‘Full throttle’: venture capital in 2021

“Now is the time to really accelerate it and go full throttle”, said Richard Butt, the Chief Scientific Officer at Apollo Therapeutics, following the successful completion of a £100m funding round.

First published in our Biotech Review of the year – issue 9.

Having brought on board new backers like the Patient Square Capital, and with plans to expand across Cambridge and to set up shop across the pond in Boston, it is easy to appreciate Butt’s excitement at the conclusion of the deal.

It might be said, though, that it is not just Apollo that is going “full throttle”. Rather, across the entire life science sector, it seems that venture capital activity has gathered speed. Indeed, the BioIndustry Association has reported that a record £3bn has been raised by the UK biotech and life science sector in the first three quarters of 2021, surpassing the total of £2.8bn raised in the sector in 2020. There is, in the words of one noted venture capitalist, “real momentum” across the life sciences sector. The throttle, then, is certainly open, even if not fully.

The COVID-19 factor

Perhaps inevitably given the events over the last year, there has been a significant increase in investment in vaccine development. After all, AstraZeneca, Moderna and Pfizer – some of whom were already giants of the sector – have arguably been transformed into household names by the pandemic. VCs surely couldn’t help but notice the sheer number of stories about vaccine development that overflowed from their newspapers for much of the past year. Indeed, when the Bristol-based Imophoron launched a fundraising in support of its rapid vaccine development, the round was soon oversubscribed, whilst Oxford’s Vaccitech, who helped in the R&D and production of the AstraZeneca vaccine, received a $125m VC injection in March 2021. Whether or not the money has followed the headlines, or vice versa, what is clear is that venture capital has kept a close eye on opportunities amongst vaccine developers.

But it’s not just vaccines themselves that have benefitted from heightened VC activity. With the success of the mRNA-based Pfizer and Moderna vaccines, companies developing mRNA and mRNA-adjacent technologies have also been a particular target of VCs with 2021 seeing a run of large investment rounds. For example, Touchlight Therapeutics (engaged in enzymatic DNA production, including for use in mRNA vaccines) closed a $125m Series B in March 2021.

Acorns to mighty oaks

Of course, the sharp increase in VC investment in life sciences cannot be solely attributed to COVID-19, nor to the heightened press attention the sector is enjoying. Rather, as has been noted elsewhere in the Biotech Review, increased VC investment is intimately linked to heightened private equity activity in the sector. To put it simply, the increased PE appetite for the life sciences – overcoming a traditional reluctance to acquire what were once deemed risky assets – has increased the numbers of exit points for investors and pioneers, be it through a sale or through a flotation. This presents a real opportunity for VCs, and their portfolio companies to take ideas from university labs to market, incentivising early-stage investment.

The latter point is instructive, and arguably goes some way to explaining why the UK is acting as something of a magnet for VC investment. Typified by the Golden Triangle – the research institutions located in the cities of Cambridge, London and Oxford – the UK has the vital infrastructure to enable ideas to flourish and for technologies to be tried and tested. It is little wonder, then, that the UK is home to more than a third of Europe’s biotech companies.

Where are we headed?

Given the UK’s strengths when it comes to nurturing the life sciences, it seems likely that VC interest in biotech and other life sciences companies will remain strong in the months ahead. In addition to the technology fields mentioned above, one further area of research receiving heightened interest from investors is the application of artificial intelligence in biotech. With 2021 providing a number of material fundraisings for biotech companies utilising AI, such as Exscientia’s $225 million Series D, it seems the intersection between biotech and AI will be a feature on the VC landscape for some time to come.

2021 was a good year for the life sciences; and whether or not it would be fair to brand VC investment its keynote, it is clear that investors’ interests at least have been piqued. The throttle is certainly roaring.