Apposite Capital: Ready to Take the Lead in Life Science Investments




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Video title: Apposite Capital: Ready to Take the Lead in Life Science Investments
Released on: May 01, 2008. © PharmaVentures Ltd
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In this interview, Fintan Walton talks to Dr. Allan Marchington, partner in Apposite Capital, an independent single sector fund located in London but established with funding from the Mizuho Financial Group, one of Japan’s largest financial services company. Focusing on health care services in the UK and on life sciences in Europe and the U.S., Apposite uses their well-established network of executives and entrepreneurs to first identify and then to take the lead as early stage investors. A nine year fund, Apposite is endowed with $200 million to invest and, to date, have invested about 50% of their fund. Dr. Marchington shares that their success is built on their systematic approach to identifying areas of investment, their diligent efforts to work closely with early-stage companies, and their top-notch Advisory Board selected from some of the world’s top pharma companies.
Venture funds from Japan.
Fintan Walton:
Hello and welcome to PharmaVentures Business Review here in Madrid. On this show I have Allan Marchington, who is a Partner at Apposite Capital. Welcome to the show.
Allan Marchington:
Thank you. It's great.
Fintan Walton:
Apposite Capital is based in London yet its funds which is a venture capital fund is from Japan?
Allan Marchington:
Correct.
Fintan Walton:
You've raised over $200 million, why Japan for your funds?
Allan Marchington:
Well it's an interesting place and Japan at the moment is going through a quite lot of change in its own healthcare system. And we are backed by a number of Japanese institutional investors one of which is Mizuho a large Japanese bank and Dainippon Sumitomo Pharmaceutical. And we really got approached initially by Mizuho they got a lot of venture funds in Japan but nothing outside of Japan per say and so they wanted to fund outside, they wanted to be involved in a fund that's out of Japan particularly in London and in Europe where they could get some exposure to European biotech and European healthcare. And so that was the initial starting point and they had agreed to corner stone our investment.
Fintan Walton:
So the founders of Apposite actually came out of Nomura as well which is obviously a Japanese bank?
Allan Marchington:
That's correct, so the Managing Partner, David Porter the Management Partner came from Nomura. David actually founded the Nomura Phase4 Venture a long time ago. And of course my other colleague, my other partner Steve Adkin he also came from Nomura and was join head of healthcare corporate finance at Nomura.
What type of companies does Apposite invests in?
Fintan Walton:
Right. So the funds come from Japan but the investments are in Europe and USA is that correct?
Allan Marchington:
Yeah we primarily focus on Europe, US and the Nordic Regions, we can invest anywhere�
Fintan Walton:
Right.
Allan Marchington:
But those are the areas that seem strongest where some of the strongest management teams seem to come from.
Fintan Walton:
Right. But presumably despite the fact of the money comes from Japan the remit is the same as for any other venture fund?
Allan Marchington:
Yeah our remit is completely the same, we are a independent fund of other Mizuho, Dainippon Sumitomo.
Fintan Walton:
Right.
Allan Marchington:
We are completely independent we've got a normal LP-GP structure.
Fintan Walton:
Right. So the types of investments that you go for and clearly you know the healthcare area is a very large area it's got it's different risk profiles from early stage biotech companies all the way through to more mature companies, what type of companies do you invest in?
Allan Marchington:
So when we started out we really took a systematic approach to looking at healthcare and try and identify those areas of greatest need but also balance the risk. And so we looked in two areas particularly, one in healthcare services and one in life sciences and within those areas we've now chosen on particular niches to actually really focus on.
Fintan Walton:
So you've identified those sort of companies but in the end what are you backing? Are you is it a technology that you are backing, the business model or the management which of those?
Allan Marchington:
Okay. In healthcare services we tend to focus on the UK and some of the changes that are happening in healthcare. In life sciences we tend to focus in the Europe on really any stage of investment and we'll lead investments investing anywhere between 5 and $20 million per investment, when it gets a bit further a field in the US we'll generally invest later stage deals.
How does Apposite identify the sort of investments to take the lead?.
Fintan Walton:
So to be a lead investor is not that easy because you've got to get in there, you've got to convince other people to come in alongside you
Allan Marchington:
Sure.
Fintan Walton:
So how do you identify those sorts of investments where you want to take a lead?
Allan Marchington:
Well we generally lead all our investments. And really how we've actually achieved that is one through our own network, my own experience has been a CEO and having worked in the US as well as in Europe as a CEO and so got a lot of experience of having run my own company and so the network is quite broad. And so we are able to bring people in there who I know and actually people quite like working with us because I have some experience of what the CEO's feeling when he is got to deal with his board, deal with their investors and so there is some empathy there as we tend to work with our companies.
Apposite's perspective on investments and changes in the biotech field.
Fintan Walton:
At the moment in 2008 whether you are in the US or in Europe, people look at the biotech field and they still look at it as a high risk sector, do you see any new change happening in 2008 or we getting into more pessimistic or more optimistic field?
Allan Marchington:
I think that's a good question, so we've tried to mitigate some of that risk by investing in healthcare services and in life sciences.
Fintan Walton:
Yeah.
Allan Marchington:
So we see healthcare services is much lower risk to the life sciences field where we tend in invest in therapeutics. I actually think I am pretty positive about biotech actually and where things are going, I think things have been quite recently but I am looking forward to picking it up in 2008, 2009.
Fintan Walton:
Right. I suppose one of the key things that's happened in the last couple of years particularly is that big pharma companies are buying up some of the biotech companies providing exit for venture funds, but equally on the other side the IPO market has become a bit dry let's say.
Allan Marchington:
Yeah, sure.
Fintan Walton:
So from your perspective do you look at that when you are trying to invest in that company trying to assess the mood for future exits?
Allan Marchington:
Sure, we spend quite a lot of time working with the large number of investors from sorry a large number of advisors from senior pharmaceutical companies looking at the future. As we see it today we see the big pharma's has got a real productivity issue going forward over the next five-years and so we don't see any down size in continuing of investing in companies where big pharma gonna � wanna take them out. So we still see acquisitions on the horizon. I think the markets are a whole different ball game and they are just gonna move with the vagaries of the investors.
Comfortability in co investing alongside corporate venture funds and large pharmaceutical companies and diverse investments.
Fintan Walton:
Right. You've I know that you've invested alongside some of the corporate venture funds as well some of the large pharmaceutical companies, is there a conflict between what they are trying to do and what you are trying to do, I mean is it comfortable and co-invest when you do that?
Allan Marchington:
Absolutely, I think the all I can say with hand on heart that all of the venture funds that we've actually, corporate venture funds we've actually invested with have been great to work with. I think they are very much aligned with this they still want to get a return on capital, but they want to undergo, understand the latest science in the area so we are very comfortable with that.
Fintan Walton:
Now when you are involved in investing in companies as diverse as the ones you've described both from the services basis as well as into biotech and the fact that they are based in California all the way through to into UK and into Europe, does that, is that difficult does that make it difficult for you to actually invest because normally funds like to invest local?
Allan Marchington:
Sure. And I think you know it certainly builds up (indiscernable) that's for sure, but we tend to put a lot of work into working with that companies but what we do like to do is actually ensure that we spend the time with companies and we do that, so it does make is difficult when they are out in San Diego or we want to spend the time with them, we are willing to get on the aero planes for them and through our network as an organization and particularly my own network having been in the States we tend to get into those deals reasonably comfortably.
The $200 million fund and financing rounds.
Fintan Walton:
Right. Just going back to the fund it's a $200 million fund is that correct?
Allan Marchington:
Yeah. That's right.
Fintan Walton:
And it's a what its life span? And how much of you've invested so far?
Allan Marchington:
So it's a nine-year fund.
Fintan Walton:
Right.
Allan Marchington:
We are just under 50% invested to-date and so we've still got some dry powder and that includes some of committed capital as well, so we got enough for several more investments in the fund as we go forward.
Fintan Walton:
And have you already gone into the second round of financing for some of the initial investee companies?
Allan Marchington:
So we are just about to complete a couple of second we've done one already and there is a couple of others just coming up for second round financing and they are going very well actually.
Fintan Walton:
Is there a temptation to get into a second fund start preparing that now at this stage?
Allan Marchington:
Well you are always talking to a future LP's about a second fund, I think we want to talk to LP's, we want to show people what we are doing and how we are doing things slightly differently there may be other people who are doing them and so we continued to scope have a dialog with LP's because you know it's the right way to be and be very open and so when the day it comes when you raise of fund they know you very well.
Investments in UK.
Fintan Walton:
Now going back to the investments that you are making in the UK particularly on the service side just to make that clear the service side you are talking about services really at the patient level rather than services back into the pharmaceutical companies themselves.
Allan Marchington:
Sure.
Fintan Walton:
So services into the patient care groups could you give us an example of the type of company that you've invested in?
Allan Marchington:
Yeah, absolutely. So we see a lot of change at the moment in the National Health Service in the UK, we particularly focus healthcare services on the UK area region. And so one example of that is CancerPartners Limited, it's a company providing oncology ambulatory care where you can get radio and chemo therapy locally rather than having to go to your hospital and some of those complications.
Fintan Walton:
And that's pay for by the NHS?
Allan Marchington:
That's pay for both privately and by the NHS in that model.
Fintan Walton:
Right. And what are the types of investments are you looking in that particular sector?
Allan Marchington:
So we look at anything you know one of our other investments is in the foster care company in the training at foster children a company called By The Bridge which is a very successful company and actually looking after children who have been both mentally, physically and sexually assaulted or abused and teaching parents how to look after those children in a professional way.
Fintan Walton:
And how do you link those back to the other types of investments that you are making, I mean there are different types of investments clearly?
Allan Marchington:
They are different types of investments, it really balances our risk profile as a fund, but on addition our understanding of the services that been provided in terms of oncology care helps us look when we look at that new therapeutics in oncology and really get an understanding of how those drugs are actually being used in a clinical sector.
UK biotech sector compared to the rest of Europe.
Fintan Walton:
Now looking at the UK, as you're very experienced individual with the UK biotech sector having around that Cambridge Chemistry at one stage of that.
Allan Marchington:
Yeah, sure.
Fintan Walton:
Cambridge Combinatorial Chemistry or discovery, that sector in the UK has gone through so many different changes and when you compare that to the rest of Europe where do you place the UK biotechnology industry in relation to its past and also in relation to what's going on in Europe?
Allan Marchington:
Okay. I think the UK as I said is going through some difficult times at the moment. I think the funding environment is certainly difficult for new companies, I think a lot of funds have moved towards later stage investments whether invested only in clinical candidates rather than earlier stage. And I think Europe has actually caught up very quickly in terms of the investment levels that's been put into that biotech market. I also think ultimately you got to look at the public markets and the public markets in Switzerland and in Europe, in Continental Europe seem much stronger at the moment on their limited exchanges. So I think at the moment when UK is going through a bit of a down, but I am sure it's going to come out of it, some of the companies that we are seeing are great companies based in the UK as well as in Continental Europe.
Allan Marchington
Partner
Dr. Allan Marchington is a partner in Apposite Capital and is responsible for Apposite's Life Sciences investments. A partner since its inception, Dr. Marchington is a well-known executive in the pharmaceuticals sector and previously worked at Abingworth Management, where he was responsible for strategic changes at several of their portfolio companies. He joined Abingworth in 2003, from Millennium Pharmaceuticals, Cambridge MA, where as a member of the senior management team he was responsible for Millennium's European activities and all of the company's technology investments. Prior to Millennium, Dr. Marchington was principal founder and CEO of Cambridge Combinatorial, a combinatorial chemistry company that was acquired by Millennium for a substantial multiple of invested capital. He has a PhD in Chemistry from the University of Liverpool.
Apposite Capital
Apposite is a single sector fund investing in both life sciences and healthcare services on an international basis. Based in London, Apposite was established by the Mizuho Financial Group, one of Japan's largest financial services companies. The members of the Apposite team have a highly synergistic mix of healthcare venture/private equity, entrepreneurship, management and investment banking experience spanning many decades. Apposite also benefits from an established global network of leading advisors covering all aspects of the global healthcare market. The fund's strategy is to leverage the capabilities of the team and its advisors, combined with the fund's extensive range of contacts in Japan, Europe and the US to continuously add value to its portfolio companies.