CM Capital: Mark Harvey shares his views on the best type of scenario for financing a company and why he is optomistic for the future.




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Video title: CM Capital: Mark Harvey shares his views on the best type of scenario for financing a company and why he is optomistic for the future.
Released on: December 21, 2011. © PharmaTelevision Ltd
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In this episode of PharmaTelevision News Review, Fintan Walton talks to Mark Harvey, Partner of CM Capital.
Types of investments
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at AusBiotech's convention in Adelaide. On this show I have Mark Harvey, who is the Partner or a Partner at CM Capital Investments which is based in Brisbane, welcome.
Mark Harvey:
Thank you.
Fintan Walton:
Mark, you're obviously a venture capitalist you invest in technologies I understand broad range of different technologies, but obviously you are here with your life sciences hat on at this particular convention, first of all just introduce our audience to your firm and the types of investments that you do.
Mark Harvey:
Yes sure, as you've seen Capital has been for 12-years now and it was started in '98 and we have raised three funds thus far and 250 million under management 21, 22 portfolio companies and they are spread across what we call texo in the ICT and then in security, but the majority of our investments have been in life sciences including pharmaceuticals, medical devices and diagnostics.
Fintan Walton:
Right, and what stage do you come in at are you an early stage investor or late stage investor?
Mark Harvey:
Definitely, definitely early stage, so a lot of the life sciences would be preclinical as the time that we would invest, but we've also done a few where they've actually been in the clinic and then would be specifically funding their clinical development.
Fintan Walton:
Okay, and obviously you're based in Queensland are you Queensland specific are you happy to invest across the whole of Australia or outside Australia?
Mark Harvey:
Okay, I think we own up 21, 22 portfolio companies two have been based in Queensland so majority outside and what we do is invest in other Australian companies or overseas companies which have a presence or doing some sort of development in Australia. We also do invest in say US companies where their technology originated out of Australia and I think of the current active companies that we have got probably 15, 16 at the moment at least half of them are based overseas even though they do have Australian technology in them.
Fintan Walton:
Okay, and in terms of how you invest you presumably you invest alongside other VC's here in Australia?
Mark Harvey:
Correct, yes so we always watch on those companies always require more money than what do you anticipate and so when get a change we'd always trying to do would be to syndicate and there is a number of Australian VCs that we have syndicated with a multiple occasions.
Mark 's views: Changes in investing in life science sector
Fintan Walton:
Okay, now you said you've started this 12-years ago what's happened in the last 12-years, not in great detail, but how is investing for you changed in the last 12-years generally speaking.
Mark Harvey:
I suppose that you could say one thing about investing in life sciences and that was up until sort of three-years ago that the major risk that any company had was technological risk and then second may be the regulatory risk, financial risk was well down the reserved risk that you had to deal with whereas nowadays financial risk has probably the foremost risk that you ever face in a company the worst thing obviously that can happen is the company run out of money and then you don't have the ability to support the company in going forward, so hence your previous question about syndication is something is very important to us, but also looking at other ways that we can keep our companies moving forward as quickly as possible but also on the nominee least amount of money that there we require.
Corporate venture funds in Australia
Fintan Walton:
Okay, now one of the other things that's happened in the last few years is the rise of corporate venture funds particularly a lot of the major pharmaceutical companies are coming to that space, are you picking that up is that something that's happening here for Australia as well?
Mark Harvey:
Yes, so we've been in a at least one company where we've had a couple of the large pharmaceutical corporates involved and in a couple of our current portfolios we are actually talking to corporates particularly US in a major device and pharmaceutical companies to be involved in any further financing of their companies, if we had to say what would be the best type of scenario for financing a company would be a one we have the blend of other institutional VCs like ourselves, but also and include a corporate venture fund for the shear factor they can always give you that market perspective and in going forward.
Fintan Walton:
Sure, so it's all about giving confidence?
Mark Harvey:
Correct.
Fintan Walton:
To each other, but you're all doing in the same thing in the most intelligent way.
Mark Harvey:
Absolutely and having the sufficient funds around the table to new programs.
Performance of CM Capital's portfolio companies over the last year
Fintan Walton:
Right. So in terms of your portfolio companies and the performance of the ASX and the liquidity of those of the shares of those companies how has that been in the last year?
Mark Harvey:
Well in the last year it's been very tight there are the just very distinct windows of liquidity to actually exit out of those companies. We've exited two ASX companies that we've held stocking for a large period of time and decided to get out and then there is very, very small windows and then been able to do so with been in six ASX life science companies we've exited four thus far and we still got another two that we are currently holding and look to add more value in those companies before we exit.
Fintan Walton:
And has any of those exits occur as a result of a trade sale or is it just the opportunity window opening for?
Mark Harvey:
Opportunity window, but largely we're always very, very conscious that when we do selling our shares that we no way harm the stock price, so although we have sold some on market the majority of the shares that we have sold in those companies has been in parcels as separate to trading on the market.
Fintan Walton:
Okay, so it's they are traded as a parcel to another investor?
Mark Harvey:
Correct, that's right, yes.
Fintan Walton:
And what sort of investors are buying those packages?
Mark Harvey:
Other institutional investors they're mainly clients through the brokers that we work with and they will buy anywhere between 1 and 3 million, $4 million worth of shares in any one time.
Influence of new tax credit system on investments in Australia
Fintan Walton:
Right, now the other thing of course is this happened this year is other tax credits and how much of that is going to influence you think investing here in Australia?
Mark Harvey:
Well I think it's a really great program and I think that will particularly with this case capital resources that Australian companies do have that this is a great way of helping those companies move along rather than the previous granting government granting systems that we have. In terms of getting other companies overseas companies to come and invest here there are rules sort of concerning there, but certainly from our native companies in terms of going forward those credits will be a great advantage.
Fintan Walton:
And then from your perspective you don't see any sort of constraints on how that's been operated itself?
Mark Harvey:
There are some constraints, I mean if we've got a company where by the technology is based in Australia but we have choose to (indiscernable) it in the US because of the expertise and management et cetera, there are does make an extra level of complexity if we wanna for instance do some more clinical development in Australia which we have done, so we have been able to work that out and work that through something which does require a fair bit of effort.
Mark 's perspective: Funding environment in Australian biotech industry
Fintan Walton:
Okay, and then in terms of obviously in the world economy it's going through particularly in US and Europe there is shaky times let's call it out for certainly volatile times what influence do you think that will have on the Australian economy and in particular obviously the markets, the capital markets and the success of your portfolio companies?
Mark Harvey:
You ask me to comment on the Australian economy, I think you'd probably find someone more related on that who has many more opinions, but I think in terms of just focusing on the life science companies, it's very difficult for Australian companies at the moment to actually get US VC attention and particularly more so in the medical device we've got several medical device companies and there just seems to be very, very little VC money investing into those companies, we (indiscernable) several of those actually in the US and so it's been very, very difficult times. I think that will generally continue to have that effect in Australia and that we need to find the capital resources for these companies in Australia, and I think over the last couple of years in particular the only companies that have been able to raise money are those which are already been listed on the ASX, I mean the IPO has effectively been closed for new companies coming forward have perhaps probably been around for a while on private, its only so much VC money at this particular time and the only ones I think that have raised significant amounts of money are those with loyal investor bases listed on the ASX, who have continued to do placements as of hit milestones.
Fintan Walton:
Right, so you have to be a certain type of company basically if you want to get funding?
Mark Harvey:
At the moment yes, hitting milestones, ASX listed with the good shareholder base and I think a large amount of money that is being raised for all across all companies that's where it's gone.
Mark's perspective: Future of Australian biotech sector
Fintan Walton:
So Mark, in the end how would you, what's your level of your optimism or pessimism about what's gonna happen in the biotech sector now over the next few years?
Mark Harvey:
As we going forward I think that getting close to the end of this year and into next year there is a certain degree of optimism, I think that we've been going for a long time now in this very pessimistic market and sooner or later human nature is to turn around and say things are going to get better, so hopefully that is the case and things will get better sooner rather than later.
Fintan Walton:
Great. Well Mark Harvey, thank you very much indeed for coming on the show.
Mark Harvey:
Thank you.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
Mark Harvey
Partner
At the time of recording this PTV interview Mark Harvey works as Partner of CM Capital. Mark joined CM Capital in April 2006 and has over 15 years experience in medical research, technology transfer and commercialization. He is involved in all aspects of life science investments. Mark has played key roles in the formation, fund raising and management of numerous life science companies including directorships, and has led the negotiations on numerous licensing and research collaboration deals. Prior to joining CM Capital, Mark was the Managing Director of Symbiosis Group Limited, an early stage life sciences investment company, and was Group Manager, Life Sciences for UniQuest, the commercial arm of the University of Queensland. In this role, Mark co-ordinated the commercialization of intellectual property assets in the field of life sciences (including biotechnology) at the University of Queensland. He was a member of the Investment Committee of UniSeed, a $60million pre-seed venture fund focused on the commercialization of technologies out of the University of Melbourne and The University of Queensland. Mark is also an Adjunct Associate Professor of The University of Queensland.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
CM Capital Investments
CM Capital is a venture capital firm specializing in investments in early, seed, and expansion and growth stages of a company's development. The firm seeks to invest in life sciences, medical devices, telecommunications, convergence of biotechnology and information technology, renewable energy, and biotechnology or chemistry sectors. It prefers to invest in companies based in Australia. The firm typically invests between AUD$500,000 ($380,000) and AUD$8 million ($6.45 million). It takes a board seat in its portfolio companies. CM Capital Investments was founded in 2007 and is based at Brisbane, Australia.