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.
Future stars
She says “Our major fund is an early stage biotech fund with around two thirds of the capital invested in start-ups. A big chunk of the ideas for this come out of the heads of the team at SV.
"Just to give you a flavour, we have created some companies ourselves; that way we can shape the company how we think it should be shaped, we recruit the team and can match the financing against the risk.
"This ensures we can get a good level of equity in the businesses, as we are putting in intellectual capital as well as financial capital. The ideas come from published and unpublished academic papers.”
The venture partners are individuals, mostly educated to PhD-level in a scientific discipline, who bring ideas to Bingham and her colleagues.
She says: “Many are people who we know or who know of us, in some cases we have worked with them before, or backed them before; one guy who we are backing now is the third time we have backed him.
"These are all people who work closely with us on portfolio companies but they are also looking to the future. One investment we have now is something that came out of [research conducted at] Kings [College London], and is around gene therapy. We were part of a £12m initial funding round; now he is going to raise £50m [for the same project], which is a lot of money in that area.
"There were two or three cell papers [published in] 2019, which triggered our interest. "
Bingham has been at the company since 1991 as a professional investor, and some of her longstanding connections stood her in good stead in her role as head of the UK Covid Vaccines Taskforce, a position she held for seven months, to the end of last year.
One of the company founders Bingham had backed in 2001 was Sean Marett, whose subsequent company, Biontech, where he is chief commercial officer, developed the first Covid-19 vaccines. Bingham had previously lunched with him before the pandemic, and so had an understanding of the projects he was working on, which meant her connection with him was strong when she took up her role as head of the UK vaccine task force.
Bingham graduated in biochemistry from the University of Oxford and spent two years working in management consultancy before undertaking an MBA at Harvard and joining the SV Health Investors in the early 1990s; she co-leads the company’s biotech division.
With regard to future investment, Bingham says: “The most interesting areas for us are: cell-based, gene-based, and MRNA, which is what proved itself during the vaccine process.
"The aim really is to move away from using small pills and instead to be more creative about how you alter the course of a disease or harness the power of the immune system to treat a disease.
"There are different types of cells in the body – these include innate immunity cells – but the more interesting ones are lymphoid cells. The exciting bit is how we can harness our adaptive immune system to do a better job.
"Cancer, for example, is a failure of the immune system to recognise mutant cells, while arthritis is the body attacking itself. The initial drugs approved in this area are for blood cancers; the next stage is to focus on solid tumours, and then to autoimmune diseases.
"How can you disrupt a gene that has a mutation? Well, you can take out the gene that's causing the disease, but where we want to get to is gene writing, that is, creating whole genes and putting them into the genome.
"On MRNA, the next stage is actually: how we can use this to move beyond vaccines?”
She also says the use of artificial intelligence will also be an increasing feature of how biotech develops.
Bingham says the company is run as a “very flat organisation. It is not the case that things happen that we [managing partners] don’t know about. We are involved early [with the companies in which she invests] and are very active, very hands on, investors”.
David Thorpe is special projects editor at FTAdviser
