Science and TechnologyWritten evidence submitted by Imperial Innovations Group plc

Imperial Innovations Group was originally founded by Imperial College London to address the “valley of death” and to enable the successful exploitation of university science. It established a track record with Imperial College spin outs including a number of successful exits. In January 2011 it successfully raised £140 million to expand its remit to focus on building and investing in technology and healthcare companies emanating from or leveraging the science base of four universities: Cambridge, Oxford, University College London and Imperial College London. The fund raising was also in response to a change in strategy with the Imperial College portfolio to build selectively a number of bigger companies rather than exiting them. Two companies: Nexeon (developing lithium ion battery technology for improving storage capacity) and Circassia (developing a range of allergy vaccines) have taken a major step forward since then: Nexeon raised £40 million and Circassia raised £60 million both funding rounds led by Innovations. Both these companies have things in common: outstanding experienced commercial and technical management teams, a substantial market opportunity, market validation and a world class technology emanating from UK science.

There are a number of aspects of the Innovations model that are important:

1.The public company “evergreen” structure provides for a longer term outlook than is possible in a conventional close end fund and an approach that is focused on building valuable companies not exit timescales.

2.The support of long-term shareholders (Invesco and Lansdowne) who are prepared to support the Group for a long time.

3.The combination of technical and commercial experience: we believe in matching world class scientists with similarly experienced management without compromise.

4.Funding companies efficiently until the technology is appropriately de-risked but thereafter funding them sufficiently and helping them to grow and become sustainable.

Our key contention is that good ideas and intellectual property need intelligent capital, and enough of it. This then attracts in good management whose aspirations are to build companies rather than being focused on exit. As an investor our approach is to work with management teams and scientists to build and optimise value—this is a long term process and the shorter cycles associated with venture funds do not work in the early stage technology sector.

We have commented more specifically on the questions below:

1. What are the difficulties of funding the commercialisation of research, and how can they be overcome?

1.1 Timescale: research emanating from Universities is typically still very early in terms of proof of concept and requires a long time to become market ready and then commercially successful. Cutting this timeline would make the early commercialisation companies (Healthcare or Technology/Engineering) more attractive to fund. Additional funding (eg that similar to the National Institute of Health in the USA) that took projects through early stages of translation would be one way—spin outs would then be more rounded when they emerged and further down the track. Another way is to reduce the timelines by reducing the regulatory burden in the case of healthcare or the product development timelines in engineering/technology (eg aerospace and defence). If the UK adopted a fast track process for approving drugs, and used the NHS (a major resource) to achieve this then the UK would become more attractive to drug companies as a location to carry out Research and Development.

1.2 The recent three life science policy papers are attempting to address this timeline issue and if the recommendations are implemented properly they will have an impact. The policies seem to address the issues well. Adopting a sector based approach to think through how to speed up the process of commercialisation should yield results.

1.3 Funding: there are not many funds that are focused on capital-intensive companies. Most money is looking for more rapid turnover internet and software businesses. We need to increase the supply of patient capital (long-term investment) for companies based around UK research and find ways of attracting in long-term institutional finance.

1.4 Entrepreneurs CGT relief should be extended to a broader group of entrepreneurs not just those that have founder shares. If you are a founder or a manager involved early then there should not be limits in order to get 10% CGT; in healthcare companies amounts held often fall below the 5% threshold so individuals take great risk but do not get this benefit even though they are fulfilling that founding role.

1.5 The patent box initiative is interesting and more lateral approaches to not only creating the IP in the UK but keeping it here should be considered.

1.6 Finally the biggest factor in terms of success is the ability of early stage companies to attract in top quality management. In the UK we do have a growing pool of talented people willing to work in technology and healthcare start ups: for example Steve Harris (CEO of Circassia) and Scott Brown (CEO of Nexeon). It is difficult to attract such management into companies unless they are backed by deep pocketed long-term investors and there is sufficient funding at the early stage of the value chain.

2. Are there specific science and engineering sectors where it is particularly difficult to commercialise research? Are there common difficulties and common solutions across sectors?

2.1 Technology is harder to invest in than life sciences. The eco system is less well defined. In life sciences, partnerships and acquisitions are common and there is a well understood process to an exit. Most big pharmaceutical and healthcare products businesses (eg medical devices) have a business development function which is responsible for sourcing in new products. Technology (excluding internet and social media) covers a broad range of industry sectors that tend to be much more conservative and more used to partnering with other big partners. For example spin out company Evo Electric recently took an investment and formed a joint venture with GKN to make electric motors—it was the first time GKN had partnered with a small start up in this way.

2.2 Encouraging chemical, oil and gas, automotive and power companies to partner and be more innovative about the way they work with small companies would be helpful. They need to move away from the “own and control” approach to allowing start ups to work with them and tap into their knowledge, product expertise and market reach without making them unattractive to investors.

3. What, if any, examples are there of UK-based research having to be transferred outside the UK for commercialisation? Why did this occur?

3.1 There are some specific areas where other countries have chosen to prioritise and provide attractive packages therefore enticing companies to move. For example, Texas is providing significant regional funding to build a hub alongside world class research centres in cell therapy for treatment of transplant rejection and cancer. The ancillary upside also includes access to the US market and possibly Nasdaq.

3.2 Companies may also be sold to large non UK entities too early due to the lack of patient capital. Both Biovex and Cyclacel moved to the US to seek access to larger funding.

4. What evidence is there that Government and Technology Strategy Board initiatives to date have improved the commercialisation of research?

4.1 It is too early to assess the impact. However, within our company portfolio we have many examples where the TSB programs have been a great catalyst and shared risk method of facilitating small growing companies to collaborate on commercialisation with larger companies without having to give up early rights. The themed approach focusing on key sectors also appears to be targeting the creation of these large company/SME collaborations which should accelerate commercialisation.

5. What impact will the Government’s innovation, research and growth strategies have on bridging the valley of death?

5.1 More needs to be done. There is recognition of the key problems but specific initiatives announced need to be clearly implemented with minimal bureaucracy. For example making the UK the best place to conduct drug development—we have the ingredients. The announcements relating to the TSB, Bioscience investment and NHS Innovation are welcome.

6. Should the UK seek to encourage more private equity investment (including venture capital and angel investment) into science and engineering sectors and if so, how can this be achieved?

6.1 Taxation policy may be an effective way of increasing patient (long-term investment) capital. There are an increasing number of better defined taxation schemes that support early stage investing but these seem to preclude entities that have a broader remit than investment. Tax benefits should be extended to investments in funds or public company entities that are targeted at early-stage business building and investment with longer timescales and perhaps broader mandates as is the case with Imperial Innovations Group plc. Such broader investment mandates enable a longer term view to be taken with a close interaction between investor and management thereby attracting in high quality management teams who know they will get long-term financial support and can therefore concentrate on running and growing a business.

6.2 Successes will encourage more investment. More could be done to raise the profile of emerging companies in the sector: for example the CEOs of the top 50 companies in life science SMEs could be brought together and specific help provided. In sectors outside life sciences there are very few investors and track records for many VCs in engineering/technology (outside the internet space) is poor. Methods of getting large established but conservative companies to work closely with these small growing businesses need to be explored—perhaps tax incentives to invest or provide development funding. This has two benefits: it brings a customer in contact with a technology earlier and provides access for the young company to industrial expertise and customers.

7. What other types of investment or support should the Government develop?

7.1 Funding is required at all points of the commercialisation process from the more research council like funding to support translational research to finance for companies to scale.

7.2 A pro-active approach to identifying a small group of companies that have the potential to become medium sized technology/life science sustainable companies might be a start point. The CEOs of those companies will be facing many challenges and specific help should be given to overcome these and incentivise maximisation of value to the UK.

7.3 The four top Universities in the UK (Cambridge, Oxford, UCL and Imperial) are particularly strong in translational medicine—promoting funding and support for projects that incorporate research and clinical inputs alongside each other would potentially reduce timelines to market. Continuing to support these world class Universities by significant translational funding not only in medicine but in areas like energy efficiency and materials would help to maximise the value capture from the research base.

Declaration of Interest

Innovations Innovations Group plc. creates, builds and invests in pioneering technologies addressing global problems in healthcare, energy, engineering and the environment. It combines deep understanding of science and technology with commercial acumen and strong investment expertise. In December 2010 Innovations raised £140 million to accelerate the making of, and increase the size of, investments in companies established under its existing intellectual property pipeline agreement with Imperial College London. The funds raised were also to broaden its investment scope. The Group now invests in in companies based on technology from or associated with the Universities of Cambridge, Oxford, University College London and Imperial College London.

January 2012


Circassia (Case Study)

Circassia is a specialty biopharmaceutical company focused on developing world class immunotherapies for some of the world’s most common allergies.


Circassia is developing a range of allergy T-cell vaccines based on its proprietary ToleroMune® technology, which uses allergen epitopes to generate regulatory T-cells to suppress allergic immune responses. Circassia’s most advanced product is designed to treat patients with cat allergies. The product has achieved phase II clinical validation and studies have identified the optimal dosing regimes for the final stage of clinical testing. Results announced in June 2011 showed that the product’s effect was maintained one year later for patients treated with four doses over 12 weeks. Circassia has further clinical trials ongoing for a number of treatments including for grass, house dust mite and ragweed allergies. In September 2011, the company announced positive phase II trial results for its ToleroMune hayfever vaccine, which reduced allergic symptoms in patients’ eyes by 30% more than placebo, and in patients’ early and late skin reactions by 54%and 19% above placebo respectively. Circassia is also developing PAP-1, a novel treatment for Psoriasis and atopic dermatitis.


Peak product sales for Circassia’s four lead products has been estimated at $2.5 billion per year by external consultants LEK. This has been corroborated by further research by Kantar Health, which estimates that the US market for Circassia’s cat product alone is over $0.6 billion. The global market for allergy treatments is currently underserved, despite large numbers of sufferers: estimates suggest that allergies affect a quarter of the population in the US and Europe, with that figure growing every year.

Investment History

Innovations holds a 18.4% stake in Circassia at an aggregate cost of £14 million. Circassia has completed four successful funding rounds with a syndicate of high quality institutional investors and venture capital firms, including Invesco Perpetual alongside Imperial Innovations. Circassia has raised a total of £93 million to date.

Management Team

Steve Harris, Chief Executive Officer

Steve was a founder member of the management team at Zeneus Pharma, and was CEO at the time Zeneus was acquired for $390 million by US biotech firm Cephalon in 2006.

Sir Richard Sykes, Chairman

Sir Richard has more than 30 years’ experience in the biotechnology and pharmaceutical industries, and was Chief Executive and Chairman of GlaxoWellcome from 1995 to 2000 and Chairman of GlaxoSmithKline until 2002. Between 2000 and 2008, he was Rector of Imperial College London, and is currently Chairman of the Royal Institution of Great Britain.

Charles Swingland, Deputy Chairman

Charles has more than 30 years’ corporate legal experience, having worked for 15 years as a corporate lawyer prior to joining PowderJect in 1996, where he managed the legal process of its sale to Chiron for $1 billion in 2003. He was also Director and General Counsel at Zeneus.

Dr Rod Hafner, VP Research & Development

Rod has over 15 years’ experience in the life sciences industry. He began his career at Proctor & Gamble, before working for Wyeth and Cortecs. He joined PowderJect in 1998, becoming Director of Programme Management and Vice President of PreDevelopment.

Dr James Shannon, Non-Executive Director

James has over 20 years of experience in senior pharmaceutical development roles, and was formerly Head of Global Development at Novartis Pharma AG.


September 2011: announced positive phase II trial results for its Toleromune hayfever vaccine, which substantially improved patients’ allergy symptoms compared to placebo and was extremely well tolerated.

June 2011: announced positive results from a phase II trial of its Toleromune cat allergy vaccine, which demonstrated that the effect of the treatment was maintained one year later for patients who received four doses over 12 weeks.

April 2011: completed £60 million fundraising for final stage development of lead allergy products


Nexeon (Case Study)

Nexeon is a battery materials and licensing company developing silicon anodes for the next generation of lithium-ion battery.


Nexeon’s unique silicon anode material unlocks the potential of silicon to deliver increased capacity without compromising lithium-ion battery cycle-life, providing lighter batteries with more power and longer lifetime between charges. Batteries containing Nexeon’s anode material have recently completed 500 full charge/discharge cycles, an important milestone in the battery industry.

The company has a broad patent portfolio relating to high aspect ratio silicon materials and the use of such materials in lithium-ion batteries. Nexeon’s production process uses cheap industrial grade silicon, and the etching is done at room temperatures and pressures, validating cost assumptions and confirming its materials will show cost as well as performance benefits compared to the competition.

The company is providing material, coated anodes and cells under Material Evaluation Agreements to major battery and automotive companies.


Latest industry estimates suggest that the global Li-ion battery market is worth around $10 billion and is growing fast as more electronic devices are designed and adopted by an eager public. Independent market analyst Takeshita predicts that the market will grow to $30bn by 2017 with Li-ion batteries used in hybrid and electric vehicles.

Investment History

Nexeon has raised a total of £55 million in investment from a range of investors including Imperial Innovations, Invesco Perpetual and Partnerships UK. Innovations holds a 40% stake in the company at an aggregate cost of £22.3 million.

Management Team

Dr Scott Brown, Chief Executive Officer

Dr Scott Brown has a strong track record of intellectual property management and licensing. He has held senior management roles at Cambridge Display Technology (CDT), Sumation (a joint venture between CDT and Sumitomo Chemical) and Dow Corning. Dr Brown joined Nexeon as CEO in June 2009.

Professor Mino Green, Chief Scientific Officer

Professor Green is the founder and developer of Nexeon’s basic technology and an Emeritus Professor at the Department of Electrical Engineering at Imperial College London.

Dr Bill Macklin, Chief Technical Officer

Dr Macklin joined Nexeon in 2008 having previously held roles as Director of Research & Development at AEA Technology and Technical Director at ABSL Power Solution.

Ian McDonald, Engineering Director

Ian has extensive industry experience, having spent 30 years in high technology process engineering. He was an Engineering Director at AEA Technology and has experience in managing and designing Li-ion battery manufacturing facilities.


August 2011: completes £40 million fundraising to allow establishment of world-class manufacturing facility in the UK.

June 2011: Nexeon wins the Martin & Audrey Wood Green Technology award at Venturefest 2011.

December 2010: announces development of world-record capacity Li-ion battery cells, with highest capacity for their size.

July 2010: company relocates to custom-built facility at Milton Park in Oxfordshire; the new facilities allow the company to accelerate its technology development.

Prepared 11th March 2013