Venture back in the spotlight

The last two days has seen a significant amount of cash pour into the UK venture space, with news emerging today that Warburg Pincus and Novo Growth Equity have just completed a £65m financing round for portfolio company Archimedes Pharma - ­ the largest funding round by a private biopharma business in Europe in the last 15 years. The news follows the $330m home-run announced yesterday, when newly established vehicle Encore Ventures and MTI Partners sold their orthobiologics company ApaTech to US-based Baxter Inc.

These deals not only illustrate the rewards of true innovation, but also reveal the potential of UK venture, proving that the space is not solely reserved for its US counterparts. Lately, in fact, European venture performance has surpassed that of the US, although that is largely down to the marked decline across the pond. Speaking to unquote" late last year, managing partner of Scottish Equity Partners Calum Paterson was convinced of UK venture's merit: "The industry here is still emerging, but ultimately, venture capital is all about commercialising innovation ­ that¹s where the big opportunity lies and we have a high level of confidence in that."

A big opportunity indeed. ApaTech was valued at around $100m in 2008, following its third institutional funding round, which involved 3i and a new investor at the time, Healthcor. 3i had supported the company since its spinout from a London university in 2001, but last year, the private equity firm had decided to sell the bulk of its venture portfolio to Encore Ventures, a division of DFJ Esprit backed by HarbourVest Partners and Coller Capital. Along with the portfolio came several 3i executives that would continue their work with Encore, namely Nigel Pitchford, who led the original ApaTech deal for 3i back in 2001. The story of Apatech is quite
impressive: in two short years, the company increased its revenues from $7.5m to $35m for the year ending 31 March 2009, while its employee numbers shot up from 40 to around 140 over the course of a year.

"We've been with this company since the beginning, supporting it with capital to expand its commercial activities in the US and its infrastructure. From the start, it was obvious to us that Bill Bonfield (the man behind ApaTech's research) was a leader in the field, and the products have proven to be well accepted by surgeons," says Pitchford.

It isn't hard to see why the company attracted such a compelling offer given its growth trajectory over the last few years. "When you start to experience that kind of revenue growth, you attract a number of trade suitors. Baxter was a good fit, as it was looking to expand its regenerative medicine business and it didn't have any competitive products. The benefits were considerable for both parties," Pitchford comments.

Archimedes Pharma looks to be on a similar growth path, as the £65m fundraise will be used to establish commercial operations in the US, as well as expand its portfolio of specialty pharmaceutical products in Europe. The start to the year has been positive - now all European venture needs is a few more success stories like these to lift the asset class from its previously subdued state.

 

 

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• Topics
• GPs
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• UK / Ireland
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• Warburg Pincus
• Venture