(Note: This newsletter has been approved as a financial promotion by o2h Ventures Limited)
Thank you for subscribing earlier to our newsletter updates. The o2h Ventures ‘Human Health’ funds make tax efficient EIS investments in Pre-Seed and Seed stage companies that address human disease: we fund the development of novel therapeutic treatments; we help build new services and tools offerings throughout the biotech ecosystem; and we spur the creation of software and artificial intelligence that will change healthcare.
Please note this newsletter will cover the overall performance and companies in all our funds since inception and include both realised and unrealised investments (Fund). Existing investors may not be invested into all the companies in the Fund as this will depend on timing of your investment and which fund(s) which you invested into. For existing investors, you may log into your investor portal at www.portfolio.o2hventures.com to see the portfolio companies that you have invested into and the performance to date. The next close for our open funds will be 31st October 2021 see www.o2hventures.com.
Performance and Position as at 31st August 2021
The NAV considering all the o2h Ventures Funds rose by 32%1 YTD and since inception in November 2018, the o2h human health S/EIS Fund has increased by 61%11. We have invested into 22 portfolio companies with a Gross AUM of £6m as on 31st Aug 2021.
We continue to see a strong supply of biotech company investment prospects. The fund typically enters as an investor in pre-seed and seed funding rounds, and may also participate during follow-on investments. The fund normally invests low-to-single-digit millions through early-stage financings. Often, these maturing companies attract higher valuations in subsequent competitive funding rounds supported by larger investment funds.
The pandemic has supported ample liquidity and high investor sentiment for biotech investing. ‘COVID-19 bolstered investors’ interest in biotech and pharma, and more capital flowed into the industry in 2020 than ever before—to the tune of $28.5 billion2; also, ‘the hot IPO market for VC-backed biotech companies, [which] saw $11.5 billion raised across 73 biotech public listings in 20203. We believe these trends reflect durable growth across the global biotech investment ecosystem. Alongside the strong market performance of US biotech IPO’s and sector indices, we note that three of the o2h Fund and Pre-fund companies have listed on AiM or TSX. In an encouraging portfolio development, London based Small Pharma (a Fund investment) recently raised CDN$63m through a reverse listing on the TSX4. We see similar supportive trends across both US- and UK-focused private equity venture investing: recently, two US-based funds led a USD$153M investment in UK-based Artios, an oncology biotech developing therapeutics in DNA damage repair. We continue following a disciplined approach to unlock value in this buoyant phase of the investment cycle, by seeking sensibly priced companies with durable, compelling investment propositions.
A real-life deal example – In4Derm
We wish to share more about a recent investment we feel exemplifies both the o2h Fund’s philosophy around investing and our approach to diligence. While In4Derm is a recent addition to o2h Fund, we are strongly enthused by the prospects of this early-stage company, and believe their funding story offers insight into our Fund’s unique approach to sourcing, analysing and creatively supporting new investments. As set out below: upon identifying the opportunity in February 2020, we invested in a company that by May 2021 had announced corporate partnerships potentially worth in excess of USD$200M.
Deal Source: in February 2020 Dr. Andrew Woodland introduced our fund to In4Derm: the company is a Dundee University spinout developing novel drugs to treat inflammatory disorders like eczema, psoriasis or rheumatoid arthritis. The In4Derm therapeutic concept is to develop medicines similar to steroids, but without the side effects: the company discovered and patented new drug compounds that can inhibit BET bromo-domain proteins, and be delivered either as topical creams or pills.
Technical Due-Diligence: an efficient and experienced subteam of o2h colleagues next undertook our standardised due diligence process, which assessed the In4Derm company assets and prospects for growth. Our key consideration was to understand how strongly the In4Derm intellectual property estate could support the business plan, by generating assets with a viable path towards clinical development and later commercialisation. Our analyses highlighted challenges within the company’s chemistry exploitation strategy, but we believe these risks may be suitably mitigated using new AI and machine learning approaches.
On review, our integrated scorecard and narrative summaries captured a supportive view of the In4Derm investment thesis: we believe selective drugs targeting the BET protein BD2 domain may offer differentiated therapeutics across anti-inflammatory indications.
Competition: other BD2-domain BET inhibitors are currently under development, supporting how these agents may have clinical utility and commercial value. Boston Pharmaceuticals acquired BOS475 from GSK, and is currently undertaking Phase 1 clinical trials to study BOS475 as a topical treatment for psoriasis. Additionally, AbbVie has Phase 1 safety studies underway for the BD2-selective BET inhibitor ABBV-744. As reported in recent publications, preclinical studies showed ABBV-744 might also be effective in oncology: compared to unselective BET inhibitors, ABBV-744 were effective in cancer models and showed adequate tolerability in blood, gastrointestinal and reproductive tissues. GSK remains active in this arena, but no information exists in the public domain regarding any BD2-selective compounds being progressed into the clinic.
Market and Business: Along with the competitive factors above, overall market trends support In4Derm’s strategic commercial aims to partner early with biotech and pharma acquirors, through option- or license deals. The value of the global dermatology prescription market was estimated to be $17-31 billion in 2016, with compound annual growth rate (CAGR) of 5.2% to 20205. The target area of eczema affects 15-20% of children and 10% of adults but current treatments are sub optimal.
The Team and Deal: the leadership and innovation team behind In4Derm highlight the company’s strong prospects, and further enhance our view of the overall value proposition. Our fund had interacted previously with highly experienced CEO Dr Tim Sparey, during the time when he developed a leading reputation in positions at Merck and Proximagen. Co-founders Dr Andrew Woodland and Dr Mark Bell are sound scientists and researchers, but their long-standing industrial experience led them to foster the company through incubation, while also crafting a grounded long-term plan focused on delivery. o2h Ventures negotiated and agreed a £1m pre-money valuation6 and then shared its due diligence to two other funds. Our efforts provided a catalyst to build a strong syndicate of seed-stage investors, including Meltwind, Wren Capital, Scottish Investment Bank and the University of Dundee.
Support: o2h Ventures appointed a Non-Executive Director representative to support In4Derm. In addition to general board duties, we offered benchmark commercial data, strategic contacts and advice towards an arising licensing agreement for the company (see next section). Given our technical expertise, we also helped the company arrange additional drug discovery service partnership agreements, and assisted to secure corporate legal counsel.
The Latest: o2h Ventures completed its deal with in4Derm in November 2020. On May 11th 2021 In4derm announced an option deal with a NASDAQ listed company with potentially >USD$200M 7 of milestone payments. The NASDAQ company was revealed in Aug 2021 as Vyne Therapeutics (Nasdaq: VYNE) when the Company exercised the Topical BETi Option and the parties entered into a License Agreement8.
1Figures are based on the Net investable amount and exclude further fees that have been or will be deducted upon success and cash balance. Funds’ valuations are based on the previous funding round valuations updated as on 30th June 2021 for unquoted companies and as on Aug 31st 2021 closing price where publicly traded. Please note the value of any investments held are calculated using the most recent price issued to us and is indicative only. Any movements since this time, such as an income payment or corporate action, may cause variations between the current market value and the indicative value given above.
Fund returns do not take into account tax savings that could be made by the investors. Please note this newsletter will cover the overall performance and companies in all our funds both realised and unrealised and will refer to the ‘Fund’. Existing investors may not be invested into all of the companies in the Fund as this will depend on timing of your investment and which fund(s) which you invested into.
2A look at Biotech and Pharma’s Biggest year ever – Pitchbook Webinar
3Pitchbook News Report
4Toronto Stock Exchange
5IMS Health, OECD Evaluate Group, TBRC Estimates, TBRC Analysis.
8Globe news wire
Please refer to the relevant fund’s full risk warnings contained in their Information Memorandums.
Your capital is at risk. Investing in early stage businesses involves risks, including illiquidity, lack of dividends, loss of investment and dilution, and it should be done only as part of a diversified portfolio. o2h Ventures’ funds are targeted exclusively at sophisticated or high net worth investors who understand these risks and make their own investment decisions. Tax relief depends on an individual’s circumstances and may change in the future. In addition, the availability of tax relief depends on the company invested in maintaining its qualifying status. Past performance is not a reliable indicator of future performance. You should not rely on any past performance as a guarantee of future investment performance.
o2h Ventures Ltd is a limited company registered in England and Wales under number 11397838 and is authorised and regulated by the Financial Conduct Authority (FRN 812245). The registered office and principal place of business is Hauxton House, Mill Scitech Park, Mill Lane, Hauxton, Cambridge, CB22 5HX, United Kingdom. Further details about o2h can be found on our website at https://o2hventures.com.