Life Sciences: Vibrant life sciences sector in investors’ sights

Sometimes an investment has all the right ingredients to steal the headlines – the figure, the name, the innovation. Elasmogen was one of those deals.

In May, the University of Aberdeen spin-out secured £8 million from the Business Growth Fund, Scottish Enterprise and the new Scottish National Investment Bank (SNIB). The cash will help to develop its “solomers” – drugs inspired by proteins found in sharks’ immune systems, they can get deeper inside solid cancer tumours because they’re small and have a unique shape.

“Securing this investment will enable the company to progress our first solomer drugs towards the clinic and to bolster our product pipeline,” says Caroline Barelle, Elasmogen’s chief executive. “Achieving this level of investment is always a challenging process and is testament to the clinical potential of our technology, the quality of the Elasmogen team, and also the commitment from our new and existing investors.”

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The investment marked SNIB’s first foray into the sector, with “medical technology and life sciences” listed under the “sustainable technology” arm of its investment strategy. Could this mean the bank making further life sciences investments in the months ahead?


“We’re speaking to lots of other companies just now,” says Paul Callaghan, investment director at SNIB. “I’d be surprised if we didn’t have another life sciences deal before the end of this financial year.”

As well as buying shares in or lending money to individual companies itself, part of SNIB’s strategy is to invest in external funds, which then go on to work with businesses. Callaghan – who worked with life sciences companies in his previous roles with Royal Bank of Scotland and Highlands and Islands Enterprise – says there aren’t any talks going on at present with a life sciences investment fund, but that the door was open for such discussions.

‘Battling its corner very strongly’

Figures released in April by the Bioindustry Association (BIA) showed British biotechnology companies raised a record £453m from venture capital (VC) funds during the first quarter of 2022. When cash raised from stock markets was added to the total, the UK delivered a more muted £481m, continuing a wider global trend from the second half of last year.

Sinclair DunlopSinclair Dunlop
Sinclair Dunlop

TC Biopharm, the Lanarkshire-based cell therapy company founded in 2014, was one of only two British businesses to list on a stock exchange during the first quarter when it joined the Nasdaq stock market in New York. The firm raised about £13m through the flotation.

“Scotland has a really vibrant life sciences sector,” says BIA head of policy Dr Martin Turner. “In 2020, it made up about 8 per cent of investment in the sector by venture capital, and about the same from government research and development funding too, so it’s definitely battling its corner very strongly.”

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In full: The Scotsman's Life Science 2021

Turner points to the findings from multiple reports – including Ian Campbell’s taskforce – about the lack of institutional investors pumping capital into life sciences. “Local council pension funds and bigger institutions aren’t investing heavily enough in innovative companies – that would help to address some of the funding gaps that Scottish companies see as they start to grow,” he adds.

Harnessing the potential of pension funds is also on Sinclair Dunlop’s mind. As managing partner of Edinburgh-based Epidarex Capital, he runs one of the few VC vehicles to have attracted one as an investor, having brought on board Strathclyde Pension Fund.

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Epidarex invests in early-stage companies developing therapies and devices, and helps universities turn their scientific research into spin-out businesses.

“Scotland continues to have a disproportionately high number of top research institutes for the life sciences and so we see a rich array of opportunities,” Dunlop says.

“The pipeline of research-driven innovations remains strong, and we have more demand for capital than we can supply. Although we work closely with co-investors like Scottish Enterprise, there’s still not a critical mass of similar funds doing what we do in Scotland.

“The average size of even a seed-stage deal for therapeutics has grown exponentially, driven by investment trends in the US. We recently seeded two Edinburgh-based spin-outs, Kynos and Macomics, and both will soon have taken in close to £10m.

“These would have been very large seed financings ten years ago but today that’s typical, and both companies are likely to raise £20m-plus in their next rounds. The average size of drug development financing continues to grow and that’s something both public and private sectors need to keep an eye on if Scotland is going to successfully bridge both the early and growth-stage financing gaps – the sector’s global competitiveness is highly dependent upon scaling-up locally accessible risk capital.”

Focus on the USA – not the NHS

Scottish Lifesciences Association (SLA) chief executive Scott Johnstone highlights the need for companies not to limit their horizons. He suggested seeking investment and markets for their products or services from overseas.

Speaking to The Scotsman during a recent SLA trip to the US, Johnstone said: “Over here, they’re looking to deploy tens or hundreds of millions of dollars. That’s one issue Scottish companies have – they’re not asking for enough from the US.

“They need to get over here, get their management team set up over here, and look like a US company. Then they’ll attract more money.”

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Scottish companies have often looked to cities such as Boston or San Francisco as places for their US bases. Johnstone suggested they need to look at other locations too.

“I’m in Indiana right now, and the life sciences industry here is worth about the same as the whole of the UK’s life sciences industry – and the state’s population is six million people,” he said, drawing the comparison with Scotland’s five million people. “Plus, they’ve got a healthcare system that drives innovation.

“We’ve tried working with the NHS for ten years and they’ve not come up with the goods. During Covid, they’ve not bought vaccines from Valneva, they’ve not bought diagnostic tests from Omega – and these companies have suffered, their share prices have gone down because of it.

“Over here, you can meet hospital groups and they’re highly attuned to innovative technologies. Scottish life sciences companies need to be seen by investors to be looking at markets in the US for their products because the NHS has let us down.”

Intense focus on investment in public infrastructure

Scotland’s public sector bodies are continuing to invest in life sciences infrastructure at sites throughout the country. Many of these facilities are designed to provide services not offered by the private sector.

The Medical Device Manufacturing Centre was “inaugurated” at Heriot-Watt University in Edinburgh in May, having been launched during the pandemic in April 2020.

The £3.7 million collaboration – which brings together experts from Edinburgh, Glasgow, Heriot-Watt, and Robert Gordon universities – has already helped 21 small businesses to make prototypes for their medical devices.

Over in Renfrewshire, the Medicines Manufacturing Innovation Centre has opened next door to the National Manufacturing Institute for Scotland in the Advanced Manufacturing Innovation District Scotland conveniently situated near Glasgow Airport.

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This £35m facility will use techniques developed by the Continuous Manufacturing & Crystallisation Centre, led by the University of Strathclyde, to help with the development of drugs in continuous runs rather than batches.

In Aberdeen, the BioHub is expected to open in November near Aberdeen Royal Infirmary on the Granite City’s Foresterhill health campus.

The £40m centre will provide laboratories and offices for life sciences companies, with project backer Opportunity North East hoping it will lead to closer connections between academics, clinicians, and entrepreneurs who are all based on the one site.

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