Life science fund bypasses early-stage investment jitters

MVM has closed its second fund at £100m, £40m above its original target, highlighting sustained investor appetite for the biotechnology sector.

MVM, the UK early-stage life sciences investor, has raised £100m (E161m) at the close of its second fund, MVM International Life Sciences Fund II. 

MVM's successful close comes at a time when early stage investment in Europe is struggling to gather pace. Figures published by Initiative Europe for the first quarter of this year revealed that a mere E90m was invested in European early-stage businesses, down 63 per cent on the Q4 2001 numbers.

However biotechnology and life science funds have been fairing considerably than venture funds in other sectors. Ernst & Young in a recent study said that life science was one of only two sectors globally to witness an increase in investment in 2001. Biopharmaceutical firms raised a total of E1.7bn in 160 deals, up 13 per cent on 2000, increasing the healthcare industry's share of the international venture capital market from 10 per cent in 2000 to 21 per cent in 2001.

MVM’s second fund will look to benefit from this trend, focusing on investments in start up and early-stage life science companies in the UK, Continental Europe and the US.

The firm, which typically invests around £3m of equity in businesses, benefits from an exclusive agreement with the Medical Research Council (MRC), the UK Government agency funding biomedical research. Under the terms of this agreement the fund has a six-month period of exclusivity to negotiate investment agreements in respect of any MRC technology that warrants the formation of a start up company.

MVM director David Brister said he was satisfied that the fund had surpassed its original target, attributing the success to the MRC backing and a proved track record in early-stage investing. 'We originally set the fund target at £60m, but decided to increase the fund to reflect increased interest in the fund. We finally decided to cap the fund at £100m in order to maintain the fund's focus on early-stage investments.'

The fund has received commitments from a number of global investors, including Goldman Sachs Private Equity Group, the European Investment Fund, Hamburgische Landesbank, Swiss Re, and Scottish Widows. Investors who supported the first MVM fund, including 3i Group, Friends Provident, Shell, Mitsubishi and Pfizer, also invested MVM II.

MVM’s first fund, the UK Medical Ventures Fund that was set up in 1998, has to date invested in 13 portfolio companies of which nine were start-ups. The companies are based primarily in the UK, alongside a number of US and European investments. To date, four of these companies have either gone public, merged or been sold, including an IPO of Third Wave Technologies on NASDAQ in February 2001, which valued the firm at $421m.