Schroder Ventures Seeks $200 Million for Life Sciences Fund

Schroder Ventures has doubled the target for its second international life sciences vehicle. The group seeks to raise $200 million (ecu 183 million) for Schroder Ventures International Life Sciences Fund II, a successor to the 1994-vintage fund.

Like its predecessor, the new fund will build a portfolio that will be biased towards US and early-stage investments in life sciences sectors, while still maintaining a healthy degree of geographical and stage diversification.

Kate Bingham, who heads Schroder Ventures’ life sciences team in London, reported that, at the end of April, Schroder’s first International Life Sciences Fund was 79% invested. At that stage, investments in the devices and therapeutics fields each accounted for 38% of its investments at cost, with the remaining 24% invested in services businesses. US investments accounted for 54% of the portfolio at cost and the UK for a further 24%. Six per cent of the fund’s investments by value were in seed stage companies, 24% in start-ups, 31% in early-stage, 11% in later-stage ventures and 28% in MBO or turnaround situations. Kate Bingham described this distribution as “pretty much in line with our original aims”.

Of the 25 investments made by the first International Life Sciences Fund, four have been fully and two partially realised. Of the full disposals, three have achieved IPOs, and one was sold to a trade acquiror. Returns on the fund’s fully exited investments realised in excess of three times cost. The structure of the fund permits the cost of realised investments to be reinvested: thus, when the fund reaches full investment, an amount close to the fund’s original total will have been invested, while leaving capacity for follow-on investments. This feature has the potential to deliver substantial benefits to investors.

The first fund was raised from fewer than a dozen US and UK participants, three of whom provided 70% of its total. Schroder Ventures intends to broaden the investor base for Schroder Ventures International Life Sciences Fund II, but has so far approached only existing investors as the new fund is still at the pre-marketing stage. Kate Bingham said initial approaches to this investor group have met with a very positive reaction. The group is aiming for a first close by early autumn.

Reflecting the increased size of the new vehicle, Schroder Ventures will expand its specialist teams both in the UK and in the US, where James Garvey and Barbara Piette are responsible for investments in the life sciences sector.