BIA member Taylor Wessing is a law firm with a division, Synapse, specialising in law for life sciences. In this showcase of content from the Synapse web resource,  Daniel Rooke writes about different funding opportunities for early stage life science companies. 

Fundraisings of early stage life science companies can be complicated affairs, not just from the point of view of negotiating and settling the legal and other documentation, but also from the point of view of actually securing the funds from investors in the first place. Fundraisings of early stage life science companies are often of a higher value than fundraisings for other types of technology companies due to, in a large part, the resources that are needed to research, develop and trial their products, ensure that they comply with government regulations and the projected cash burn associated with these. Fortunately, there are a number of ways for early stage life science companies to raise funds and in this section we discuss the types of funding that are typically available for an early stage life sciences company.

The types of funding that are typically available

As with most types of early stage investments, a life sciences company raises funds either by issuing shares or by borrowing money from individuals, venture capital bodies or lending institutions.

The ability and appropriateness of either type of funding will often depend on issues such as:

  • the personal financial position of the initial shareholders and related persons;
  • the type of business and products that the life science company is trying to develop;
  • the stage of development of the technology (i.e. is it just an idea at the time of the fundraising or has IP already been developed which can serve as a platform for the future development of a company e.g. a spin-out);
  • the financial position of the business; and
  • the asset position of the business.

Early stage investments in life sciences companies often take the form of equity, loan notes or a combination of both. These, together with other types of funding, are discussed in more detail below.

Equity

Equity is a term which covers all types of shareholding investments in a company. Equity has the following characteristics.

  • it gives the equity holder ownership of a stake in the business;
  • it is unprotected, so on a liquidation or winding-up the shareholders will not recover their funds until all creditors and other costs of winding up the company have been paid in full;
  • when a company is limited by shares the liability of those shareholders can never be more than the amount which they invested; and
  • a shareholder has rights in the company; these are set out under statute and common law and can be varied by agreement between shareholders through the articles of association and/or a shareholders’ agreement. We have produced a separate article setting out the key documents and terms of investments into life science companies.

Debt

Debt is a term which covers all types of borrowings by companies and has the following characteristics:

  • debt ranks ahead of equity on an insolvency of a company. Secured debt ranks ahead of unsecured debt;
  • if it is secured, this means that the company has charged or pledged certain of its assets to the lender in order to obtain funds;
  • from the company’s point of view a secured loan will restrict its ability to deal with the assets which have been charged;
  • many lenders (particularly banks) will not risk funds in companies with little trading history and/or tangible assets without taking some form of personal security from the shareholders and/or director; and
  • the advantage to the shareholders and the company of borrowing money is that it allows shareholders to retain their shareholdings without dilution.

Loan notes

Loan notes can be a halfway-house between equity and debt and be a flexible alternative.

A third party will lend money to a company and the loan will be convertible into shares at a future date or on certain events happening. There would usually be interest payable on the capital amount of the loan notes. That capital sum may be secured against assets of the company. Loan notes are often convertible into shares at prescribed prices in certain circumstances or, instead, will be repayable within a certain period or on certain events happening.

Statutory restrictions to raising funds

Companies seeking finance from investors are, in effect, promoting investments and must therefore ensure that in doing so, they comply with the relevant legal and regulatory requirements which have been put in place to protect the investor.

Section 21 of the Financial Services and Markets Act 2000 (`FSMA 2000′) prohibits financial promotion communications in the UK unless they are made or approved by an ‘authorised person’ (that is, a person authorised under FSMA 2000 to engage in regulated activity) or unless there is an available exemption. There are exemptions available where the target audience is restricted to institutional investors such as venture capital funds, existing shareholders or creditors and certain high net worth and sophisticated individuals such as business angels (or groups of them).

Company law prohibits private companies from offering shares or other types of securities to the public (including any section of the public). However, private limited companies can offer their shares by private placement in certain circumstances.

In additional, companies must ensure compliance with or be exempt from Section 85 of FSMA 2000, under which it is provided that where securities are offered to the public (or a section of the public) in the UK for the first time, the offeror must publish a prospectus unless the issuer falls within one of a long list of exemptions from this requirement.

Boris_MedCity_Imanova_scan_600_300You may well have noticed the launch of MedCity in the media this week. This is a really promising initiative which will impact our sector and has already involved several BIA members. Boris Johnson is pictured above testing out Imanova’s 3D scanning technology in honour of the event, and there’s a great five minute clip of Bloomberg interviewing Eliot Forster (Chairman of MedCity and CEO of Creabilis) on what MedCity will do. With members from across the UK, I maintain that together we are the most vibrant cluster in Europe – and that many companies and academics outside the south east have multiple links with firms and academics within the south east. For me having MedCity as a champion of life science – influential in the financial hub of the City of London – will stand to benefit our sector as a whole. As Kit Malthouse, Deputy Mayor of London for Business and Enterprise, writing in our blog argues, MedCity will drive investment here from around the world.

If you’re looking for an opportunity to chat with members of the science and investment communities or to meet with Kit and the MedCity team come along to our Science and Finance in the City networking evening on 15 May. Last year’s was a great success, and we’ll be back in London’s Living Room at City Hall.

If you are not in the south east perhaps getting to our next BIA Breakfast in Nottingham, on Thursday 24 April fits well with your diary. We’ll be keen to pick your brains on topics that will inform our manifesto policy development with OneNucleus, BioPartner UK and Bionow. For a chance to vent your views come along or contact us on manifesto2015@bioindustry.org – recent topics have included Biomedical Catalyst funding, tech transfer and the availability of lab space.

This week Health Minister Earl Howe convened a meeting to galvanise the UK community to take advantage of two policy initiatives of recent weeks – the new adaptive licensing pilot at the EMA and the Earlier Access to Medicines Scheme (EAMS) here in the UK. It was truly an example of the “all hands on deck” approach as No. 10, Sir John Bell, the Department of Health, NICE, the MHRA, CASMI, NHS England and trade associations plotted the way forward for UK companies to take full advantage of these innovative schemes.

I hope you’ll have a relaxing Easter break this weekend. There will be no Newscast on Easter Monday so the next edition will be Monday 28 April. That morning we’ll have our joint event with ABPI on EAMS - the event is now fully booked with a waiting list, which just goes to show the appetite in the sector for more information and a chance to discuss this new scheme. I am looking to work with others to set up a similar event on the adaptive licensing process soon too – watch this space – and our conference with the MHRA will also be a good chance to understand the regulatory innovations in the pipeline.

On Easter Sunday 20 April our charity of the year Fight for Sight will be featured in a BBC1 Lifeline Appeal, presented by Judy Finnigan, whose mother lost her sight with Age-related Macular Degeneration (AMD). The appeal will hopefully raise lots of money and awareness of the importance of eye research. Your donations at our Gala Dinner this year have been totted up and verified, and I’m pleased to say that in total you raised very close to £30,000 before gift aid. Fight for Sight have called this a truly remarkable result and said that they are just so grateful for your support.

Best
Steve

This week’s post features Dr Ian Hudson from the Medicines and Healthcare Regulatory Agency (MHRA), outlining the role of the MHRA’s Innovation Office in helping organisations to navigate the medical regulatory landscape more efficiently.

The Innovation Office provides multidisciplinary guidance on innovative medicines in early development, as well as novel methods, manufacturing processes and materials. Contacting the MHRA Innovation Office is free of charge and early engagement is encouraged.

Do you have a video you would like the sector to see? Contact us.

MRC_Chris_WatkinsLast week the Medical Research Council (MRC) announced a new partnership with AstraZeneca to create a joint facility in Cambridge for screening compounds. Here MRC’s Director of Translational Research and Industry, Chris Watkins, reflects on the motivations behind the move.

Large pharmaceutical companies like AstraZeneca are used to hosting visiting researchers from universities or research institutes. In fact, one of the ways that the Medical Research Council supports academic researchers to work with industry is by funding them on projects that will require that kind of interaction. There are examples of industry researchers working in academic labs in the early stages of developing a commercial product.

But non-industry scientists working full-time within a company environment is much rarer. That’s just one of the ways that the exciting partnership with AstraZeneca, announced last week, is breaking new ground in the UK in relations between the academic and industrial sectors.

We’re collaborating to create a new facility, the AstraZeneca/MRC UK Centre for Lead Discovery, which will be based in AstraZeneca’s new R&D site at the Cambridge Biomedical Campus. There MRC-supported academic researchers will work side-by-side with AstraZeneca scientists in their high-throughput screening group, working on ways to better understand disease pathways.

These non-industry researchers will have open access to the company’s state-of-the-art high throughput screening equipment. And they won’t just have access to the equipment – they’ll also have access to AstraZeneca’s compound library of more than two million molecules.

The collaboration will run for an initial five years, and we plan to fund up to 15 screening projects per year to be carried out at the centre at steady state, with the possibly of some projects beginning as early as 2015 at AstraZeneca’s existing facilities.

The MRC will assess applications to use the centre in our usual rigorous way, via peer review, and will encourage applications from a broad range of therapy areas and diseases – not just those of core interest to AstraZeneca. The company will have first refusal to negotiate licences for the development of any resulting intellectual property, with the researchers free to pursue other options if they wish.

Sharing the same labs, resources and aims will create a truly transparent research environment where academic and pharmaceutical industry scientists can work together.

We’re anticipating that this kind of innovative access to equipment and resources – and these new relationships – will speed up the identification of new, better validated targets for drug discovery, and ultimately more effective treatments for patients. This research simply wouldn’t have happened without such a collaboration being in place. We hope that by partnering with industry in these kinds of inventive ways, the MRC can help break down barriers to more effective collaborations between the academic and commercial research sectors.

I’ve written recently about why the MRC collaborates with industry - it’s because researchers working across sectors is the only way that we can accelerate research into how diseases develop and progress, and speed up the discovery of drugs and other interventions.

This collaboration is a great example of the kind of truly open and innovative research environments that this mission requires.

Kit_Malthouse_220_330With the launch of Med City today, Kit Malthouse, London Assembly Member and Deputy Mayor of London for Business and Enterprise, describes why he feels the organisation has an important role to play.

I am very excited to announce the arrival of Med City. Today (8 April) the Mayor of London and I will launch this new organisation, which will promote the South East of England as the world’s premier region for life sciences.

You may wonder why such an organisation is needed. The BIA’s members will all know that the Cambridge-London-Oxford triangle is already home to the most important agglomeration of scientific research on earth. (Technically it should be “Med Cities” as all three cities are central to this success). But the public at large, regulators in London and Brussels, and investors around the world need to be reminded of the amazing opportunities that we have to offer in this triangle.

Not only do we have the world’s most important academic centres – UCL, Oxford, King’s, Cambridge and Imperial – but we also have a cornucopia of private sector research, from start-ups that will shift the tectonic plates of medicine to the big pharmaceutical investors like GSK and Johnson & Johnson.

Importantly, and uniquely in the world, we are the only global bio-science centre that is also a global financial hub and is also the seat of government for a G8 country. Only in London does this mix of science, money and regulation come together, and with the scientific epicentres of Cambridge and Oxford within an hour of the capital, we truly have what it takes to be the most powerful discovery engine on earth.

And these discoveries matter, not only for the economy (as Deputy Mayor for Business I think this field is where the UK can truly be internationally competitive), but also for the quality and happiness of all our lives.

Med City will drive investment from around the world. It will provide a coherent voice to governments and the EU. It will identify gaps in the triangle’s offer, and seek to fill them by bringing together the key players. Crucially, it will complement the excellent work already being done by organisations such as the BIA. I am very grateful to Steve Bates for all his support in the development of Med City so far, and I am very glad Steve will join me, the Mayor and Eliot Forster – Med City’s interim Chair – in ringing in this new chapter in Britain’s glorious scientific tradition.

 

Oxitec_Hadyn_SynBioBeta2014_600_300Last Wednesday the European Parliament voted through the EU Clinical Trials Regulation. This is a key staging post in the development of new rules for conducting clinical trials in Europe, an issue that the BIA, led by our Head of Regulatory Affairs, Christiane Abouzeid, has been closely involved in for the last nine years. The new regulation will provide a harmonised regulatory framework for clinical trials, the main benefits of which are the EU portal, one submission, joint assessment and one decision at Member State level. It is now critical that the legislation, due to come into force in 2016, is adopted and implemented in a practical and consistent way. The BIA will work with regulators including the MHRA and European Medicines Agency (EMA) to ensure the future EU Portal system is efficient, user friendly and secure. I would encourage companies planning trials in the next couple of years to use the Voluntary Harmonisation Procedure for multinational clinical trials and engage with the BIA as we consult members on implementation measures. The BIA has produced a briefing paper for members detailing the impact of our work in this area, highlighting the final changes to the Regulation and giving guidance on what to expect after publication of the Regulation.

Another related boost here was the decision last monday from Earl Howe to approve funding for the Health Research Authority to deliver a single approval system for all health research studies in England. This promises to simplify the regulation of research and remove complexity for researchers and industry by incorporating assessments by NHS staff alongside independent Research Ethics Committee opinions.

It was great to see so many members of our Synthetic Biology Advisory Committee represented throughout the day at the SynBioBeta conference held at Imperial College last Thursday. They gave presentations on developments in the synthetic biology industry, including its applications in healthcare, and I joined a panel discussing how to foster industry growth. For a flavour of the day, take a look at #SBBLondon on twitter. I’m also pleased to say that one of our synbio members, Oxitec, had some great news in the last couple of weeks as the BBSRC named Luke Alphey their Innovator of the Year. Luke’s work with Oxitec has focused on the genetic control of insect pests, and you can see more about their mosquito control strategy in this TED talk video by CEO Hadyn Parry (pictured above, speaking at SynBioBeta).

Last week I participated in a panel session at the launch of Genetic Alliance UK’s Patient Charter. The Charter outlines 29 recommendations made by 77 patient groups on the new approach the Government and NICE are using to determine whether or not medicines for rare conditions are made available through the NHS as part of NICE’s Highly Specialised Technology (HST) Programme. You can see their guest blog on the charter here, and read our recent report on the difficulties of evaluating drugs for rare diseases.

There have been some encouraging words from influential leaders regarding shaping a commercially sustainable bioscience environment over recent days. I was greatly encouraged to see that the new Head of NHS England, Simon Stevens, who took up his post last week, understands and promotes the importance of the NHS as a driver of the nation’s economic growth. At the Newcastle International Centre for Life, a charitable centre linking scientists, clinicians, educationalists and business people to advance life sciences, he said that, “This Centre embodies a virtuous circle – of cutting-edge British innovation, new NHS treatments and regional economic growth. If like me you believe in a tax-funded NHS, you’ll want the Health Service to play its part in growing our nation’s economy, precisely so we can sustain public health services, for generations to come.”

And Kit Malthouse, Deputy Mayor for London speaking at the SynBioBeta conference stated that “science should be the second pillar of the London economy after financial services”. He asserted that if he has one mission it is to ensure that promising bioscience has access to finance.

Kit’s words give us a preview into what to expect at the launch of the Mayor of London’s MedCity tomorrow which we are very excited about – keep an ear on the BBC Today programme tomorrow morning for a package about it. (If you’d like to see a good recent discussion on UK biotech on the Today programme, just last Tuesday they featured Kate Bingham from SV Life Sciences Advisers, Mene Pangalos from AZ and US entrepreneur Heather Agnew – see here from 06.22:18 to 06.27:50).

I am pleased to confirm the date for one of our flagship events, the UK CEO and Investor Forum will take place on 10th and 11th July. I urge you to sign up now for this must attend event – the UK’s only senior-level bioscience management meeting.

And to finish with some member news, Convergence Pharmaceuticals announced a new research alliance with Evotec, building from Convergence’s £2.4 million Biomedical Catalyst grant for the discovery and development of compounds against a novel GPCR pain target.

Have a good week all.

Best,

Steve

final-logo-genetic-alliance-uk-colour-jpgToday Genetic Alliance UK launched a landmark Patient Charter that highlights the concerns patients have about the new approach the Government and NICE are using to determine whether or not medicines for very rare conditions are made available through the NHS.  Here they write to explain more.

The new process at NICE is the Highly Specialised Technologies (HSTs) evaluation programme. Following a workshop hosted by Genetic Alliance UK, patient representatives expressed their concerns that, while greatly needed, the existing HST evaluation process is opaque, potentially disruptive to the wider NHS and risks downplaying the patient voice.

The Patient Charter sets out a list of recommendations to improve the interim framework and ensure that it is fit for purpose. 77 patient groups signed up to the Charter to endorse the recommendations. This is the first time that so many patient groups from across the rare disease community have come together with a united call for change.

The launch took place at a breakfast meeting hosted by the BIA and ABPI at their headquarters in central London. It was chaired by Alastair Kent OBE (Director, Genetic Alliance UK). On the panel were Steve Bates (BIA), Josie Godfrey (NICE), Dr Robin Lachmann (National Hospital for Neurology and Neurosurgery) and Frances Macdonald (ABPI).

Alastair Kent OBE, Director of Genetic Alliance UK, said: “The public have consistently given support to the concept of providing highly priced medicines to patients with rare diseases. It is right that we have the HST evaluation process, but given what is at stake, it is critical that the process is fit for purpose. It needs to be transparent, it needs to integrate with the health service, and the patient voice needs to be central to the entire process.”

Steve Bates, BIA Chief Executive Officer, said: “Genetic Alliance should be commended for the launch of this Patient Charter which articulates many of the core areas that all stakeholders interested in the development of new, innovative medicines for patients with rare and very rare diseases need to be concerned with. In particular, how NICE chooses which medicines go through this new evaluation route through topic selection will be incredibly important, not only for the many patients who want to access new medicines but for the developers of those products who need predictability and transparency.”

The key recommendations in the Patient Charter included:

  • Ensuring there was a continued dialogue between NICE and NHS England to prevent NICE recommendations disrupting access to other, currently prescribed treatments by pushing them beyond the NHS budget.
  • Improving the transparency of the process during topic selection – the stage which determines which medicines will or will not be evaluated through the HST process. In comparison to the remainder of HST evaluation, topic selection is a black box. Patients are neither involved in the process nor able to access the deliberations of NICE’s topic selection committee.
  • Updating the criteria used in topic selection, in particular the interpretation of the term ‘clinically distinct’, which does not currently recognise patient subgroups defined by symptoms, genetics or biomarkers, meaning many medicines for rare diseases are currently ineligible for HST evaluation.
  • Calling for NICE to provide third-party, contracted support for patient communities involved in HST evaluations. If a patient group does not exist, or if the group is small, poorly resourced or unable to produce an evidence submission alone, NICE risks the patient voice being absent unless targeted support is provided. As yet, NICE has made no provision for this.

You can see more in the BIA’s recent report on the evaluation of medicines for rare and very rare diseases.

Stevenage_breakfast_600_300The positive run of UK biotechs accessing the London public market continued last week as Horizon Discovery traded for the first time on AIM, following Circassia’s listing earlier this month. I look forward to hearing their story at a BIA event in the coming months – but you can get a flavour from CEO Darrin Disley’s interview with CNBC.

It was also great to feel the optimistic mood in the room at our manifesto breakfast event in Stevenage, pictured above. Attendees discussed the potential of Easy Access IP to give university tech transfer offices improved opportunities to commercialise patents. It’s a collaborative project led by the University of Glasgow, King’s College London and the University of Bristol to promote new ways of sharing intellectual property (IP) and to adopt new approaches which make it easier for universities and industry to work together.

Tech transfer is a topic which has been on our radar lately, as many of you will have seen. As part of our life science manifesto development, we have been asking the sector for views on how well tech transfer works, and just last week the House of Commons announced an inquiry into business-university collaboration. We will be responding to the inquiry, focusing particularly on tech transfer, Catapult centres and the eight great technologies. If you have views you’d like us to represent, please get in touch with Zoe Freeman.

Empower, a campaign group set up by the late Les Halpin for improving access to medicines, held a parliamentary reception last week attended by patients’ families, alongside George Freeman MP and the Minister for Health Earl Howe. Empower welcomed the recent announcements of a UK Early Access to Medicines Scheme and an Adaptive Licensing Pilot in Europe and announced a medical innovation manifesto for patients, aiming to see patients having a greater voice in their treatment and to develop more adaptive pathways for clinical research and medical innovation.

Finally I am particularly looking forward to SynBioBeta this week, hosted at Imperial College in conjunction with the new Synthetic Biology Innovation and Knowledge Centre SynbiCITE. Following on from an academic focus and welcome reception on Wednesday, Thursday 3 April will be a business-focused day of panel discussions and talks from BIA members, startups, industry players, investors and partners in the growing synthetic biology ecosystem. I will be among those speaking and if you’re interested to attend, BIA members can register using code ‘PK232’ for a 20% discount.

Best,
Steve

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