More VC funding can take Scotland’s life sciences sector to the next level - Julie Nixon

Attracting investment for early-stage life science companies can be a challenge. Some companies will need tens of millions of pounds before bringing a product to market or being sold to a larger business. The risks and expense of bringing a life science product to market can be significant, and regulatory approval time-consuming. Life science companies will often not generate revenue for many years while undertaking R&D, a deterrent to many investors.

Scotland’s life science sector has always been well-served by angel investors such as Archangel and Equity Gap. Many spin-outs and start-ups receive initial seed funding from angels incentivised by tax reliefs such as the Enterprise Investment Scheme. But to progress to raising series A funding and beyond, life science companies may need to attract venture capital (VC) funding.

Attracting VC funding for Scotland’s life science companies has been difficult despite the wealth of innovation generated by universities. One issue is bridging the “valley of death”, a term referring to the difficulties in obtaining investment beyond seed funding to develop products to a stage where VC investment can be obtained.

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With its UK headquarters in Edinburgh, Epidarex Capital has invested in Scottish life science companies such as AdoRx Therapeutics, Caldan Therapeutics, Clyde Biosciences, Kynos Therapeutics and Mironid. Typical investments are £2 million-£5 million.

Dr Julie Nixon is Managing Associate, Commercial, TLT LLP

In a 2013 Scotsman interview, Sinclair Dunlop of Epidarex, hailing from Scotland himself, made it very clear that returning to Scotland was a business decision based on the untapped wealth of life science companies in which venture capitalists would want to invest. Investment activity by Epidarex in Scotland promotes the life science sector, hopefully attracting other fund managers.

Encouragingly, more Scottish life science companies appear to be attracting VC investment. Recent deals include VC investment by Syncona in Resolution Therapeutics, a biopharmaceutical company developing cell therapies in collaboration with the University of Edinburgh Centre for Regenerative Medicine to treat advanced liver disease, which raised a £10 million extension to its Series A financing. O2h Ventures was one investor in a recent funding round for Edinburgh-based Neurocentrx Pharma, developing orally delivered drug formulations of ketamine, primarily aimed to treat mood disorders. Deepbridge Capital also invested last year in Microplate Dx, a University of Strathclyde spin-out seeking to address the challenge of antimicrobial resistance.

One recommendation of the Campbell Report, published early in 2022 by the Scottish Government and prepared by the Life Sciences Working Group, is for the Scottish Government to “develop and maintain a network of local and international health innovation life science investors (including VC, PE and institutional). This will provide facilitated access to Scottish innovation for investors”. The Campbell Report highlights that “Scotland has one of the largest life science clusters in Europe with over 200 medical technologies companies, 150 pharma services companies and 750 organisations overall employing 40,000 people”. The Working Group has engaged with local and international investors to promote Scotland’s reputation for innovation.

The pandemic reinforced the need to create global health solutions quickly in emergency situations. Another massive problem is antimicrobial resistance which has resulted in millions of deaths worldwide. It is projected the number of deaths due to antimicrobial resistance will rise to 50 million a year by 2040. The pandemic brought home what a healthcare crisis costs, and investment is required into healthcare to avert future crises. Now is the time for the government, universities and entrepreneurs to continue to attract more VC funding and promote Scotland as a great place to do business.

Dr Julie Nixon is Managing Associate, Commercial, TLT LLP

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