When Dame Kate Bingham emerged as head of the UK government’s Covid vaccine programme, she was thrust into the heat of political and media intrigue that was a long way from her day job as a biotech investor.
The UK’s vaccine programme has generally been hailed globally as a success, and Bingham has returned to her role as joint managing partner at SV Health Investors, which runs, along with a range of institutional mandates, the International Biotechnology Trust, a £314m market cap investment trust.
The investment trust trades at a discount of just over 4 per cent to its net asset value.
It mostly invests in listed equities, and is managed by Ailsa Craig, Bingham and Marek Poszepczynski. Between 5-15 per cent of the capital is assigned to unquoted businesses, and mostly invests in one of the SV funds run by Bingham to get this exposure,though there are also some unquoted holdings held separately that came from Bingham and her team.
During Bingham's time as head of the vaccine programme, the International Biotechnology Trust was not permitted to invest in Covid vaccine companies. One of the strongest performing biotech investments of last year globally was vaccine maker Moderna, which drove returns for the sector as a whole and probably contributed to the relative underperformace of IBT, as it was excluded.
Biotech has attracted significant levels of investor interest in recent years, due to low interest rates and a growing awareness of the potential for scientific progress to positively affect individuals' lives, as well as its ability to generate strong businesses.
But the rise in focus on the sector has not, says Bingham, led to a rise in the valuations that such assets trade at in the UK and Europe.
She says: “In the US, valuations are rising dramatically in the public and private markets. What happens in the public markets tends to happen in the private markets, and it is there.
"But in Europe and the UK we have not seen that level yet, partly because the level of funding available is much lower, so the level of competition is much lower, and that feeds into valuations.”
Bingham, who is one of the three 'decision makers' at the business who decide on which companies to invest in, says the average level of stage one funding in the UK and EU is about $17m (£12m) whereas in the US the average level is $29m.
Bingham says this creates a “valuation arbitrage”, whereby assets of a similar value or potential are trading at lower prices in one region than another, based solely on the geographical location of a company. This creates a potential investment opportunity, but Bingham says the “arbitrage opportunity won’t last forever”.
Investing in early stage science is notoriously difficult, with many products that make the clinical trial stage failing, and so not becoming marketable, with all of the capital deployed lost.
Bingham says most of the pipeline of new ideas for the various funds she runs come from within the network of “venture partners” SV Health Investors have at their disposal.