Deepbridge Life Sciences EIS
In 2020 the UK life sciences industry employed 268,000 people across 6,330 businesses, generating £88.9 billion of turnover in total. The Deepbridge Life Sciences EIS fund aims to capitalise on that strength.
The fund looks to provide UK science and technology start-ups with private capital to supplement government grants. Investors can expect a portfolio of five to 15 companies, working on disruptive technology or scientific breakthroughs in biopharmaceuticals, biotechnology, or medical technology with the potential to develop a new market or replace existing solutions in an established market.
Deals will be sourced from Deepbridge’s Life Sciences SEIS Fund as well as its network of industry contacts. Since its inception in 2017, the EIS Fund has invested over £38 million in 41 companies. There have been no exits and one failure so far, however, past performance is not a guide to the future.
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- Focus on biotechnology, pharmaceutical and healthcare sectors
- Experienced investment management team
- Targets portfolio of 5 to 15 investee companies, minimum £3,000 per company
- Target return of £1.70 per £1 invested after four years, not guaranteed
- Evergreen offering
- 0% initial charge through Wealth Club (normally 2.5%, non-advised)
- Minimum investment £10,000 – you can apply online
Deepbridge Capital brings together over 200 years of combined scientific and commercial experience.
It was set up by Ian Warwick in 2010. He started his career in the Royal Navy, then became an oil engineer in Houston and worked in several printer companies before settling on technology start-ups in New York. When he founded Deepbridge, Mr Warwick didn’t have experience in managing money but he and his founding partners all had experience in technology and in floating businesses.
The Life Sciences team, headed by Dr Savvas Neophytou, is responsible for selecting, establishing and managing the Life Sciences EIS and SEIS. Dr Neophytou worked in the City for 15 years as an investment banker at JP Morgan, Bear Stearns, Shore Capital, Cantor Fitzgerald and Panmure Gordon. He holds a PhD in psychopharmacology and a degree in pharmacology.
His team is monitored by a six-strong Supervisory Investment Committee. Members include some high-calibre names in the sector.
Professor Nagy Habib, for instance, pioneered clinical trials for the treatment of liver cancer and was named one of Britain’s top surgeons by the Saturday Times Magazine in 2011. Lloyd Price was a founding member of the Digital Healthcare Council in 2017 and founded, invested in, and exited a number of businesses, most recently online healthcare appointment booking service Zesty, acquired by Induction Healthcare Group PLC in May 2020.
Professor Chris Wood, who acts as the Senior Medical Adviser on the committee, founded and exited two biotech companies, including Bioenvision, which he sold for $345 million after seven years. Chris is a fellow of the Royal College of Physicians & Surgeons of Edinburgh.
Deepbridge currently manages £152 million across its two EIS and two SEIS funds (July 2021).
Watch a video interview with Louise Farley, partner at Deepbridge Capital:
The UK is home to one of the strongest life sciences sectors globally. "Life sciences" covers a broad range of subsectors including biotechnology, diagnostics, healthcare, research and pharmaceutical products and services.
Given the specialist nature of this sector, Deepbridge looks for founders who are experts in their field. Ideally, the investment team favours those developing disruptive technologies or more efficient alternatives. As Life Sciences is an IP-rich market, the company must have some sort of barrier to entry and should ideally have protected its IP prior to investment.
The EIS fund aims to complement Deepbridge’s Life Science SEIS Fund by providing follow-on funding to the SEIS investee companies Deepbridge considers the most promising. To date, around 80% of EIS investments have been sourced from the SEIS fund. Both funds have similar investment strategies: the key difference is the stage of the business. At the EIS level, companies should have moved past proof of concept and begun to demonstrate market validation. This could be anything from a letter of intent to actual revenues. The key is that the company has a tangible route to commercialisation.
As an active investor, Deepbridge only looks to support companies where it believes it can add value. Traditionally, this involves mentoring companies and founders on operational practices and strategies. Deepbridge can also use its industry network: the fund has been able to accelerate client introductions, secure later-stage funding partners, and provide sector expertise in this way.
The fund targets a return of 170p per 100p invested over a term of at least four years, although it could take longer. Target returns and timings are not guaranteed.
Companies will need to demonstrate a clear exit strategy to Deepbridge before receiving investment. Deepbridge expects the most likely exit routes to be either a trade sale or refinancing – not guaranteed.
In some circumstances, Deepbridge would consider an exit within the three-year EIS period, however, it would only do so if it considered it in investors’ best interest.
To date, Deepbridge has invested in 41 companies through its Life Sciences EIS fund. The number of companies included in an investor’s portfolio will depend on the amount subscribed. The minimum is three (for a £10,000 subscription), with typical portfolios including five to 15 companies.
Below are portfolio company examples from previous iterations of the EIS fund. They are outlined to give a flavour of the types of companies you might expect but are unlikely to be part of a new investor’s portfolio.
NanOptima – recent investment
NanOptima was established in 2016 to develop a new drug delivery platform for use in ophthalmology (eye disease and disorders).
In particular, the company’s technology looks to combat age-related macular degeneration – a condition that affects 25% of people over 75 and costs the UK around £1.6 billion a year. Current treatment requires 10-12 injections into the eye a year. Nanoptima technology can reduce the frequency of injections to as little as twice a year by allowing a slow release of drugs over time. That could be better for patients and potentially significantly reduce the cost for healthcare providers.
The Deepbridge Life Science EIS fund initially invested a little over £500,000 in the business in April 2021 in a deal that valued the business at £4.7 million. Past performance is not a guide to the future.
Biopharmaceutical company, Elasmogen has developed a patented solution to treat inflammatory diseases.
A spinout from the University of Aberdeen, Elasmogen has been able to develop and isolate soloMERs, a molecule similar in structure and properties to an antibody (a key part of the immune response). However, because of the way they are derived, soloMERs sit outside the complex and competitive landscape of antibody patenting.
Elasmogen has secured a multi-layered IP position covering its platform, formats, products and process in the US, Europe, and other territories. It is using this technology to rapidly develop a number of products aimed at treating auto-inflammatory diseases and some forms of cancer.
Deepbridge initially provided £150,000 in SEIS funding to the company in 2016. Over the last four years, Deepbridge has invested an additional £3.1 million through its EIS fund. Across all its EIS investments in the company, the fund is showing an average unrealised gain of 1.27x (December 2021). Past performance is not a guide to the future.
Beamline Diagnostics (example of previous failure)
Beamline Diagnostics developed biopsy screening solutions for cancer diagnosis.
Its technology was based on infrared spectroscopy – a technique that could be used to measure molecular changes in tissue or cells. This could provide quicker diagnoses together with cost savings and reduced backlogs for pathology laboratories.
Deepbridge first invested in 2016 through its SEIS fund and provided subsequent EIS investment in 2017. In this time the company hit several milestones, including the completion of clinical trials. However, because of the pandemic, the Government suspended non-essential clinical trials, halting the company’s progress. After failing to raise additional capital, the company entered into administration in January 2021 and the fund’s investment was written down to nil.
To date, there has been one failure from the 41 companies in the portfolio, there has yet to be a positive exit. Past performance is not a guide to future returns.
The chart below shows the average performance of the total subscribed into the fund each tax year, based on valuations as at 31 December 2021, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Performance per £100 invested in each tax year
Source: Deepbridge Capital, as at 31 December 2021. Performance figures are supplied by Deepbridge Capital and are net of all fees, based on Deepbridge’s valuation methodology. Past performance is not a guide to the future. In the above figures, initial tax relief of up to 30% could also apply – remember tax rules can change and tax benefits depend on circumstances.
Risks – important
This, like all investments available through Wealth Club, is only for experienced investors happy to make their own investment decisions without advice.
EIS investments are high-risk and should only form part of a balanced portfolio. As must be expected with early-stage investments, some or even all of the companies in the portfolio could fail: the fewer the companies included in the portfolio, the higher the risk of loss if things don’t go to plan. You should not invest money you cannot afford to lose.
There is no ready market for unlisted EIS shares: they are illiquid and hard to sell and value. There will need to be an “exit” for you to receive a realised return on your investment. Exits are likely to take considerably longer than the three-year minimum EIS holding period; equally, an exit within three years could impact tax relief.
To claim tax relief, you will need EIS3 certificates, normally issued once shares have been allotted. This can take several months: please check the deployment timescales carefully. Tax reliefs depend on the portfolio companies maintaining their EIS-qualifying status. Remember, tax rules can change and benefits depend on circumstances.
Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
A summary of the fees and charges is shown below. Please see the provider's documents for more details. Some of these will be payable by the investor, others by the investee companies. The investment may have additional charges and expenses: please see the provider documents, including the Key Information Document, for more details.
|Full initial charge||2.5%|
|Wealth Club initial saving||2.5%|
|Net initial charge through Wealth Club||0%||Annual management charge||—|
|Performance fee||20%||Investee company charges|
More detail on the charges
Timing of the offer
Deepbridge intends to deploy investors capital into new investments every month; investors should therefore expect to be fully deployed within a month of investing. Please note, allotment deadlines are not guaranteed.
Deepbridge is an experienced investment house with over £152 million under management within its EIS and SEIS funds. The company is well resourced and is one of the better-known names in the tax-efficient market.
Deepbridge continues to grow its profile as an active investor within the life sciences industry and overall has a seven-year track record, having launched the SEIS fund in 2015. During this time, Deepbridge has invested £38 million through the Life Sciences EIS fund, backing 41 companies.
As with any sector-specific fund, the portfolio is likely to be more concentrated than a generalist fund. However, the investment team will aim to invest across a range of subsectors and business models (not guaranteed). To date, there has been one failure and no positive exits, however, the fund is still relatively young with the majority of companies still within the minimum three-year holding period.
Read important documents and then apply
Wealth Club aims to make it easier for experienced investors to find information on – and apply for – tax-efficient investments. You should base your investment decision on the provider's documents and ensure you have read and fully understand them before investing. This review is a marketing communication. It is not advice or a personal or research recommendation to buy the investment mentioned. It does not satisfy legal requirements promoting investment research independence and is thus not subject to prohibitions on dealing ahead of its dissemination.
- Life sciences
- Target return
- Funds raised / sought
- Minimum investment