Epidarex Capital III closes on £102m

The fund, which was launched in December 2018 with an initial target of £85m, expects to achieve a net return of around 25%.

"We had most of the fund raised pre-Covid-19," Epidarex managing partner Sinclair Dunlop told Unquote. "We brought in our last investor in early March but the majority of commitments were raised by December 2019."

"We noticed an increased interest in our model and sector because of the coronavirus pandemic," Dunlop added. "Generalist investors, which are not life-science specialists, became more aware of the importance of research in this sector, which is getting a lot more attention at the moment.

"Overall, raising a fund in early-stage venture is never easy," Dunlop said. "A lot of investors, including institutional investors, are very cautious and there is a perception that it necessarily takes longer to get your returns in life sciences compared to tech, software or fintech. But this perception is changing and our model has disproven that idea. The majority of our exits have been very successful sales in the industry, and big pharma and big biotech companies are eager to buy novel science companies. Even for early-stage VC, we have seen that the timeline for exit is shorter than it used to be."

The new vehicle raised by Epidarex is more than double the size of its predecessor, Epidarex Capital II, which held a final close on £47.5m in 2014. The fund is currently fully deployed across 12 companies, 10 of which are based in the UK and two in Germany. The VC told Unquote that the fund is expected to close two exits by the end of the year.

In addition to its European vehicles, Epidarex is also raising a US-dedicated fund dedicated to early-stage life sciences, which is expected to close in the coming months.

Headquartered in Edinburgh and in Bethesda, Maryland, Epidarex is a transatlantic venture capital firm that invests in early-stage, high-potential life science companies in emerging research hubs. The firm partners at an early stage with top scientists and entrepreneurs in the UK and the US to develop products addressing major unmet needs in the global healthcare market.

Investors
The British Business Bank is a cornerstone investor in the fund. It committed £50m from its Enterprise Capital Funds (ECF) programme for early-stage venture capital.

The programme combines private and public money to enable equity investments in high-growth businesses. Since its inception, it has committed £1.36bn (including third-party investment) to finance 540 smaller UK-based high-growth businesses. The bank's investment in Epidarex Capital III UK is the largest from ECF to date, and the first to specialise in life science.

In addition to the British Business Bank, the Universities of Edinburgh, Manchester, Glasgow and Aberdeen, alongside Strathclyde Pension Fund and several global investors, have committed capital to the fund. Its LP base also includes a family offices from Hong Kong, a family office from Dubai, three UK-based family offices and several corporate investors, the VC told Unquote.

Investments
Epidarex Capital III UK will invest in new life science companies from emerging research hubs across the UK, including spinouts from highly regarded universities. Typical initial investments will range from £2m to £5m.

"We plan to build a portfolio of 12-15 novel life science companies, predominantly operating in therapeutics and also medical technology," Dunlop told Unquote. "We usually lead a series-A round in the £2-5m range as initial investment, and subsequently support the company with additional capital in series-B and follow-on rounds raised in syndication with other financial investors."

Dunlop added: "Our focus is finding leading research institutions that don't have easy access to local scalable risk capital and support of VC backers in their own region. This is where we find great value-creation opportunities."

Epidarex Capital III has already made its first investment in Lunac Therapeutics, a spinout from the University of Leeds; the company received £2.65m in a series-A round. Lunac is developing next-generation anticoagulants to minimise bleeding risk, and capitalises on a decade of academic research supported by the university.

The fund has made a second investment that will be announced soon: a spinout from Edinburgh University operating in the oncology space, Unquote understands.

People
Epidarex Capital – Sinclair Dunlop, Kyparissia Sirinakis (managing partners).

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