350 participating companies, 1,400 attendees, and 3,400 business-to-business and investor meetings during the conference itself.
Around the Jefferies conference – which took place on Wednesday and Thursday - a series of satellite events have sprung up throughout that week: we counted at least 10, including BioBeat which celebrated 50 Female Movers and Shakers in the industry and Consilium’s annual conference.
The quality of the UK’s life sciences sector will continue to attract such events, which are likely to get even bigger and better and help more companies to seek funding from both local and global investors.
Arriving or Leaving
The Brexit conundrum still plagues large pharma – should they stay or should they go? The decision to move the EMA to Amsterdam means Britain will lose expertise and comes as a blow to the surrounding ecosystem. At the same time, J&J has, apparently, put plans for a JLab in Cambridge on hold till there is further clarity on the UK’s post-Brexit position. On the plus side, both Merck and Qiagen announced that they will locate their European headquarters in the UK.
Jargon of the Month: The City
The “City” is the term used to describe the financial district in London. The term has become synonymous with England’s investment community, and people often refer to The City as a homogenous collective of investors. It is the equivalent of the USA’s “Wall Street”.
The City comprises the one “Square mile” (actually 1.12mile2)), within the historic walls, of the City of London. It has by far the highest concentration of banks and financial institutions in the UK including the centre of insurance, Lloyd’s. Few people live in the City, but hundreds of thousands commute in every day: there are 455k workers in the City of London, or 9% of London’s total workforce and 1 in 75 UK workers are employed in the City. Of these, 340k are employed in Financial, professional and associated business services institutions. The City’s workforce is young with 62% of workers between 20 and 39 years of age. The median wage of a City worker is £55k.
The City is no longer the only financial centre in London. But, it still accounts for around 45% of UK’s financial employment. Canary Wharf (at 20%), and a group of investors in the West End have shown that – with the arrival of electronic trading systems - investors and banks can be anywhere. Despite Brexit, the UK is expected to remain a key global investment sector helped by the fact that it’s trading day covers the time zones of the other major financial centres – Tokyo in the morning and New York in the afternoon.
Introducing the Investor: Abingworth LLP
Abingworth LLP (Limited Liability Partnership) has raised 11 funds since 1987 and is focused on investing across the range of life sciences business. To date, Abingworth has invested in 145 businesses, seen 64 IPOs, made 45 M&A/Exits and seen 30 product approvals.
The team is spread across London, Boston and San Francisco though the majority of staff are based in London. Abingworth has invested in therapeutics, medical devices, diagnostics, instrumentation and software, from seed stage to marketed products and in both private and public companies. For Abingworth, the focus is on “significant unmet needs in healthcare.” Investments tend to be US$15-30m per company over 3-8 years and mostly in Europe and the US.
Its most recent funds, Abingworth Clinical Co-Development Fund and Abingworth Bioventures VI, raised US$108m and £225m respectively and are currently investing. The Abingworth Clinical Co-Development fund is taking an interesting approach, financing late-stage therapeutics and receiving a pre-negotiated return once the drug is approved.
Investments to date across its funds include CRISPR Therapeutics, Verona Pharma, and Wilson Therapeutics.
This communication should not be regarded as investment research or marketing materials and does not constitute any recommendations to buy or sell shares.