Let savers benefit from the life sciences of the future

Ian Connatty says life sciences remain an untapped opportunity for many schemes

clock • 3 min read
Ian Connatty is managing director at British Patient Capital
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Ian Connatty is managing director at British Patient Capital

Buoyed by the extraordinary response to the pandemic, the UK’s life sciences sector is experiencing its very own coming of age. From leading the charge on ground-breaking gene therapy to driving the global race to develop and deploy vaccines, life sciences are showing their importance in addressing global challenges.

Beyond this, it is evident that life sciences are central to the UK's own prosperity as a whole. The UK is a world leader in this space, employing more than 250,000 people and generating an annual turnover of £80 billion in the UK[1]. Our universities - from Cambridge to Manchester - are increasingly becoming incubators for life sciences talent, acting as a breeding ground for some of the most innovative, world-changing firms in healthcare, pharmaceuticals, and biotechnology. Underpinned by this heritage and expertise, it is clear that the sector has a bright future ahead. This provides a significant investment opportunity for pension funds in particular.

However, the UK lags worryingly behind other jurisdictions, including the US, when it comes to funding the most innovative companies in this space. The latest small business equity tracker from the British Business Bank revealed that the UK still has a lower proportion of venture capital (VC) deals and investment going into research and development intensive companies - which include life sciences - than many other countries. This is also the primary cause of the UK-US VC funding gap.

Whilst the UK hosts the largest advanced therapies community in Europe, life sciences firms have historically struggled to scale up on UK shores. The funding gap is particularly acute at the venture growth stage where early-stage funding is internationally competitive. This gap means these firms need to dedicate significant resources to continually pursue follow-on funding, or seek alternative investment. Ultimately, this is putting the brakes on their ability to scale.

Post Covid-19, there has been increasing investor appetite for life sciences, with 120 UK deals totaling £1.7bn in 2021[2]. Institutional investors, notably pension funds, have a role to play in ensuring this continues. Yet, for many, it remains an untapped area of opportunity.

In the venture capital market as a whole, data shows the importance of pension funds and other institutional investors to US VC markets. A third (34%) of commitments by US limited partners (LPs) during 2017-2021 were undertaken by pension funds, and a further 9% by endowments. In stark contrast, equivalent figures in the UK are 8% and 2% respectively[3].

British Patient Capital was established to address the gap in later stage financing. In particular, our Life Sciences Investment Programme has allocated an additional £200m to make cornerstone commitments to later stage venture growth funds which are focused on the UK's life sciences sector.

BPC investments are already supporting some of the UK's most promising therapeutics companies, and through our wider technology portfolio are investing in a large number of the UK's most dynamic growth stage healthtech companies - such as Alchemab Theraputics alongside SV Health Investors and the Dementia Discovery Fund. Alchemab Theraputics is harnessing the power of naturally protective antibodies to develop novel products for patients with hard-to-treat diseases.

From speaking with some of these companies, it is clear that we are only in the foothills of what is possible, and there is so much to be done to support and invest in our most promising companies. Emerging ‘megatrends' such as longer life expectancies, the rise of genomic medicine, and increasing access to digital healthcare are radically reshaping how we live and making this investment even more important. The opportunity to invest therefore lies not only in the financial returns as these megatrends develop, but the opportunity to champion a better society.

For the UK to be the global science superpower it can be, these companies need support at each stage of their lifecycle. Only by providing this funding can institutional investors and pension savers can gain exposure to the businesses that will be the global leaders of the future.

Ian Connatty is managing director at British Patient Capital

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