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International Clinical Trials

Growth Fund

Since the financial crisis first hit in 2007, pharmaceutical companies have struggled to acquire funding for R&D, particularly those early-stage companies which are pre-proof of concept (POC). This lack of funding options has been stifling R&D and innovation in the life sciences sector. However, there are signs that a more healthy mix of alternative and traditional funding options is now returning to the marketplace. As a result, there is an improving trend in the ability of companies to raise funds for R&D.

This article looks at the funding options available to businesses conducting clinical trials, from early-stage pre-POC companies to those with established revenue streams, and illustrates the available options.

Corporate Venturing

For early-stage companies and academics alike, forming strategic partnering relationships and spin-outs with a view to commercialisation can bring a whole raft of benefits. Not only can such relationships be a means of acquiring a valuable source of finance for funding R&D, but they can also provide access to skills, experience and services which would otherwise be unavailable.

‘Corporate venturing’ is not new, but an increased number of large pharma companies have got involved in recent years, by either investing alongside traditional venture capital or supporting particular collaborations.

Specialist commercialisation companies can also assist businesses and academics with late-stage projects to fund R&D, commercialise their products/services and generate cashflow, thereby improving their investability going forward.

In 2006, IP Group plc, one of the UK’s leading technology commercialisation businesses, invested in Retroscreen Virology Group plc, which began its life as a spin-off from the University of London. This partnership enabled Retroscreen, a virology healthcare business that provides preclinical analytical and clinical services, to expand and improve its studies on the influenza B virus, from initial small trials to larger commercial scale studies. Another example is Angle plc’s investment in Parsortix, a non-invasive cancer diagnostic product, which is expected to receive US Food and Drug Administration approval for clinical sales in September 2014.

Public Funding Initiatives


Another funding route is government public funding initiatives. High-profile examples include the European Commission’s (EC’s) Eighth Framework Programme, known as Horizon 2020, as well as government and national development funds such as the UK Government’s Biomedical Catalyst programme and the Wales Life Sciences Investment Fund. Many companies involved in pan-European consortia receive funding through these programmes.

The Eighth Framework Programme combines all research-related European Union initiatives. It forms part of the Europe 2020 Strategy, which aims to assist with funding of R&D and innovation to provide smart, sustainable growth in Europe.

The EC's Seventh Framework Programme provided funding (out of its Euro 50 billion budget) to a wide range of projects and, following its closure in 2012, was succeeded by Horizon 2020. Running from 2014 to 2020, this new initiative has an Euro 80 billion budget, of which about Euro 25 million will be dedicated to science. This will also include a 77 per cent increase in funding for the European Research Council, which the EC hopes will further advance top-level R&D and innovation.

National Development Funds

A £180 million translational funding programme, Biomedical Catalyst is operated by the Medical Research Council and the Technology Strategy Board. It aims to provide funding and support for small- and medium-sized UK businesses, academics and universities involved in innovative healthcare projects, including clinical trials.

In November 2012, Biomedical Catalyst announced its latest round of funding had provided grants totalling £39 million, of which £9.5 million went to 10 projects led by academic institutions, and a further £29.6 million to 22 projects by small and medium-sized companies, including £1.6 million to Modern Biosciences plc. This drug development company specialises in taking late-stage discovery projects, conducting early POC clinical studies, and subsequently licensing the resulting programmes to the pharma and biotech industries. The award helped the firm to significantly advance a rheumatoid arthritis treatment programme towards eventual commercial success.

In addition, the Wales Life Sciences Investment Fund (which has a target investment fund size of £100 million) was officially opened in 2013, and aims to invest in life sciences and related medical, pharma and healthcare companies based in Wales, providing both financial and business support. Since its launch, more than 160 businesses have applied to the fund.

Similar government development initiatives are operating in other countries and, as with the Wales Life Sciences Investment Fund, often focus on developing local businesses. For example, the Ontario Ministry of Research and Innovation in Canada operates the Ontario Research Fund, which has a CAD$730 million commitment to invest in projects that support the national government’s aim of advancing scientific excellence.

Early-stage businesses carrying out clinical trials would be well advised to research what government and other initiatives are available to them in their local jurisdiction.

Private Equity and Venture Capital

While different funds will have different investment criteria – for example, an established revenue base or credible short-term prospects of revenue – a common criterion for most funds will be an experienced and committed management team.

By way of illustration, in 2009 Retroscreen raised £2.6 million of equity funding from new investors, Aquarius Equity Partners Ltd (a niche fund manager) and IP Venture Fund (a fund operated by the IP Group plc). Aquarius highlighted that a strong management team with a well thought-out business plan, looking for investment and hands-on assistance to take them to the next stage of their business model, was important in its decision to provide financial backing.

Meanwhile, a number of UK venture funds are structured as tax-efficient Venture Capital Trusts (VCTs) in order to provide tax relief for their investors under the Enterprise Investment Scheme (EIS). Accordingly, a key requirement for such initiatives will be eligibility under the EIS and VCT schemes.

These reliefs are intended to provide incentives for investors and counterbalance the risks associated with investing in small, unquoted firms; qualifying for EIS/VCT can significantly improve a company's investability. Companies should consider the eligibility criteria at an early stage and, where possible, seek advance assurance from HM Revenue & Customs that they are eligible.

Public Markets


Since the financial crisis of 2007/08, raising funds on public markets has been challenging. However, there has been a notable shift in recent months, with institutional investors showing a renewed interest in this area.

As a result, going to the public markets may be an ever-more realistic and attractive option for companies in the life sciences sector looking to take the next step in their development. Retroscreen’s admission to trading on the AIM market of the London Stock Exchange and Stemline Therapeutics’ $33 million listing on NASDAQ in 2012 are two notable examples of this shift in attitude.

As well as access to capital, the public markets offer companies a range of benefits, including enhanced status, the ability to incentivise employees, a transactional currency in the form of their listed shares, and a potentially profitable exit option for investors.

Company Admission

While the benefits of going to the public markets are a huge draw for companies, the decision to list cannot be taken lightly. Preparation for admission will typically take up to a year, with the actual process taking between three and four months. Companies can carry out a series of actions to get the business ready for admission and to maximise its appeal to investors. For example, a company preparing for admission should:
  • Consider the make-up of its board, the balance of executive and non-executive directors, and their skills and experience
  • Introduce improved commercial practices, such as pricing models and client account management, to ensure projects are appropriately priced and deliver high client satisfaction
  • Ensure it has a clear focus on and an identifiable path to profit, so it is an attractive investment to institutional and other investors when it comes to the market
  • Consider, in conjunction with its professional advisers, its stage of development and listing eligibility
Various R&D funding options are available throughout the lifecycle. In particular, companies with a strong management team and established revenue streams, or a clear pathway to profit, can benefit from a number of initiatives at each stage of their development.

The success of companies in the sector coming to market is expected to boost both company and investor confidence, and stimulate further investment in clinical trials businesses – and those in need of funding should seek advice early on to ascertain their options.

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Mark Howard is a Partner at Charles Russell LLP. He advises on primary and secondary listings, public takeovers, private mergers and acquisitions, joint ventures, restructurings and distressed asset sales in the life sciences and other sectors. Mark's experience includes advising the founders of Equateq Ltd on the disposal of the company to BASF, and advising WH Ireland on the placing of new shares in Angle plc.

Jodie Dennis is an Associate at Charles Russell LLP. As well as providing general company law advice, she advises on a range of transactions, including mergers and acquisitions, equity capital markets and private equity investments. Jodie’s recent experience includes advising on the alternative investment market initial public offerings of Netscientifi c plc (acting for Nomad) and Tekcapital plc (acting for the company).
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