L.I. Group

The Healthcare Technology Venture Market in Europe, UK and Yorkshire & Humber About Library Innovation Group (L.I. Group)

The L.I. Group was formed as a spin-out company from the Library House Consulting Department. The company uses established evidence-based research methodologies to deliver strategic insights into innovation-led companies and markets. It also advises public and private sector organisations on strategic issues that involve technology, innovation, entrepreneurship and finance.

Project Team: Martin Holi Alexander Jan Stephen Mounsey Dr Jonathan Lawton Dr Siobhán Ní Chonaill Malgosia Rozycka

For more information about the contents of this report, please contact: i

L.I. Group St John’s Innovation Centre Cowley Road Cambridge CB4 OWS United Kingdom www.li-group.co.uk [email protected]

Access To Finance For Healthcare Technologies Programme

Access to Finance for Healthcare Technologies is an investment readiness programme established by Yorkshire Forward to assist companies in the Health Technology sectors. The programme addresses three key factors relevant to the Yorkshire & Humber region: • the opportunity to develop investment markets, especially for companies in complex and challenging markets such as healthcare; • the opportunity to engage talented business support professionals able to provide advice and guidance on raising finance in general and especially in this sector; and • a shortage of existing successfully venture backed companies to act as role models, explain the process and showcase the benefits. The programme is scheduled to run for an initial period of three years from January 2009 and is delivered by a consortium of three companies, led by Grant Thornton UK LLP and including Quotec and BITECIC. www.investinginhealth.co.uk The Healthcare Technology Venture Market

Contents 1. Executive summary...... 1 2. Introduction...... 2 3. The healthcare technology sector...... 3 3.1. Pharmaceutical industry...... 4 3.1.1. Global and European pharmaceutical industry...... 5 3.1.2. The UK pharmaceutical industry...... 5 3.1.3. Pharmaceutical industry in Yorkshire & Humber...... 7 3.2. Medical technology industry...... 7 3.2.1. Medical technology product naming classification...... 8 3.2.2. Cardiovascular...... 8 3.2.3. Diagnostics...... 8 3.2.4. Orthopaedics...... 9 ii 3.2.5. Global expenditure in medical technologies...... 10

CONTENTS 3.2.6. Medical technologies in Europe...... 10 3.2.7. Medical technologies in the UK...... 11 3.3. Medical technologies Yorkshire & Humber...... 12 4. The financing cycle of healthcare technology companies...... 13 4.1. Where do healthcare technology companies come from?...... 13 4.2. Is the United Kingdom a good place to attract venture capital investments?...... 13 4.3. Is this also true for healthcare technology companies?...... 14 4.4. First round investments...... 16 4.5. Who are the early-stage investors?...... 17 4.6. How much capital was invested?...... 17 4.7. Follow on investment rounds...... 18 4.7.1. European investors in healthcare technology companies...... 19 4.7.2. Top deals in Europe...... 22 4.7.3. Top deals in the UK...... 22 5. The attractiveness of Yorkshire & Humber...... 23 5.1. The investment landscape in Yorkshire & Humber...... 23 5.1.1. The origin of companies in the region...... 23 5.1.2. Venture capital backed university spin-outs in the healthcare technology sector...... 25 5.1.3. Independent healthcare technology start-ups...... 26 5.2. Investors in Yorkshire & Humber...... 27 5.3. Venture capital investment successes...... 29 6. Future trends in the healthcare technology venture market...... 30 7. Sponsors of Access to Finance for Healthcare Technologies Programme...... 38 Foreword

Yorkshire & Humber is at the forefront of the UK’s latest advances in healthcare making it an important region for the healthcare technology industry and one of the fastest-growing nationally. It has one of the UK’s highest concentrations of medical device companies, superb specialist skills (especially in surgical instrumentation, orthopaedics and advanced wound-care), exceptional access to clinical trials, pioneering R&D and Europe’s largest teaching hospital.

The healthcare technology venture market is the second largest sector, behind information and telecommunications, attracting around 24% of all deals in Europe and 29% in the UK. This represents over £2.1bn of investment in European healthcare companies and £434m in the UK in 2007 and 2008.

However, despite the buoyancy of the sector and the strengths of the region, many healthcare technology companies still face difficulty in raising private equity particularly in the early stage where they face the so called ‘equity gap’ . Typically this is the first round of venture capital investment of around £500K to £2m where investors regard propositions as particularly risky.

To help companies in Yorkshire & Humber best position themselves to secure funding we are very pleased to announce a new programme, ‘Access to Finance for Healthcare Technologies’, which will assist these companies to become ‘investment iii ready’. We are delighted to be part of a consortium with a track record of success in this area, led by Grant Thornton and including Quotec and BITECIC, which will work closely with companies in the region to provide skills, business model reviews, FOREWORD mentoring and investor introductions to get them in the best possible shape to secure investment. The programme will run from January 2009 to April 2012 and is open to all SMEs in the healthcare technology market based in Yorkshire & Humber.

This report has been prepared for the launch of the programme, with the needs of entrepreneurial companies in mind, to provide an overview of the level of investment activity in the healthcare technology sector over the last two years in Europe, the UK and Yorkshire & Humber. It details the types of deals that have been completed and who the most active investors have been and also provides a commentary on the current status of the investment market and likely future trends. I hope that you will find it informative.

Glenn Stone

Partner, Grant Thornton UK LLP The Healthcare Technology Venture Market

Key Facts*

£2.1bn of venture capital has been invested into European healthcare companies.

133,000 people are employed by healthcare technology companies in the UK.

Over 300 venture capital investments have been made into UK healthcare companies.

71 first round investments have been made into UK healthcare companies.1 iv £1.4m is the average deal amount for a UK first round investment into the healthcare technology sector KEY FACTS 88 active companies spun-out from Yorkshire Universities (2nd place in the UK).2

17 is the number of active venture capital backed healthcare technology university spin-outs in Yorkshire.

£383m is the total annual research income of the universities in Yorkshire & Humber.

£76.2m is the value of contract research with Yorkshire Universities (3rd place in the UK).3

*as of Jan 2007 – Nov 2008 1 Executive summary

This report provides an overview of the healthcare technology venture capital market. It analyses both historical and current investment data on the healthcare technology venture market in the Yorkshire & Humber region and benchmarks it against European and UK figures. It uses a qualitative approach to gauge what the industry perceives to be both the future trends and overall potential of the healthcare technology industry.

The healthcare technology sector is made up of a number of sub areas, including pharmaceutical, drug development, medical technologies and other life sciences. These areas are of particular interest as they have experienced high levels of growth in recent years due to increases in national health expenditure, the global ageing population, developments in technology (including diagnostics and drug delivery) and the rise in the number of chronic illnesses.

The UK’s leading manufacturing industry is the pharmaceutical and drug development sector, with two of the world’s top ten pharmaceutical companies based in the country. Within the Yorkshire & Humber region, pharmaceutical companies make up less than half of all healthcare technology companies within the area. Johnson & Johnson, one of the largest global pharmaceutical companies, has subsidiaries based in the Yorkshire & Humber region as are a number of major publicly-listed UK pharmaceutical companies including; Avacta Group, Syntopix Group and Fusion IP. 1 Although the UK is heavily reliant on imports it accounts for 11% of the total European medical device market and 20% of all European medical technology companies. Within the UK, the sector employs some 60,000 individuals and nearly a tenth of EXECUTIVE SUMMARY these are employed within the Yorkshire & Humber region accounting for an output of £450m. In addition to four public- quoted companies (quoted on the London Stock Exchange) there are several large international medical technology companies based in the Yorkshire & Humber region.

Venture capital in the healthcare technology sector accounts for approximately 24% of all investments in Europe. Of the 311 deals completed between 2007 and 2008 there was an almost equal split in investment activity between the pharmaceutical and medical technology area. The average investment size into a healthcare technology company was £2.7m, £1.3m lower than the European average in this sector. There have been six first round investments in the Yorkshire & Humber region over the past two years accounting for nearly 10% of all first round investments in to healthcare technology companies in the UK.

The Yorkshire & Humber region benefits from the presence of a number of strong research universities that have contributed several spin-out companies to the local healthcare technology sector. The universities collaborate closely with intellectual property commercialisation companies which provide capital and advice to spin-out companies. However, the number of products or services that can be transferred into separate spin-out companies is limited at any university. This therefore requires a sustained effort by the region to establish, finance and grow additional start-up companies.

This report has identified a number of technological trends within the healthcare technology sector that are increasingly appealing to venture capital investors. These include miniaturisation and nano-biotechnology, stem cell, ophthalmology, standardisation, imaging and personalised medication. The report also investigates the latest financial trends for early-stage businesses within the sector. The Healthcare Technology Venture Market

2 Introduction Over the years the European healthcare technology sector Methodology has provided many attractive investment opportunities Venture capital investment data is derived from different for investors. Venture capital investments into this sector information sources and news providers. The main data now count for one-third of the European and UK venture source for investment activities was the Library House capital market. The emergence of biotechnology within the database ‘European Venture Intelligence’ (EVI) as of pharmaceutical and drug development sectors has created November 2008. Additional information was taken from a niche venture capital market with specialised early- from correspondence with investors, technology transfer stage investors. In the field of medical technologies many offices and universities. Market capitalisation values are innovations are now explored through smaller companies taken from the statistics of the London Stock Exchange developing diagnostic tools, implants, medical instruments (LSE) as of December 2008. and drug delivery systems to serve patients, with particular focus on the ageing societies across European countries. The data presented in this report is taken from publicly available sources. Due to the nature of the venture capital Despite the relatively high venture activity in medical market not all information about investments is disclosed. technology in the UK all venture capital stakeholders are 2 However, the L.I. Group claims to provide an accurate aware of the challenges that the venture capital market will picture based on the information that is currently available. face in the upcoming months and possibly years. The impact INTRODUCTION of changes taking place in the economic and financial markets will undoubtedly influence the venture capital market significantly and will require special efforts from entrepreneurs to secure financing for their companies and for investors to close new funds.

This report analyses the European healthcare technology venture market over the past two years (2007-2008) using quantitative and qualitative research methods. Analysis of venture capital investment data within this sector is used to specify the investment activity and trends. The results are backed by interviews with experts and professionals from venture capital organisations, technology transfer offices, venture capital backed companies and other service providers.

Secondly, the results from the analysis provide the basis for recommendations addressed to investment-seeking entrepreneurs of healthcare technology companies located in the UK and, more specifically, in Yorkshire & Humber.

Finally, the report gives a detailed overview of the regional healthcare technology market in the Yorkshire & Humber. Through the analysis of companies, case studies and historical investments, this report provides entrepreneurs, investors, technology transfer professionals, universities and business support organisations with a clearer understanding of the regional investment landscape and ways in which these groups can benefit from investment opportunities. 3 The healthcare technology sector

The healthcare industry is generally defined as that which provide healthcare services; the identification of numerous has a focus upon the treatment and tending of patients medical areas with unmet needs, particularly oncological, who are injured, sick, disabled or infirm and is facilitated by cardiovascular, arthropathic and neurological diseases such as professional health workers and technology. The healthcare Alzheimer’s and Parkinson’s. Rising obesity levels worldwide, technology industry can thus be broadly segmented into which have led to much higher numbers of diabetes- and two areas: cardiovascular-related conditions, have also created a demand • Pharmaceutical and drug development for innovative healthcare technologies. A company that is able to serve any of these demands can provide huge financial • Medical technologies returns to their investors, and is therefore a prime target for Investors look for companies that have excellent growth venture capital funds. potential driven by the company’s own innovative capacity. However, external factors such as market size and market According to the latest OECD Health Data, the average growth are part of the key reasons for investment as national spend on healthcare worldwide still remains at companies are more likely to gain venture backing if they the 8.9% of the GDP (denoted by the OECD in Figure 1), can prove that their products and services can serve large or with the US spending the highest percentage of GDP (see growing markets that would have a high uptake of innovative Figure 1). It can be seen that healthcare spending remains 3 goods. Before an analysis of differing sectors within the a large enough market to attract the interests of investors, SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR healthcare technologies industry can be undertaken, the particularly when the innovation can garner a large enough overall industry and the effects technology has upon it, has portion of the expenditure. to be understood. • In previous years it has been stated that the focus The demand for innovation in the healthcare market is driven by on healthcare technology would cost the country several factors including the increase in life expectancy across increasingly large amounts year on year, with some developed western countries; the increase of expenditure to healthcare experts stating that the development and

Figure 1 – Health expenditure as a share of GDP, 2006 (Source: OECD) The Healthcare Technology Venture Market

diffusion of medical technology was responsible for the persistent difference between health spending and overall economic growth. Some argued that new medical technology may account for about one-half or more of real long-term spending growth. However, the costs were shown to have specific benefits such as: • Development of new treatments for previously untreatable terminal conditions; • Major advances in clinical ability to treat previously untreatable acute conditions; • Development of new procedures for discovering and treating secondary diseases within a disease; • Expansion of the indications for a treatment over time, increasing the patient population to which the treatment is applied; • On-going, incremental improvements in existing 4 capabilities, which may improve quality; • Clinical progress, through major advances or by the SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR cumulative effect of incremental improvements that extends the scope of medicine to conditions once regarded as beyond its boundaries, such as mental illness and substance abuse.6

As stipulated in the ‘Impacts of Advances in Medical Figure 2 – Developed from Rettig (1994) Technology in Australia’ report (2005)7, increased and Productivity Commission (2005) expenditure on new medical technologies is reflected in improved treatments and a significant increase in the 3.1. Pharmaceutical industry numbers of people treated. Although advances in medical technology have provided value for money — particularly The pharmaceutical industry is one that is focused on the as people highly value improvements in the quality development, production and marketing of medication, and length of life — in practice the cost effectiveness of which is defined as ‘as any substance intended for usein individual technologies varies widely. This high level of the diagnosis, cure, mitigation, treatment, or prevention 8 variation in healthcare cost effectiveness makes the overall of disease.’ Lately the pharmaceutical industry has value, or net community benefit, to be an important point undertaken intensive research and development activities of consideration. within the biotechnology industry and therefore the term biotechnology has become synonymous with drug discovery With this in mind, two key questions shown in Figure 2 must and production. In order to understand the healthcare be asked when looking at new healthcare technology. technologies industry one must look at these industries and the potential market facing venture capital investors. These two questions and the subsequent thought process have become the basis for determining the impact and hence attractiveness to investors interested in the healthcare industry. 3.1.1. Global and European pharmaceutical Europe, with two based in the UK (see Table 1). Despite this industry sources claim that Europe still made up at least one-third of the overall sales spend in 2007.9

3.1.2. The UK pharmaceutical industry As shown in Table 1, the UK is home to two of the world’s largest and most profitable pharmaceutical giants, the British founded GlaxoSmithKline and the Anglo-Swedish AstraZeneca. The UK pharmaceutical industry is estimated to be worth over US$19bn. It is directly responsible for 72,000 jobs, of which an estimated 28,000 are in R&D. This results in a gross output to the country of approximately £235,000 per employee (Table 2). An analysis of DTI and ONS data reveals that the pharmaceutical industry has used over a third of its sales revenue for R&D purposes in 2007. Figure 3 – Breakdown of global pharmaceutical sales by region – In line with this, ONS data shows that the pharmaceutical 2007 (Source: IMS,2008) industry contributes over a quarter of the entire UK’s R&D spend. 5 The global pharmaceutical industry was estimated to be worth over US$660bn in 2008. Figure 3 shows the breakdown SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR of global pharmaceutical sales by region. It can be seen that one third of global pharmaceutical sales were in Europe. Of the top ten pharmaceutical companies, five are based in

Corporation Country Sales (£m) Market share (%) Pfizer US 22,292 6.7 GlaxoSmithKline GB 18,847 5.6 Novartis CH 17,154 5.1 Sanofi Aventis FR 16,788 5.0 Astrazeneca GB 15,010 4.5 Johnson & Johnson US 14,478 4.3 Roche CH 13,814 4.1 Merck & Co US 13,631 4.1 Abbott US 9,570 2.9 Lilly US 8,335 2.5 Top 10 149,920 44.9 Amgen US 8,188 2.5 Wyeth (acquired by Pfizer) US 7,949 2.4 Bayer DE 7,020 2.1 Bristol-Myers Squibb US 6,519 2.0 Boehringer Ingelheim DE 6,277 1.9 Schering-Plough US 6,181 1.9 Takeda JP 5,479 1.6 Teva IL 5,300 1.6 Novo Nordisk DK 3,336 1.0 Daiichi Sankyo JP 2,925 0.9 Top 20 209,093 62.6

Table 1 – Top world pharmaceutical corporations, 2007 (Source: IMS World Review 2007) The Healthcare Technology Venture Market

Employees R&D employment R&D as a % of total Salaries and wages Gross output per Year (1,000s) (1,000s) employment (£m) employee (£) 1980 73.3 12 17 412 33,315 1985 66.9 15 22 662 60,239 1990 71.1 18 26 1,120 90,549 1995 61.9 17 27 2,039 160,242 2000 66.0 25 38 2,214 190,492 2001 71.0 27 38 2,624 198,862 2002 84.0 29 35 3,086 183,940 2003 73.0 27 37 2,698 212,712 2004 73.0 27 37 3,040 208,753 2005 68.0 26 38 3,084 231,588 2006 72.0 28 39 3,414 235,278

Table 2 – Employment in the UK pharmaceutical industry (Source: ONS,2008) 6

Total market sales SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR Rank Corporation Nationality Market share (%) (£m) 1 Pfizer US 1,091.5 9.3

2 GlaxoSmithKline GB 1,056.9 9.0

3 Sanofi-Aventis FR 782.0 6.7

4 Astrazeneca GB 667.6 5.7

5 Novartis CH 458.9 3.9

6 Roche CH 438.2 3.7

7 Wyeth (acquired by Pfizer) US 387.0 3.3

8 Merck & Co US 353.0 3.0

9 Lilly US 344.5 2.9

10 Boehringer Ingelheim DE 267.6 2.3

11 Johnson & Johnson US 256.5 2.2

12 Schering Plough US 252.5 2.1

13 Novo Nordisk US 218.0 1.9

14 Bayer Schering DE 195.1 1.7

15 Abbott US 167.8 1.4

16 Teva IL 136.3 1.2

17 Bristol-Myers Squibb US 114.5 1.0

18 Mundi Int. US 113.8 1.0

19 Gilead Sciences US 105.0 0.9

20 Servier FR 102.3 0.9

Table 3 – Nationality of top 20 pharmaceutical companies in the UK (Source: IMS Dataview, 2007) Trade 3.1.3. Pharmaceutical industry in Yorkshire & Year Exports Imports Balance Humber 2006 13,400 9,114 4,286 In the Yorkshire & Humber area, pharmaceutical and 2007 14,080 9,871 4,209 biopharmaceutical companies account for significantly less 2008* 12,085 7,934 4,151 than half of healthcare technology companies in the region. * as up to date as November 2008 Although the number of companies correlates with previous Yorkshire Forward reports10, the reliability of this dataset Table 4 – UK exports and imports of pharmaceutical goods (Company House) is questionable and the true percentage 2006-2008 (Source: uktradeinfo.com,2008) is up for debate. Key publicly listed pharmaceutical and biotechnology corporations in the Yorkshire & Humber The UK is home to a number of global pharmaceutical region include Avacta Group, Syntopix Group and Fusion IP. companies, especially within the Greater South East. The Yorkshire & Humber region is home to several of 3.2. Medical technology industry the Johnson & Johnson family of companies. As Table 3 suggests only a small minority of the Top 20 UK-based Medical technology is generally defined as the use of technology 11 pharmaceutical corporations originated and are active to manage a range of health conditions through diagnostic within the UK. Nonetheless, the pharmaceutical industry and therapeutic application. In a more general sense, the is considered to be Britain’s leading manufacturing sector. term can be used to refer to the procedures, equipment, and 7 This claim is backed up by HM Revenue & Custom data from processes by which medical care is delivered. uktradeinfo, which has shown a trade surplus from 2006 SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR Medical technology companies have a range of focuses and to 2008 for the Pharmaceutical industry. According to HM these include: Revenue & Custom, this surplus has been ongoing since mid 1980, making the UK one of the top five countries for global pharmaceutical trade. However, there is speculation at this time that due to the strength of the Euro and the subsequent weakness of Sterling, UK-based pharmaceutical companies may be less profitable in the upcoming year.

Figure 4 – Key health sector focus 12 The Healthcare Technology Venture Market

3.2.1. Medical technology product naming with an annual estimated cost of €192bn to the overall EU classification economy. Though the health sectors with which medical technology companies focus upon seem very well defined and limited, According to the WHO’s 2007 statistical data, heart disease there is a huge range of products that can be developed and strokes account for 21.7% of deaths worldwide, for each area. Table 5 shows the common nomenclature while cardiovascular disease accounts for 30%. The WHO developed by the Global Medical Device Nomenclature estimates that in 2015 almost 20 million people will die from Agency. a cardiovascular-related condition. This can all be related to both an ageing global population and a sustained rise in obesity. In fact, rising obesity levels are not only responsible Term Examples for the growing number of cases of heart disease and Active implantable Cardiac pacemakers, strokes, but has also contributed to the rise in deaths technology neurostimulator, etc. related to diabetes. The WHO predicts that within the next Anaesthetic and respiratory Anaesthetic and respiratory ten years diabetes-related deaths will increase worldwide technology technology by more than 50%. Dentistry tools, alloys, resins, Dental technology dental floss, brush, etc. This in turn has created a viable marketplace with the 8 Electromechanical medical X-ray machine, scanner, laser, cardiovascular device market expected to reach US$40.46bn technology etc. by 2011 in North America alone. Cardiovascular medical

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR Hospital hardware Hospital bed, etc. technology products include cardiac rhythm management, Pregnancy, blood glucose, heart valves, cardiac surgery systems, minimally-invasive In-vitro diagnostic technology genetic tests, etc. image-guided technologies, interventional neurovascular Nonactive implantable Hip, knee joint replacement, technologies and heart assist devices and stents. An example technology cardiac stent of this is that the European drug-eluting stent market has Ophthalmic and optical Eye glasses, contact lenses, been forecast to reach $4.5bn by year end this year, up from 14 technology ophtalmoscope, etc. $1.6bn in 2001. Reusable instruments Various surgical instruments Globally, the major cardiovascular device companies include Syringes, needles, gloves, Single use technology Cordis (Johnson & Johnson), Medtronic, Boston Scientific, balloon catheters, etc. Guidant, St Jude Medical, Abbot, Sorin, Conor Medsystems Technical aids for disabled Wheelchair, walking aid, and Biotronik. per­sons hearing aid, electrical bed, etc. Diagnostic and therapeutic Radiotherapy units 3.2.3. Diagnostics radiation technology As healthcare has improved, there has been an ever- Table 5 - Global medical device nomenclature increasing reliance on better and faster diagnostic tests. (Source: Global Medical Device Nomenclature Agency, 2009) Such diagnostics include biotechnological-based testing as Despite the plethora of health-related focii listed above, well as medical hardware. cardiovascular, diagnostics and orthopaedics are the largest therapy areas within medical technologies. The pace of technological change in the diagnostic market is enabling earlier and more accurate diagnoses of disease, 3.2.2. Cardiovascular improving clinical decisions and assisting more effective monitoring of treatment. The global market for in vitro This focus is on any medical technology, whether therapeutic, diagnostics was valued in excess of US$38bn in 2007 and has diagnostic or procedural, that deals with disease or the been forecast to grow by 6.7% year on year until 2012. There prevention of disease relating to the cardiovascular system. are two diagnostic methods in particular that are seen as high growth areas: molecular diagnostics and point of care It is estimated that the two most common occurrences of diagnostic tests. These are expected to exhibit a Compound cardiovascular disease, heart disease and strokes, cost the Annual Growth (CAG) of 14% until 2010 from a base value of US $448.5bn in 2008.13 In line with this trend, cardiovascular $2.6bn in 2005, and 7.8% until 2010 from a base of $12bn in disease is considered to be the major cause of death in the 2005, respectively. European Union, killing over 2 million people each year 3.2.4. Orthopaedics of years ago in the areas of reconstructive devices and joint Orthopaedic conditions affect hundreds of millions of people replacements, spinal implants and instrumentation, fracture throughout the world. According to recent reports orthopaedic repair and orthobiologics. conditions account for up to half of all chronic conditions in people over the age of 50 in developed countries, a figure that is In 2007, the European market for orthopaedic devices was set to double by 2020. Combined with the fact that a fifth of all valued at around $3bn. On a global scale, worldwide sales visits to outpatient clinics worldwide are for musculo-skeletal reached $25.9bn and it is estimated that by 2010 the sector conditions, a focus on orthopaedics by medical technology will top $44bn in global revenues. companies seems an obvious and lucrative choice. Globally, the major orthopaedic medical technology The main products seen within this sector are divided into a companies include Smith & Nephew, based in York, and number of different fields, with strong growth seen a number DePuy (Johnson & Johnson) which is based in Leeds.

9 SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

Figure 5 – Top 25 global expenditure in medical technologies in 2007 (€bn) (Source: Eucomed,2008) The Healthcare Technology Venture Market

3.2.5. Global expenditure in medical technologies Within Europe, Germany is both the biggest exporter (€14bn) Figure 5 provides a quick overview of the 25 countries with and the biggest importer (€9.2bn) of medical technology. In the largest global expenditure in medical technologies. As terms of exports, Germany is followed by France, the UK and can be clearly seen, the US has the largest expenditure, Ireland. The biggest importers after Germany are France, almost €80bn. In fact, US expenditure is equivalent to the Italy, the UK and Spain. Germany, the UK, Ireland, Sweden, entire expenditure of Europe. Denmark and Finland have trade surpluses in medical technology, while all other countries have trade deficits, 3.2.6. Medical technologies in Europe suggesting the prowess of these countries in this area. As stated recently in a report15 by the McKinsey Group, the European medical technology market, which is regulated by the European Medical Devices Directives, is growing at a rate of 5–6% each year – a model of consistency in an otherwise turbulent economic climate. In support of this, Espicom Business Intelligence predicts that the main medical device markets in Western Europe will grow by over 40% in the coming years to reach an estimated US$82.4bn 16 10 by 2013. According to Eucomed medical technology sales in Europe SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR amounted to €63.6bn in 2005, making up one-third of the global market share. Eucomed has also stated that the European medical technology industry invests some €3.8bn in R&D and employs 435,000 people across Europe, making a major impact upon Europe’s economy while costing it less that 0.7% of GNP.

Figure 6 – Location of European medical technology companies (Source: Episcom, 2008)

Figure 7 – Number of employees employed by European medical technology companies (Source: Episcom, 2008) 3.2.7. Medical technologies in the UK The UK makes up an 11% share of the European medical device market and in 2008 this was valued at approximately US$9.9bn. Despite the fact that 20% of all European companies operate from the UK and that the UK has a trade surplus in this industry, the UK medical technology industry is heavily reliant on imports. This is indicative of a domestic industry that is composed of manufacturers that are small and undercapitalised.

At present it is estimated that the UK has 2,000 companies engaged in medical device manufacture, 85% of which are considered small companies (10 -50 people) with a turnover less than £5m. As shown in Table 6, the medical technology industry employs over 60,000 people, the second largest employer in Europe after Germany in this sector.17 Closer examination of the industry landscape shows that the UK is Figure 8 – European medical technology market split particularly focused on R&D and has excelled in the areas of 11 (Source: Eucomed,2008) advanced wound care, diagnostics and orthopaedics. SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

Country Employees % of European Total Population (000s) Workforce per capita Austria 6,000 1.40% 8,175 0.07 Belgium 5,500 1.30% 10,421 0.05 Czech Republic 12,760 2.90% 10,212 0.12 Denmark 14,000 3.20% 5,401 0.26 Finland 3,000 0.70% 5,228 0.06 France 40,000 9.20% 60,200 0.07 Germany 110,000 25.30% 82,491 0.13 Greece 2,500 0.60% 11,062 0.02 Hungary 4,250 1.00% 10,107 0.04 Ireland 26,000 6.00% 4,044 0.64 Italy 29,815 6.90% 57,553 0.05 Netherlands 9,500 2.20% 16,282 0.06 Norway 500 0.10% 4,592 0.01 Poland 8,700 2.00% 38,180 0.02 Portugal 3,200 0.70% 10,509 0.03 Romania 15,000 3.50% 21,631 0.07 Slovakia 2,198 0.50% 5,382 0.04 Slovenia 1,237 0.30% 2,001 0.06 Spain 25,400 5.80% 42,692 0.06 Sweden 15,000 3.50% 8,994 0.17 Switzerland 40,000 9.20% 7,390 0.54 United Kingdom 60,000 13.80% 59,834 0.10

Total Europe 434,560 100% 498,863 0.09

Table 6 – Workforce in medical technology companies (Eucomed,2008) The Healthcare Technology Venture Market

3.3. Medical technologies Yorkshire and Humber According to UK Trade and Investment (UKTI), and the latest ONS and Companies House data, Yorkshire has the UK’s highest concentration of medical device companies. Over 200 firms involved within the medical technology industry have a base in Yorkshire, employing some 7,000 staff and producing an output of over £450m. These companies include a large number of medical device firms, particularly within the orthopaedic and medical devices arena, including: • Reckitt Benckiser; www.reckittbenckiser.com • DePuy International (a Johnson & Johnson company); www.depuy.com • Smith and Nephew; www.global.smith-nephew.com 12 • Swann-Morton; www.swann-morton.com • Tunstall Healthcare; www.tunstall.co.uk

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR It is believed that the existing presence of these firms plays a substantial role in the attractiveness of the area for new investments.

It should be noted that there are a number of companies that have originated from and are still based in the region. These include Dawmed Systems, 1st Dental Laboratories, Medical House and Surgical Innovations Group. 4. The financing cycle of healthcare technology companies Of the different sources of finance available to entrepreneurs 4.1. Where do healthcare technology venture capital plays only a minor role. To put this in context, companies originate from? of the 1.2m companies in the UK only around 2,000, or The products and services of healthcare technology 0.16%, have received venture capital investments. However, companies are often based on experience gained by former experts estimate that up to 80% of the fastest growing academics or researchers at R&D departments of technology companies, in terms of both revenue and employment, have corporations. The scientific discoveries of academics are received venture capital investment during their life cycle. usually commercialised through university spin-out companies Most of the world’s biggest healthcare companies including that acquire the intellectual property rights from the incubator Amgen, Genentech, Biogen and others have at some point organisation in exchange for an equity stake or the payment received venture capital investments or, like General Electric, of a licensing fee. The same mechanism can also be used for Medtronic, Johnson & Johnson and Amgen, have their own corporate spin-outs. By contrast, start-up companies are often venture capital activities that invest into the industry. founded by entrepreneurs who have a strong professional Innovation companies often display the following growth background and the necessary scientific expertise to start a pattern as they develop from an initial idea into an new company with a unique selling position. established market player. The different stages of growth 13 An analysis of UK-based healthcare technology companies are often linked to certain types of funding: that have received investments over the past two years shows SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES that the majority of companies began as independent start- ups, followed by university spin-outs, spin-outs from non- university research organisations, and corporate spin-outs.

Origin of healthcare technology companies Percentage Independent start-up companies ~50% Spin-outs from universities 30-40% Spin-outs from research organisations 5-10% Corporate spin-outs ~5% Total 100%

Table 7 - Origin of UK-based healthcare technology companies (Source: EVI, Jan 07 - Nov 08)

Across the different healthcare technology areas there is a distinct pattern of where healthcare technology companies originate from. For example, pharmaceutical and drug development companies do not usually originate from Figure 9 – Financing lifecycle universities (unlike medical technology companies). Despite The report follows the financing cycle of venture capital this, many entrepreneurs who have started companies have backed companies from their foundation to the time when done so with an extensive background in healthcare research the investors can exit their investments. The different within public research organisations or large corporations. stages of the finance cycle will be presented in the following chapters using the insights gained from both data analysis 4.2. Is the United Kingdom a good place and interviews with relevant market authorities. to attract venture capital investments? There are many factors that influence the provision of venture capital within a country and all European countries have made a commitment – verbally at least - to improve the conditions surrounding the supply and demand of venture capital. The impact of factors such as the entrepreneurial The Healthcare Technology Venture Market

climate, legal and tax frameworks, a country’s innovative 4.3. Is this also true for healthcare capacity and so forth, on the venture capital market has technology companies? been discussed extensively elsewhere and is not the subject The healthcare technology venture capital market is of this report.18 the second largest sector behind the information and At the outset an entrepreneur is mostly inflexible regarding telecommunications sector. Around 24% of all European the decision of where to locate the company. While spin- deals and 29% of all UK deals are invested into healthcare out companies often choose an initial location close to their technology, meaning that nearly every third deal in the UK incubator organisation, start-up companies are normally is healthcare-related. based near to where the entrepreneur lives.

Entrepreneurs who start a company in the UK can benefit from the most active venture capital market in Europe with 29% of all European investments (1,076 deals) and 27% of all disclosed investment (£2.16bn) going into UK-based companies. In terms of deal activity per capita, the United Kingdom is comparable to the United States.19 Between 14 2007 and 2008 at least 3,600 deals were closed between investors from all over the world and entrepreneurs with

SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES European-based companies.

The total disclosed amount invested in the 2,070 recorded deals in the UK was £8bn, meaning a European-based company could secure an average of nearly £3.9m per deal. The average deal size for a UK-based company is, at £2.9m, significantly lower than for companies in the rest of Europe. But this is not necessarily all bad news for national entrepreneurs as the drop in the average value is possibly a result of the higher disclosure rates for smaller venture capital deals in the UK.

Figure 10 – Distribution venture capital investments across sectors in Europe in 2007 (based on 1,492 deals) (Source: EVI, 2007)

Europe UK Ratio (incl. UK)

Number of venture capital backed deals 3,668 1,076 29%

Number of investments with disclosed deal 2,070 748 36% All venture capital amount backed deals Total deal amount (£m) 8,034 2,160 27%

Average investment amount (£m) 3.9 2.9 74%

Table 8 – Overview of European venture capital investments (Source: EVI, Jan 07 - Nov 08) UK dominance within the European healthcare technology In terms of deal size, the UK healthcare technology sector is indicated by the fact that 35% of all European deals investment landscape differs significantly from the European are closed by UK companies. landscape where the average deal size is £1m above the UK average. The average deal amount for medical technologies UK pharmaceutical and drug development companies have is at the same level in both regions. By contrast, European received in total over £433m in 161 disclosed deals. The lower pharmaceutical deals are on average £2.3m bigger. average deal size in the UK is a result not only of the higher disclosure rates for small deals, but also because there are fewer In summary, the UK has the biggest healthcare technology deals above £10m compared to other European countries. investment market in Europe. Entrepreneurs have the opportunity to secure substantial venture capital A breakdown of the different technology areas shows that investments to establish and grow their companies. But ‘pharmaceuticals and drug development’ and ‘medical before entrepreneurs can expect multi-million pound deals, technologies’ offer almost equal investment opportunities in they have to prove that there is a market for their product the UK. In Europe, however, the number of pharmaceutical- or service. related deals is significantly larger than those related to medical technology. This would suggest that the UK has a far greater emphasis upon medical technology. 15 Europe (incl. UK Ratio

UK) SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES Number of venture capital backed deals 886 311 35% Percentage of all venture capital deals per region 24% 29% Healthcare technology Number of investments with disclosed deal amount 532 161 30% sector Total deal amount (£m) 2,106 434 21% Average investment amount (£m) 4.0 2.7 68%

Table 9 – Overview of European and UK healthcare technology investments (Source: EVI, Jan 07 - Nov 08)

Healthcare technology sector UK Pharmaceuticals & Medical Total Others drug development technologies Total number of investments 311 130 113 68 (disclosed and undisclosed deal amounts) Number of investments with 161 64 63 34 disclosed deal amount Disclosure rate 52% 49% 56% 50%

Total deal amount (£m) 433.61 168.62 168.63 96.36

Average investment amount (£m) 2.69 2.63 2.68 2.83 Table 10 – Overview of UK healthcare technology investments (Source: EVI, Jan 07 - Nov 08)

Healthcare technology sector Europe Pharmaceuticals & Total Medical technologies Others drug development Total number of investments (disclosed 886 462 294 130 and undisclosed deal amounts) Number of investments with disclosed 532 297 164 71 deal amount Disclosure rate 60% 64% 56% 55% Total deal amount (£m) 2,106.10 1,476.83 472.68 156.59 Average investment amount (£m) 3.96 4.97 2.88 2.21 Table 11 – Overview of European healthcare technology investments (Source: EVI, Jan 07 - Nov 08) The Healthcare Technology Venture Market

4.4. First round investments Number of As stated earlier, entrepreneurs with intellectual property (IP) Rank UK region first round investments assets and companies that have proven their technology are 1 South East 14 in the best position to approach investors such as business angels or institutional seed and early-stage investors. Seed and 2 London 12 early-stage funds are often managed by institutional investors 3 Scotland 11 and backed by public money in the form of co-investment 4 North West 7 schemes or fund-of-fund investments. These public initiatives 5 Yorkshire & Humber 6 address the so called ‘equity-gap’, which refers to the scarcity 6 West Midlands 5 of initial investments for early-stage companies up to £1m. 7 East of England 5 The main reasons for the lack of investments of this size is that investing in early-stage businesses is considered to have 8 Wales 3 higher investment risks and proportionally higher transaction 9 South West 3 costs in the form of due diligence and investment appraisals. 10 North East 2 Besides a few independent investors, public sector backed 11 East Midlands 2 funds are primarily tasked with investing into companies that 12 Northern Ireland 1 fall in this equity gap. This funding is often used to finalise 16 Total: 71 the proof-of-concept stage and establish a management and legal structure. Table 13 - Overview of UK first round venture capital investments SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES in healthcare (Source: EVI, Jan 07 - Nov 08) First round investments are a good indicator of the state of the healthcare technology market, showing the level of activity among entrepreneurs and investors. A European comparison of first round investments offers good news to entrepreneurs in the UK as it shows that the UK has the highest level of activity:

Number of Rank Country first round investments 1 GB 71 2 DE 48 3 FR 17 4 SE 18 5 CH 17

Table 12 – European countries with the most first round venture capital investments into the healthcare technology sector (Source: EVI, Jan 07 - Nov 08)

As noted earlier, entrepreneurs are often reluctant to base their companies outside their own region. This means the regional activity level for first round investments provides Figure 11 – Distribution of first round investments in the UK (Source: EVI, Jan 07 - Nov 08) interesting insights into both the regional capacity for starting companies and the availability of early-stage investors. In the past two years, there have been a number of early-stage investments into healthcare technologies in Yorkshire & Humber. 4.5. Who are the early-stage investors? close relationships with universities and invest primarily in university spin-out companies. A European analysis of first round investments shows that institutional investors backed by public money and The good news for entrepreneurs is that nearly eighty specialised independent investors play an important role in different venture capital organisations invested into UK providing the initial capital injections. healthcare technology companies over the past two years, although it was common for them to invest solely into What these very active venture capital organisations all a single company. Our research indicates that the right have in common is that they invest within a specific region business has the chance to attract international investors or at least within their national boundaries. Only a few like the Novartis Venture Funds, Odlander Fredrikson or organisations, like Life Science Partner and BB Biotech Truffle Capital. Ventures, have undertaken first round investment activity outside their national boundaries. 4.6. How much capital was invested? The analysis of investment activity over the past two years Around a third of all healthcare technology deals in Europe are supports a commonly held view that entrepreneurs should initial capital injections. In a similar manner to overall venture focus their search for an initial investor within the borders of capital investment, as discussed in section 4.3, the average the country or region where their venture is located. amount invested in the UK is lower (£2.8m) than the average for all European healthcare technology deals (£3.9m). The 17 A follow-on analysis identified the most active early-stage spread is around £1m per deal across the different healthcare healthcare technology investors in the UK. The results are technology areas. However, for pharmaceutical and drug SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES similar to the European analysis with public sector backed development companies the average investment size is institutional investors dominating the league tables. still very high at over £4m per deal. This largely reflects the Interestingly, two of the independent institutional investors need to fund pre-clinical trials which are expensive and time (Imperial Innovations and IP Group) in this league have very consuming before any product can be brought to market.

Number of Rank Investor Country Investor type investments 1 High-Tech Gründerfonds DE Public Sector Backed 13 2 Clave Mayor SASGECR ES Institutional Investor 6 2 KFW Bankengruppe DE Public Sector Backed 6 4 SEED Capital Denmark DK Public Sector Backed 5 4 Bayern Kapital (Seedfonds Bayern) DE Public Sector Backed 5

4 Scottish Enterprise Fund GB Institutional Investor 5

Table 14 – Most active European first rounds investors (Source: EVI, Jan 07 - Nov 08)

Rank Investor Investor type Number of investments 1 Scottish Enterprise Fund Public Sector Backed 5 2 Imperial Innovations Institutional Investor 4 3 Rainbow Seed Fund Public Sector Backed 3 3 NESTA Ventures Public Sector Backed 3 3 Merseyside Special Investment Fund Public Sector Backed 3 3 IP Group Institutional Investor 3 3 Catapult Venture Managers Public Sector Backed 3

Table 15 – Most active UK first round investors (Source: EVI, Jan 07 - Nov 08) The Healthcare Technology Venture Market

Pharmaceuticals & Medical Europe Total drug Others technologies development Total number of first round investment 280 118 113 49 (Disclosed and undisclosed deal amounts) Number of first round investments with disclosed deal 138 66 54 18 amount Disclosure Rate 49% 56% 48% 37% Deal amount of first round investments (£000s) 392,364 268,852 95,933 27,579 Average amount of first round investments (£000s) 2,843 4,074 1,777 1,532

Table 16 - Overview of first round investments in Europe (Source: EVI, Jan 07 - Nov 08)

In the UK the average size of a first round investment is up by strong research universities and a substantial capacity for to 50% lower than the European average. However, the spin-out companies which traditionally receive lower first disclosure rates are 17% higher, indicating that more deals round investments than independent start-up companies. for smaller amounts have been disclosed. The average deal 18 amount for first round investments into pharmaceutical and 4.7. Follow-on investment rounds drug development companies is, at £2.44m, almost identical The high cash-burn rates of research-based companies

SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES to the average investment amount of all deals in this sector, means that they immediately have to look for follow-on at £2.63m. By contrast, deals into medical technologies and funding. The next funding round, usually referred to as a other healthcare technology areas tend to be smaller. Series A round, often involves investment sizes from around £1m up to several million pounds. These investment rounds Despite the data indicated in Tables 16 and 17, first are often led by recognised national institutional investors round investments can still be large, such as the £33m while other investors join the deal in a syndicate (syndicated investment into the Belgium-based drug development deal). At these relatively early stages in a company’s company Movetis. Founded in 2006, the company received development, a syndicate of investors often rely upon a investments in January 2007 from BIP Investment Partners, lead investor to monitor the company closely and to provide GIMV, KBC Private Equity, Life Sciences Partners, Quest for hands-on support while the rest of the syndicate can be Growth, and Sofinnova Partners. In the UK in 2007, Vantia located all over world. Consequently, it is rare that overseas Therapeutics, benefiting from its position as a spin-out of investors take the lead in a Series A investment round. Ferring Research Ltd, received £19m from MVM, Novo and SV Life Sciences. An additional aspect to consider at Series A is that venture capital organisations have become more specialised with a A more detailed analysis of Europe and the UK shows that the later stage focus. Whereas early-stage investors often invest average deal size in Yorkshire & Humber region is far below across different sectors, later-stage investors often have the European and UK average. This is probably related to more specialised teams for specific technologies and sectors. the fact that the Yorkshire & Humber region is characterised

Pharmaceuticals & Medical UK Total Others drug development technologies Total number of first round investment 71 22 30 19 (Disclosed and undisclosed deal amounts) Number of first round investments with 47 17 22 8 disclosed deal amount Disclosure Rate 66% 77% 73% 42% Deal amount of first round investments (£000s) 65,891 41,555 18,716 5,620 Average amount of first round investments (£000s) 1,402 2,444 851 703

Table 17 – Overview of first round investments in the UK (Source: EVI, Jan 07 - Nov 08) Pharmaceuticals Medical Yorkshire & Humber Total and Others technologies drug development Total number of first round investment 6 2 4 6 (Disclosed and undisclosed deal amounts) Number of first round investments with disclosed 4 2 2 0 deal amount Disclosure rate 67% 100% 50% n.a.

Deal amount of first round investments (£000s) 1,435 650 785 n.a.

Average amount of first round investments (£000s) 359 325 393 n.a.

Table 18 – Overview of first round investments in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08)

Most active investors in healthcare Number of Rank Country Type of investor technologies investments 1 Scottish Enterprise Fund GB Public Sector Backed 27 2 High-Tech Gründerfonds DE Public Private Backed 26 19 3 KfW Bankengruppe DE Public Sector Backed 21 4 MIG Fonds DE Institutional Investor 15 SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES 5 Sofinnova Partners FR Institutional Investor 14 6 Imperial Innovations GB Institutional Investor 12 6 Catapult Venture Managers GB Public Sector Backed 12 6 Bayern Kapital (Seedfonds Bayern) DE Public Sector Backed 12 9 Atlas Venture GB Institutional Investor 11 9 SEED Capital Denmark DK Institutional Investor 11 9 Life Sciences Partners DE Institutional Investor 11 12 IBG Beteiligungsgesellschaft Sachsen-Anhalt DE Public Sector Backed 10 12 Société Générale Asset Management FR Institutional Investor 10 12 Auriga Partners FR Institutional Investor 10 12 HealthCap Venture Capital SE Institutional Investor 10 12 Novo GB Institutional Investor 10 12 Oxford Technology Management GB Institutional Investor 10 12 NESTA Ventures GB Public Sector Backed 10

Table 19 – Most active investors in the European healthcare technology sector (Source: EVI, Jan 07 - Nov 08)

4.7.1. European investors in healthcare sector-backed investors like High-Tech Gründerfonds, technology companies Bayern Kapital (Seedfonds Bayern), Scottish Enterprise Around 300 institutional investors, corporations and other Fund and the German state-owned bank KfW. investment organisations have invested in European healthcare technology companies over the past two Investors can also specialise in certain areas within the years. The majority of them have only participated in healthcare technology sector. For example, there is a one investment (around 200) and a small number have clear difference between the venture funds that back drug participated in two investments (around 50). Less than 50 development companies and those that back medical investors have participated in more than two investments. technology companies. The regulatory requirements for new drugs result in a long time-to-market period for new The most active investors are mainly from the UK and products and the cash requirements for drug development Germany, including established institutional investors like companies are among the highest of all sectors. Although Sofinnova Partners and Life Science Partners; and public the development of medical technology products is also The Healthcare Technology Venture Market

embedded in a complex regulatory framework, this sector public backed investors like Scottish Enterprise, KfW and has more similarities to the development of products and the High-Tech Gründerfonds populate both tables, Table 20 services in other non-healthcare related sectors and has a indicates that the pharmaceuticals venture capital market significantly shorter time-to-market. Tables 20 and 21 provide is lead by sector specialist Sofinnova Partners, followed by an overview of the most active investors in pharmaceuticals MIG Fonds, Novo, Atlas Venture, Life Science Partners, TVM and drug development, and medical technology. Capital, Augira Partners and MVM Life Science Partners; all of whom have dedicated life science investment teams. Tables 20 and 21 replicate Tables 14 and 15, highlighting the most active early-stage investors. What is obvious from Table In terms of medical technology, the picture is more diverse 20 and 21 is the level of specialisation among the investors, and, as Table 21 shows, public sector backed investors again particularly in pharmaceuticals and drug development. While rank well.

Most active investors in pharmaceuticals and drug Rank Country Number of investments development

1 Sofinnova Partners FR 14 20 1 KfW Bankengruppe DE 14 3 MIG Fonds DE 13

SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES 4 Scottish Enterprise Fund GB 12 4 High-Tech Gründerfonds Management DE 12 5 Novo GB 10 6 Atlas Venture GB 9 6 Life Sciences Partners DE 9 8 TVM Capital DE 8 8 SEED Capital Denmark DK 8 8 Auriga Partners FR 8 8 MVM Life Science Partners GB 8

Table 20 – Overview of the most active investors in pharmaceuticals and drug development (Source: EVI, Jan 07 - Nov 08)

Rank Most active investors in medical technologies Country Number of investments 1 Scottish Enterprise Fund GB 13 2 High-Tech Gründerfonds Management DE 12 3 NESTA Ventures GB 7 4 KfW Bankengruppe DE 6 4 Bayern Kapital (Seedfonds Bayern) DE 6 4 Imperial Innovations GB 6 4 Wellington Partners Venture Capital DE 6 5 Odlander, Fredrikson & Co(HealthCap Venture Capital) SE 5 5 Oxford Technology Management GB 5 5 OTC Asset Management FR 5 5 Catapult Venture Managers GB 5 5 IP Group GB 5

Table 21 – Overview of the most active medical technology investors (Source: EVI, Jan 07 - Nov 08) Deal Date Company Region amount Sector Investors Investment round (£000s) Pharmaceuticals Ganymed Germany ATS Beteiligungsverwaltung; Nov-2008 54,820 & Drug Venture Funding 5 Pharmaceuticals Rheinland-Pfalz Future Capital; MIG Fonds Development 3i Group; Abingworth Management; Atlas Venture Pharmaceuticals LLP; BIT; Edmond de Rothschild France Jan-2007 Novexel 33,702 & Drug Investment Partners; Goldman Venture Funding 2 Seine-St-Denis Development Sachs Capital Partners; NIF SMBC Ventures; Neomed Management; Novo; Sofinnova Partners Pharmaceuticals May-2008 Pharma Swiss Slovenia 27,883 & Drug Enterprise Investors Venture Funding 2 Development 3i Group; BC Brandenburg Capital; DH Capital Gmbh & Co KG; EMBL Ventures; Grazia Equity Gmbh; KfW Bankengruppe; 21 L-EigenkapitalAgentur (L-EA); Germany Pharmaceuticals immatics Landeskreditbank Baden- SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES Feb-2007 Baden- 26,424 & Drug Venture Funding 3 biotechnologies Wuerttemberg-Foerderbank; Wuerttemberg Development Merifin Capital; National Technology Enterprises Company; OH Beteiligungen GmbH und Co. KG; Vinci Capital; Wellington Partners Venture Capital AVIDA Group; DEWB; Dieckell Vermoegensverwaltung und Beratungsgesellschaft mbH; Dow CVC; Edmond de Rothschild Investment Partners; IBB Pharmaceuticals Germany Beteiligungsgesellschaft mbH; May-2007 Noxxon Pharma 25,277 & Drug Venture Funding 4 Berlin IBG Beteiligungsgesellschaft Development Sachsen-Anhalt mbH; Medical Strategy; Seventure Partners; Sofinnova Partners; TVM Capital Gmbh; Undisclosed Institutional Investors United Kingdom Medical June-2008 Apatech 23,096 3i Group; HealthCor Partners Venture Funding 5 East of England Technologies Private investor(s); ATS Beteiligungsverwaltung; Future Capital; Ingro Finanz; Landesbank Pharmaceuticals Ganymed Germany Baden-Wuerttemberg KfW April-2007 22,793 & Drug Venture Funding 3 Pharmaceuticals Rheinland-Pfalz Mittelstandsbank; MIG Fonds; Development Nextech Venture Lp; ONC Partners; VI Partners AG (Venture Incubator); Varuma Germany Pharmaceuticals Undisclosed; dievini Hopp April-2008 Apogenix Baden- 21,768 & Drug Venture Funding 2 BioTech holding GmbH & Co KG Wuerttemberg Development Abingworth Management; Crédit Pharmaceuticals Fovea France Agricole Private Equity; Forbion; Dec-2007 21,612 & Drug Venture Funding 2 Pharmaceuticals Paris GIMV; Sofinnova Partners; Development Wellcome Trust Table 22 – Overview biggest European healthcare technology investments (Source: EVI, Jan 07 - Nov 08) The Healthcare Technology Venture Market

4.7.2. Top deals in Europe 4.7.3. Top deals in the UK The league table of the biggest deals (over £20m), as shown The UK has not seen as many big investments as some other in Table 22, in the European healthcare sector is dominated, European countries over the past two years. The majority as expected, by companies active in the pharmaceuticals of big investments went into German companies (ten), and drug development area. The largest investments were followed by French companies (eight). Swiss companies closed by the German-based Ganymed Pharmaceuticals, received the same number of investments as UK companies with a £54.8m investment in November 2007 and a £22.8m (six). investment in April 2007. It is also noted that these syndicated later-stage deals involve several investors, Within the UK, five of the six biggest deals were closed with some of them joining as new investors while others by companies in the South East and one in the East of participated in earlier financing rounds. England.

Only one investment went into a medical technologies During the same period, there were three investments into company which, incidentally, is also the only UK later-stage drug development companies based in Yorkshire & Humber investment in the league table. Germany, however, had five (Table 24). investments in total (as mentioned before, two belonging to Ganymed) and two from France and one from Slovenia. 22 Out of the 45 biggest investments in Europe, only six investments were made into UK-based companies. SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES

Deal Investment Rank Date Company Region Amount Sector Investors round (£000s) United Kingdom 9 June-2008 Apatech 23,096 Medical Technologies 3i Group; HealthCor Partners Venture Funding 5 East of England Oxford United Kingdom Clarus Ventures; DFJ Esprit; Wellington 14 Oct-2007 19,478 Medical Technologies Venture Funding 3 Immunotec South East Partners Venture Capital Vantia United Kingdom Pharmaceuticals & 15 Mar-2008 19,000 MVM; Novo; SV Life Sciences Venture Funding 1 Therapeutics South East Drug Development ABN AMRO Capital; Biogen Idec New Ventures; Credit Agricole Indosuez Private United Kingdom Pharmaceuticals & 19 Mar-2008 PanGenetics 17,618 Equity; Edmond de Rothschild Investment Venture Funding 3 East of England Drug Development Partners; Fortis Private Equity NV (Fagus NV); Index Ventures Abingworth Management; Johnson & United Kingdom Pharmaceuticals & 24 Oct-2007 Syntaxin 16,000 Johnson Development Corporation; Life Venture Funding 2 South East Drug Development Sciences Partners; Quest for Growth; SR One Goldman Sachs Capital Partners; Imperial Circassia United Kingdom Pharmaceuticals & 45 Jan-2008 11,000 Innovations; Invesco Perpetual; Lansdowne Venture Funding 2 Holdings South East Drug Development Capital Table 23 – Overview biggest UK venture capital investments (Source: EVI, Jan 07 - Nov 08)

Deal Amount Rank Date Company Region (£000s) 53 Nov-2007 Neoss Yorkshire & Humber 10,000 88 Dec-2007 Photopharmica Holdings Yorkshire & Humber 6,000 157 Jan-2008 Tissue Regenix Yorkshire & Humber 3,000

Table 24 – Overview of the biggest investments in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08) 5. The attractiveness of Yorkshire & Humber

Similar to measuring early-stage investment activity, the Rank Location Deals Investments attractiveness of a region for later-stage investments is analysed United Kingdom by comparing the investment activity across different regions. 1 41 138,418 But unlike early-stage investments, later-stage venture capital South East organisations invest internationally. International comparisons United Kingdom 33 2 22,037 can be made by scaling the investment activity by, for example, Scotland ‘per capita’ or ‘all companies’. This, however, has some United Kingdom methodological disadvantages due to the different sizes and 3 32 35,985 industrial structure of the European countries. Another way is London ti compare one region to another. One advantage of this is that Germany 4 30 80,649 the comparison happens within the same industry. To avoid a Bavaria bias, Yorkshire & Humber was compared to other regions in United Kingdom the two main European economies Germany and France. In 5 26 89,712 Germany the ‘states’ and in France the ‘regions’ have a similar East of England structure and function as the UK ‘regions’. United Kingdom 6 22 25,305 23 North West The table shows that Yorkshire & Humber is well placed and SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER Germany directly follows the major and most well-known European 7 16 95,506 biotech regions in the UK and Germany, and on the same Baden-Wuerttemberg level as Paris and the populous German state of Nord-Rhine United Kingdom 8 15 22,570 Westphalia which contains cities like Cologne, Düsseldorf, Yorkshire & Humber Essen, and Dortmund. Germany 8 15 13,061 5.1. The investment landscape in North Rhine-Westphalia Yorkshire & Humber France 8 15 87,028 The following section considers the venture capital industry Paris in Yorkshire & Humber. In recent years, an interesting United Kingdom 11 10 6,926 blend of university spin-outs and start-up companies were Wales financed by a variety of regional, national and international United Kingdom investors. 11 10 4,940 East Midlands

This analysis is based on data released into the public domain Germany 11 10 6,028 mainly through the companies or investors themselves. The Thueringen report provides a comprehensive picture of the region’s United Kingdom investment landscape by presenting the financing cycle 14 9 2,620 of local companies as well as regional investors and their West Midlands investment history. United Kingdom 14 9 17,420 South West 5.1.1. The origin of companies in the region

As previously noted, universities play an important role Table 25 – Overview of the number of deals in different European in creating promising technology-based companies. regions (Source: EVI, Jan 07 - Nov 08) University spin-out companies provide excellent investment opportunities for regional, national and international researchers and students and their means to study and investors. A basic factor for the creation and quality of undertake research. Therefore it is important to look into the university spin-out companies is the extent and quality innovative capacity and the technology transfer activities of of the underlying research embedded in the university’s the universities in the region. The Healthcare Technology Venture Market

Total income from Recurrent research Total research Total income (£m) research grants and income from funding income (£m) contracts (£m) council grants (£m) The University of Leeds 422,334 136,804 90,794 46,010 The University of Sheffield 338,706 127,300 84,556 42,744 The University of York 188,339 66,588 43,748 22,840 The University of Bradford 105,689 16,569 9,762 6,807 The University of Hull 127,372 15,299 9,296 6,003 Sheffield Hallam University 177,249 13,829 10,014 3,815 The University of Huddersfield 102,276 3,134 1,702 1,432 Leeds Metropolitan University 146,006 2,921 2,432 489 The University of Lincoln 71,652 1,416 1,162 254 York St John University 33,273 87 37 50 Total: 1,712,896 383,947 253,503 130,444

Table 26 - Overview of universities located in Yorkshire & Humber (excl. Open University) 24 (Source: Yorkshire Universities and HESA) 21

SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER The local universities strongly contribute to the regional 2006, Fusion IP entered a partnership with a £10m healthcare technology landscape through their knowledge side fund from Nikko Principal Investments Ltd that and technology transfer activities. Eleven universities are is “exclusively available to invest in our existing and represented by Yorkshire Universities,20 the regional higher future portfolio companies.” 23 education association for the region. • IP Group Plc core business is the commercialisation of intellectual property originating from research The two biggest universities by total income and by research intensive institutions. The company was founded in income are the University of Leeds and the University of 2001 and also provides management of venture funds Sheffield. Both universities are members of The Russell focusing on early-stage technology companies and the 22 Group and count for 69% of the region’s research income in-licensing of drug related intellectual property from and 44% of the total income. research intensive institutions. All the three major universities in the region have entered Different opinions exist regarding the capacity of universities agreements with partners to commercialise their intellectual to engage in knowledge and technology transfer activities. property. These partners can supply experts to provide advice One opinion is that universities should have a research income and also have the capital to back these companies. in excess of £20m to produce sufficient research output to run a technology transfer office. However, smaller universities The University of York and the University of Leeds have can also have substantial knowledge and technology transfer entered into an agreement with IP Group Plc, while the activities. In such cases it might be useful to collaborate across University of Sheffield cooperates with Fusion IP: universities or with external partners. a) University of York The big three universities in the region work with external partners, predominantly IP commercialisation companies The agreement between the IP Group Plc with the University who support them in the commercialisation of the of York started in 2003 with the Centre for Novel Agricultural intellectual property created in the university to provide the Products. In March 2006 the agreement was extended to best service for their entrepreneurial academics. The most cover the entire university. active organisations in Yorkshire & Humber are two public- In the field of healthcare technologies, IP Group and the quoted companies, IP Group and Fusion IP: University of York have spun-out Bioniqs Ltd which has • Fusion IP Plc (formerly known as Biofusion Plc) developed unique expertise in ionic liquids that can facilitate commercialises intellectual property that is developed and improve bio-chemical and bio-catalytic processes that at universities and similar establishments. In March are difficult to undertake using conventional technologies. b) University of Leeds a) University of Leeds In 2002 the University of Leeds outsourced its • Photopharmica (Holdings) Ltd (2001) develops novel commercialisation activities as one of the first UK universities photosensitisers as products for medical use and has to the Techtran Group. In 2005 Techtran Group was acquired opened up new applications of topical photodynamic by IP Group. therapy. As of June 2008 the company was valued at £26m with the IP Group holding a 49.9% stake; www. c) University of Sheffield photopharmica.com In 2005 the University of Sheffield signed an exclusive ten • Tissue Regenix Ltd (2006) is leveraging innovative year agreement with Fusion IP, focusing on biosciences and tissue engineering platform technologies to develop and commercialising all of university’s medical IP. In July 2008 the commercialise cellular tissue; www.tissueregenix.com agreement was expanded into an exclusive agreement that b) University of Sheffield allows Fusion IP to commercialise all of the university’s IP. • Asterion Ltd (2001) owns novel, patented 5.1.2. Venture capital backed university spin-outs therapeutic platform technologies to generate and in the healthcare technology sector develop long-acting biopharmaceutical products; www.asterion.co.uk Many of the university spin-out companies in Yorkshire & • Adjuvantix Ltd (1999) is an early-stage Humber have received initial seed and early-stage investment biopharmaceutical company focused on the 25 or even further-stage investments. Most of the healthcare development of rational means to effectively and

technology university spin-out companies originated from SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER safely enhance the immune response to prophylactic one of the three major research universities: and therapeutic vaccines; www.adjuvantix.com

Disclosed Company Origin investments Investors (£000s) Absynth University of Sheffield 325 Fusion IP Adjuvantix University of Sheffield 857 Fusion IP and WRTSF Asterion University of Sheffield 1,000 Fusion IP and WRTSF The Viking Fund, WRTSF, Yorkshire Cancer Cizzle Biotechnology University of York 1,070 Research Diurnal University of Sheffield 221 Fusion IP Imagel University of York 280 IP Group Lifestyle Choices University of Sheffield 221 Fusion IP Medella Therapeutics University of Sheffield 320 Fusion IP Paraytec University of York 845 Viking Fund & Co-Investors; YFM Group Phase Focus University of Sheffield 1,050 Fusion IP, Viking Fund and WRTSF Photopharmica Holdings University of Leeds 15,750 IP Group, WRTSF WRTSF, Aberdeen Asset Management, Yorkshire Pro-Cure Therapeutics University of York 2,950 Cancer Research IP Group, Aquarius Equity Partners, Ora Capital, Tissue Regenix University of Leeds 4,105 WRTSF Xceleron University of York 5,270 Close Ventures, Foursome Zilico University of Sheffield Undiscl. Viking Fund & Co-Investors

Table 27 – Selected venture capital backed healthcare technology spin-out companies in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08) The Healthcare Technology Venture Market

• Zilico Ltd (2006), formerly Aperio Diagnostics Ltd, • Imagel Ltd (2006) offers a full 3D dosimetry is a medical diagnostics company pioneering new and imaging solution for radiotherapy planning; technologies that will allow swifter, more accurate www.imagel.co.uk detection of cervical cancer and pre-cancerous • Paraytec Ltd (2005) is designing, developing and conditions; www.zilico.co.uk manufacturing ultra-violet area imaging detectors • Phase Focus Ltd (2006) is developing an alternative which can be used with simple micro-syringes and/ approach to microscopy; www.phasefocus.co.uk or existing separations hardware including capillary • Absynth Ltd (2007) is developing vaccines and electrophoresis systems, nano- and capillary LC systems antibodies to treat infections caused by the bacterium to enable high sensitivity across a wide dynamic range Staphylococcus Aureus (S. Aureus) including its more without sacrificing spatial resolution. The company difficult-to-treat drug-resistant form, methicillin-resistant was a finalist in the BioEntrepreneurial Company S. Aureus (MRSA); www.absynthbiologics.co.uk of the Year Award and received a Pittcon R&D 100 Award in 2007 for its product ActiPix™ D100 detector; • Medella Ltd (2007) focuses on the use of monoclonal www.paraytec.com antibodies to inhibit the action of Adrenomedullin a molecule found in 80% of cancer cells; • Pro-Cure Therapeutics Ltd (2001) is researching for www.medellatherapeutics.co.uk new therapeutic drugs for the treatment of prostate cancer; www.pro-curetherapeutics.com 26 • Diurnal Ltd (2004) is a pharmaceutical company that creates therapeutics using advanced proprietary • Xceleron (1996) is one of the longest active spin-

SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER formulations and novel physiological treatment outs in the region. The company has raised over £4m regimes of approved drugs for use in the endocrine in funding and is focused on human microdosing; (hormone) area; www.diurnal.co.uk www.xceleron.com • Lifestyle Choices (2005) launched its first product, a 5.1.3. Independent healthcare technology start-ups new triple hormone ovarian reserve test called Plan Other companies have been started independently from Ahead in 2006; www.planaheadtest.com/index.php universities or research organisations, for example: c) University of York • Cizzle Biotechnology Ltd (2005) is focused on the • Activ4Life Healthcare Technologies Ltd is offering development of novel Ciz1-targeted therapeutic improved, cost-reduced clinical results by providing products and related diagnostics for lung cancer; patient activity monitoring, predictive modelling www.cizzlebiotechnology.co.uk and management to inform clinical decision-making; www.a4lhealth.com

Healthcare technology Helthcare technology Disclosed deal Foundation Investors company sector amount (£000s) Activ4Life Healthcare 2007 Medical Technologies 125 SYIF and YHEF Technologies Pharmaceuticals & Drug Kirkstall 2000 379 SYIF, Viking Fund, Business Angels Development MMC Ventures, Delta Partners and Neoss 2000 Medical Technologies 18,000 Medtronic Inc EPIC VCT, Abstract Group and other Pharmacy 2U 1999 Health Care Services 5,000 institutional investors Enterprise Ventures Ltd, North West Platform Diagnostics 2002 Medical Technologies 1,044 Equity Fund, BBI Holdings Plc and Carclo Plc Coalfileds Enterprise Fund (Enterprise Rostra UK 2005 Health Care Services 250 Ventures), Private Investors YFM, Rensburg VCT, 3i, Granville Baird Tissuemed 1985 Medical Technologies 11,110 Capital Partners, Friends Ivory & Sime, SCIPrivate Equity, Capital for Companies

Table 28 – Selected venture capital backed healthcare technology start-ups in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08) • Kirkstall Ltd is developing toxicity screening products majority of seed and early-stage investments into the local to be used by the pharmaceutical and cosmetic university spin-out and start-up companies: industries that will reduce the need for animal testing; www.kirkstall.org 1. South Yorkshire Investment Fund (SYIF); • Pharmacy 2U Ltd founded internet pharmacy in www.syif.com the UK in 1999 and is now the country’s largest 2. Viking Fund; www.vikingfund.co.uk dedicated internet and mail order pharmacy; 3. White Rose Technology Seedcorn Fund (WRTSF); www.pharmacy2u.co.uk www.whiteroseseedcorn.com • Platform Diagnostics Ltd is creating and developing 4. Yorkshire & Humber Equity Fund (YHEF); platform technologies for the In-Vitro diagnostics www.yhef.co.uk industry; www.platform-diagnostics.com 5. Fusion IP; www.fusionip.co.uk • Rostra UK Ltd is providing solutions to National Health 6. IP Group; www.ipgroupplc.com/ipo Service patients for the treatment of symptomatic varicose veins; www.rostrauk.com South Yorkshire Investment Funds (SYIF) is a venture capital and loan fund tasked with investing in small and • Tissuemed Ltd is researching, developing and medium sized (SME) businesses in South Yorkshire who manufacturing proprietary polymers and films for use struggle to secure finance for growth through the traditional as surgical sealants; www.tissuemed.com banking system or from other lenders. SYIF was established 27 in 2001 and has invested almost £50m in 500 investments SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER in South Yorkshire businesses. SYIF can provide seedcorn, 5.2. Investors in Yorkshire & Humber loan and equity-linked investments, ranging from £15k The venture capital invested into these companies originates to £2.5m. The fund’s investors are the European Regional from a variety of investors. The region benefits from six local Development Fund and Yorkshire Forward. venture capital organisations which were involved in the

Lowest concentration of companies Highest concentration of companies Location of VC backed companies

Figure 12 – Location of venture capital backed companies in Yorkshire (Source: L.I. Group, Dec 2008) The Healthcare Technology Venture Market

The Viking Fund is a co-investment venture capital fund, investments of between £2m and £10m in UK unquoted specialised in providing finance for early-stage technology companies; www.nvm.co.uk companies in Yorkshire. The fund received £5m under the • Partnership Investment Finance is a £37m fund for BERR/Small Business Service’s Early Growth Fund scheme Yorkshire, The Humber, and North Lincolnshire which and provides early-stage finance to match investments by has been established to enable small and medium business angels or other private sector investors. In the past sized businesses (SMEs) and social enterprises three years, the Viking Fund has invested in more than 48 access to funding by way of equity or loan finance; rounds in 23 companies, totalling £3.4m, plus an additional www.partnershipif.co.uk £4.6m in match funding from other investors. The Viking The region also benefits from business angel networks, for Fund has invested in the Yorkshire-based healthcare example companies Phase Focus Ltd, Zilico Ltd, Paraytec Ltd and the AIM listed Syntopix Plc. • The Viking Club is an investment club for high net worth individuals interested in making investments of The White Rose Technology Seedcorn Fund (WRTSF) is between £5,000 and £200,000 in early-stage businesses an early-stage seedcorn fund managed by Aberdeen Assets with a technology bias and potential for high growth; Managers, which invests in technology emerging from the www.vikingclub.co.uk Universities of York, Leeds and Sheffield. The £9m Fund • Yorkshire Association of Business Angels (YABA) is a 28 provides venture capital funding of up to £500,000. The fund regional forum for business angels; www.yaba.org.uk was founded in 1999 with £4.5m from the Government’s Funding local businesses

SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER University Challenge Competition (the Office of Science and The South Yorkshire Investment Fund, Viking Fund, White Technology, the Wellcome Trust and the Gatsby Foundation) Rose Technology Seedcorn Fund and the Yorkshire & Humber and a further £1.5m from the White Rose Universities (Leeds, Equity fund are all public sector backed funds. These funds Sheffield and York). The Fund received another £3m from normally invest over a limited time period until they have Yorkshire Forward in June 2002. The fund has invested in at invested their available capital. They are often managed by least 19 spin-out companies from the three universities. external managers, as in the case of the WRTSF and YHEF. The latter announced in July 2008 that the fund has reached The Yorkshire & Humber Equity Fund (YHEF) is one of nine the end of its investment period and no new investments English Regional Venture Capital Funds. YHEF was founded will be made.24 in 2002 to provide venture capital to SME companies based in Yorkshire & Humber and it is managed by YFM Venture Andrew Burton, the Viking Fund’s managing director stated Finance Ltd. in an interview in December last year: “We want to continue the Viking experience. We think we have made a big The IP Group and Fusion IP were presented in an earlier difference and our portfolio has got a lot of value. Our plans chapter. are to raise another fund or another small series of funds to replace the £5m Viking Fund that we’re almost at the end of Other investors with strong regional links include for investing in now.”25 example:

• Aquarius Partners is a venture capital fund manager The SYIF is better placed having received a £7m funding based in Manchester; www.aquariusequity.com boost from Yorkshire Forward in January 2009.26 • Enterprise Ventures provides venture capital and private equity to high growth unquoted companies throughout With two active funds, one with fundraising plans, several the North of England and the Midlands regions and business angel initiatives and the university partnerships, it manages several different funds that invest in regional is clear that the region offers a variety of equity financing companies; www.enterprise-ventures.co.uk sources to local entrepreneurs. • Key Capital Partners is focused on the equity gap, making equity investments of between £1 million As of December 2008, Yorkshire Forward announced a new and £10 million in profitable, growing companies; £120m fund to be used to support the growth of small and www.keycapitalpartners.co.uk medium-sized businesses in the Yorkshire & Humberside region starting late 2009. The aim of the investment is to ensure • Nothern Venture Managers is an independent that these growing businesses can gain access to the support private equity businesses focussed on making equity needed to ensure that they become successful businesses. Furthermore, entrepreneurs have the opportunity to raise In the area of medical equipment two companies are quoted capital from any other national or international investors on the London Stock Exchange: and have done so recently. The start-up company Neoss Ltd • Surgical Innovations Group Plc specialises in the has raised over $20m since its first investment in 2003 from design and manufacture of innovative devices for use investors outside the region. In January 2009 the company in minimally invasive surgery and industrial markets. announced its latest investment round of $5.5m. The The Group’s medical division is focused on strong company’s main investors are MMC Ventures (UK), Delta international growth in two specialist areas namely Partners (UK) and Medtronic Inc (US). minimally invasive surgery, where its products are used in ‘keyhole’ (laparoscopic) surgery and products for 5.3. Venture capital investment autologous blood transfusion (whereby a patient’s own successes blood is recycled). An entrepreneur who plans to raise money from venture • Dawmed Systems Plc main activity is designing, capital organisations needs to have a plan in place that developing, manufacturing, selling, distributing, shows how potential investors can make a suitable return testing and servicing washer-disinfectors and washer- (exit). This exit can be released trough selling the company disinfector-dyers for the primary and secondary to another investor (secondary), another company healthcare sectors. (acquisition) or going public (initial public offering). b) Acquired companies 29 The following section provides an overview of successful A recently exited company, Axordia Ltd (founded in 2004), venture capital exits in the Yorkshire & Humber area: developed a human embryonic stem cell (hESC) technology SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER platform. According to the Fusion IP website the company a) Public-quoted healthcare technology companies has received £661k in exchange of a shareholding up to 49%. The partnership between Techtran Group/IP Group and the In December 2008 the company was acquired by Intercytex University of Leeds has already resulted in university spin- Plc. At this point Fusion IP had a 64.1% shareholding in out companies that are now publicly-quoted: Axordia, and in return for the company they received a 4.78% shareholding in the enlarged Intercytex. The closing • Avacta Group Plc (formerly known as Readybuy Plc) is price of Intercytex ordinary shares on 19 December 2008 researching, developing and producing rapid response was £0.24, valuing Fusion IP’s holding in Intercytex at detection devices for the biopharmaceutical, homeland £1.1m27 and valuing Axordia at 1.68m.28 security and defence, and clinical diagnostics markets. The company was founded in 2004, went public in c) Investment successes by engagement of corporate August 2006 at the AIM of the London Stock Exchange investors (LSE), and has a market cap of £17.5m in late 2008 . Large corporations also invest in early-stage companies. • Syntopix Group Plc was founded in 2003 and was quoted Investments of this nature give corporates visibility on on the AIM in March 2006. The company was backed by emerging technologies that in the future could either be TechTran Group (now: IP Group), the Viking Fund, White disruptive or value-adding to the corporation. Rose Technology Seedcorn Fund and Business Angels. The main activity is researching, discovering and For example, after several rounds of investments from local developing drugs for the topical treatment of common investors, Platform Diagnostics Ltd received investment dermatological diseases, currently focusing on acne from two corporations, BBI Holdings Plc and Carclo and superficial Staphylococcus Aureus infections. The Plc. According to the company’s website, the company current market capitalisation is £6.36m. undertook these investments with a view to commercialising These examples show that it is possible to develop its innovative technology.29 university spin-out companies into larger companies within a reasonable time frame. However, it should be noted that Avacta Group Plc and Syntopix Group Plc were floated at the IPO peak in 2006. IPOs in 2009/2010 are unlikely to reach such values. (Note: the median market-cap for all public- quoted biotechnology and pharmaceuticals companies on the LSE (Main Market and AIM) is around £15m as of December 2008). The Healthcare Technology Venture Market

6. Future trends in the healthcare technology venture market

Future market trends within venture capital can be divided A similar Spanish company called Cellerix, which was into two separate areas, technological trends and financial founded in 2004 has developed innovative treatments based trends. on cell therapy and is leading the development of a new generation of treatments using expanded adult stem cells. A recent survey in 2008 showed that 84% of all CEOs in Since 2007, the company has raised over £30m in venture pharmaceuticals and the life sciences are confident that capital, including a €27.2m series B financing round in 2007 their companies will increase their revenues in the upcoming plus a £10m venture loan in 2008; www.cellerix.com year.32 The CEOs regarded innovation as the best way to keep their competitive edge. With leaders such as this, the In the UK ReInnervate, a Durham University spin-out future of the healthcare technology market should be in company, whose work is predominantly in the field of stem safe hands. cell biology and developmental neuroscience, recently closed a funding round of £750k; www.reinnervate.com In line with these expectations are the profit increases announced by the likes of Abbott Laboratories, whose profits Ophthalmology rose by 28% last financial year, and by Johnson & Johnson, 30 Although the area of ophthalmology has received much whose profits climbed by 14% in the fourth-quarter of 2008 less media attention than stem cells, this has not hindered alone. it from receiving a noted amount of venture capital interest. SECTION SIX FUTURE TRENDS For example, the French company, Novagali Pharma, who Technology Trends develop innovative products for all segments of the eye has Some of the key trends within the healthcare technologies raised over €44m in venture capital since the company’s industry include areas such as nano-biotechnology, stem foundation in 2000 (www.novagali.com). Other examples cells and ophthalmology. include the Swiss-based Sensimed (£3.5m, Series A, www.sensimed.ch) and Cambridge-based Altacor; Miniaturisation and nano-biotechnology www.altacor-pharma.com Although this area has been a focus for investors for some time, there is still a lot of interest in new approaches to drug Standardisation – or smaller, cheaper, better delivery and dosing systems and the miniaturisation of Attractive propositions to any investor, especially within medical products and drugs. As a result, a new sub-area has the field of medical technology, are companies that can emerged, referred to as nanotechnology. Nanotechnology manufacture standardised products to a high quality at a more firms produce products off the base of nanotechnology competitive price. These types of companies are interesting platforms. The development of these platforms occurs to potential investors’ because they address large markets. predominantly in small innovation-based companies, which require early-stage capital investment to finance their An example of this is the French company Implanet, research and development. Investments into this area has which has received €13m in an initial financing round from a already resulted in a number successful exits, attracting Franco-German investment consortium led by Auriga Capital, further interest into this sub-sector by the venture capital Edmond de Rothschild Investment Partners and Wellington investment community. Partners (www.implanet.com).

Stem Cells Other similar companies include, ILIAS-medical, which Stem cell research, and in particular the use of human- is backed by Sirius Venture Fund and the High-Tech sourced stem cells, is a controversial topic, and debate still Gründerfonds and is currently developing the world’s smallest remains regarding the ethical implications of using human artificial lung (www.ilias-medical.de) as well asPharmaSet , a embryonic stem cells. Despite this there have been a number French company, which develops cheap disposable surgical of commercial successes in this area. For example, Geron, devices for the medical industry (www.pharmaset.com). an American drug development company that is developing human embryonic stem cell-based (hESC) therapies has, in Imaging and Software a landmark case, received FDA clearance to begin the world’s Imaging technologies have become one of the most first human clinical trial of an hESC therapy. www.geron.com interesting medical technology areas of investment lately. In the last two years, forty companies whose activities lie company is developing an enzyme replacement therapy for in this region have received investment. Coupled with the Morbus Morquio, a rare lysosomal storage disease; www. advances in hardware, there have also been substantial vivendy.ch developments in software applications, primarily related with Computed Tomography (CT) and Magnetic Resonance Zymenex (Denmark) is engaged in developing Imaging (MRI) as well as other areas where graphical data pharmaceutical products to treat rare, serious, genetic processing is important. Another area where software is diseases, for which there is no treatment available today; playing an ever important role is in the area of computer- www.zymenex.com assisted planning of therapies and surgeries. Financial Trends One of the most publicised imaging companies of late Cost advantage in medical technologies is the Paris-based Biospace Med which was founded by Companies in the medical technologies sector benefit Nobel Prize winner Georges Charpak to provide researchers from several advantages. Firstly, compared to traditional in biology with innovative imaging tools based on his drug development activities, medical technologies discoveries in high-energy physics and particle detection. require shorter time periods to develop a product and www.biospacemed.com take it to market, resulting in lower costs for research and development. It also appears that Europe has some inter- The 2007 funded Visiopharm (Denmark) is a specialist in regional cost advantages compared to the United States. 31 image analysis software for the life-sciences, including In many European countries it is significantly cheaper to

hardware integration, automation, and quality inspection. SECTION SIX FUTURE TRENDS develop medical technology products from an idea to a www.visiopharm.com marketable product. Surgix, an Israeli-based company is developing a visual- Ongoing M&A activity based system for image guided surgery primarily focused on orthopaedic trauma, was awarded the Ernest and Young The recent acquisition of Wyeth by Pfizer shows that Entrepreneur of the Year in Israel in 2006. www.surgix-med.com healthcare technology companies are looking for opportunities to improve their innovative capacity. Many Personalised medicine and focussing on smaller patient corporations have large cash reserves and are highly liquid, groups allowing them to make strategic acquisitions. An industry that is proving to be of interest to investors Acquisitions of innovative companies play an important is the growing idea of personalised medication, allowing strategic role in strengthening a corporation’s innovative customised treatments to be developed rapidly for individual capacity. Although the majority of acquisition targets or small groups of people with special or incurable ailments. tend to be larger and more established companies, early- A lot of this drug development work has been carried out stage venture capital backed companies are also in the within the Oxbridge region as well as the large medical focus of these large acquirers. In the current climate, focused clusters of Switzerland and Denmark. companies (corporations and SMEs) with strong cash positions will have the opportunity to acquire companies Horizon Discovery (Cambridge, UK) is aiming to provide that are in testing financial positions hence have lower drug discovery researchers with tools that accelerate the valuations and in doing so acquiring companies will search for new and more effective ‘targeted’ or ‘personalised’ strengthen their own product pipeline and market drugs; www.horizondiscovery.com position. Such behaviour has a subsequent downstream impact on universities and SMEs. Corporations that Oxford Nanopore Technologies (Oxford, UK) a company scout universities and research organisations to find new backed with more than £32m of venture capital is developing approaches and technologies help academics, inventors a technology for label-free molecular detection and analysis, and future entrepreneurs to gain first-hand experience with potential applications in DNA sequencing, diagnostics, drug development and defence; www.nanoporetech.com with the industry.

Vivendy Therapeutics based in Switzerland was founded While the trend to outsource R&D has already started, in March 2006, a spin-out of Inotech Biotechnologies AG, the current financial crisis will put additional pressure and closed a financing round of nearly £20m in 2008. The on companies to keep activities off the balance sheet The Healthcare Technology Venture Market

and maintain flexibility. This will result in interesting by broadening its risk profile. While larger acquisitions opportunities for smaller companies, particularly in the area dominate the press, the management teams of corporations of research services. emphasise that they are also interested in smaller companies. For example Abbott Laboratories, which has $4bn in available Over the past two years more than fifty venture capital cash, announced in January 2009 that it is looking to buy backed healthcare companies have been acquired. companies both in pharmaceutical and non-pharmaceutical The acquirers not only include all of the internationally sectors to take advantage of the heavily discounted company recognised corporations but also many smaller and medium valuations that are now on offer33, both in the venture capital sized companies as well. Some of which are themselves and healthcare technology market. Recent market activity venture capital backed. has indicated that companies in the medical technologies sector have valuations of EBITDA-multiples starting from 8, The largest disclosed acquisitions of venture capital backed whilst those in the pharmaceutical sector have multiples of healthcare technology companies over £20m were completed around 10-14.34 by pharmaceutical corporations. Table 29 confirms that the UK and Germany are strong in producing successful drug Given the economic downturn and despite the fact that development companies that go on to be acquired by large corporations are still active in acquisitions, there are a number pharmaceutical companies. Not unsuprisingly, the price of disadvantages for early-staged innovation companies to 32 paid for medical technology companies is lower than drug consider. development companies.

SECTION SIX FUTURE TRENDS The acquisition and consolidation activity among the larger When it comes to acquisitions, different acquirers have corporations means that there will be less investment different strategic agendas. For example, some companies through acquisition for early-stage healthcare technology try to strengthen their product pipeline by buying companies companies. Therefore the number of companies available with similar products or services, while other companies try for licensing deals, as corporate investors, or even as to build a broader product pipeline with acquisitions into buyers will decrease resulting in the continued downward new areas outside their current product portfolio. Johnson & pressure. Johnson’s acquisition strategy is to build a broad and varied portfolio of drugs, medical devices and diagnostic tests so Moreover, the large acquisitions may also result in as to try and shield itself against any economic downturns subsequently longer periods of inactivity whilst the two

Deal amount Date Company Sector Region Acquirer (£000s) Pharmaceuticals & 2008 Direvo Biotech DE 166,710 Bayer HealthCare Drug Development Alantos Pharmaceuticals & 2007 DE 150,557 Amgen Pharmaceuticals Drug Development Pharmaceuticals & 2008 U3 Pharma DE 119,311 Daiichi Sankyo Drug Development Pharmaceuticals & 2008 PIramed GB 81,087 Roche Drug Development Pharmaceuticals & 2007 Arrow Therapeutics GB 76,412 AstraZeneca Drug Development Pharmaceuticals & 2007 Biolipox SE 65,502 Orexo Pharmaceuticals Drug Development 2007 Precimed Group Medical Technologies CH 60,561 Greatbatch 2007 etkon Medical Technologies DE 51,808 Institut Straumann 2007 Endoart Medical Technologies CH 49,653 Allergan

Table 29 – Biggest acquisitions of healthcare technology companies (Source: EVI, Jan 07 - Nov 08) corporations consolidate their product portfolios before In addition to these developments, in these the difficult they again go out looking for other interesting investment economic time investors are increasingly focusing on their opportunities. existing portfolio as opposed to scouting for new investment opportunities. As many of their portfolio companies will Focus on later stage deals and orientation towards have lower revenues than was forecasted at the time of the licensing deals investment, additional funding will be required to keep the There appears to be a trend towards later stage deals, which portfolio companies alive. has its origins in several recent developments. Over the past few years several investors in healthcare technology As venture capital supply is inelastic this will, as described companies have built strong reputations, which has placed above, increase the demand for seed and early-stage capital them in a strong position to raise bigger funds. For example, supplied by other sources. In particular, entrepreneurs will Abingworth has closed a £382m life science fund in 2008 be increasingly looking to local business angels and public and TVM Capital manages €240m in their latest Life Science sector backed funds for investments Ventures VI. These bigger funds have been raised to focus on later stage, larger multi-million investment pound rounds. The first signs for this development are found in, for example, Smaller rounds are increasingly less interesting due to the former entrepreneurs and business angels who are already relatively high transaction costs. attracted to the manifold investment opportunities. A recent example is the venture capital organisation QureInvest, 33 Why is there a focus on later stage deals more prevalent? which invested up to €5m in companies in order to develop

them to a stage where they become interesting for licensing SECTION SIX FUTURE TRENDS Firstly, the crash of the venture capital market at the deals. The first company benefiting from such an investment beginning of this century made entry for new investors more is the CT Atlantic AG (Zurich, Switzerland); www.ct-atlantic. difficult. Investors that would normally start by investing in com. The investment should help the company to reach a early-stage deals before progressing to larger deals are now stage where they can look for a licensing deal instead of in short supply. follow-on investments.

Secondly, early stage investors with smaller investments Another spin-out from Zurich University is Neurimmune often suffer from dilution in follow-on investment rounds Therapeutics (www.neurimmune.com) which showed that and often have only limited capital to participate in the it is possible to enter into licensing deals when the company follow-on investments. In particular, drug development is at an early stage. Neurimmune Therapeutics signed a companies require several investment rounds before they deal with Biogen Idec worth up to £30m. Drug development can be exited. companies are especially suited to this business model where the presentation of promising data increases the Thirdly, many investors have become more risk-averse likelihood of attracting venture capital investment and focussing on more proven technologies or services of benefiting from future licensing agreements. Overall, embedded in later stage companies. licensing agreements can offer some early-stage companies an excellent funding alternative when venture capital options are scarce.

The report shows the important role of the healthcare technology venture market in European and the UK. Healthcare technologies and related services attract around one-third of all venture capital investments made in Europe. Besides being the leading venture capital market in Europe, the UK benefits from a strong corporate and research base in this sector which is contributing over 50% of all venture capital backed companies; and strong networks across universities, technology transfer offices, service providers, entrepreneurs, SMEs and corporates.

This can also be seen in the Yorkshire & Humber region where several spin-out companies originated from strong research universities and a network regional investors and service providers helps spin-out and start-up companies to secure their funding. However, this region will feel the squeeze in the venture capital market and needs concentrated efforts to ensure that the regional companies are in the best position to survive the current climate and can grow so much more under improved market conditions. But this also requires ongoing support for research and development in research organisations and corporates to develop marketable ideas, which is necessary to keep the competitive advantage of UK in the healthcare technology sector. The Healthcare Technology Venture Market

Acknowledgements

We would like to thank everyone who has contributed to this report, particularly the Access to Finance for Healthcare Technologies consortium for their sponsorship and the following organisations that supplied data and provided insight in one-on-one interviews for use in this report:

• 3i, London (UK) • Abcam, Cambridge (UK) • Abingworth Life Science Investments, London (UK) • Bradford Bioscience Business Incubator, Bradford (UK) • CorporateInformation.com, Milford (US) • Eucomed, Brussels (Belgium) • Fusion IP (Sheffield) 34 • Grant Thornton, London and Yorkshire & Humber regional offices(UK) • Higher Education Funding Council England, London (UK) • Higher Education Statistics Agency, Cheltenham (UK) • Imperial Innovation, London (UK) • IP Group (UK) • Leeds Innovation Centre and Bioincubator (UK) • Leeds Met University (UK) • Library House, Cambridge (UK) • London Stock Exchange, London (UK) • Longbow Capital, London (UK) • Medilink, Sheffield (UK) • Science City York, York (UK) • Techtran Group, Leeds (UK) • University of Huddersfield (UK) • University of Hull (UK) • University of Leeds (UK) • University of Sheffield (UK) • University of York (UK) • Viking Fund, Normanton (UK) • York Incubator, York (UK) • Yorkshire Concept Fund, Leeds (UK) • Yorkshire Connect (UK) • And all the other undisclosed companies and investors ... Disclaimer

Information about the venture capital market is constantly changing. Reasons for this include new disclosure of past investments, new available insights into the structure of investments, changes in the methodology and definition among others reasons. Therefore any future report might publish alternative figures on venture capital investments in Europe to this report. However, the L.I. Group claims to provide an accurate picture based on the information currently available. All information used in the publication of this report has been compiled from sources that are believed to be reliable. Reasonable steps have been taken to ensure that no errors or inaccurate descriptions arise, but this cannot be guaranteed and the report does not purport to contain all information that recipients may require. Opinions contained in this report represent those of L.I. Group at the time of publication. Neither L.I. Group, nor any of its founders, employees, agents or advisers makes any express or implied report or warranty, and no responsibility or liability is accepted by any of them, with respect to any errors or omissions in this report or any other information supplied at any time to or on behalf of the recipient, or with respect to the fairness, adequacy, accuracy or completeness of the information in this report, including without limitation the reasonableness of the projections, forecasts, estimates or any associated assumptions contained in it, or any information otherwise supplied at any time to the recipient.

The value of investments can fall as well as rise and can be subject to large and sudden swings. In addition, it may be difficult 35 or impossible to buy, sell, or obtain accurate information about the value of, companies or investments mentioned in this report. Past performance is not necessarily a guide to future performance.

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Endnotes

1 For the period January 2007 to November 2008 2 HE-BCI Survey 2006-2007 3 HE-BCI Survey 2006-2007 4 Joseph P. Newhouse, “Medical Care Costs: How Much Welfare Loss?”, Journal of Economic Perspectives 6(3 Summer 1992): 3-21. 5 Technical Review Panel on the Medicare Trustees Reports, Review of Assumptions and Methods of the Medicare Trustees’ Financial Projections (December 2000), www.cms.hhs.gov/ReportsTrustFunds/02_TechnicalPanelReports.asp#TopOfPage 6 Richard A. Rettig, “Medical Innovation Duels Cost Containment,” Health Affairs (Summer 1994): 15. 7 Productivity Commission, Australian Government, Impacts of Advances in Medical Technology in Australia, August 31, 2005, Melbourne, Australia 36 8 Federal Food, Drug, and Cosmetic Act (2001). 9 IMS Health, MIDAS, MAT. 10 Yorkshire Forward, Healthcare Technology Industries: Mapping Study 2006. 11 This includes Biotechnologically based procedures or developments, especially the more medically and organism based “Red Biotechnology” sector. 12 Source: Sami Hamade - Developing medical technologies, presentation. 13 American Heart Association and the National Heart, Lung, and Blood Institute. 14 Eucomed, 2008, www.eucomed.org 15 McKinsey, (Internal Docment), 2008. 16 The Outlook for Medical Devices in Western Europe. 17 Eucomed, 2008, www.eucomed.org 18 EVCA: Benchmarking Study 2008; Kortum S. and Lerner J.: Does Venture Capital Spur Innovation?, NBER Working Paper No. 6846. 19 For a comparison of the venture capital investment activity in the UK and the US see the forthcoming report from the Council of Science and Technology: Corporate Venture Activity in the UK. 20 www.yorkshireuniversities.ac.uk 21 www.yorkshireuniversities.ac.uk/unis.php 22 www.russellgroup.ac.uk 23 www.fusionip.co.uk/OurPartners/NikkoNPIVenturesLtd 24 www.yhef.co.uk 25 www.yorkshirepost.co.uk/businessnews/Young-firms-that-welcome-a.4823985.jp 26 www.syif.com/news/news271.asp 27 www.fusionip.co.uk/News/Axordia+Sale.htm?p=1 28 www.intercytex.com/icx/news/releases/2008/2008-12-22 29 www.platform-diagnostics.com/about-overview.htm 30 www.kirkstall.org 31 The University of Sheffield: U-Inspire – Knowledge Transfer Newsletter, Issue 4, Summer 2008, p12. 32 PWC: 11th Annual Global CEO Survey 2008. Pharmaceutical and Life Science Summary. 33 www.bloomberg.com/apps/news?pid=20601203&sid=a5VZKJLMOfkY&refer=insurance 34 Interview with Kai Ingo Seidel from Close Bothers in Going Public, Special Issue 11/2008, page 26-27. 35 Transkript 2009 (Vol. 15), Nr. 1-2, p.6. Abbreviations

AIM – Alternative Investment Market

CAG – Compound Annual Growth

CEO – Chief Executive Officer

DTI – Department of Trade and Industry

EBITA – earnings before interest, taxes and amortisation

EVI – European Venture Intelligence

FDA – Food and Drug Administration

GDP – Gross Domestic Product 37 GNP – Gross National Product

HE-BCI Survey – Higher education-business and community interaction survey hESC – human embryonic stem cell

IP – Intellectual property

IPO – Initial Public Offering

KfW – Kreditanstalt für Wiederaufbau

LSE – London Stock Exchange

Ltd – Limited

M&A – Mergers & Acquisitions

OECD – Organisation for Economic Co-operation and Development

ONS – Office for National Statistics

Plc – Public limited company

R&D – Research and Development

SYIF – South Yorkshire Investment Funds

UKTI – UK Trade and Investment

WHO – World Health Organisation

WRSTF – White Rose Technology Seedcorn Fund

YABA – Yorkshire Association of Business Angels

YHEF – Yorkshire & Humber Equity Fund The Healthcare Technology Venture Market

Grant Thornton is a leading business and financial adviser, delivering unparalleled service standards and tailor-made solutions to over 40,000 corporate and individual clients. It is the UK member of Grant Thornton International, one of the world’s leading international organisations of independently owned and managed accounting and consulting firms.

38 Quotec is a technology and innovation strategy consultancy that

SECTION SEVEN SPONSORS utilises a wide network of technology and market experts to assist industry and the public sector in technology commercialisation and knowledge transfer. In the area of health technology Quotec develops and manages industrial innovation programmes for the UK Department of Health. These include the Small Business Research Initiative and other elements of the Invention for Innovation (i4i) programme. Quotec also works directly with health companies large and small on technology development and exploitation. It provides help and support for many small technology based companies seeking investment finance.

BITECIC provides specialist R&D services to support organisations aiming to take new concepts through to market in all areas of healthcare and medical device technology. Drawing on expertise from a world-class team of business, clinical and research personnel, BITECIC applies its regional knowledge to developing and managing the local, national and international collaborations that will add value to its customers.

NOTES L.I. Group St. John’s Innovation Centre Cowley Road Cambridge CB4 0WS United Kingdom www.li-group.co.uk [email protected]