Sir Christopher Evans, the founder of biotech firm Merlin Biosciences, has incorporated that firm into his new venture Excalibur.
Excalibur will manage Merlin’s three funds totalling €450 million ($715 million). The first two funds were early stage bio-technology, while the firm has diversified to a more generalised medical focus in its third fund.
The firm expects to return 50 percent of the money to investors from the third fund this year, as it reaches its fifth year. Evans told PEO he was confident the fund could make a two to three times return for investors.
Excalibur will invest generally across the medical sector in speciality pharmaceuticals, diagnostics, healthcare services, and medical devices.
Evans said it is still very difficult to profit from early stage biotech investing in Europe in contrast to the US.
“[In Europe] to get an early stage project off the ground you need a number of financing rounds, which dilutes your stake out. Unless you have gigantic early stage funds there’s not enough money to get these companies quickly to a critical amount.
“We’ve moved on. My funds have matured and the companies are nearly all late stage, so we should continue that theme. Instead of going backwards ten years we can make more money more quickly for investors by backing lower risk, later stage companies.” Evans said there is a great need for early stage investors in medical research, but he felt it was more important to demonstrate the profitability and low risk nature of general medical investments.
Excalibur has also acquired the entire profitable business activities and the team of Merchant Ventures, a financial services advisor. “I’m going to acquire at least one or two other boutiques in the next 12 months,” he said.
Investors in Excalibur include property billionaire Sir Tom Hunter and UK bank Lloyds TSB.
The firm will raise two later stage medical funds this year. It will seek more than £100 million for investment in international companies, and will also raise less than £100 million for investment in the UK. Next year Evans is planning to raise a further larger scale private equity healthcare fund, for which he may make opportunistic medical investments in 2008.
Evans has also raised £300 million ($594 million; €374 million) for co-investment alongside Merlin in the last 18 months, which has already been invested. He also has debt facilities provided by Lloyds TSB. Evans said Excalibur will make more than £10 million in profits this year.
Evans was arrested in 2006 in relation to the UK cash for honours inquiry, which accused the Labour government selling titles to businessman. Evans was not formally charged. Separately his firm Merlin is involved in an inquiry by the Serious Fraud Office. Evans denies allegations by a former employee of irregularities in an investment in one of the three funds.