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Don’t invest unless you’re prepared to lose all your money invested. This is a high risk investment. You could lose all the money you invest and are unlikely to be protected if something goes wrong. Take 2 mins to learn more

Early-Stage Biotech Investing in the UK through the lens of o2h Ventures
Feb 15 2023

The global biotech industry has an extraordinarily impact on science, healthcare, environment and the business. The British biotech industry has been under the spotlight during the COVID19 era highlighting the need for a homegrown vertically integrated biotechnology machine that designs, develops and manufactures new therapeutics. The UK, in our opinion, has emerged as a global leader in biotech innovation during the pandemic as it was instrumental in developing the first vaccine for COVID19 overcoming scientific, regulatory and manufacturing hurdles. The British government has also been supporting the biotech sector highlighting its significance in ‘Growing the bioeconomy: a national strategy to 2030’.

Over the last few years we have seen investors take an introspective look at their portfolios with a view to include biotechnology companies as part of the mix. Given the technical complexity of investing in biotech companies, we believe that technical due diligence coupled with commercialisation experience is important. Only a small number of retail funds have exposure to these opportunities b) have the technical experience to provide appropriate due diligence, c) and can provide industry connections to help industrialise the science. Consequently, some of these fledgling biotech companies went on to raise funds in the USA, creating a lost opportunity for UK investors.

At o2h Ventures, we are passionate about establishing a Biotech ecosystem that can source, assess, incubate and support investments through their pre-seed and seed rounds. We have established a biotech specialist fund at o2h Ventures focused on investing in exciting early-stage opportunities that can be nurtured in the UK biotech ecosystem and thus build a pipeline of innovative medicines and investment opportunities for later stage funds and pharmaceutical companies to invest into or acquire; while also providing investors with non-biotech background to invest in a biotech portfolio by leveraging our expertise and experience in performing due diligence on early-stage biotech newcos.

The UK government also provides a supportive regulatory environment for these early-stage companies to attract investors through their HMRC EIS (Enterprise Investment Scheme), Knowledge-intensive and R&D tax incentives. Biotech is a highly knowledge-intensive industry where innovation is the key to success for the companies and a significant factor for growth of Britain’s economy. Additionally, the UK government has made significant investments in the biotech sector in recent years, through initiatives such as the Biomedical Catalyst and the Industrial Strategy Challenge Fund.

During the current economic turbulence, the overall global sectors have been struggling in all aspects of business. We are optimistic that the tailwind Biotech sector got during the pandemic will hold the ground strong and will be a hot-bed for investors while accelerating drug discovery and impacting the lives of patients.

To conclude the above, we can concur that Britain has the potential to be a ‘Scientific Superpower’; we have world-class scientists and infrastructure along with strong academic grass roots. With the appropriate government intervention through further tax incentives, amending IPO listing rules in London, unlocking pensions for investing, and management training for our scientists, will only go to further make this a more attractive sector for investments.

Looking forward to the UK as the forerunner in a World Class Biotech industry, o2h Ventures will continue to support our existing portfolio companies whilst also investing in new exciting and innovative early-stage Biotech companies, and de-risking the investments by understanding areas of high interest to big pharma and then providing ‘hands-on’ support via team building, mentoring, fundraising, scientific support and seeking commercial partnerships.

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more articles by Prashant Shah
  • o2h-ventures Early-Stage Biotech Investing in the UK through the lens of o2h Ventures 15 Feb 2023
  • o2h-ventures o2h Ventures Portfolio Companies Update 26 Sep 2022
  • o2h-ventures o2h Ventures qualifies as a FINALIST in the Growth Investor Awards 2022 06 Sep 2022
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The o2h team are leaders in the biotech community and have been actively involved as investors, holding various board/industry positions as well as being engaged in grassroots scientific activity for over 20 years.
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o2h ventures Limited is regulated and authorised by the Financial Conduct Authority (FRN 812245). Capital at risk, only suitable for high net worth and sophisticated investors

Risk Information

Due to the potential for losses, the Financial Conduct Authority (FCA) considers this investment to be high risk

What are the key risks?

1 – You could lose all the money you invest

• If the business you invest in fails, you are likely to lose 100% of the money you invest. Most start-up businesses fail.

2 – You are unlikely to be protected if something goes wrong

• Protection from the Financial Services Compensation Scheme (FSCS), in relation to claims against failed regulated firms, does not cover poor investment performance. Try the FSCS investment protection checker here. (https://www.fscs.org.uk/check/investment-protection-checker)

• Protection from the Financial Ombudsman Service (FOS) does not cover poor investment performance. If you have a complaint against an FCA-regulated firm, FOS may be able to consider it. Learn more about FOS protection here. (https://www.financial-ombudsman.org.uk/consumers)

3 – You won’t get your money back quickly

• Even if the business you invest in is successful, it may take several years to get your money back. You are unlikely to be able to sell your investment early.

• The most likely way to get your money back is if the business is bought by another business or lists its shares on an exchange such as the London Stock Exchange. These events are not common.

• If you are investing in a start-up business, you should not expect to get your money back through dividends. Start-up businesses rarely pay these.

4 – Don’t put all your eggs in one basket

• Putting all your money into a single business or type of investment for example, is risky. Spreading your money across different investments makes you less dependent on any one to do well.

• A good rule of thumb is not to invest more than 10% of your money in high-risk investments (https://www.fca.org.uk/investsmart/5-questions-ask-you-invest)

5 – The value of your investment can be reduced

• The percentage of the business that you own will decrease if the business issues more shares. This could mean that the value of your investment reduces, depending on how much the business grows. Most start-up businesses issue multiple rounds of shares.

• These new shares could have addition rights that your shares don’t have, such as the right to receive a fixed dividend, which could further reduce your chances of getting a return on your investment.

If you are interested in learning more about how to protect yourself, visit the FCA’s website here (https://www.fca.org.uk/investsmart)