Life sciences venture capital investment update 
by Magnus Williams

Following a record breaking year for venture capital (VC) investment in the UK in 2017 (with more than £5.6 billion being invested in total, and more than £1 billion in university spin-outs alone¹), VC investment in the UK generally has dipped slightly in the first quarter of 2018. This may be accredited to an exceptionally high deal flow in the final quarter of 2017, coupled with a high number of “mega-rounds” led by those such as SoftBank’s Vision Fund, and an emerging trend of investors focusing on funding fewer, but later stage, companies (with many of these transactions completing just prior to calendar year-end).

Investment appetite for the UK’s thriving life sciences sector specifically continues to grow, reflecting the energy of this sector, and its resilience to market volatility and geopolitical hurdles. In the first three months of 2018, Penningtons Manches has been involved in a high level of deal activity and has in particular noticed growing interest from international investors in high-growth life sciences companies. For example, Penningtons Manches assisted Oxford Vacmedix UK Limited, a biopharma company spun out from Oxford University which focuses on the development of cancer vaccines, on its Series A round of $12.5 million. This is the first time that a UK cancer vaccines company has been funded by both South Korean and Chinese investors (with Cancer ROP, a prominent South Korean healthcare institution, leading the consortium).

Penningtons Manches also assisted Enterprise Therapeutics, which focuses on experimental therapies for respiratory diseases, on its £29 million Series B round, co-led by U.S based Versant Ventures and Novartis Venture Fund. In the private equity market, too, UK growth-oriented businesses are attracting a high level of international interest. For example, Penningtons Manches advised MedPharm Limited, a leading provider of contract topical and transdermal product design and formulation development services, which in March completed an investment by Ampersand Capital Partners, a private equity firm based in Boston and Amsterdam. Specifically, the university spin-out sector continues to flourish. For example, Penningtons Manches advised Oxford University spin-out Brainomix Ltd, which develops imaging biomarkers for neurological and cerebrovascular disorders, on a £7 million investment. Brainomix is one of 3 Oxford-based life science companies who have been advised by Penningtons Manches on the closing of Series A rounds in the first quarter of this year with investments totalling over £20m from investors in the UK, China, Germany and the U.S.

We anticipate investment in this sector to be buoyed by the new "sector deal" for life sciences, announced as part of the Industrial Strategy White Paper², published by the UK government in November 2017. This includes a government commitment to increase public investment R&D funding to £12.5 billion by 2021/22, a proposal to promote inward investment in UK clinical trials by streamlining clinical trial approvals processes, and further commitment to invest in many life sciences 'clusters', including the Oxford-Milton Keynes-Cambridge corridor. Therefore, notwithstanding the challenges facing UK companies in the coming months, including the implementation of the GDPR (which becomes effective across the EU on 25 May 2018) and the Clinical Trial Regulation, the UK life sciences sector looks to be in a strong position and has a promising outlook for the second quarter of 2018.