BioWorld International Correspondent
LONDON - Technology management company Biofusion Ltd. will be the first to test the market in 2005, floating on the Alternative Investment Market in London to raise £10 million (US$18.7 million) to develop nine existing portfolio companies and fund new start-ups.
The company, which has devised a model for commercializing publicly funded intellectual property, agreed to a 10-year contract with the University of Sheffield that gives it exclusive access to the output of the university's £30 million annual life sciences research budget.
"Assuming no exits, the money we are raising now will last until mid-2009, in which time we will add 12 new companies to those we have now," David Baynes, CEO, told BioWorld International.
The lead businesses in the portfolio, Molecular SkinCare Ltd. and Celltran Ltd., are 12 months to 24 months away from exit, but the rest are very early stage. Biofusion said it will invest heavily in the earlier funding rounds to avoid dilution and aims to own between 15 percent to 30 percent of a company's equity as it exits the portfolio.
Sheffield, UK-based Biofusion was set up in 2002 as the commercialization arm of Sheffield University Enterprises Ltd., the technology transfer business of the university. It is 70 percent owned by the university and 30 percent by the management, and owns an estimated 60 percent of each of the portfolio companies. About 30 percent of Biofusion's equity is being offered in the initial public offering, and its market capitalization after flotation would be £30 million.
"Given the size of its interest in the portfolio companies and the amount of money Sheffield invests in life sciences, the brokers feel confident in the numbers," Baynes said. "The valuation is not exotic."
Baynes previously was at Celsis plc, while Peter Grant, operations director, worked for Genzyme UK and Enzymatix Ltd., the company that spawned Celsis and Chiroscience plc.
Sheffield University is ranked fifth in the country for the quality of its life sciences research, and has particular strengths in bioengineering, nanotechnology, cancer, stem cells, genomics, molecular biology and computational biology.
The role model for Biofusion is IP2IPO Ltd., which floated on AIM in 2003, and since has seen the exit of three portfolio companies. However, unlike IP2IPO, which has agreements with a number of universities, Biofusion is confined to the Sheffield deal. The bulk of its portfolio is at an early stage and, to date, no Sheffield University spinout companies have made a successful exit.
Baynes said the flotation would provide a platform for similar contracts with other universities, offering them equity in exchange for rights. "Sheffield University is happy with that. There are no deals in prospect as yet, but if we did one, we would look to raise more money, keeping the money we are raising now for Sheffield spinouts."