Deepbridge Life Sciences EIS
The UK has a proud history of discovery, innovation and development in life sciences – from the discovery of penicillin through to the more recent and world-leading 100,000 Genomes project. In fact, three of the world’s top ten universities for Life Sciences are based in the UK. Life sciences are vital for the UK economy, providing over a quarter of a million jobs and annual turnover of £70 billion. The government is keen to support the life sciences sector, investing $3 billion into health R&D in 2017, a level of support second only to the US.
The Deepbridge Life Sciences EIS fund aims to capitalise on the UK’s strength in life sciences and the government’s commitment to it. The intention is to provide UK science and technology start-ups with private capital to supplement government grants. Investors can expect a portfolio of around ten 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 raised over £29.2 million and has invested in 26 companies. There have been no exits or failures to date, 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
- Expected portfolio of 8 – 10 companies , not guaranteed
- Target return of £1.70 per £1 invested after four years, not guaranteed
- Evergreen offering
- 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 for one of the biggest printer companies before settling on technology start-ups in New York. When he founded Deepbridge, Mr Warwick didn’t have experience of 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 seven-strong Supervisory Investment Committee. Members include some high-calibre names in the sector.
Professor Nagy Habib, for instance, pioneered novel clinical trials for the treatment of cancer and was named one of Britain’s top surgeons by the Times in 2011. Lloyd Price co-founded Zesty in 2012 and three years later his business was selected as one of the UK’s 30 finest early-stage technology businesses. In 2016, he was voted one of the most influential people in HealthTech globally.
Professor Chris Wood, who acts as the Senior Medical Adviser on the committee, founded and exited two biotech companies including Bioenvision, which sold for $345 million after seven years. Chris is a fellow of the Royal College of Physicians & Surgeons of Edinburgh.
Deepbridge currently operates two EIS funds, two SEIS funds and one IHT fund. In aggregate Deepbridge manages £122 million within its range of EIS and SEIS funds (October 2020).
Watch a video interview with Louise Farley, partner at Deepbridge Capital:
Life Sciences covers a broad range of subsectors including biotechnology, diagnostics, healthcare, research and pharmaceutical products and services. The UK has a strong pedigree in Life Sciences and is home to one of the strongest, most productive health and life sciences sectors globally.
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 have ideally protected its IP prior to investment.
The EIS fund will complement Deepbridge’s Life Science SEIS Fund by providing follow-on funding to promising SEIS investee companies. To date, more than 80% of the 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. 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 26 companies through its Life Sciences EIS fund. Investors could expect to receive a portfolio of 8–10 EIS-qualifying companies, not guaranteed.
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.
A spinout from Liverpool University, Aquarate has developed technology to measure dehydration levels in patients.
While seemingly innocuous, dehydration can have significant consequences. In the UK, more than 40,000 people die each year from preventable hydration-related illnesses. Fluid intake can be monitored but this is often still a manual process, reliant on inaccurate, paper-based tracking.
Founder Rebecca Taylor previously studied product design and engineering at Liverpool University. After discovering this gap in the market, she designed the firm’s ‘smart mug’. The device has built-in sensors and its own software records, allowing medical professionals to track patients’ fluid levels easily over a 24-hour period.
Deepbridge first invested £150,000 through its Life Sciences SEIS fund. It has since provided £365,000 in EIS follow-on funding which will be used to scale up production.
A 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 three years, Deepbridge has invested an additional £1.7 million through its EIS fund.The latest investment round will be used to accelerate the development of the company’s next generation of treatments.
Previous exits and failures
To date, there have yet to be any exits from the EIS portfolio. In addition, no portfolio company has failed to date, but please note due to the nature of early-stage investing, you should expect some failures. Please note, past performance is not a guide to the future.
As the fund launched in 2017, its performance track record is limited. To date, none of the 26 companies in the portfolio has been exited or failed. 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 15 September 2020, expressed on a £100 invested basis. Please note, individual investor portfolios’ performance will deviate from the average.
Source: Deepbridge Capital, as at 15 September 2020. 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. So, for the tax year 2017/18, the total return including initial income tax relief would be £150.61– 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 so should only form part of a balanced portfolio and you should not invest money you cannot afford to lose. They also tend to be illiquid and hard to sell and value. Before you invest, please carefully read the Risks and Commitments and the offer documents to ensure you fully understand the risks.
Tax rules can change and benefits depend on circumstances.
This EIS fund invests in early-stage businesses which are more likely to fail than larger ones. So you should expect a number of failures in the portfolio, or even be prepared for all companies to fail.
Exits could take considerably longer than the three-year minimum holding period.
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 has told us it intends to deploy investors capital into new investments every month; however, it may take several months for investors to become fully invested.
Deepbridge has informed us for applications received by 19 March 2021, it intends to fully deploy investors' capital by the end of the tax year 2020/21.
Please note, allotment deadlines are not guaranteed. In the past, Deepbridge has been unable to invest investor subscriptions fully before the end of the tax year. Deepbridge has been working to address this area of concern.
Why is the timing of the deployment important?
When you invest in an EIS fund, the fund manager will deploy your funds over time by investing in EIS-qualifying companies.
Once your funds are deployed, your shares are allotted. The date your shares are allotted (not the date you invested) will determine the investment date for tax purposes.
If your shares are allotted in EIS-qualifying companies before 5 April 2021, you should be able to choose whether to use the income tax relief against tax you owe for the 2020/21 tax year or against tax you’ve already paid for the previous one (known as “carry back”).
Please remember, tax rules can change and benefits depend on circumstances.
Deepbridge is an experienced investment house with over £120 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 now has a five-year track record, having launched the SEIS fund in 2015. During this time, Deepbridge has raised £29.2 million for the Life Sciences EIS fund, backing 26 companies, and £15 million for its Life Sciences SEIS fund, backing 75 companies.
As with any sector-specific fund, the portfolio is likely to be more concentrated than with generalist funds. However, the investment team will aim to invest across a range of subsectors and business models (not guaranteed). To date, there has yet to be an exit or a failure but the fund is still relatively young with the majority of companies still within the minimum three-year holding period. Please note, past performance is not a guide to the future.
Read important documents and 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
- 19 Mar 2021 for 2020/21 allotment