“Full gas”: venture capital in 2021

“Now is the time to really ramp it up and go full throttle,” said Richard Butt, Chief Scientific Officer of Apollo Therapeutics, following a successful £100m funding round.

First published in our Biotech Review of the Year – Issue 9.

After bringing in new backers like Patient Square Capital, and with plans to expand to Cambridge and set up shop across the pond in Boston, it’s easy to appreciate Butt’s enthusiasm to the conclusion of the agreement.

One could say, however, that it is not just Apollo that is running at full speed. On the contrary, in the life sciences sector as a whole, it seems that venture capital activity has accelerated. Indeed, the BioIndustry Association reported that a record £3 billion was raised by the UK biotech and life sciences sector in the first three quarters of 2021, beating the total by 2.8 billion pounds raised in the sector in 2020. There is, in the words of one reputable venture capitalist, “real momentum” in the life sciences sector. The throttle is therefore certainly open, even if not completely.

The COVID-19 factor

Given the perhaps inevitable events of the past year, there has been a significant increase in investment in vaccine development. After all, AstraZeneca, Moderna and Pfizer – some of which were already industry giants – have arguably been turned into household names by the pandemic. The VCs surely couldn’t help but notice the sheer number of stories about vaccine development that overflowed their diaries for much of the past year. Indeed, when the Bristol-based company Imophoron launched a fundraiser to support its rapid vaccine development, the round was quickly oversubscribed, while Oxford Vaccitechwhich helped with the R&D and production of the AstraZeneca vaccine, received a $125 million VC injection in March 2021. Whether or not the money made headlines, or vice versa, what is clear is that venture capital has been keeping a close eye on opportunities among vaccine developers.

But it’s not just the vaccines themselves that have benefited from increased VC activity. With the success of Pfizer and Moderna mRNA vaccines, companies developing mRNA and mRNA-adjacent technologies have also been a particular target of VCs, with 2021 seeing a series of large investment rounds. For example, Touchlight Therapeutics (engaged in the production of enzymatic DNA, including for use in mRNA vaccines) closed a Series B of $125 million in March 2021.

From acorns to mighty oaks

Of course, the surge in venture capital investments in the life sciences cannot be solely attributed to COVID-19, nor to the increased press attention the sector is enjoying. On the contrary, as noted elsewhere in the Biotechnology review, the increase in venture capital investments is closely linked to the intensification of private equity activity in the sector. To put it simply, the increased appetite for life sciences equity – overcoming a traditional reluctance to acquire what were once considered risky assets – has increased the number of exit points for investors and pioneers. , whether through a sale or an IPO. This presents a real opportunity for venture capitalists and their portfolio companies to bring ideas from academic labs to market, incentivizing early-stage investment.

This last point is instructive and probably partly explains why the UK acts as a magnet for venture capital investment. Characterized by the Golden Triangle – the research institutes located in the cities of Cambridge, London and Oxford – the UK has the vital infrastructure to allow ideas to flourish and technologies to be tried and tested. It’s no wonder then that the UK is home to more than a third of Europe’s biotech companies.

Where are we going?

Given the UK’s strengths in life sciences development, it seems likely that venture capital interest in biotechnology and other life sciences companies will remain strong in the months ahead. In addition to the technology areas mentioned above, another area of ​​research that is attracting increased interest from investors is the application of artificial intelligence in biotechnology. With 2021 providing a number of material fundraisers for biotech companies using AI, such as Exscientia’s $225 million Series D, it looks like the intersection between biotech and AI will be a feature of the venture capital landscape for some time to come.

2021 has been a good year for life sciences; and whether or not it is fair to make venture capital investing its mainstay, it is clear that investors’ interests have at least been piqued. The throttle certainly roars.

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