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14 July 2015

H1 2015 data review: a tale of two quarters

An analysis of GUV data for the year so far.

Author: Gregg Bayes-Brown, editor

Global University Venturing recorded a total of $6.5bn over 319 deals for the first half of this year (H1), up from 220 deals and a $2.84bn deal value for the same period in 2014. Funds were also higher, although the number of new funds was down, with $4.32bn over 29 funds compared to $3.5bn over 47 funds last year.

What began as a timid year on the new funds front got twisted on its head by Q2 as two blockbuster funds entered the fray, along with several other sizeable additions. The US and life sciences continued to dominate the dealflow, accounting for 51% and 44% of all deals, respectively.

First quarter

The first quarter of the year (Q1) revealed strong dealflow, with 172 deals netting a total of $2.6bn – an increase of $1bn for the same period in 2014 over its 95 recorded deals. However, this was offset by a smaller number of funds appearing in 2015, raising $920m worth of university-related funding pots over 9 funds compared to $1.2bn over 21 funds last year.

It was also the quarter where the series A came into its own. While there was no Juno Therapeutics, 45% of Q1’s series A rounds were in the double digits. The out and out winner of the series A rounds was Jet, an online shopping portal founded by Pennsylvania graduate Marc Lore which has secured $80m from the like of Bain Capital Ventures and Accel Partners. What makes this a particular stand out is that the platform has not even launched yet, but is being billed as a competition to Amazon by providing the lowest prices for goods on the internet.

Jibo, a spin-out of Massachusetts Institute of Technology (MIT), also had a strong series A, raising $25.3m in a round backed by university investment consortium Osage University Partners and others for family-based robotics. Merganser Biotech, founded on University of California Los Angeles technology, was another solid performer, raising $28m in a round also backed by Osage. Outside the US, the largest series A goes to University College London, which saw its spin-out Autolus raise $45m.

Based on the same group of immunotherapies which grabbed headlines last year, Autolus might not have secured the Juno or Adaptimmune levels of series A, but demonstrates the cancer-fighting technology is still hot in the minds of investors.

Not as hot, however, as Moderna Therapeutics, which is developing mRNA therapeutics to treat cancer and a whole host of other diseases. An early yet prominent contender for GUV’s Deal of the Year 2015, the company secured $450m in the largest biotech venture round in history – a clear $176.3m ahead of its nearest competition in Reliant Pharmaceuticals 2003 round. As a matter of perspective, our 2014 Deal of the Year winner Juno Therapeutics – seventh largest biotech venture round in history – received our award on the back of a deal the size of the difference between Moderna and Reliant. The US-based firm draws on founders from Harvard, MIT, and Karolinska Institute, the last of which it has a strategic collaboration agreement with. It’s also partnered with AstraZeneca, Alexion, and the Defence Advanced Research Projects Agency (Darpa) to further its work.

Timid companies refusing to disclose exits prevented us from ranking acquisitions and IPO rounds this quarter, which is good news for Max Planck Institute’s Suppremol, a biotech spin-out based on the Nobel Prize winning research of Robert Huber. The Germany-based firm was snapped up by Baxter International for $225m in March. Duke University’s Regado Biosciences came second in a deal worth $60m, and Ulster University’s risk management software spin-out 8over8 claimed the bronze medal with a $41m sale to power plant construction firm $41m. We also saw XO1, the Cambridge University firm developing ichorcumab, dubbed the “holy grail” of anticoagulants, and one of GUV’s spin-outs to watch highlighted at the start of 2014, acquired by Johnson & Johnson.

Propping up the poor showing for new funds was Emergence Capital, which raised $335m in its fourth fund. Aimed at cloud-based software, several unnamed university endowment funds were joined by national foundations and pension funds in the fundraising. The European Commission also helped round out the overall fund value with $226.6m announced as an innovation fun to help spin-outs and other firms cross the value of death. And, fresh off a scorching hot year for the firm which saw solid dealflow, performance, and a US-expansion in 2014, UK-based commercialisation firm IP Group raised $193m to further its global reach and boost its investment muscles.


Second quarter

The second quarter of the year (Q2) saw two blockbuster funds arrive after the dearth in new funds in Q1.

Aside from Oxford Sciences Innovation, April saw the launch of Woodford Patient Capital Trust (WPCT). Floating on the London Stock Exchange, the fund raised £800m ($1.25bn), becoming the largest of any UK listed fund and automatically entering it into the FTSE 250 index.

Established by former Invesco equity manager Neil Woodford, the fund is an extension of the renowned British investor’s interest in university spin-outs and the early stage. According to the fund’s prospectus, around 50% of all its deals will be in the early stage, with a further 25% focused on early growth firms.

Set to be a major boon for British university innovation, the fund is drawing heavily on Imperial College London’s expertise. It builds on ties between Neil Woodford and the institution’s tech transfer office Imperial Innovations back when Woodford worked at Invesco, a majority shareholder in Innovations. Susan Searle, the former CEO of Innovations, is chairing WPCT’s board, and is joined by Imperial spin-out Circassia’s co-founder Steven Harris and Scott Brown, CEO of fellow spin-out Nexeon.

In other fund news, it was a big quarter for the MIT-backed Skolkovo, which raised a $200m university venturing fund to back spin-outs coming from the Russian innovation centre, backed by China-based investor Cybernaut. US-based university investor consortium Osage University Partners also returned for its second fund, breaking its $200m target to reach $215m.

Overall, the quarter showed strong results, building from Q1 with $3.9bn over 148 deals recorded by GUV and an increase in funds, both in quantity and in quality thanks to OSI and WPCT. One of the interesting trends of this quarter has been the increase in donations provided to universities, many of which are record breaking for campuses. GUV recorded five $50m+ donations to campuses in Q2, topped by a $400m donation to Harvard University made by hedge fund manager John Paulson, the largest in the institution’s history, which will be going towards developing a new campus across the Charles River in Boston.

The quarter also saw some strong exits, notably Domino Printing Services, one of Cambridge’s oldest spin-outs. Born out of Cambridge’s research centre Cambridge Consultants in the 1960s, the firm was acquired by Japan-based printing company Brother Industries for $1bn. There was also reason for celebration at Queensland University, which saw drug developer Spinifex pass over to pharmaceutical firm Novartis for $200m. Oxford too saw life sciences success as its immunotherapy firm Adaptimmune held its IPO in April, securing $191m.

Another large IPO was held for Malin Corporation, a life sciences investor backed by UK and Ireland sovereign wealth funds and Woodford Investment Management, Neil Woodford’s other investment vehicle. The $350m fund launch immediately led into a $50m round, one of Q2’s biggest investment deals, into Novan Therapeutics, a life sciences spinout of University of North Carolina at Chapel Hill.

Fred Hutchinson Cancer Research Centre, one of the three sources of Juno Therapeutics, saw another one of its immunotherapy firms raise a large round when Adaptive Biotechnologies secured $195m in its series F round, indicating an IPO might be near. Talking of Juno, the firm will likely be a talking point in Q3 as GUV received word of a $1bn investment by Celgene into the firm as this magazine was going to press.

Most active universities

Cambridge: Keeping its rivalry with Oxford warm, Cambridge overtook Oxford in our most active university list. The UK-based university scored some solid deals, including $20m series A for simulated gaming and virtual reality worlds spin-out Improbable and $18m for cyber-security firm Darktrace, marking a second investment into the firm by Invoke Capital, the $1bn venture fund launched by Autonomy founder Mike Lynch. The whole cluster also recorded $64.1bn in deals over the past two years according to Cambridge-based news provider Business Weekly – averaging $2.7bn a month. However, the most headline grabbing news to come out of Cambridge this quarter was Cambridge Chocolate Technologies, which will be launching a chocolate bar that reverses the effects of aging in the skin, due to hit stores in UK and the EU soon.

Stanford: Stanford’s StartX fund has been firing on all cylinders of late. The fund, which uses the student run incubator StartX as a sounding board, has been involved with six investments which we have recorded since the start of the year. However, Stanford’s biggest winners have been plasma therapeutics spin-out Alkahest, which secured $37.5m from pharmaceutical firm Grifols, and Springpath, a data storage platform which emerged from stealth with $34m from a number of backers including Stanford itself.

Oxford: No-one could blame Oxford for resting on its laurels after its Q1 last year, which saw $50m returned to the university during the sale of gaming firm NaturalMotion to Zynga for $527m. But obviously, Oxford Sciences Innovation underlines that it has chosen not to do so. Additionally, Oxford saw its solar-powered stained glass window spin-out Oxford Photovoltaics secure $12.2m in its series B and Isis Innovation, the university’s tech transfer office, closed its second fund at $3.1m – the second such fund in less than a year. Another big win has been Adaptimmune, Oxford’s immunotherapy spin-out, which raised $191m in its IPO.

University College London, Harvard and Minnesota: In a three-way tie, UCL probably tips the scales in its favour. Despite Harvard spin-outs having three great series As with Macrolife Pharmaceuticals ($22m), Qstream ($4m), and Wave Life Sciences ($18m), they still do not quite collectively add up to UCL’s afore-mentioned $45m series A for Autolus. Minnesota has also kickstarted its way into 2015, with $17m in series A backing for Vidku, a spin-out developing a video sharing app called Flipgrid aimed at higher education.

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