GUV annual review

The outlook for university venturing around the world continues to be positive after more than $4bn last year was committed to over 30 new funds targeting primarily academic and public research-led innovations.

This compares with 32 new funds raising $2.7bn in 2013 and 90 launches in 2014 with an aggregate $5.5bn, according to Global University Venturing (GUV).

Although the final deal tally from institutions is still being counted, 2015 could have been a record-breaking year for deals, with potentially more than 700 tracked by GUV, compared with 538 in 2014 and 233 in 2013. And some of these deals, such as Immunocore, an immunotherapy firm with origins at Oxford University before raising $320m last year in a round, have in themselves been record-breakers (see below).

Rather than see the returns reaped by third parties, universities are increasingly making large investments. Tsinghua Unigroup, a subsidiary of the state-backed Tsinghua Holdings invested by Tsinghua University, invested $100m into Acadine, a China-based mobile operating system developer.

Zhao Weiguo, chairman of Tsinghua Unigroup, at the time said: “The operating system is the most critical link between users and service providers, and this field is the most important battleground for the entire IT industry worldwide. Yet it has been highly monopolised on the desktop and in the mobile space, and the offerings cannot meet the specialized needs of many vertical sectors. The Acadine team has the international vision and calibre to challenge this monopoly and we fully support them in this endeavour.”

China at the start of last year put in place a $6.5bn government programme (see GGV article) to support venture capital and university venturing and Tsinghua’s speakers at the GUV Fusion conference in London in June said its institution was being used as a pilot for others.

As with Tsinghua, some of last year’s new funds, such as Oxford Sciences Innovation (OSI), which raised £320m ($487m) in last summer, could credibly stand against almost any independent venture capital fund in terms of size, although most others were started with more modest sums.

Yissum Research Development Company, the tech transfer arm of Hebrew University of Jerusalem, launched Agrinnovation, a $4m fund to invest in agriculture innovations backed by Australia-based investors Victor Smorgon Group.

Others have taken a while to go from announcement to starting. Just before the new year, University of California (UC) launched its $250m fund to invest in innovation opportunities that emerge from the institution first announced UC Ventures in 2014. The university’s office of the chief investment officer is the anchor investor, committing the $250m of initial funding. 

This year could also see further launches around the world, given a virtuous circle has been developing where returns from intellectual property or previous investments are reinvested. Last year, Apple was required by the courts to pay Wisconsin University $234m in damages after the tech giant allegedly infringed on one of the university’s processor patents.

Carl Gulbrandsen, managing director of Warf, the US’s oldest tech transfer and investment funds, said: “This is a case where the hard work of our university researchers and the integrity of patenting and licensing discoveries has prevailed. The jury recognised the seminal computer processing work that took place on our campus. This decision is great news for the inventors, University of Wisconsin-Madison and for Warf.”

Australian spinouts, for example, could be set for a boom as universities anticipate A$800m ($571.2m) earmarked for university venturing by in the first six months of the year.

The Commonwealth Scientific and Industrial Research Organisation is planning to use cash raised from its A$450m wifi patent windfall to launch a tech-focused investment fund, while top universities are developing a A$200m fund, the same amount as Brandon Capital, which supported Melbourne spinout Hatchtech before the headlice treatment firm was sold to pharmaceutical firm Dr Reddy’s for $279m as well as other spinouts.

Dean Moss, CEO of Uniquest, the tech transfer arm of Queensland University, said: “The model of investing in university IP is being validated. That has got everybody in superannuation looking at this and saying, ‘Wow, this is good’. We have not had this before. The government is saying, ‘This model has been shown to work’, and it is attracting international attention.”

As with Yissum’s Agrinnovation fund or OSI, which has search engine provider Google as a limited partner, increasing numbers of corporations are looking to university venturing funds as a source of deals and insights.

Postal firm Australia Post is launching an A$20m investment vehicle targeting e-commerce startups and co-locating the fund at Melbourne University’s Melbourne Accelerator Programme (MAP).

Australia Post also hopes to grow the fund to over A$100m in the coming years, although such hopes can sometimes go unfulfilled judging by the interest over the changing fund sizes for the Bertelsmann-backed University Ventures second fund (see below).

In another positive signal for the developing industry, there is increased global cooperation between institutions. Russia has connected its universities to global experts, while US-based Johns Hopkins University is investing in a $30m fund along with startup hub Luminox Partners on a new $30m digital healthcare fund focused on Israel.

Oxford University’s tech transfer unit Isis Innovation was also named a consultant in a £50m UK-China tech transfer fund launched as part of Chinese President Xi Jinping’s trip to the UK last year.

Tom Hockaday, CEO of Isis, who is expected to step down this year, said: “The fund will provide an important new source of finance for UK technology businesses, enabling existing businesses to grow through access to the funding and the Chinese market, and also enabling those businesses to invest their resources into research and development in the UK. World-class research as the basis for new products and services in world-scale markets will provide opportunities for the next generation of UK businesses, working collaboratively and competitively in China.”

The goal for these top groups is, as Hockaday said, “world-class research” for “world-scale markets” and here US institutions retain a healthy lead.

Stanford University was been named the world’s most innovative university, according to a ranking using patents rather than spinouts conducted by news provider Reuters.

The Silicon Valley-based institution beat Massachusetts Institute of Technology (MIT) and Harvard, second and third respectively, and other Ivy League peers in a table dominated by US institutions. Only one non-US university, Korea Advanced Institute of Science & Technology, made the top 10.

Imperial College London, placed 11^th, is the highest-ranked university in Europe, with KU Leaven at 16 and Cambridge University at 25.

The Harvard Impact Study said its 375,000 living alumni had created more than 146,000 for-profit and non-profit ventures employing 20 million people and with aggregate annual revenues of $3.9 trillion – greater than the gross domestic product of Germany, the world’s fourth-largest economy.

Meanwhile, MIT’s impact report, found its 130,000 alumni had created 4.6 million jobs in 30,200 active companies posting aggregate annual revenue of $1.9 trillion – more than the gross domestic product of Russia, the world’s 10th-largest economy.

Edward Roberts, the professor at the MIT Sloan School of Management who led its study, a
follow-up to a previous report he prepared in 2009, said in news provider BetaBoston’s article: “We are seeing a more rapid rate of growth than we have ever seen before in the formation and start[ing] up of new companies by MIT alumni.”

Immunocore smashes European biotech records

Immunocore, an immunotherapy firm with origins at Oxford University, has secured the largest European life sciences fundraising round so far at $320m.

The Oxford-based biotech raised the cash from pharmaceutical giant Eli Lilly, life sciences investor Malin, RTW Investments, a number of new and existing private backers of Immunocore, and Woodford Investment Management, which led the round jointly with Malin and is one of renowned British investor Neil Woodford’s two funds. Between them, Woodford and Malin provided $80m of the total. The round marks the sole fundraising held for Immunocore since it became its own company in 2008.

The round is not only Europe’s largest, but the second-biggest life sciences round worldwide. Only Moderna Therapeutics, a US-based life sciences firm developing messenger RNA therapeutics which can be used to map out a new or existing pathogen’s genome and produce an antibody to kill it, has raised a bigger round with $450m announced at the start of the year. Immunocore’s round bumps Reliant Pharmaceuticals’ $273.7m into third place, followed by Jazz Phamaceuticals at $250m and Intrexon at $200m.

Immunocore already has several agreements with high profile pharmaceutical firms in place, including GlaxoSmithKline (GSK), Genentech, and Medimmune, the research and development unit of AstraZeneca. In 2013, GSK contributed $222m to for preclinical rights to drugs Immunocore is working on. In the same year, the firm agreed to a similar deal with Genentech with an upfront payment of between $10m and $20m with over $300m in milestone payments on the table. In 2014, Immunocore entered a research and licensing collaboration agreement with Medimmune, in which the Oxford firm received $20m in upfront payments and a further $300m in development and commercial milestone payments, with more royalty payments dependent on success.

The firm is a sister company of Adaptimmune, another immunotherapy company originating from Oxford which raised $104m in its series A last year and held an IPO worth $191m in April. The two firms originally come from Avidex, an Oxford University firm spun out of the institution in 1999. Avidex would go on to be acquired by German Medigene in 2006, which would later spin out Immunocore in 2008.

Similar to Adaptimmune, Immunocore is working on cancer-focused immunotherapies based around genetically-altered T-cells. In immunotherapy, T-cells are removed from a patient’s body, adapted to identify and kill cancer – and  also infectious diseases – before being reintegrated with the patient.

The technology has proven successful in trials, with immunotherapy companies reporting high rates of complete remission in patients, even in those previously thought terminal. One market leader, US-based Juno Therapeutics, has seen complete remission in 88% of its patients in its phase 1 and 2 trials, and immunotherapy trials conducted by Pennsylvania University have reported patients previously terminal who are cancer-free five years later.

Subsequently, investor enthusiasm has soared in recent years for the immunotherapy market, which could potentially be worth $35bn per annum in a decade’s time. Juno raised $176m in its series A, followed by $134m in a series B and a $265m IPO, all within a year of launching. Since going public, there were fears that immunotherapy investment was cooling off, fears quelled earlier this month when biotech Celgene agreed to invest a further $1bn into Juno, paying $93m a share, or $850m, over a 10-year deal, and $150m in upfront payments. Kite Pharma, a peer of Juno and a spinout of University of California Los Angeles, saw its own shares jump 10% on the news. Kite has also had strong fundraising success, raising $35m in its series A and $128m in an IPO held last year.

Immunocore isn’t the only bet Woodford has placed on a university-linked immunotherapy firm. Woodford Investment Management joined Invesco and Imperial Innovations – the technology transfer office of Imperial College London – in backing Cell Medica, a company formed by Innovations in 2007, when it held its series B worth $79m last year.

Multiple university and research institute spinouts are following in the footsteps of Juno, Immunocore, Cell Medica and Kite. Oxford itself yesterday launched another immunotherapy firm, iOx Therapeutics, in partnership with Ludwig Cancer Research. Medical University of Innsbruck launched ViraTherapeutics last month with $4m in series A backing. Sapvax, an Auckland University spinout, was recently launched and is currently searching for $8m to get off the ground. Victoria University partnered Malaghan Institute of Medical Research to launch Avalia in May, which has already attracted a solid consortium of backers. Fred Hutchinson, one of the three institutes behind Juno, saw another one of its immunotherapy firms, Adaptive Biotechnologies, raise $195m in the same month. And University College London joined the hunt at the start of the year, launching Autolus with $45m in backing.

The Immunocore, Cell Medica, and Adaptimmune successes could be a boon for Autolus and iOx in particular as it would appear the same enthusiasm which has benefited Juno, Kite, and Adaptive has found its way across the Atlantic – especially when the large funds raised by Oxford Sciences Innovation, Malin and Woodford Patient Capital Trust are taken into account.

According to the Financial Times, Immunocore’s round will not give Eli Lilly special rights to Immunocore’s intellectual property, which has kept its most valuable technology away from the deals with other pharmaceutical giants. The round also sets Immunocore development up for the next three to five years, and gives the company the choice of remaining private or holding an IPO. If it goes public, it is thought Immunocore will list in London owing to its CEO Eliot Forster’s links to London Mayor Boris Johnson’s MedCity programme, of which Forster is head.

Forster said: “Our new investors include some of the most highly regarded international institutions in the healthcare sector. We believe this is another endorsement of our technology, our novel class of TCR based biologic therapies, of our mission to build a world-leading biotechnology company and of the outstanding scientists at Immunocore. This funding will be invaluable in assisting us to continue the rapid advancement of IMCgp100 in the clinic and the further development of our internal portfolio of ImmTacs. This supports us in our mission to build a premier biotech company based on our ImmTac technology platform.”

University Ventures’ fund intrigue

One of the attractions of most venture capital funds to its managers is that the money is committed and then legally required to be delivered when the general partner (GP) strikes a deal.

This limited partnership (LP) agreement forms the basis for how much GPs get paid and under what conditions the money can be invested.

It is rare indeed for the LP commitments to shrink rather than rise unless a key-man or other clause is affected causing the LPs to change their mind.

So the regulatory filings for University Ventures’ second fund has been intriguing. The latest, August 14, puts the fund at $136m, compared with the $105m University Ventures Fund I launched in 2011.

A nice increase but a total fund II size less than the $188m it disclosed i
n April 2014 US Securities and Exchange Commission filing. And back in March 2013, the fund had still raised $175m, half its planned total of $350m, according to its filing at the time.

The fund’s main managers remain Ryan Craig, the founding director of Bridgepoint Education, and Daniel Pianko, the first outside director of Altius Education, with Gregg Rosenthal, an education expert from Bertelsmann also on the filing as an executive officer. David Figuli, former general counsel to two state university systems, is still principal to the fund, judging by his LinkedIn profile, although he is no longer an executive officer in the latest filing as he was in 2014.

There is no update on the LPs in the second fund and information requests to the main investors in the first fund, Germany-based media group Bertelsmann and University of Texas Investment Management Company (Utimco), were unanswered, along with a request to University Ventures itself. Bertelsmann revealed in March 2014, when the target was still $350m, that it had agreed to provide half the second fund’s total cash.

Utimco’s investment returns filing for last year showed it had just more than $24m in value from University Ventures’ first fund – through two vehicles – up from nearly $5.7m in mid-2012.

University Ventures Fund II is expected to widen the firm’s scope and include areas such as medical education and seed investing. In a July profile, news provider EdSurge said University Ventures had set up a $5m seed fund for investing in startups focused on serving the higher education industry.

The seed fund has already invested in four companies, according to EdSurge – CampusLogic, Entangled Ventures, ProSky, and Portfolium, and are included in its 11 current investments.

Deals, therefore, are being done – which is the main thing for entrepreneurs – but the opportunity for learning more about the fundraising process itself has yet to be taken.