Deepbridge Life Sciences SEIS

Please note, the fund is now closed for 2020/21 deployments - you can still apply for 2021/22.

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 through university spinout programmes, incubators, and Deepbridge’s network of industry contacts. Since its inception in 2015, the SEIS Fund has raised over £15 million and invested in 75 companies. There have been no exits for failures to date, however, past performance is not a guide to future returns. 

Important: The information on this website is for experienced investors. It is not advice nor a research or personal recommendation to invest. If you’re unsure, please seek advice. Investments are for the long term. They are high risk and illiquid and can fall as well as rise in value, so you could get back less than you invest.

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Highlights

  • Portfolio of up to ten early-stage science or technology-based companies
  • Specialising in biopharmaceuticals, biotechnology or medical technology
  • Highly experienced team with strong science background
  • Potential to attract government and regional grants and matched funding
  • Each investee company will have strong intellectual property and must demonstrate scalability
  • Target return of 2.5x money invested after 5-7 years (net of fees), returns not guaranteed
  • Pay no initial charge through Wealth Club
  • Minimum investment £10,000

The manager

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).

Investment strategy 

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. 

Currently, Deepbridge is reviewing around 1,000 opportunities every year, of these, it may only invest in 30. For the SEIS, the main deal flow sources are university spinout programmes, incubators, and Deepbridge’s personal industry network.

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. 

At the SEIS level, the majority of companies may only be at the ‘idea’ stage, with the exception of university spinouts which can have around 5-7 years development at the point of the investment. For most companies, SEIS funding is needed to develop or support the launch of a key product or service. Typically, this process is capital intensive, particularly for sectors such as drug development. Consequently, Deepbridge will only select companies it believes it can support for three additional funding rounds. 

Deepbridge only looks to support companies to which 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. 

Target return 

The fund targets a return of 250p per 100p invested over five to seven years, not guaranteed. 

Exit strategy

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 SEIS period, however, it would only do so if it considered it in investors’ best interest.

Portfolio

To date, Deepbridge has raised £15 million for its SEIS fund and has invested in 75 companies. Investors should expect to receive a portfolio of up to 10 SEIS-qualifying companies, not guaranteed.

Below are portfolio company examples from previous iterations of the SEIS 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.

Blossom Genetics – Deepbridge Life Sciences SEISBlossom Genetics

Founded in 2019, Blossom Genetics specialises in the research, development, and cultivation of pharmaceutical-standard medical cannabis products . 

Unlike many agricultural commodities, there has been relatively little research into the genetic and environmental factors which can influence cannabis plants. In fact, the majority of cannabis varieties were developed decades ago by hobby breeders. Consequently, Blossom has invested significantly in its breeding programme, allowing it to produce new strains with specific pharmaceutical traits . 

Alongside its genetics programme, Blossom also cultivates its own medical grade cannabis. The company controls the entire supply chain to better ensure its products are high quality and supplies its products to growers worldwide .

Deepbridge invested £150,000 into the company in March 2020

elasmogen – Deepbridge Life Sciences EISElasmogen

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 invested £1.15 million into the company and has since provided an additional £2 million in funding in January 2020. The latest funding round will be used to accelerate the development of the company’s next generation of treatments. 

Previous exits and failures

To date, there has yet to be any exits from the SEIS portfolio. In addition, no portfolio company has failed to date, but please note due to the nature of early-stage investing, you should anticipate some failures.

Performance

The fund launched in 2015, to date the fund has yet to experience any exits or failures from its 75 investee companies. However, given the generous tax reliefs available to SEIS investors, the unrealised track record is encouraging, in our view. Past performance is not a guide to future returns.

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 50% could also apply. So, for the tax year 2017/18, the total return including initial income tax relief would be £194.76 – 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.

Charges

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.

Investor charges
Full initial charge 2%
Wealth Club initial saving 2%
Net initial charge through Wealth Club 0%
Annual management charge
Administration charge
Performance fee 20%
Investee company charges
Initial charge 5%
Annual charges 2.5%
All fees and charges are stated exclusive of VAT, which may be applicable in some cases. Any fees and charges payable by the investee companies or the underlying businesses do not directly come out of your investment. However, they will effectively reduce the returns generated by investee companies and therefore impact your investment.

More detail on the charges

Timing of the offer 

The fund aims to deploy investments within 6 to 18 months of the close date. Please note, due to the nature of investing in SEIS companies, Deepbridge does not guarantee a timescale for fully investing subscriptions. 

Please note, the tranche for 2020/21 tax year deployments is now closed. You can still apply for the 2021/22 tax year. 

Our view

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, although, given the considerable risks associated with SEIS investing, the unrealised track record is promising, in our view. Please note, past performance is not a guide to the future. The charging structure means investors pay no direct initial fees and can claim tax relief on up to 100% of their initial subscription.

Register your interest

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.

The details

Type
Fund
Sector
Life sciences
Target return
2.5x
Funds raised / sought
-
Minimum investment
£10,000
Deadline
Discretionary
Last updated: 6 November 2020

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