Deepbridge Life Sciences EIS

The Deepbridge Life Sciences EIS gives investors an opportunity to invest in a selected portfolio of up to ten innovative healthcare companies, whilst taking advantage of the EIS tax benefits. 

Highlights

  • Invest in companies with high growth potential in the sectors of biopharmaceuticals, biotechnology and medical technology
  • Experienced investment management team
  • Target return of £1.70 per £1 invested, over a minimum of 4 years – not guaranteed
  • Performance fee aligned to the investors' interests
  • Pay no initial charge through Wealth Club
  • Minimum investment £10,000

The offer

The Deepbridge Life Sciences EIS invests in a diversified portfolio of up to ten investee companies.

Generally, Deepbridge seeks companies with the following characteristics:

  • A focus on life sciences and medical device technology;
  • Significant market potential with clear need and market growth;
  • Providing a solution to a recognised clinical or healthcare need;
  • Innovation-driven products that have the potential to create new market segments or displace current technologies;
  • Medical technology businesses with a clear and realistic path to commercialisation;
  • Robust intellectual property which may provide patented or patentable IP protection;

Deepbridge will take an active executive role on the board of the investee companies to help accelerate their growth.

Portfolio company examples

Elasmogen Ltd

Elasmogen Ltd is a biologics company that was spun out of the University of Aberdeen in February 2016.

Elasmogen is progressing sight-saving therapies for inflammatory eye disease and in particular for patients who have been let down by current small molecule and systemic monoclonal antibody therapies. 

Using its IP-protected soloMER™ platform, Elasmogen exploits the power of biologics as drugs but in small, simple, and stable formats that are amenable to site-specific delivery.

The company is targeting potential revenues of c.£20,000 per patient as a target price via the NHS reimbursement programme. 

Renephra Ltd

Renephra Ltd is a medical device development company that is seeking to address the significant ongoing medical problems associated with fluid overload within the human body. The company has developed a patented transdermal fluid removal device that removes excess interstitial fluid through the skin. 

The new device is a minimally invasive and more cost effective alternative to current solution of diuretics, dialysis and ultrafiltration for conditions such as heart failure and chronic oedema/lymphoedema. 

The company is at the stage of proof of concept, achieved following initial studies carried out at the Central Manchester NHS Trust (CMFT)/University of Manchester. 

Discussions have already taken place with the German medical device manufacturer. The product, when ready, would be available for direct sales via a small sales team or through a global distribution network; and

The company is also seeking to conclude a commercial deal with a partner who will design and commercialise a product for home and community use. This product, when ready, would be sold direct to consumers through an online medical distributor.

The manager

Deepbridge Capital was set up by Ian Warwick. Initially he intended to launch an unquoted growth technology fund. However, after the rules changed to allow investments of up to £5 million in an individual company, he considered EIS more appropriate.

Mr Warwick has had a varied career: he was in the Royal Navy, then 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, he didn’t have experience of managing money but he and his founding partners all had experience in technology and in listing and floating businesses.

Deepbridge’s investment team is required to invest their own money in the portfolio companies. If the portfolio loses money, they lose money, so there’s an added incentive to apply a tight investment selection process and help businesses achieve their objectives.

Target return

The investment objective of the Deepbridge Life Sciences EIS is to generate tax-efficient mid-case capital growth of 170p for every 100p invested, over a minimum 4 year period. Exit events will be sought at the earliest opportunity after the third anniversary of the investment. If you take into account EIS 30% income tax relief, that’s £1.70 for every £0.70 effectively invested. Please note though: returns are not guaranteed. Capital is at risk and you could get back less than you invest. Moreover, tax benefits depend on circumstances and tax rules can change.

Exit strategy

Before receiving investment from Deepbridge, a company will have to demonstrate a clear exit strategy. By the end of the initial three year period (the minimum investment holding period to benefit from EIS tax relief), the investee companies should have established revenue streams supported by a three-year track record. At that point, Deepbridge will target either a trade sale or refinancing, thereby enabling funds to be returned to investors – this is not guaranteed.

Should an exit opportunity become available before three years, Deepbridge might consider it if it is believed to be in the investors' best interest. 

So far there have been no exits, nor failures, although they are possible, indeed likely as with any portfolio of this nature.

Risks

This is a high-risk offer. These are early-stage technology businesses, so they will be more prone to failure than later stage, more mature businesses. It is also likely they will require multiple rounds of funding thus diluting the stakes of earlier investors. These are long-term investments. 

The usual risks with unquoted companies exist with this EIS offer. For instance, EIS investments are illiquid and capital is at risk. Investors should only invest money they can afford to lose. 

Fees

When you invest via Wealth Club, you pay no initial fees from the subscription, so you should receive tax relief on the full amount. Deepbridge fees are paid by the investee companies.

The underlying investee companies will pay a fee of 2% per annum to Deepbridge. There is a 2.5% corporate advisory and arrangement fee, paid from the underlying companies. In addition, there is a dealing fee of 0.65% for sales and purchases charged to underlying investee companies and a further 0.5% per annum custody fee. Finally, there is a performance fee equivalent to 20% of the profit from each individual company with a minimum hurdle of £1.20 per £1 invested prior to any performance fee being applicable. VAT is charged where applicable. 

Our view

This is an interesting, albeit higher-risk EIS offer.  The core team comes with many years of experience in investing in, managing and floating businesses.

Wealth Club aims to highlight investments we believe have merit, but you should form your own view. You should decide based 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. 21 December 2017

The details

Type
Fund
Sector
Life sciences
Target return
£1.70 per £1 invested
Funds raised / sought
£2 million raised
Minimum investment
£10,000
Deadline
Discretionary

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