Library Innovation Group (2008) - European Healthcare Technology Venture Market

L.I.
Group
The Healthcare Technology Venture Market

in Europe, UK and Yorkshire & Humber
About Library Innovation Group (L.I. Group)
The L.I. Group was formed as a spin-out company from the Library House Consulting Department. The company uses
established evidence-based research methodologies to deliver strategic insights into innovation-led companies and
markets. It also advises public and private sector organisations on strategic issues that involve technology, innovation,
entrepreneurship and finance.
Project Team:
Martin Holi
Alexander Jan
Stephen Mounsey
Dr Jonathan Lawton
Dr Siobhán Ní Chonaill
Malgosia Rozycka
For more information about the contents of this report, please contact: i
L.I. Group
St John’s Innovation Centre
Cowley Road
Cambridge
CB4 OWS
United Kingdom
www.li-group.co.uk
info@li-group.co.uk
Access To Finance For Healthcare Technologies Programme

Access to Finance for Healthcare Technologies is an investment readiness programme established by Yorkshire Forward to
assist companies in the Health Technology sectors. The programme addresses three key factors relevant to the Yorkshire &
Humber region:
• the opportunity to develop investment markets, especially for companies in complex and challenging markets such as
healthcare;
• the opportunity to engage talented business support professionals able to provide advice and guidance on raising
finance in general and especially in this sector; and
• a shortage of existing successfully venture backed companies to act as role models, explain the process and showcase
the benefits.
The programme is scheduled to run for an initial period of three years from January 2009 and is delivered by a consortium of
three companies, led by Grant Thornton UK LLP and including Quotec and BITECIC.
www.investinginhealth.co.uk
Contents
1. Executive summary.............................................................................................1
2. Introduction........................................................................................................2
3. The healthcare technology sector.........................................................................3
3.1. Pharmaceutical industry................................................................................................. 4
3.1.1. Global and European pharmaceutical industry................................................................5
3.1.2. The UK pharmaceutical industry......................................................................................5
3.1.3. Pharmaceutical industry in Yorkshire & Humber..............................................................7
3.2. Medical technology industry...........................................................................................7
3.2.1. Medical technology product naming classification......................................................... 8
3.2.2. Cardiovascular................................................................................................................ 8
3.2.3. Diagnostics.................................................................................................................... 8
3.2.4. Orthopaedics................................................................................................................. 9
ii 3.2.5. Global expenditure in medical technologies..................................................................10
3.2.6. Medical technologies in Europe.....................................................................................10
CONTENTS
3.2.7. Medical technologies in the UK..................................................................................... 11

3.3. Medical technologies Yorkshire & Humber.....................................................................12
4. The financing cycle of healthcare technology companies...................................... 13
4.1. Where do healthcare technology companies come from?............................................. 13
4.2. Is the United Kingdom a good place to attract venture capital investments?................. 13
4.3. Is this also true for healthcare technology companies?..................................................14
4.4. First round investments.................................................................................................16
4.5. Who are the early-stage investors?................................................................................ 17
4.6. How much capital was invested?................................................................................... 17
4.7. Follow on investment rounds........................................................................................18
4.7.1. European investors in healthcare technology companies...............................................19
4.7.2. Top deals in Europe.......................................................................................................22
4.7.3. Top deals in the UK........................................................................................................22
5. The attractiveness of Yorkshire & Humber........................................................... 23
5.1. The investment landscape in Yorkshire & Humber.........................................................23
5.1.1. The origin of companies in the region............................................................................23
5.1.2. Venture capital backed university spin-outs in the healthcare technology sector...........25
5.1.3. Independent healthcare technology start-ups.............................................................. 26
5.2. Investors in Yorkshire & Humber....................................................................................27
5.3. Venture capital investment successes........................................................................... 29
6. Future trends in the healthcare technology venture market.................................. 30
7. Sponsors of Access to Finance for Healthcare Technologies Programme.................38
Foreword
Yorkshire & Humber is at the forefront of the UK’s latest advances in healthcare making it an important region for the
healthcare technology industry and one of the fastest-growing nationally. It has one of the UK’s highest concentrations
of medical device companies, superb specialist skills (especially in surgical instrumentation, orthopaedics and advanced
wound-care), exceptional access to clinical trials, pioneering R&D and Europe’s largest teaching hospital.
The healthcare technology venture market is the second largest sector, behind information and telecommunications,
attracting around 24% of all deals in Europe and 29% in the UK. This represents over £2.1bn of investment in European
healthcare companies and £434m in the UK in 2007 and 2008.
However, despite the buoyancy of the sector and the strengths of the region, many healthcare technology companies
still face difficulty in raising private equity particularly in the early stage where they face the so called ‘equity gap’ .
Typically this is the first round of venture capital investment of around £500K to £2m where investors regard propositions
as particularly risky.
To help companies in Yorkshire & Humber best position themselves to secure funding we are very pleased to announce a
new programme, ‘Access to Finance for Healthcare Technologies’, which will assist these companies to become ‘investment iii
ready’. We are delighted to be part of a consortium with a track record of success in this area, led by Grant Thornton and
including Quotec and BITECIC, which will work closely with companies in the region to provide skills, business model reviews,
FOREWORD
mentoring and investor introductions to get them in the best possible shape to secure investment. The programme will run
from January 2009 to April 2012 and is open to all SMEs in the healthcare technology market based in Yorkshire & Humber.
This report has been prepared for the launch of the programme, with the needs of entrepreneurial companies in mind, to
provide an overview of the level of investment activity in the healthcare technology sector over the last two years in Europe,
the UK and Yorkshire & Humber. It details the types of deals that have been completed and who the most active investors
have been and also provides a commentary on the current status of the investment market and likely future trends. I hope
that you will find it informative.
Glenn Stone
Partner, Grant Thornton UK LLP

Key Facts*
£2.1bn of venture capital has been invested into European healthcare companies.
133,000 people are employed by healthcare technology companies in the UK.
Over 300 venture capital investments have been made into UK healthcare companies.
71 first round investments have been made into UK healthcare companies. 1
iv £1.4m is the average deal amount for a UK first round investment into the healthcare technology sector
88 active companies spun-out from Yorkshire Universities (2nd place in the UK).
KEY FACTS
17 is the number of active venture capital backed healthcare technology university spin-outs in Yorkshire.
£383m is the total annual research income of the universities in Yorkshire & Humber.
£76.2m is the value of contract research with Yorkshire Universities (3rd place in the UK). 3
as of Jan 2007 – Nov 2008

*
1 Executive summary
This report provides an overview of the healthcare technology venture capital market. It analyses both historical and current
investment data on the healthcare technology venture market in the Yorkshire & Humber region and benchmarks it against
European and UK figures. It uses a qualitative approach to gauge what the industry perceives to be both the future trends and
overall potential of the healthcare technology industry.
The healthcare technology sector is made up of a number of sub areas, including pharmaceutical, drug development, medical
technologies and other life sciences. These areas are of particular interest as they have experienced high levels of growth
in recent years due to increases in national health expenditure, the global ageing population, developments in technology
(including diagnostics and drug delivery) and the rise in the number of chronic illnesses.
The UK’s leading manufacturing industry is the pharmaceutical and drug development sector, with two of the world’s top
ten pharmaceutical companies based in the country. Within the Yorkshire & Humber region, pharmaceutical companies
make up less than half of all healthcare technology companies within the area. Johnson & Johnson, one of the largest global
pharmaceutical companies, has subsidiaries based in the Yorkshire & Humber region as are a number of major publicly-listed
UK pharmaceutical companies including; Avacta Group, Syntopix Group and Fusion IP.
1
Although the UK is heavily reliant on imports it accounts for 11% of the total European medical device market and 20% of all
European medical technology companies. Within the UK, the sector employs some 60,000 individuals and nearly a tenth of
EXECUTIVE SUMMARY
these are employed within the Yorkshire & Humber region accounting for an output of £450m. In addition to four public- quoted
companies (quoted on the London Stock Exchange) there are several large international medical technology companies based
in the Yorkshire & Humber region.
Venture capital in the healthcare technology sector accounts for approximately 24% of all investments in Europe. Of the 311
deals completed between 2007 and 2008 there was an almost equal split in investment activity between the pharmaceutical
and medical technology area. The average investment size into a healthcare technology company was £2.7m, £1.3m lower than
the European average in this sector. There have been six first round investments in the Yorkshire & Humber region over the past
two years accounting for nearly 10% of all first round investments in to healthcare technology companies in the UK.
The Yorkshire & Humber region benefits from the presence of a number of strong research universities that have contributed
several spin-out companies to the local healthcare technology sector. The universities collaborate closely with intellectual
property commercialisation companies which provide capital and advice to spin-out companies. However, the number of
products or services that can be transferred into separate spin-out companies is limited at any university. This therefore
requires a sustained effort by the region to establish, finance and grow additional start-up companies.
This report has identified a number of technological trends within the healthcare technology sector that are increasingly
appealing to venture capital investors. These include miniaturisation and nano-biotechnology, stem cell, ophthalmology,
standardisation, imaging and personalised medication. The report also investigates the latest financial trends for early-stage
businesses within the sector.
2 Introduction
Over the years the European healthcare technology sector Methodology
has provided many attractive investment opportunities Venture capital investment data is derived from different
for investors. Venture capital investments into this sector information sources and news providers. The main data
now count for one-third of the European and UK venture source for investment activities was the Library House
capital market. The emergence of biotechnology within the database ‘European Venture Intelligence’ (EVI) as of
pharmaceutical and drug development sectors has created November 2008. Additional information was taken from
a niche venture capital market with specialised early- from correspondence with investors, technology transfer
stage investors. In the field of medical technologies many offices and universities. Market capitalisation values are
innovations are now explored through smaller companies taken from the statistics of the London Stock Exchange
developing diagnostic tools, implants, medical instruments (LSE) as of December 2008.
and drug delivery systems to serve patients, with particular
focus on the ageing societies across European countries. The data presented in this report is taken from publicly
available sources. Due to the nature of the venture capital
Despite the relatively high venture activity in medical market not all information about investments is disclosed.
technology in the UK all venture capital stakeholders are However, the L.I. Group claims to provide an accurate
2 aware of the challenges that the venture capital market will picture based on the information that is currently available.
face in the upcoming months and possibly years. The impact
of changes taking place in the economic and financial
INTRODUCTION
markets will undoubtedly influence the venture capital

market significantly and will require special efforts from
entrepreneurs to secure financing for their companies and
for investors to close new funds.
This report analyses the European healthcare technology

venture market over the past two years (2007-2008) using
quantitative and qualitative research methods. Analysis of
venture capital investment data within this sector is used
to specify the investment activity and trends. The results
are backed by interviews with experts and professionals
from venture capital organisations, technology transfer
offices, venture capital backed companies and other service
providers.
Secondly, the results from the analysis provide the basis

for recommendations addressed to investment-seeking
entrepreneurs of healthcare technology companies located
in the UK and, more specifically, in Yorkshire & Humber.
Finally, the report gives a detailed overview of the regional

healthcare technology market in the Yorkshire & Humber.
Through the analysis of companies, case studies and
historical investments, this report provides entrepreneurs,
investors, technology transfer professionals, universities and
business support organisations with a clearer understanding
of the regional investment landscape and ways in which
these groups can benefit from investment opportunities.
3 The healthcare technology sector
The healthcare industry is generally defined as that which provide healthcare services; the identification of numerous
has a focus upon the treatment and tending of patients medical areas with unmet needs, particularly oncological,
who are injured, sick, disabled or infirm and is facilitated by cardiovascular, arthropathic and neurological diseases such as
professional health workers and technology. The healthcare Alzheimer’s and Parkinson’s. Rising obesity levels worldwide,
technology industry can thus be broadly segmented into which have led to much higher numbers of diabetes- and
two areas: cardiovascular-related conditions, have also created a demand
• Pharmaceutical and drug development for innovative healthcare technologies. A company that is
able to serve any of these demands can provide huge financial
• Medical technologies
returns to their investors, and is therefore a prime target for
Investors look for companies that have excellent growth venture capital funds.
potential driven by the company’s own innovative capacity.
However, external factors such as market size and market According to the latest OECD Health Data, the average
growth are part of the key reasons for investment as national spend on healthcare worldwide still remains at
companies are more likely to gain venture backing if they the 8.9% of the GDP (denoted by the OECD in Figure 1),
can prove that their products and services can serve large or with the US spending the highest percentage of GDP (see
growing markets that would have a high uptake of innovative Figure 1). It can be seen that healthcare spending remains
3
goods. Before an analysis of differing sectors within the a large enough market to attract the interests of investors,
healthcare technologies industry can be undertaken, the particularly when the innovation can garner a large enough
SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

overall industry and the effects technology has upon it, has portion of the expenditure.
to be understood.
• In previous years it has been stated that the focus
The demand for innovation in the healthcare market is driven by on healthcare technology would cost the country
several factors including the increase in life expectancy across increasingly large amounts year on year, with some
developed western countries; the increase of expenditure to healthcare experts stating that the development and
Figure 1 – Health expenditure as a share of GDP, 2006 (Source: OECD)

diffusion of medical technology was responsible for

the persistent difference between health spending
and overall economic growth. Some argued that new
medical technology may account for about one-half or
more of real long-term spending growth. However, the
costs were shown to have specific benefits such as:
• Development of new treatments for previously
untreatable terminal conditions;
• Major advances in clinical ability to treat previously
untreatable acute conditions;
• Development of new procedures for discovering and
treating secondary diseases within a disease;
• Expansion of the indications for a treatment over
time, increasing the patient population to which the
treatment is applied;
• On-going, incremental improvements in existing
4 capabilities, which may improve quality;
• Clinical progress, through major advances or by the
cumulative effect of incremental improvements that
extends the scope of medicine to conditions once

regarded as beyond its boundaries, such as mental
illness and substance abuse.6
As stipulated in the ‘Impacts of Advances in Medical Figure 2 – Developed from Rettig (1994)
Technology in Australia’ report (2005)7, increased and Productivity Commission (2005)
expenditure on new medical technologies is reflected in
improved treatments and a significant increase in the
3.1. Pharmaceutical industry
numbers of people treated. Although advances in medical
technology have provided value for money — particularly The pharmaceutical industry is one that is focused on the
as people highly value improvements in the quality development, production and marketing of medication,
and length of life — in practice the cost effectiveness of which is defined as ‘as any substance intended for use in
individual technologies varies widely. This high level of the diagnosis, cure, mitigation, treatment, or prevention
variation in healthcare cost effectiveness makes the overall of disease.’8 Lately the pharmaceutical industry has
value, or net community benefit, to be an important point undertaken intensive research and development activities
of consideration. within the biotechnology industry and therefore the term
biotechnology has become synonymous with drug discovery
With this in mind, two key questions shown in Figure 2 must and production. In order to understand the healthcare
be asked when looking at new healthcare technology. technologies industry one must look at these industries and
the potential market facing venture capital investors.
These two questions and the subsequent thought process
have become the basis for determining the impact and hence
attractiveness to investors interested in the healthcare
industry.
3.1.1. Global and European pharmaceutical Europe, with two based in the UK (see Table 1). Despite this
industry sources claim that Europe still made up at least one-third of
the overall sales spend in 2007.9
3.1.2. The UK pharmaceutical industry

As shown in Table 1, the UK is home to two of the world’s
largest and most profitable pharmaceutical giants, the
British founded GlaxoSmithKline and the Anglo-Swedish
AstraZeneca. The UK pharmaceutical industry is estimated
to be worth over US$19bn. It is directly responsible for
72,000 jobs, of which an estimated 28,000 are in R&D. This
results in a gross output to the country of approximately
£235,000 per employee (Table 2). An analysis of DTI and
ONS data reveals that the pharmaceutical industry has used
over a third of its sales revenue for R&D purposes in 2007.
Figure 3 – Breakdown of global pharmaceutical sales by region – In line with this, ONS data shows that the pharmaceutical
2007 (Source: IMS,2008) industry contributes over a quarter of the entire UK’s R&D
spend. 5
The global pharmaceutical industry was estimated to be
worth over US$660bn in 2008. Figure 3 shows the breakdown

of global pharmaceutical sales by region. It can be seen that
one third of global pharmaceutical sales were in Europe. Of
the top ten pharmaceutical companies, five are based in
Corporation Country Sales (£m) Market share (%)

Pfizer US 22,292 6.7
GlaxoSmithKline GB 18,847 5.6
Novartis CH 17,154 5.1
Sanofi Aventis FR 16,788 5.0
Astrazeneca GB 15,010 4.5
Johnson & Johnson US 14,478 4.3
Roche CH 13,814 4.1
Merck & Co US 13,631 4.1
Abbott US 9,570 2.9
Lilly US 8,335 2.5
Top 10 149,920 44.9
Amgen US 8,188 2.5
Wyeth (acquired by Pfizer) US 7,949 2.4
Bayer DE 7,020 2.1
Bristol-Myers Squibb US 6,519 2.0
Boehringer Ingelheim DE 6,277 1.9
Schering-Plough US 6,181 1.9
Takeda JP 5,479 1.6
Teva IL 5,300 1.6
Novo Nordisk DK 3,336 1.0
Daiichi Sankyo JP 2,925 0.9
Top 20 209,093 62.6
Table 1 – Top world pharmaceutical corporations, 2007 (Source: IMS World Review 2007)
Employees R&D employment R&D as a % of total Salaries and wages Gross output per
Year
(1,000s) (1,000s) employment (£m) employee (£)
1980 73.3 12 17 412 33,315
1985 66.9 15 22 662 60,239
1990 71.1 18 26 1,120 90,549
1995 61.9 17 27 2,039 160,242
2000 66.0 25 38 2,214 190,492
2001 71.0 27 38 2,624 198,862
2002 84.0 29 35 3,086 183,940
2003 73.0 27 37 2,698 212,712
2004 73.0 27 37 3,040 208,753
2005 68.0 26 38 3,084 231,588
2006 72.0 28 39 3,414 235,278
Table 2 – Employment in the UK pharmaceutical industry (Source: ONS,2008)
6
Total market sales
Rank Corporation Nationality Market share (%)
(£m)
1 Pfizer US 1,091.5 9.3
2 GlaxoSmithKline GB 1,056.9 9.0
3 Sanofi-Aventis FR 782.0 6.7
4 Astrazeneca GB 667.6 5.7
5 Novartis CH 458.9 3.9
6 Roche CH 438.2 3.7
7 Wyeth (acquired by Pfizer) US 387.0 3.3
8 Merck & Co US 353.0 3.0
9 Lilly US 344.5 2.9
10 Boehringer Ingelheim DE 267.6 2.3
11 Johnson & Johnson US 256.5 2.2
12 Schering Plough US 252.5 2.1
13 Novo Nordisk US 218.0 1.9
14 Bayer Schering DE 195.1 1.7
15 Abbott US 167.8 1.4
16 Teva IL 136.3 1.2
17 Bristol-Myers Squibb US 114.5 1.0
18 Mundi Int. US 113.8 1.0
19 Gilead Sciences US 105.0 0.9
20 Servier FR 102.3 0.9
Table 3 – Nationality of top 20 pharmaceutical companies in the UK (Source: IMS Dataview, 2007)
Trade 3.1.3. Pharmaceutical industry in Yorkshire &
Year Exports Imports
Balance Humber
2006 13,400 9,114 4,286 In the Yorkshire & Humber area, pharmaceutical and
2007 14,080 9,871 4,209 biopharmaceutical companies account for significantly less
2008* 12,085 7,934 4,151 than half of healthcare technology companies in the region.
* as up to date as November 2008 Although the number of companies correlates with previous
Yorkshire Forward reports10, the reliability of this dataset
Table 4 – UK exports and imports of pharmaceutical goods (Company House) is questionable and the true percentage
2006-2008 (Source: uktradeinfo.com,2008) is up for debate. Key publicly listed pharmaceutical and
biotechnology corporations in the Yorkshire & Humber
The UK is home to a number of global pharmaceutical region include Avacta Group, Syntopix Group and Fusion IP.
companies, especially within the Greater South East.
The Yorkshire & Humber region is home to several of
3.2. Medical technology industry
the Johnson & Johnson family of companies. As Table 3
suggests only a small minority of the Top 20 UK-based Medical technology is generally defined as the use of technology
pharmaceutical corporations originated and are active to manage a range of health conditions through diagnostic11
within the UK. Nonetheless, the pharmaceutical industry and therapeutic application. In a more general sense, the
is considered to be Britain’s leading manufacturing sector. term can be used to refer to the procedures, equipment, and 7
This claim is backed up by HM Revenue & Custom data from processes by which medical care is delivered.
uktradeinfo, which has shown a trade surplus from 2006

Medical technology companies have a range of focuses and
to 2008 for the Pharmaceutical industry. According to HM
these include:
Revenue & Custom, this surplus has been ongoing since mid
1980, making the UK one of the top five countries for global
pharmaceutical trade. However, there is speculation at this
time that due to the strength of the Euro and the subsequent
weakness of Sterling, UK-based pharmaceutical companies
may be less profitable in the upcoming year.
Figure 4 – Key health sector focus 12

3.2.1. Medical technology product naming with an annual estimated cost of €192bn to the overall EU
classification economy.
Though the health sectors with which medical technology
companies focus upon seem very well defined and limited, According to the WHO’s 2007 statistical data, heart disease
there is a huge range of products that can be developed and strokes account for 21.7% of deaths worldwide,
for each area. Table 5 shows the common nomenclature while cardiovascular disease accounts for 30%. The WHO
developed by the Global Medical Device Nomenclature estimates that in 2015 almost 20 million people will die from
Agency. a cardiovascular-related condition. This can all be related
to both an ageing global population and a sustained rise in
obesity. In fact, rising obesity levels are not only responsible
Term Examples
for the growing number of cases of heart disease and
Active implantable Cardiac pacemakers,
strokes, but has also contributed to the rise in deaths
technology neurostimulator, etc.
related to diabetes. The WHO predicts that within the next
Anaesthetic and respiratory Anaesthetic and respiratory
ten years diabetes-related deaths will increase worldwide
technology technology
by more than 50%.
Dentistry tools, alloys, resins,
Dental technology
dental floss, brush, etc. This in turn has created a viable marketplace with the
8 Electromechanical medical X-ray machine, scanner, laser, cardiovascular device market expected to reach US$40.46bn
technology etc. by 2011 in North America alone. Cardiovascular medical
Hospital hardware Hospital bed, etc. technology products include cardiac rhythm management,
Pregnancy, blood glucose, heart valves, cardiac surgery systems, minimally-invasive

In-vitro diagnostic technology
genetic tests, etc. image-guided technologies, interventional neurovascular
Nonactive implantable Hip, knee joint replacement, technologies and heart assist devices and stents. An example
technology cardiac stent of this is that the European drug-eluting stent market has
Ophthalmic and optical Eye glasses, contact lenses, been forecast to reach $4.5bn by year end this year, up from
technology ophtalmoscope, etc. $1.6bn in 2001.14
Reusable instruments Various surgical instruments
Globally, the major cardiovascular device companies include
Syringes, needles, gloves,
Single use technology Cordis (Johnson & Johnson), Medtronic, Boston Scientific,
balloon catheters, etc.
Guidant, St Jude Medical, Abbot, Sorin, Conor Medsystems
Technical aids for disabled Wheelchair, walking aid,
and Biotronik.
persons hearing aid, electrical bed, etc.
Diagnostic and therapeutic Radiotherapy units 3.2.3. Diagnostics
radiation technology
As healthcare has improved, there has been an ever-
Table 5 - Global medical device nomenclature increasing reliance on better and faster diagnostic tests.
(Source: Global Medical Device Nomenclature Agency, 2009)
Such diagnostics include biotechnological-based testing as
Despite the plethora of health-related focii listed above, well as medical hardware.
cardiovascular, diagnostics and orthopaedics are the largest
therapy areas within medical technologies. The pace of technological change in the diagnostic market
is enabling earlier and more accurate diagnoses of disease,
3.2.2. Cardiovascular improving clinical decisions and assisting more effective
monitoring of treatment. The global market for in vitro
This focus is on any medical technology, whether therapeutic,
diagnostics was valued in excess of US$38bn in 2007 and has
diagnostic or procedural, that deals with disease or the
been forecast to grow by 6.7% year on year until 2012. There
prevention of disease relating to the cardiovascular system.
are two diagnostic methods in particular that are seen as
high growth areas: molecular diagnostics and point of care
It is estimated that the two most common occurrences of
diagnostic tests. These are expected to exhibit a Compound
cardiovascular disease, heart disease and strokes, cost the
Annual Growth (CAG) of 14% until 2010 from a base value of
US $448.5bn in 2008.13 In line with this trend, cardiovascular
$2.6bn in 2005, and 7.8% until 2010 from a base of $12bn in
disease is considered to be the major cause of death in the
2005, respectively.
European Union, killing over 2 million people each year
3.2.4. Orthopaedics of years ago in the areas of reconstructive devices and joint
Orthopaedic conditions affect hundreds of millions of people replacements, spinal implants and instrumentation, fracture
throughout the world. According to recent reports orthopaedic repair and orthobiologics.
conditions account for up to half of all chronic conditions in
people over the age of 50 in developed countries, a figure that is In 2007, the European market for orthopaedic devices was
set to double by 2020. Combined with the fact that a fifth of all valued at around $3bn. On a global scale, worldwide sales
visits to outpatient clinics worldwide are for musculo-skeletal reached $25.9bn and it is estimated that by 2010 the sector
conditions, a focus on orthopaedics by medical technology will top $44bn in global revenues.
companies seems an obvious and lucrative choice.
Globally, the major orthopaedic medical technology
The main products seen within this sector are divided into a companies include Smith & Nephew, based in York, and
number of different fields, with strong growth seen a number DePuy (Johnson & Johnson) which is based in Leeds.
Figure 5 – Top 25 global expenditure in medical technologies in 2007 (€bn) (Source: Eucomed,2008)
3.2.5. Global expenditure in medical technologies Within Europe, Germany is both the biggest exporter (€14bn)
Figure 5 provides a quick overview of the 25 countries with and the biggest importer (€9.2bn) of medical technology. In
the largest global expenditure in medical technologies. As terms of exports, Germany is followed by France, the UK and
can be clearly seen, the US has the largest expenditure, Ireland. The biggest importers after Germany are France,
almost €80bn. In fact, US expenditure is equivalent to the Italy, the UK and Spain. Germany, the UK, Ireland, Sweden,
entire expenditure of Europe. Denmark and Finland have trade surpluses in medical
technology, while all other countries have trade deficits,
3.2.6. Medical technologies in Europe suggesting the prowess of these countries in this area.
As stated recently in a report15 by the McKinsey Group, the
European medical technology market, which is regulated
by the European Medical Devices Directives, is growing
at a rate of 5–6% each year – a model of consistency in
an otherwise turbulent economic climate. In support of
this, Espicom Business Intelligence predicts that the main
medical device markets in Western Europe will grow by over
40% in the coming years to reach an estimated US$82.4bn
by 2013.16
10
According to Eucomed medical technology sales in Europe
amounted to €63.6bn in 2005, making up one-third of the
global market share. Eucomed has also stated that the

European medical technology industry invests some €3.8bn
in R&D and employs 435,000 people across Europe, making
a major impact upon Europe’s economy while costing it less
that 0.7% of GNP.
Figure 6 – Location of European medical technology companies

(Source: Episcom, 2008)
Figure 7 – Number of employees employed by European medical technology companies (Source: Episcom, 2008)
3.2.7. Medical technologies in the UK
The UK makes up an 11% share of the European medical
device market and in 2008 this was valued at approximately
US$9.9bn. Despite the fact that 20% of all European
companies operate from the UK and that the UK has a trade
surplus in this industry, the UK medical technology industry
is heavily reliant on imports. This is indicative of a domestic
industry that is composed of manufacturers that are small
and undercapitalised.
At present it is estimated that the UK has 2,000 companies

engaged in medical device manufacture, 85% of which are
considered small companies (10 -50 people) with a turnover
less than £5m. As shown in Table 6, the medical technology
industry employs over 60,000 people, the second largest
employer in Europe after Germany in this sector.17 Closer
examination of the industry landscape shows that the UK is
Figure 8 – European medical technology market split particularly focused on R&D and has excelled in the areas of 11
(Source: Eucomed,2008) advanced wound care, diagnostics and orthopaedics.

Country Employees % of European Total Population (000s) Workforce per capita
Austria 6,000 1.40% 8,175 0.07
Belgium 5,500 1.30% 10,421 0.05
Czech Republic 12,760 2.90% 10,212 0.12
Denmark 14,000 3.20% 5,401 0.26
Finland 3,000 0.70% 5,228 0.06
France 40,000 9.20% 60,200 0.07
Germany 110,000 25.30% 82,491 0.13
Greece 2,500 0.60% 11,062 0.02
Hungary 4,250 1.00% 10,107 0.04
Ireland 26,000 6.00% 4,044 0.64
Italy 29,815 6.90% 57,553 0.05
Netherlands 9,500 2.20% 16,282 0.06
Norway 500 0.10% 4,592 0.01
Poland 8,700 2.00% 38,180 0.02
Portugal 3,200 0.70% 10,509 0.03
Romania 15,000 3.50% 21,631 0.07
Slovakia 2,198 0.50% 5,382 0.04
Slovenia 1,237 0.30% 2,001 0.06
Spain 25,400 5.80% 42,692 0.06
Sweden 15,000 3.50% 8,994 0.17
Switzerland 40,000 9.20% 7,390 0.54
United Kingdom 60,000 13.80% 59,834 0.10
Total Europe 434,560 100% 498,863 0.09
Table 6 – Workforce in medical technology companies (Eucomed,2008)

3.3. Medical technologies Yorkshire and

Humber
According to UK Trade and Investment (UKTI), and the
latest ONS and Companies House data, Yorkshire has the
UK’s highest concentration of medical device companies.
Over 200 firms involved within the medical technology
industry have a base in Yorkshire, employing some 7,000
staff and producing an output of over £450m. These
companies include a large number of medical device firms,
particularly within the orthopaedic and medical devices
arena, including:
• Reckitt Benckiser; www.reckittbenckiser.com
• DePuy International (a Johnson & Johnson company);
www.depuy.com
• Smith and Nephew; www.global.smith-nephew.com
12 • Swann-Morton; www.swann-morton.com
• Tunstall Healthcare; www.tunstall.co.uk
It is believed that the existing presence of these firms plays
a substantial role in the attractiveness of the area for new

investments.
It should be noted that there are a number of companies

that have originated from and are still based in the region.
These include Dawmed Systems, 1st Dental Laboratories,
Medical House and Surgical Innovations Group.
4. The financing cycle of healthcare technology companies
Of the different sources of finance available to entrepreneurs 4.1. Where do healthcare technology
venture capital plays only a minor role. To put this in context, companies originate from?
of the 1.2m companies in the UK only around 2,000, or
The products and services of healthcare technology
0.16%, have received venture capital investments. However,
companies are often based on experience gained by former
experts estimate that up to 80% of the fastest growing
academics or researchers at R&D departments of technology
companies, in terms of both revenue and employment, have
corporations. The scientific discoveries of academics are
received venture capital investment during their life cycle.
usually commercialised through university spin-out companies
Most of the world’s biggest healthcare companies including
that acquire the intellectual property rights from the incubator
Amgen, Genentech, Biogen and others have at some point
organisation in exchange for an equity stake or the payment
received venture capital investments or, like General Electric,
of a licensing fee. The same mechanism can also be used for
Medtronic, Johnson & Johnson and Amgen, have their own
corporate spin-outs. By contrast, start-up companies are often
venture capital activities that invest into the industry.
founded by entrepreneurs who have a strong professional
Innovation companies often display the following growth background and the necessary scientific expertise to start a
pattern as they develop from an initial idea into an new company with a unique selling position.
established market player. The different stages of growth
13
An analysis of UK-based healthcare technology companies
are often linked to certain types of funding:
that have received investments over the past two years shows
SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES

that the majority of companies began as independent start-
ups, followed by university spin-outs, spin-outs from non-
university research organisations, and corporate spin-outs.
Origin of healthcare technology companies Percentage

Independent start-up companies ~50%
Spin-outs from universities 30-40%
Spin-outs from research organisations 5-10%
Corporate spin-outs ~5%
Total 100%
Table 7 - Origin of UK-based healthcare technology companies

(Source: EVI, Jan 07 - Nov 08)
Across the different healthcare technology areas there is a

distinct pattern of where healthcare technology companies
originate from. For example, pharmaceutical and drug
development companies do not usually originate from
Figure 9 – Financing lifecycle
universities (unlike medical technology companies). Despite
The report follows the financing cycle of venture capital this, many entrepreneurs who have started companies have
backed companies from their foundation to the time when done so with an extensive background in healthcare research
the investors can exit their investments. The different within public research organisations or large corporations.
stages of the finance cycle will be presented in the following
chapters using the insights gained from both data analysis 4.2. Is the United Kingdom a good place
and interviews with relevant market authorities. to attract venture capital investments?
There are many factors that influence the provision of
venture capital within a country and all European countries
have made a commitment – verbally at least - to improve the
conditions surrounding the supply and demand of venture
capital. The impact of factors such as the entrepreneurial
climate, legal and tax frameworks, a country’s innovative 4.3. Is this also true for healthcare
capacity and so forth, on the venture capital market has technology companies?
been discussed extensively elsewhere and is not the subject
The healthcare technology venture capital market is
of this report.18
the second largest sector behind the information and
At the outset an entrepreneur is mostly inflexible regarding telecommunications sector. Around 24% of all European
the decision of where to locate the company. While spin- deals and 29% of all UK deals are invested into healthcare
out companies often choose an initial location close to their technology, meaning that nearly every third deal in the UK
incubator organisation, start-up companies are normally is healthcare-related.
based near to where the entrepreneur lives.
Entrepreneurs who start a company in the UK can benefit

from the most active venture capital market in Europe with
29% of all European investments (1,076 deals) and 27% of
all disclosed investment (£2.16bn) going into UK-based
companies. In terms of deal activity per capita, the United
Kingdom is comparable to the United States.19 Between
14 2007 and 2008 at least 3,600 deals were closed between
investors from all over the world and entrepreneurs with
European-based companies.
The total disclosed amount invested in the 2,070 recorded

deals in the UK was £8bn, meaning a European-based
company could secure an average of nearly £3.9m per
deal. The average deal size for a UK-based company is, at
£2.9m, significantly lower than for companies in the rest of
Europe. But this is not necessarily all bad news for national
entrepreneurs as the drop in the average value is possibly
a result of the higher disclosure rates for smaller venture
capital deals in the UK.
Figure 10 – Distribution venture capital investments across sectors

in Europe in 2007 (based on 1,492 deals) (Source: EVI, 2007)
Europe
UK Ratio
(incl. UK)
Number of venture capital backed deals 3,668 1,076 29%
Number of investments with disclosed deal

All venture capital 2,070 748 36%
amount
backed deals
Total deal amount (£m) 8,034 2,160 27%
Average investment amount (£m) 3.9 2.9 74%
Table 8 – Overview of European venture capital investments (Source: EVI, Jan 07 - Nov 08)
UK dominance within the European healthcare technology In terms of deal size, the UK healthcare technology
sector is indicated by the fact that 35% of all European deals investment landscape differs significantly from the European
are closed by UK companies. landscape where the average deal size is £1m above the UK
average. The average deal amount for medical technologies
UK pharmaceutical and drug development companies have is at the same level in both regions. By contrast, European
received in total over £433m in 161 disclosed deals. The lower pharmaceutical deals are on average £2.3m bigger.
average deal size in the UK is a result not only of the higher
disclosure rates for small deals, but also because there are fewer In summary, the UK has the biggest healthcare technology
deals above £10m compared to other European countries. investment market in Europe. Entrepreneurs have
the opportunity to secure substantial venture capital
A breakdown of the different technology areas shows that investments to establish and grow their companies. But
‘pharmaceuticals and drug development’ and ‘medical before entrepreneurs can expect multi-million pound deals,
technologies’ offer almost equal investment opportunities in they have to prove that there is a market for their product
the UK. In Europe, however, the number of pharmaceutical- or service.
related deals is significantly larger than those related to
medical technology. This would suggest that the UK has a far
greater emphasis upon medical technology.
15
Europe (incl.
UK Ratio
UK)

Number of venture capital backed deals 886 311 35%
Percentage of all venture capital deals per region 24% 29%
Healthcare
technology Number of investments with disclosed deal amount 532 161 30%
sector
Total deal amount (£m) 2,106 434 21%
Average investment amount (£m) 4.0 2.7 68%
Table 9 – Overview of European and UK healthcare technology investments (Source: EVI, Jan 07 - Nov 08)
Healthcare technology sector

UK
Pharmaceuticals & Medical
Total Others
drug development technologies
Total number of investments
311 130 113 68
(disclosed and undisclosed deal amounts)
Number of investments with
161 64 63 34
disclosed deal amount
Disclosure rate 52% 49% 56% 50%
Total deal amount (£m) 433.61 168.62 168.63 96.36
Average investment amount (£m) 2.69 2.63 2.68 2.83

Table 10 – Overview of UK healthcare technology investments (Source: EVI, Jan 07 - Nov 08)
Healthcare technology sector

Europe Pharmaceuticals &
Total Medical technologies Others
drug development
Total number of investments (disclosed 886 462 294 130
and undisclosed deal amounts)
Number of investments with disclosed 532 297 164 71
deal amount
Disclosure rate 60% 64% 56% 55%
Total deal amount (£m) 2,106.10 1,476.83 472.68 156.59
Average investment amount (£m) 3.96 4.97 2.88 2.21
Table 11 – Overview of European healthcare technology investments (Source: EVI, Jan 07 - Nov 08)
4.4. First round investments Number of

Rank UK region first round
As stated earlier, entrepreneurs with intellectual property (IP)
investments
assets and companies that have proven their technology are
1 South East 14
in the best position to approach investors such as business
angels or institutional seed and early-stage investors. Seed and 2 London 12
early-stage funds are often managed by institutional investors 3 Scotland 11
and backed by public money in the form of co-investment 4 North West 7
schemes or fund-of-fund investments. These public initiatives 5 Yorkshire & Humber 6
address the so called ‘equity-gap’, which refers to the scarcity
6 West Midlands 5
of initial investments for early-stage companies up to £1m.
7 East of England 5
The main reasons for the lack of investments of this size is
that investing in early-stage businesses is considered to have 8 Wales 3
higher investment risks and proportionally higher transaction 9 South West 3
costs in the form of due diligence and investment appraisals. 10 North East 2
Besides a few independent investors, public sector backed 11 East Midlands 2
funds are primarily tasked with investing into companies that
12 Northern Ireland 1
fall in this equity gap. This funding is often used to finalise
16 Total: 71
the proof-of-concept stage and establish a management and
legal structure. Table 13 - Overview of UK first round venture capital investments
in healthcare (Source: EVI, Jan 07 - Nov 08)
First round investments are a good indicator of the state

of the healthcare technology market, showing the level of
activity among entrepreneurs and investors. A European
comparison of first round investments offers good news
to entrepreneurs in the UK as it shows that the UK has the
highest level of activity:
Number of
Rank Country first round
investments
1 GB 71
2 DE 48
3 FR 17
4 SE 18
5 CH 17
Table 12 – European countries with the most first round venture

capital investments into the healthcare technology sector
As noted earlier, entrepreneurs are often reluctant to base

their companies outside their own region. This means the
regional activity level for first round investments provides Figure 11 – Distribution of first round investments in the UK
interesting insights into both the regional capacity for
starting companies and the availability of early-stage
investors. In the past two years, there have been a number
of early-stage investments into healthcare technologies in
Yorkshire & Humber.
4.5. Who are the early-stage investors? close relationships with universities and invest primarily in
university spin-out companies.
A European analysis of first round investments shows
that institutional investors backed by public money and
The good news for entrepreneurs is that nearly eighty
specialised independent investors play an important role in
different venture capital organisations invested into UK
providing the initial capital injections.
healthcare technology companies over the past two years,
although it was common for them to invest solely into
What these very active venture capital organisations all
a single company. Our research indicates that the right
have in common is that they invest within a specific region
business has the chance to attract international investors
or at least within their national boundaries. Only a few
like the Novartis Venture Funds, Odlander Fredrikson or
organisations, like Life Science Partner and BB Biotech
Truffle Capital.
Ventures, have undertaken first round investment activity
outside their national boundaries.
4.6. How much capital was invested?
The analysis of investment activity over the past two years Around a third of all healthcare technology deals in Europe are
supports a commonly held view that entrepreneurs should initial capital injections. In a similar manner to overall venture
focus their search for an initial investor within the borders of capital investment, as discussed in section 4.3, the average
the country or region where their venture is located. amount invested in the UK is lower (£2.8m) than the average
for all European healthcare technology deals (£3.9m). The
17
A follow-on analysis identified the most active early-stage spread is around £1m per deal across the different healthcare
healthcare technology investors in the UK. The results are technology areas. However, for pharmaceutical and drug

similar to the European analysis with public sector backed development companies the average investment size is
institutional investors dominating the league tables. still very high at over £4m per deal. This largely reflects the
Interestingly, two of the independent institutional investors need to fund pre-clinical trials which are expensive and time
(Imperial Innovations and IP Group) in this league have very consuming before any product can be brought to market.
Number of
Rank Investor Country Investor type
investments
1 High-Tech Gründerfonds DE Public Sector Backed 13
2 Clave Mayor SASGECR ES Institutional Investor 6
2 KFW Bankengruppe DE Public Sector Backed 6
4 SEED Capital Denmark DK Public Sector Backed 5
4 Bayern Kapital (Seedfonds Bayern) DE Public Sector Backed 5
4 Scottish Enterprise Fund GB Institutional Investor 5
Table 14 – Most active European first rounds investors (Source: EVI, Jan 07 - Nov 08)
Rank Investor Investor type Number of investments

1 Scottish Enterprise Fund Public Sector Backed 5
2 Imperial Innovations Institutional Investor 4
3 Rainbow Seed Fund Public Sector Backed 3
3 NESTA Ventures Public Sector Backed 3
3 Merseyside Special Investment Fund Public Sector Backed 3
3 IP Group Institutional Investor 3
3 Catapult Venture Managers Public Sector Backed 3
Table 15 – Most active UK first round investors (Source: EVI, Jan 07 - Nov 08)
Pharmaceuticals &
Medical
Europe Total drug Others
technologies
development
Total number of first round investment
280 118 113 49
(Disclosed and undisclosed deal amounts)
Number of first round investments with disclosed deal
138 66 54 18
amount
Disclosure Rate 49% 56% 48% 37%
Deal amount of first round investments (£000s) 392,364 268,852 95,933 27,579
Average amount of first round investments (£000s) 2,843 4,074 1,777 1,532
Table 16 - Overview of first round investments in Europe (Source: EVI, Jan 07 - Nov 08)
In the UK the average size of a first round investment is up by strong research universities and a substantial capacity for
to 50% lower than the European average. However, the spin-out companies which traditionally receive lower first
disclosure rates are 17% higher, indicating that more deals round investments than independent start-up companies.
for smaller amounts have been disclosed. The average deal
18 amount for first round investments into pharmaceutical and 4.7. Follow-on investment rounds
drug development companies is, at £2.44m, almost identical The high cash-burn rates of research-based companies
to the average investment amount of all deals in this sector, means that they immediately have to look for follow-on
at £2.63m. By contrast, deals into medical technologies and funding. The next funding round, usually referred to as a
other healthcare technology areas tend to be smaller. Series A round, often involves investment sizes from around
£1m up to several million pounds. These investment rounds
Despite the data indicated in Tables 16 and 17, first
are often led by recognised national institutional investors
round investments can still be large, such as the £33m
while other investors join the deal in a syndicate (syndicated
investment into the Belgium-based drug development
deal). At these relatively early stages in a company’s
company Movetis. Founded in 2006, the company received
development, a syndicate of investors often rely upon a
investments in January 2007 from BIP Investment Partners,
lead investor to monitor the company closely and to provide
GIMV, KBC Private Equity, Life Sciences Partners, Quest for
hands-on support while the rest of the syndicate can be
Growth, and Sofinnova Partners. In the UK in 2007, Vantia
located all over world. Consequently, it is rare that overseas
Therapeutics, benefiting from its position as a spin-out of
investors take the lead in a Series A investment round.
Ferring Research Ltd, received £19m from MVM, Novo and
SV Life Sciences. An additional aspect to consider at Series A is that venture
capital organisations have become more specialised with a
A more detailed analysis of Europe and the UK shows that the
later stage focus. Whereas early-stage investors often invest
average deal size in Yorkshire & Humber region is far below
across different sectors, later-stage investors often have
the European and UK average. This is probably related to
more specialised teams for specific technologies and sectors.
the fact that the Yorkshire & Humber region is characterised
Pharmaceuticals & Medical

UK Total Others
drug development technologies
71 22 30 19
Number of first round investments with
47 17 22 8
disclosed deal amount
Disclosure Rate 66% 77% 73% 42%
Deal amount of first round investments (£000s) 65,891 41,555 18,716 5,620
Average amount of first round investments (£000s) 1,402 2,444 851 703
Table 17 – Overview of first round investments in the UK (Source: EVI, Jan 07 - Nov 08)
Pharmaceuticals
Medical
Yorkshire & Humber Total and Others
technologies
drug development
6 2 4 6
Number of first round investments with disclosed
4 2 2 0
deal amount
Disclosure rate 67% 100% 50% n.a.
Deal amount of first round investments (£000s) 1,435 650 785 n.a.
Average amount of first round investments (£000s) 359 325 393 n.a.
Table 18 – Overview of first round investments in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08)
Most active investors in healthcare Number of

Rank Country Type of investor
technologies investments
1 Scottish Enterprise Fund GB Public Sector Backed 27
2 High-Tech Gründerfonds DE Public Private Backed 26 19
3 KfW Bankengruppe DE Public Sector Backed 21
4 MIG Fonds DE Institutional Investor 15

5 Sofinnova Partners FR Institutional Investor 14
6 Imperial Innovations GB Institutional Investor 12
6 Catapult Venture Managers GB Public Sector Backed 12
6 Bayern Kapital (Seedfonds Bayern) DE Public Sector Backed 12
9 Atlas Venture GB Institutional Investor 11
9 SEED Capital Denmark DK Institutional Investor 11
9 Life Sciences Partners DE Institutional Investor 11
12 IBG Beteiligungsgesellschaft Sachsen-Anhalt DE Public Sector Backed 10
12 Société Générale Asset Management FR Institutional Investor 10
12 Auriga Partners FR Institutional Investor 10
12 HealthCap Venture Capital SE Institutional Investor 10
12 Novo GB Institutional Investor 10
12 Oxford Technology Management GB Institutional Investor 10
12 NESTA Ventures GB Public Sector Backed 10
Table 19 – Most active investors in the European healthcare technology sector (Source: EVI, Jan 07 - Nov 08)
4.7.1. European investors in healthcare sector-backed investors like High-Tech Gründerfonds,

technology companies Bayern Kapital (Seedfonds Bayern), Scottish Enterprise
Around 300 institutional investors, corporations and other Fund and the German state-owned bank KfW.
investment organisations have invested in European
healthcare technology companies over the past two Investors can also specialise in certain areas within the
years. The majority of them have only participated in healthcare technology sector. For example, there is a
one investment (around 200) and a small number have clear difference between the venture funds that back drug
participated in two investments (around 50). Less than 50 development companies and those that back medical
investors have participated in more than two investments. technology companies. The regulatory requirements for
new drugs result in a long time-to-market period for new
The most active investors are mainly from the UK and products and the cash requirements for drug development
Germany, including established institutional investors like companies are among the highest of all sectors. Although
Sofinnova Partners and Life Science Partners; and public the development of medical technology products is also
embedded in a complex regulatory framework, this sector public backed investors like Scottish Enterprise, KfW and
has more similarities to the development of products and the High-Tech Gründerfonds populate both tables, Table 20
services in other non-healthcare related sectors and has a indicates that the pharmaceuticals venture capital market
significantly shorter time-to-market.Tables 20 and 21 provide is lead by sector specialist Sofinnova Partners, followed by
an overview of the most active investors in pharmaceuticals MIG Fonds, Novo, Atlas Venture, Life Science Partners, TVM
and drug development, and medical technology. Capital, Augira Partners and MVM Life Science Partners; all
of whom have dedicated life science investment teams.
Tables 20 and 21 replicate Tables 14 and 15, highlighting the
most active early-stage investors. What is obvious from Table In terms of medical technology, the picture is more diverse
20 and 21 is the level of specialisation among the investors, and, as Table 21 shows, public sector backed investors again
particularly in pharmaceuticals and drug development. While rank well.
Most active investors in pharmaceuticals and drug

Rank Country Number of investments
development
1 Sofinnova Partners FR 14
20 1 KfW Bankengruppe DE 14
3 MIG Fonds DE 13
4 Scottish Enterprise Fund GB 12
4 High-Tech Gründerfonds Management DE 12

5 Novo GB 10
6 Atlas Venture GB 9
6 Life Sciences Partners DE 9
8 TVM Capital DE 8
8 SEED Capital Denmark DK 8
8 Auriga Partners FR 8
8 MVM Life Science Partners GB 8
Table 20 – Overview of the most active investors in pharmaceuticals and drug development (Source: EVI, Jan 07 - Nov 08)
Rank Most active investors in medical technologies Country Number of investments

1 Scottish Enterprise Fund GB 13
2 High-Tech Gründerfonds Management DE 12
3 NESTA Ventures GB 7
4 KfW Bankengruppe DE 6
4 Bayern Kapital (Seedfonds Bayern) DE 6
4 Imperial Innovations GB 6
4 Wellington Partners Venture Capital DE 6
5 Odlander, Fredrikson & Co(HealthCap Venture Capital) SE 5
5 Oxford Technology Management GB 5
5 OTC Asset Management FR 5
5 Catapult Venture Managers GB 5
5 IP Group GB 5
Table 21 – Overview of the most active medical technology investors (Source: EVI, Jan 07 - Nov 08)
Deal
Date Company Region amount Sector Investors Investment round
(£000s)
Pharmaceuticals
Ganymed Germany ATS Beteiligungsverwaltung;
Nov-2008 54,820 & Drug Venture Funding 5
Pharmaceuticals Rheinland-Pfalz Future Capital; MIG Fonds
Development
3i Group; Abingworth
Management; Atlas Venture
Pharmaceuticals LLP; BIT; Edmond de Rothschild
France
Jan-2007 Novexel 33,702 & Drug Investment Partners; Goldman Venture Funding 2
Seine-St-Denis
Development Sachs Capital Partners; NIF SMBC
Ventures; Neomed Management;
Novo; Sofinnova Partners
Pharmaceuticals
May-2008 Pharma Swiss Slovenia 27,883 & Drug Enterprise Investors Venture Funding 2
Development
3i Group; BC Brandenburg
Capital; DH Capital Gmbh & Co
KG; EMBL Ventures; Grazia Equity
Gmbh; KfW Bankengruppe; 21
L-EigenkapitalAgentur (L-EA);
Germany Pharmaceuticals
immatics Landeskreditbank Baden-
Feb-2007 Baden- 26,424 & Drug Venture Funding 3

biotechnologies Wuerttemberg-Foerderbank;
Wuerttemberg Development
Merifin Capital; National
Technology Enterprises Company;
OH Beteiligungen GmbH und
Co. KG; Vinci Capital; Wellington
Partners Venture Capital
AVIDA Group; DEWB; Dieckell
Vermoegensverwaltung und
Beratungsgesellschaft mbH;
Dow CVC; Edmond de Rothschild
Investment Partners; IBB
Pharmaceuticals
Germany Beteiligungsgesellschaft mbH;
May-2007 Noxxon Pharma 25,277 & Drug Venture Funding 4
Berlin IBG Beteiligungsgesellschaft
Development
Sachsen-Anhalt mbH; Medical
Strategy; Seventure Partners;
Sofinnova Partners; TVM Capital
Gmbh; Undisclosed Institutional
Investors
United Kingdom Medical
June-2008 Apatech 23,096 3i Group; HealthCor Partners Venture Funding 5
East of England Technologies
Private investor(s); ATS
Beteiligungsverwaltung; Future
Capital; Ingro Finanz; Landesbank
Pharmaceuticals
Ganymed Germany Baden-Wuerttemberg KfW
April-2007 22,793 & Drug Venture Funding 3
Pharmaceuticals Rheinland-Pfalz Mittelstandsbank; MIG Fonds;
Development
Nextech Venture Lp; ONC
Partners; VI Partners AG (Venture
Incubator); Varuma
Germany Pharmaceuticals
Undisclosed; dievini Hopp
April-2008 Apogenix Baden- 21,768 & Drug Venture Funding 2
BioTech holding GmbH & Co KG
Wuerttemberg Development
Abingworth Management; Crédit
Pharmaceuticals
Fovea France Agricole Private Equity; Forbion;
Dec-2007 21,612 & Drug Venture Funding 2
Pharmaceuticals Paris GIMV; Sofinnova Partners;
Development
Wellcome Trust
Table 22 – Overview biggest European healthcare technology investments (Source: EVI, Jan 07 - Nov 08)
4.7.2. Top deals in Europe 4.7.3. Top deals in the UK

The league table of the biggest deals (over £20m), as shown The UK has not seen as many big investments as some other
in Table 22, in the European healthcare sector is dominated, European countries over the past two years. The majority
as expected, by companies active in the pharmaceuticals of big investments went into German companies (ten),
and drug development area. The largest investments were followed by French companies (eight). Swiss companies
closed by the German-based Ganymed Pharmaceuticals, received the same number of investments as UK companies
with a £54.8m investment in November 2007 and a £22.8m (six).
investment in April 2007. It is also noted that these
syndicated later-stage deals involve several investors, Within the UK, five of the six biggest deals were closed
with some of them joining as new investors while others by companies in the South East and one in the East of
participated in earlier financing rounds. England.
Only one investment went into a medical technologies During the same period, there were three investments into
company which, incidentally, is also the only UK later-stage drug development companies based in Yorkshire & Humber
investment in the league table. Germany, however, had five (Table 24).
investments in total (as mentioned before, two belonging
to Ganymed) and two from France and one from Slovenia.
22 Out of the 45 biggest investments in Europe, only six
investments were made into UK-based companies.
Deal
Investment
Rank Date Company Region Amount Sector Investors
round
(£000s)
United Kingdom
9 June-2008 Apatech 23,096 Medical Technologies 3i Group; HealthCor Partners Venture Funding 5
East of England
Oxford United Kingdom Clarus Ventures; DFJ Esprit; Wellington
14 Oct-2007 19,478 Medical Technologies Venture Funding 3
Immunotec South East Partners Venture Capital
Vantia United Kingdom Pharmaceuticals &
15 Mar-2008 19,000 MVM; Novo; SV Life Sciences Venture Funding 1
Therapeutics South East Drug Development
ABN AMRO Capital; Biogen Idec New
Ventures; Credit Agricole Indosuez Private
United Kingdom Pharmaceuticals &
19 Mar-2008 PanGenetics 17,618 Equity; Edmond de Rothschild Investment Venture Funding 3
East of England Drug Development
Partners; Fortis Private Equity NV (Fagus NV);
Index Ventures
Abingworth Management; Johnson &
United Kingdom Pharmaceuticals &
24 Oct-2007 Syntaxin 16,000 Johnson Development Corporation; Life Venture Funding 2
South East Drug Development
Sciences Partners; Quest for Growth; SR One
Goldman Sachs Capital Partners; Imperial
Circassia United Kingdom Pharmaceuticals &
45 Jan-2008 11,000 Innovations; Invesco Perpetual; Lansdowne Venture Funding 2
Holdings South East Drug Development
Capital
Table 23 – Overview biggest UK venture capital investments (Source: EVI, Jan 07 - Nov 08)
Deal Amount
Rank Date Company Region
(£000s)
53 Nov-2007 Neoss Yorkshire & Humber 10,000
88 Dec-2007 Photopharmica Holdings Yorkshire & Humber 6,000
157 Jan-2008 Tissue Regenix Yorkshire & Humber 3,000
Table 24 – Overview of the biggest investments in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08)
5. The attractiveness of Yorkshire & Humber
Similar to measuring early-stage investment activity, the Rank Location Deals Investments
attractiveness of a region for later-stage investments is analysed
by comparing the investment activity across different regions. United Kingdom
1 41 138,418
But unlike early-stage investments, later-stage venture capital South East
organisations invest internationally. International comparisons United Kingdom 33
can be made by scaling the investment activity by, for example, 2 22,037
Scotland
‘per capita’ or ‘all companies’. This, however, has some
methodological disadvantages due to the different sizes and United Kingdom
3 32 35,985
London
industrial structure of the European countries. Another way is
ti compare one region to another. One advantage of this is that Germany
the comparison happens within the same industry. To avoid a 4 30 80,649
Bavaria
bias, Yorkshire & Humber was compared to other regions in
the two main European economies Germany and France. In United Kingdom
5 26 89,712
East of England
Germany the ‘states’ and in France the ‘regions’ have a similar
structure and function as the UK ‘regions’. United Kingdom 23
6 22 25,305
North West
The table shows that Yorkshire & Humber is well placed and
Germany
SECTION FIVE THE ATTRACTIVENESS OF YORKSHIRE & HUMBER

directly follows the major and most well-known European 7 16 95,506
biotech regions in the UK and Germany, and on the same Baden-Wuerttemberg
level as Paris and the populous German state of Nord-Rhine United Kingdom
Westphalia which contains cities like Cologne, Düsseldorf, 8 15 22,570
Yorkshire & Humber
Essen, and Dortmund.
Germany
8 15 13,061
North Rhine-Westphalia
5.1. The investment landscape in
Yorkshire & Humber 8
France
15 87,028
Paris
The following section considers the venture capital industry
in Yorkshire & Humber. In recent years, an interesting United Kingdom
blend of university spin-outs and start-up companies were 11 10 6,926
Wales
financed by a variety of regional, national and international
investors. United Kingdom
11 10 4,940
East Midlands
This analysis is based on data released into the public domain Germany
mainly through the companies or investors themselves. The 11 10 6,028
Thueringen
report provides a comprehensive picture of the region’s
investment landscape by presenting the financing cycle United Kingdom
14 9 2,620
West Midlands
of local companies as well as regional investors and their
investment history. United Kingdom
14 9 17,420
South West
5.1.1. The origin of companies in the region
As previously noted, universities play an important role Table 25 – Overview of the number of deals in different European
in creating promising technology-based companies. regions (Source: EVI, Jan 07 - Nov 08)
University spin-out companies provide excellent investment
opportunities for regional, national and international researchers and students and their means to study and
investors. A basic factor for the creation and quality of undertake research. Therefore it is important to look into the
university spin-out companies is the extent and quality innovative capacity and the technology transfer activities of
of the underlying research embedded in the university’s the universities in the region.
Total income from Recurrent research

Total research
Total income (£m) research grants and income from funding
income (£m)
contracts (£m) council grants (£m)
The University of Leeds 422,334 136,804 90,794 46,010
The University of Sheffield 338,706 127,300 84,556 42,744
The University of York 188,339 66,588 43,748 22,840
The University of Bradford 105,689 16,569 9,762 6,807
The University of Hull 127,372 15,299 9,296 6,003
Sheffield Hallam University 177,249 13,829 10,014 3,815
The University of Huddersfield 102,276 3,134 1,702 1,432
Leeds Metropolitan University 146,006 2,921 2,432 489
The University of Lincoln 71,652 1,416 1,162 254
York St John University 33,273 87 37 50
Total: 1,712,896 383,947 253,503 130,444
Table 26 - Overview of universities located in Yorkshire & Humber (excl. Open University)
24 (Source: Yorkshire Universities and HESA) 21
The local universities strongly contribute to the regional 2006, Fusion IP entered a partnership with a £10m
healthcare technology landscape through their knowledge side fund from Nikko Principal Investments Ltd that
and technology transfer activities. Eleven universities are is “exclusively available to invest in our existing and
represented by Yorkshire Universities,20 the regional higher future portfolio companies.” 23
education association for the region. • IP Group Plc core business is the commercialisation
of intellectual property originating from research
The two biggest universities by total income and by research intensive institutions. The company was founded in
income are the University of Leeds and the University of 2001 and also provides management of venture funds
Sheffield. Both universities are members of The Russell focusing on early-stage technology companies and the
Group22 and count for 69% of the region’s research income in-licensing of drug related intellectual property from
and 44% of the total income. research intensive institutions.
All the three major universities in the region have entered
Different opinions exist regarding the capacity of universities
agreements with partners to commercialise their intellectual
to engage in knowledge and technology transfer activities.
property. These partners can supply experts to provide advice
One opinion is that universities should have a research income
and also have the capital to back these companies.
in excess of £20m to produce sufficient research output to run
a technology transfer office. However, smaller universities
The University of York and the University of Leeds have
can also have substantial knowledge and technology transfer
entered into an agreement with IP Group Plc, while the
activities. In such cases it might be useful to collaborate across
University of Sheffield cooperates with Fusion IP:
universities or with external partners.
a) University of York
The big three universities in the region work with external
partners, predominantly IP commercialisation companies The agreement between the IP Group Plc with the University
who support them in the commercialisation of the of York started in 2003 with the Centre for Novel Agricultural
intellectual property created in the university to provide the Products. In March 2006 the agreement was extended to
best service for their entrepreneurial academics. The most cover the entire university.
active organisations in Yorkshire & Humber are two public-
In the field of healthcare technologies, IP Group and the
quoted companies, IP Group and Fusion IP:
University of York have spun-out Bioniqs Ltd which has
• Fusion IP Plc (formerly known as Biofusion Plc) developed unique expertise in ionic liquids that can facilitate
commercialises intellectual property that is developed and improve bio-chemical and bio-catalytic processes that
at universities and similar establishments. In March are difficult to undertake using conventional technologies.
b) University of Leeds a) University of Leeds
In 2002 the University of Leeds outsourced its • Photopharmica (Holdings) Ltd (2001) develops novel
commercialisation activities as one of the first UK universities photosensitisers as products for medical use and has
to the Techtran Group. In 2005 Techtran Group was acquired opened up new applications of topical photodynamic
by IP Group. therapy. As of June 2008 the company was valued at
£26m with the IP Group holding a 49.9% stake; www.
c) University of Sheffield photopharmica.com
In 2005 the University of Sheffield signed an exclusive ten • Tissue Regenix Ltd (2006) is leveraging innovative
year agreement with Fusion IP, focusing on biosciences and tissue engineering platform technologies to develop and
commercialising all of university’s medical IP. In July 2008 the commercialise cellular tissue; www.tissueregenix.com
agreement was expanded into an exclusive agreement that b) University of Sheffield
allows Fusion IP to commercialise all of the university’s IP.
• Asterion Ltd (2001) owns novel, patented
therapeutic platform technologies to generate and
5.1.2. Venture capital backed university spin-outs
develop long-acting biopharmaceutical products;
in the healthcare technology sector
www.asterion.co.uk
Many of the university spin-out companies in Yorkshire &
• Adjuvantix Ltd (1999) is an early-stage
Humber have received initial seed and early-stage investment 25
biopharmaceutical company focused on the
or even further-stage investments. Most of the healthcare
development of rational means to effectively and
technology university spin-out companies originated from
safely enhance the immune response to prophylactic

one of the three major research universities:
and therapeutic vaccines; www.adjuvantix.com
Disclosed
Company Origin investments Investors
(£000s)
Absynth University of Sheffield 325 Fusion IP
Adjuvantix University of Sheffield 857 Fusion IP and WRTSF
Asterion University of Sheffield 1,000 Fusion IP and WRTSF
The Viking Fund, WRTSF, Yorkshire Cancer
Cizzle Biotechnology University of York 1,070
Research
Diurnal University of Sheffield 221 Fusion IP
Imagel University of York 280 IP Group
Lifestyle Choices University of Sheffield 221 Fusion IP
Medella Therapeutics University of Sheffield 320 Fusion IP
Paraytec University of York 845 Viking Fund & Co-Investors; YFM Group
Phase Focus University of Sheffield 1,050 Fusion IP, Viking Fund and WRTSF
Photopharmica Holdings University of Leeds 15,750 IP Group, WRTSF
WRTSF, Aberdeen Asset Management, Yorkshire
Pro-Cure Therapeutics University of York 2,950
Cancer Research
IP Group, Aquarius Equity Partners, Ora Capital,
Tissue Regenix University of Leeds 4,105
WRTSF
Xceleron University of York 5,270 Close Ventures, Foursome
Zilico University of Sheffield Undiscl. Viking Fund & Co-Investors
Table 27 – Selected venture capital backed healthcare technology spin-out companies in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08)
• Zilico Ltd (2006), formerly Aperio Diagnostics Ltd, • Imagel Ltd (2006) offers a full 3D dosimetry
is a medical diagnostics company pioneering new and imaging solution for radiotherapy planning;
technologies that will allow swifter, more accurate www.imagel.co.uk
detection of cervical cancer and pre-cancerous • Paraytec Ltd (2005) is designing, developing and
conditions; www.zilico.co.uk manufacturing ultra-violet area imaging detectors
• Phase Focus Ltd (2006) is developing an alternative which can be used with simple micro-syringes and/
approach to microscopy; www.phasefocus.co.uk or existing separations hardware including capillary
• Absynth Ltd (2007) is developing vaccines and electrophoresis systems, nano- and capillary LC systems
antibodies to treat infections caused by the bacterium to enable high sensitivity across a wide dynamic range
Staphylococcus Aureus (S. Aureus) including its more without sacrificing spatial resolution. The company
difficult-to-treat drug-resistant form, methicillin-resistant was a finalist in the BioEntrepreneurial Company
S. Aureus (MRSA); www.absynthbiologics.co.uk of the Year Award and received a Pittcon R&D 100
Award in 2007 for its product ActiPix™ D100 detector;
• Medella Ltd (2007) focuses on the use of monoclonal
www.paraytec.com
antibodies to inhibit the action of Adrenomedullin
a molecule found in 80% of cancer cells; • Pro-Cure Therapeutics Ltd (2001) is researching for
www.medellatherapeutics.co.uk new therapeutic drugs for the treatment of prostate
cancer; www.pro-curetherapeutics.com
26 • Diurnal Ltd (2004) is a pharmaceutical company that
creates therapeutics using advanced proprietary • Xceleron (1996) is one of the longest active spin-
formulations and novel physiological treatment outs in the region. The company has raised over £4m
regimes of approved drugs for use in the endocrine in funding and is focused on human microdosing;
(hormone) area; www.diurnal.co.uk www.xceleron.com
• Lifestyle Choices (2005) launched its first product, a 5.1.3. Independent healthcare technology start-ups
new triple hormone ovarian reserve test called Plan
Other companies have been started independently from
Ahead in 2006; www.planaheadtest.com/index.php
universities or research organisations, for example:
c) University of York
• Cizzle Biotechnology Ltd (2005) is focused on the • Activ4Life Healthcare Technologies Ltd is offering
development of novel Ciz1-targeted therapeutic improved, cost-reduced clinical results by providing
products and related diagnostics for lung cancer; patient activity monitoring, predictive modelling
www.cizzlebiotechnology.co.uk and management to inform clinical decision-making;
www.a4lhealth.com
Healthcare technology Helthcare technology Disclosed deal

Foundation Investors
company sector amount (£000s)
Activ4Life Healthcare
2007 Medical Technologies 125 SYIF and YHEF
Technologies
Pharmaceuticals & Drug
Kirkstall 2000 379 SYIF, Viking Fund, Business Angels
Development
MMC Ventures, Delta Partners and
Neoss 2000 Medical Technologies 18,000
Medtronic Inc
EPIC VCT, Abstract Group and other
Pharmacy 2U 1999 Health Care Services 5,000
institutional investors
Enterprise Ventures Ltd, North West
Platform Diagnostics 2002 Medical Technologies 1,044 Equity Fund, BBI Holdings Plc and
Carclo Plc
Coalfileds Enterprise Fund (Enterprise
Rostra UK 2005 Health Care Services 250
Ventures), Private Investors
YFM, Rensburg VCT, 3i, Granville Baird
Tissuemed 1985 Medical Technologies 11,110 Capital Partners, Friends Ivory & Sime,
SCIPrivate Equity, Capital for Companies
Table 28 – Selected venture capital backed healthcare technology start-ups in Yorkshire & Humber (Source: EVI, Jan 07 - Nov 08)
• Kirkstall Ltd is developing toxicity screening products majority of seed and early-stage investments into the local
to be used by the pharmaceutical and cosmetic university spin-out and start-up companies:
industries that will reduce the need for animal testing;
www.kirkstall.org 1. South Yorkshire Investment Fund (SYIF);
• Pharmacy 2U Ltd founded internet pharmacy in www.syif.com
the UK in 1999 and is now the country’s largest 2. Viking Fund; www.vikingfund.co.uk
dedicated internet and mail order pharmacy; 3. White Rose Technology Seedcorn Fund (WRTSF);
www.pharmacy2u.co.uk www.whiteroseseedcorn.com
• Platform Diagnostics Ltd is creating and developing 4. Yorkshire & Humber Equity Fund (YHEF);
platform technologies for the In-Vitro diagnostics www.yhef.co.uk
industry; www.platform-diagnostics.com
5. Fusion IP; www.fusionip.co.uk
• Rostra UK Ltd is providing solutions to National Health
6. IP Group; www.ipgroupplc.com/ipo
Service patients for the treatment of symptomatic
varicose veins; www.rostrauk.com South Yorkshire Investment Funds (SYIF) is a venture
capital and loan fund tasked with investing in small and
• Tissuemed Ltd is researching, developing and
medium sized (SME) businesses in South Yorkshire who
manufacturing proprietary polymers and films for use
struggle to secure finance for growth through the traditional
as surgical sealants; www.tissuemed.com
banking system or from other lenders. SYIF was established
27
in 2001 and has invested almost £50m in 500 investments
in South Yorkshire businesses. SYIF can provide seedcorn,

5.2. Investors in Yorkshire & Humber loan and equity-linked investments, ranging from £15k
The venture capital invested into these companies originates to £2.5m. The fund’s investors are the European Regional
from a variety of investors. The region benefits from six local Development Fund and Yorkshire Forward.
venture capital organisations which were involved in the
Lowest concentration of companies

Highest concentration of companies
Location of VC backed companies
Figure 12 – Location of venture capital backed companies in Yorkshire (Source: L.I. Group, Dec 2008)
The Viking Fund is a co-investment venture capital fund, investments of between £2m and £10m in UK unquoted
specialised in providing finance for early-stage technology companies; www.nvm.co.uk
companies in Yorkshire. The fund received £5m under the • Partnership Investment Finance is a £37m fund for
BERR/Small Business Service’s Early Growth Fund scheme Yorkshire, The Humber, and North Lincolnshire which
and provides early-stage finance to match investments by has been established to enable small and medium
business angels or other private sector investors. In the past sized businesses (SMEs) and social enterprises
three years, the Viking Fund has invested in more than 48 access to funding by way of equity or loan finance;
rounds in 23 companies, totalling £3.4m, plus an additional www.partnershipif.co.uk
£4.6m in match funding from other investors. The Viking
The region also benefits from business angel networks, for
Fund has invested in the Yorkshire-based healthcare
example
companies Phase Focus Ltd, Zilico Ltd, Paraytec Ltd and the
AIM listed Syntopix Plc. • The Viking Club is an investment club for high net
worth individuals interested in making investments of
The White Rose Technology Seedcorn Fund (WRTSF) is between £5,000 and £200,000 in early-stage businesses
an early-stage seedcorn fund managed by Aberdeen Assets with a technology bias and potential for high growth;
Managers, which invests in technology emerging from the www.vikingclub.co.uk
Universities of York, Leeds and Sheffield. The £9m Fund • Yorkshire Association of Business Angels (YABA) is a
28 provides venture capital funding of up to £500,000. The fund regional forum for business angels; www.yaba.org.uk
was founded in 1999 with £4.5m from the Government’s Funding local businesses
University Challenge Competition (the Office of Science and
The South Yorkshire Investment Fund, Viking Fund, White
Technology, the Wellcome Trust and the Gatsby Foundation)

Rose Technology Seedcorn Fund and theYorkshire & Humber
and a further £1.5m from the White Rose Universities (Leeds,
Equity fund are all public sector backed funds. These funds
Sheffield and York). The Fund received another £3m from
normally invest over a limited time period until they have
Yorkshire Forward in June 2002. The fund has invested in at
invested their available capital. They are often managed by
least 19 spin-out companies from the three universities.
external managers, as in the case of the WRTSF and YHEF.
The latter announced in July 2008 that the fund has reached
The Yorkshire & Humber Equity Fund (YHEF) is one of nine
the end of its investment period and no new investments
English Regional Venture Capital Funds. YHEF was founded
will be made.24
in 2002 to provide venture capital to SME companies based
in Yorkshire & Humber and it is managed by YFM Venture
Andrew Burton, the Viking Fund’s managing director stated
Finance Ltd.
in an interview in December last year: “We want to continue
the Viking experience. We think we have made a big
The IP Group and Fusion IP were presented in an earlier
difference and our portfolio has got a lot of value. Our plans
chapter.
are to raise another fund or another small series of funds to
replace the £5m Viking Fund that we’re almost at the end of
Other investors with strong regional links include for
investing in now.”25
example:
• Aquarius Partners is a venture capital fund manager The SYIF is better placed having received a £7m funding
based in Manchester; www.aquariusequity.com boost from Yorkshire Forward in January 2009.26
• Enterprise Ventures provides venture capital and private
equity to high growth unquoted companies throughout With two active funds, one with fundraising plans, several
the North of England and the Midlands regions and business angel initiatives and the university partnerships, it
manages several different funds that invest in regional is clear that the region offers a variety of equity financing
companies; www.enterprise-ventures.co.uk sources to local entrepreneurs.
• Key Capital Partners is focused on the equity gap,
making equity investments of between £1 million As of December 2008, Yorkshire Forward announced a new
and £10 million in profitable, growing companies; £120m fund to be used to support the growth of small and
www.keycapitalpartners.co.uk medium-sized businesses in the Yorkshire & Humberside
region starting late 2009. The aim of the investment is to ensure
• Nothern Venture Managers is an independent
that these growing businesses can gain access to the support
private equity businesses focussed on making equity
needed to ensure that they become successful businesses.
Furthermore, entrepreneurs have the opportunity to raise In the area of medical equipment two companies are quoted
capital from any other national or international investors on the London Stock Exchange:
and have done so recently. The start-up company Neoss Ltd • Surgical Innovations Group Plc specialises in the
has raised over $20m since its first investment in 2003 from design and manufacture of innovative devices for use
investors outside the region. In January 2009 the company in minimally invasive surgery and industrial markets.
announced its latest investment round of $5.5m. The The Group’s medical division is focused on strong
company’s main investors are MMC Ventures (UK), Delta international growth in two specialist areas namely
Partners (UK) and Medtronic Inc (US). minimally invasive surgery, where its products are used
in ‘keyhole’ (laparoscopic) surgery and products for
5.3. Venture capital investment autologous blood transfusion (whereby a patient’s own
successes blood is recycled).
An entrepreneur who plans to raise money from venture • Dawmed Systems Plc main activity is designing,
capital organisations needs to have a plan in place that developing, manufacturing, selling, distributing,
shows how potential investors can make a suitable return testing and servicing washer-disinfectors and washer-
(exit). This exit can be released trough selling the company disinfector-dyers for the primary and secondary
to another investor (secondary), another company healthcare sectors.
(acquisition) or going public (initial public offering).
b) Acquired companies
29
The following section provides an overview of successful A recently exited company, Axordia Ltd (founded in 2004),
venture capital exits in the Yorkshire & Humber area: developed a human embryonic stem cell (hESC) technology

platform. According to the Fusion IP website the company
a) Public-quoted healthcare technology companies
has received £661k in exchange of a shareholding up to 49%.
The partnership between Techtran Group/IP Group and the In December 2008 the company was acquired by Intercytex
University of Leeds has already resulted in university spin- Plc. At this point Fusion IP had a 64.1% shareholding in
out companies that are now publicly-quoted: Axordia, and in return for the company they received a
4.78% shareholding in the enlarged Intercytex. The closing
• Avacta Group Plc (formerly known as Readybuy Plc) is price of Intercytex ordinary shares on 19 December 2008
researching, developing and producing rapid response was £0.24, valuing Fusion IP’s holding in Intercytex at
detection devices for the biopharmaceutical, homeland £1.1m27 and valuing Axordia at 1.68m.28
security and defence, and clinical diagnostics markets.
The company was founded in 2004, went public in c) Investment successes by engagement of corporate
August 2006 at the AIM of the London Stock Exchange investors
(LSE), and has a market cap of £17.5m in late 2008 .
Large corporations also invest in early-stage companies.
• Syntopix Group Plc was founded in 2003 and was quoted Investments of this nature give corporates visibility on
on the AIM in March 2006. The company was backed by emerging technologies that in the future could either be
TechTran Group (now: IP Group), the Viking Fund, White disruptive or value-adding to the corporation.
Rose Technology Seedcorn Fund and Business Angels.
The main activity is researching, discovering and For example, after several rounds of investments from local
developing drugs for the topical treatment of common investors, Platform Diagnostics Ltd received investment
dermatological diseases, currently focusing on acne from two corporations, BBI Holdings Plc and Carclo
and superficial Staphylococcus Aureus infections. The Plc. According to the company’s website, the company
current market capitalisation is £6.36m. undertook these investments with a view to commercialising
These examples show that it is possible to develop its innovative technology.29
university spin-out companies into larger companies within
a reasonable time frame. However, it should be noted that
Avacta Group Plc and Syntopix Group Plc were floated at the
IPO peak in 2006. IPOs in 2009/2010 are unlikely to reach
such values. (Note: the median market-cap for all public-
quoted biotechnology and pharmaceuticals companies
on the LSE (Main Market and AIM) is around £15m as of
December 2008).
6. Future trends in the healthcare technology venture market

Future market trends within venture capital can be divided A similar Spanish company called Cellerix, which was
into two separate areas, technological trends and financial founded in 2004 has developed innovative treatments based
trends. on cell therapy and is leading the development of a new
generation of treatments using expanded adult stem cells.
A recent survey in 2008 showed that 84% of all CEOs in Since 2007, the company has raised over £30m in venture
pharmaceuticals and the life sciences are confident that capital, including a €27.2m series B financing round in 2007
their companies will increase their revenues in the upcoming plus a £10m venture loan in 2008; www.cellerix.com
year.32 The CEOs regarded innovation as the best way to
keep their competitive edge. With leaders such as this, the In the UK ReInnervate, a Durham University spin-out
future of the healthcare technology market should be in company, whose work is predominantly in the field of stem
safe hands. cell biology and developmental neuroscience, recently
closed a funding round of £750k; www.reinnervate.com
In line with these expectations are the profit increases
announced by the likes of Abbott Laboratories, whose profits Ophthalmology
rose by 28% last financial year, and by Johnson & Johnson, Although the area of ophthalmology has received much
30 whose profits climbed by 14% in the fourth-quarter of 2008 less media attention than stem cells, this has not hindered
alone. it from receiving a noted amount of venture capital interest.
For example, the French company, Novagali Pharma, who
SECTION SIX FUTURE TRENDS
Technology Trends develop innovative products for all segments of the eye has
Some of the key trends within the healthcare technologies raised over €44m in venture capital since the company’s
industry include areas such as nano-biotechnology, stem foundation in 2000 (www.novagali.com). Other examples
cells and ophthalmology. include the Swiss-based Sensimed (£3.5m, Series A,
www.sensimed.ch) and Cambridge-based Altacor;
Miniaturisation and nano-biotechnology www.altacor-pharma.com
Although this area has been a focus for investors for some
time, there is still a lot of interest in new approaches to drug Standardisation – or smaller, cheaper, better
delivery and dosing systems and the miniaturisation of Attractive propositions to any investor, especially within
medical products and drugs. As a result, a new sub-area has the field of medical technology, are companies that can
emerged, referred to as nanotechnology. Nanotechnology manufacture standardised products to a high quality at a more
firms produce products off the base of nanotechnology competitive price. These types of companies are interesting
platforms. The development of these platforms occurs to potential investors’ because they address large markets.
predominantly in small innovation-based companies, which
require early-stage capital investment to finance their An example of this is the French company Implanet,
research and development. Investments into this area has which has received €13m in an initial financing round from a
already resulted in a number successful exits, attracting Franco-German investment consortium led by Auriga Capital,
further interest into this sub-sector by the venture capital Edmond de Rothschild Investment Partners and Wellington
investment community. Partners (www.implanet.com).
Stem Cells Other similar companies include, ILIAS-medical, which

Stem cell research, and in particular the use of human- is backed by Sirius Venture Fund and the High-Tech
sourced stem cells, is a controversial topic, and debate still Gründerfonds and is currently developing the world’s smallest
remains regarding the ethical implications of using human artificial lung (www.ilias-medical.de) as well as PharmaSet, a
embryonic stem cells. Despite this there have been a number French company, which develops cheap disposable surgical
of commercial successes in this area. For example, Geron, devices for the medical industry (www.pharmaset.com).
an American drug development company that is developing
human embryonic stem cell-based (hESC) therapies has, in Imaging and Software
a landmark case, received FDA clearance to begin the world’s Imaging technologies have become one of the most
first human clinical trial of an hESC therapy. www.geron.com interesting medical technology areas of investment lately.
In the last two years, forty companies whose activities lie company is developing an enzyme replacement therapy for
in this region have received investment. Coupled with the Morbus Morquio, a rare lysosomal storage disease; www.
advances in hardware, there have also been substantial vivendy.ch
developments in software applications, primarily related
with Computed Tomography (CT) and Magnetic Resonance Zymenex (Denmark) is engaged in developing
Imaging (MRI) as well as other areas where graphical data pharmaceutical products to treat rare, serious, genetic
processing is important. Another area where software is diseases, for which there is no treatment available today;
playing an ever important role is in the area of computer- www.zymenex.com
assisted planning of therapies and surgeries.
Financial Trends
One of the most publicised imaging companies of late Cost advantage in medical technologies
is the Paris-based Biospace Med which was founded by
Companies in the medical technologies sector benefit
Nobel Prize winner Georges Charpak to provide researchers
from several advantages. Firstly, compared to traditional
in biology with innovative imaging tools based on his
drug development activities, medical technologies
discoveries in high-energy physics and particle detection.
require shorter time periods to develop a product and
www.biospacemed.com
take it to market, resulting in lower costs for research and
development. It also appears that Europe has some inter-
The 2007 funded Visiopharm (Denmark) is a specialist in 31
regional cost advantages compared to the United States.
image analysis software for the life-sciences, including
In many European countries it is significantly cheaper to
hardware integration, automation, and quality inspection.
develop medical technology products from an idea to a

www.visiopharm.com
marketable product.
Surgix, an Israeli-based company is developing a visual-
Ongoing M&A activity
based system for image guided surgery primarily focused
on orthopaedic trauma, was awarded the Ernest and Young The recent acquisition of Wyeth by Pfizer shows that
Entrepreneur of theYear in Israel in 2006. www.surgix-med.com healthcare technology companies are looking for
opportunities to improve their innovative capacity. Many
Personalised medicine and focussing on smaller patient corporations have large cash reserves and are highly liquid,
groups allowing them to make strategic acquisitions.
An industry that is proving to be of interest to investors
Acquisitions of innovative companies play an important
is the growing idea of personalised medication, allowing
strategic role in strengthening a corporation’s innovative
customised treatments to be developed rapidly for individual
capacity. Although the majority of acquisition targets
or small groups of people with special or incurable ailments.
tend to be larger and more established companies, early-
A lot of this drug development work has been carried out
stage venture capital backed companies are also in the
within the Oxbridge region as well as the large medical
focus of these large acquirers. In the current climate,
focused clusters of Switzerland and Denmark.
companies (corporations and SMEs) with strong cash
positions will have the opportunity to acquire companies
Horizon Discovery (Cambridge, UK) is aiming to provide
that are in testing financial positions hence have lower
drug discovery researchers with tools that accelerate the
valuations and in doing so acquiring companies will
search for new and more effective ‘targeted’ or ‘personalised’
strengthen their own product pipeline and market
drugs; www.horizondiscovery.com
position. Such behaviour has a subsequent downstream
impact on universities and SMEs. Corporations that
Oxford Nanopore Technologies (Oxford, UK) a company
scout universities and research organisations to find new
backed with more than £32m of venture capital is developing
approaches and technologies help academics, inventors
a technology for label-free molecular detection and analysis,
and future entrepreneurs to gain first-hand experience
with potential applications in DNA sequencing, diagnostics,
drug development and defence; www.nanoporetech.com with the industry.
Vivendy Therapeutics based in Switzerland was founded While the trend to outsource R&D has already started,
in March 2006, a spin-out of Inotech Biotechnologies AG, the current financial crisis will put additional pressure
and closed a financing round of nearly £20m in 2008. The on companies to keep activities off the balance sheet
and maintain flexibility. This will result in interesting by broadening its risk profile. While larger acquisitions
opportunities for smaller companies, particularly in the area dominate the press, the management teams of corporations
of research services. emphasise that they are also interested in smaller companies.
For example Abbott Laboratories, which has $4bn in available
Over the past two years more than fifty venture capital cash, announced in January 2009 that it is looking to buy
backed healthcare companies have been acquired. companies both in pharmaceutical and non-pharmaceutical
The acquirers not only include all of the internationally sectors to take advantage of the heavily discounted company
recognised corporations but also many smaller and medium valuations that are now on offer33, both in the venture capital
sized companies as well. Some of which are themselves and healthcare technology market. Recent market activity
venture capital backed. has indicated that companies in the medical technologies
sector have valuations of EBITDA-multiples starting from 8,
The largest disclosed acquisitions of venture capital backed whilst those in the pharmaceutical sector have multiples of
healthcare technology companies over £20m were completed around 10-14.34
by pharmaceutical corporations. Table 29 confirms that the
UK and Germany are strong in producing successful drug Given the economic downturn and despite the fact that
development companies that go on to be acquired by large corporations are still active in acquisitions, there are a number
pharmaceutical companies. Not unsuprisingly, the price of disadvantages for early-staged innovation companies to
32 paid for medical technology companies is lower than drug consider.
development companies.
The acquisition and consolidation activity among the larger
When it comes to acquisitions, different acquirers have corporations means that there will be less investment
different strategic agendas. For example, some companies through acquisition for early-stage healthcare technology
try to strengthen their product pipeline by buying companies companies. Therefore the number of companies available
with similar products or services, while other companies try for licensing deals, as corporate investors, or even as
to build a broader product pipeline with acquisitions into buyers will decrease resulting in the continued downward
new areas outside their current product portfolio. Johnson & pressure.
Johnson’s acquisition strategy is to build a broad and varied
portfolio of drugs, medical devices and diagnostic tests so Moreover, the large acquisitions may also result in
as to try and shield itself against any economic downturns subsequently longer periods of inactivity whilst the two
Deal amount
Date Company Sector Region Acquirer
(£000s)
Pharmaceuticals &
2008 Direvo Biotech DE 166,710 Bayer HealthCare
Drug Development
Alantos Pharmaceuticals &
2007 DE 150,557 Amgen
Pharmaceuticals Drug Development
Pharmaceuticals &
2008 U3 Pharma DE 119,311 Daiichi Sankyo
Drug Development
Pharmaceuticals &
2008 PIramed GB 81,087 Roche
Drug Development
Pharmaceuticals &
2007 Arrow Therapeutics GB 76,412 AstraZeneca
Drug Development
Pharmaceuticals &
2007 Biolipox SE 65,502 Orexo Pharmaceuticals
Drug Development
2007 Precimed Group Medical Technologies CH 60,561 Greatbatch
2007 etkon Medical Technologies DE 51,808 Institut Straumann
2007 Endoart Medical Technologies CH 49,653 Allergan
Table 29 – Biggest acquisitions of healthcare technology companies (Source: EVI, Jan 07 - Nov 08)
corporations consolidate their product portfolios before In addition to these developments, in these the difficult
they again go out looking for other interesting investment economic time investors are increasingly focusing on their
opportunities. existing portfolio as opposed to scouting for new investment
opportunities. As many of their portfolio companies will
Focus on later stage deals and orientation towards have lower revenues than was forecasted at the time of the
licensing deals investment, additional funding will be required to keep the
There appears to be a trend towards later stage deals, which portfolio companies alive.
has its origins in several recent developments. Over the
past few years several investors in healthcare technology As venture capital supply is inelastic this will, as described
companies have built strong reputations, which has placed above, increase the demand for seed and early-stage capital
them in a strong position to raise bigger funds. For example, supplied by other sources. In particular, entrepreneurs will
Abingworth has closed a £382m life science fund in 2008 be increasingly looking to local business angels and public
and TVM Capital manages €240m in their latest Life Science sector backed funds for investments
Ventures VI. These bigger funds have been raised to focus on
later stage, larger multi-million investment pound rounds. The first signs for this development are found in, for example,
Smaller rounds are increasingly less interesting due to the former entrepreneurs and business angels who are already
relatively high transaction costs. attracted to the manifold investment opportunities. A recent
example is the venture capital organisation QureInvest, 33
Why is there a focus on later stage deals more prevalent? which invested up to €5m in companies in order to develop
them to a stage where they become interesting for licensing

Firstly, the crash of the venture capital market at the deals. The first company benefiting from such an investment
beginning of this century made entry for new investors more is the CT Atlantic AG (Zurich, Switzerland); www.ct-atlantic.
difficult. Investors that would normally start by investing in com. The investment should help the company to reach a
early-stage deals before progressing to larger deals are now stage where they can look for a licensing deal instead of
in short supply. follow-on investments.
Secondly, early stage investors with smaller investments Another spin-out from Zurich University is Neurimmune
often suffer from dilution in follow-on investment rounds Therapeutics (www.neurimmune.com) which showed that
and often have only limited capital to participate in the it is possible to enter into licensing deals when the company
follow-on investments. In particular, drug development is at an early stage. Neurimmune Therapeutics signed a
companies require several investment rounds before they deal with Biogen Idec worth up to £30m. Drug development
can be exited. companies are especially suited to this business model
where the presentation of promising data increases the
Thirdly, many investors have become more risk-averse likelihood of attracting venture capital investment and
focussing on more proven technologies or services of benefiting from future licensing agreements. Overall,
embedded in later stage companies. licensing agreements can offer some early-stage companies
an excellent funding alternative when venture capital
options are scarce.
The report shows the important role of the healthcare technology venture market in European and the UK. Healthcare
technologies and related services attract around one-third of all venture capital investments made in Europe. Besides being
the leading venture capital market in Europe, the UK benefits from a strong corporate and research base in this sector
which is contributing over 50% of all venture capital backed companies; and strong networks across universities, technology
transfer offices, service providers, entrepreneurs, SMEs and corporates.
This can also be seen in the Yorkshire & Humber region where several spin-out companies originated from strong research
universities and a network regional investors and service providers helps spin-out and start-up companies to secure their
funding. However, this region will feel the squeeze in the venture capital market and needs concentrated efforts to ensure
that the regional companies are in the best position to survive the current climate and can grow so much more under
improved market conditions. But this also requires ongoing support for research and development in research organisations
and corporates to develop marketable ideas, which is necessary to keep the competitive advantage of UK in the healthcare
technology sector.
Acknowledgements
We would like to thank everyone who has contributed to this report, particularly the Access to Finance for Healthcare
Technologies consortium for their sponsorship and the following organisations that supplied data and provided insight in
one-on-one interviews for use in this report:
• 3i, London (UK)

• Abcam, Cambridge (UK)
• Abingworth Life Science Investments, London (UK)
• Bradford Bioscience Business Incubator, Bradford (UK)
• CorporateInformation.com, Milford (US)
• Eucomed, Brussels (Belgium)
• Fusion IP (Sheffield)
34
• Grant Thornton, London and Yorkshire & Humber regional offices(UK)
• Higher Education Funding Council England, London (UK)
• Higher Education Statistics Agency, Cheltenham (UK)
• Imperial Innovation, London (UK)
• IP Group (UK)
• Leeds Innovation Centre and Bioincubator (UK)
• Leeds Met University (UK)
• Library House, Cambridge (UK)
• London Stock Exchange, London (UK)
• Longbow Capital, London (UK)
• Medilink, Sheffield (UK)
• Science City York, York (UK)
• Techtran Group, Leeds (UK)
• University of Huddersfield (UK)
• University of Hull (UK)
• University of Leeds (UK)
• University of Sheffield (UK)
• University of York (UK)
• Viking Fund, Normanton (UK)
• York Incubator, York (UK)
• Yorkshire Concept Fund, Leeds (UK)
• Yorkshire Connect (UK)
• And all the other undisclosed companies and investors ...
Disclaimer
Information about the venture capital market is constantly changing. Reasons for this include new disclosure of past
investments, new available insights into the structure of investments, changes in the methodology and definition among
others reasons. Therefore any future report might publish alternative figures on venture capital investments in Europe to
this report. However, the L.I. Group claims to provide an accurate picture based on the information currently available.
All information used in the publication of this report has been compiled from sources that are believed to be reliable.
Reasonable steps have been taken to ensure that no errors or inaccurate descriptions arise, but this cannot be guaranteed
and the report does not purport to contain all information that recipients may require. Opinions contained in this report
represent those of L.I. Group at the time of publication. Neither L.I. Group, nor any of its founders, employees, agents or
advisers makes any express or implied report or warranty, and no responsibility or liability is accepted by any of them, with
respect to any errors or omissions in this report or any other information supplied at any time to or on behalf of the recipient,
or with respect to the fairness, adequacy, accuracy or completeness of the information in this report, including without
limitation the reasonableness of the projections, forecasts, estimates or any associated assumptions contained in it, or any
information otherwise supplied at any time to the recipient.
The value of investments can fall as well as rise and can be subject to large and sudden swings. In addition, it may be difficult
35
or impossible to buy, sell, or obtain accurate information about the value of, companies or investments mentioned in this
report. Past performance is not necessarily a guide to future performance.
This report does not form part of any contract and is provided for information purposes only. It is not, and is not part of, an
invitation or inducement to buy, sell, subscribe for, or underwrite any investments and shall not be construed as such. Any
recipient of this report who intends to acquire shares or securities in any company which is the subject of this report shall
make such acquisition solely on the basis of its own assessment and investigations. The L.I. Group shall not be liable to any
recipient of this report for any decision made or action taken in reliance on information in this report. Except as disclosed
in the report, L.I. Group does not hold any positions in companies mentioned in this report but may perform services or
solicit business from companies mentioned. L.I. Group’s founders, officers, employees, agents and members may have a
position in any such companies or in related investments. L.I. Group does not provide regulated investment services, and
is not authorised to do so. Nothing in this report shall be taken to constitute advice or recommendations on transactions in
investments, or any other regulated investment service.
Copyright
© 2009 L.I. Group. All rights reserved. This report or any part of it (including its words, graphics and layout) must not be
copied, printed, scanned, stored, communicated to the public or otherwise reproduced, distributed or made available in any
way whatsoever, including by electronic means, and whether directly or indirectly, without the prior written permission of
L.I. Group.
Endnotes
1 For the period January 2007 to November 2008

2 HE-BCI Survey 2006-2007
3 HE-BCI Survey 2006-2007
4 Joseph P. Newhouse, “Medical Care Costs: How Much Welfare Loss?”, Journal of Economic Perspectives 6(3 Summer
1992): 3-21.
5 Technical Review Panel on the Medicare Trustees Reports, Review of Assumptions and Methods of the Medicare
Trustees’ Financial Projections (December 2000),
www.cms.hhs.gov/ReportsTrustFunds/02_TechnicalPanelReports.asp#TopOfPage
6 Richard A. Rettig, “Medical Innovation Duels Cost Containment,” Health Affairs (Summer 1994): 15.
7 Productivity Commission, Australian Government, Impacts of Advances in Medical Technology in Australia, August
31, 2005, Melbourne, Australia
36 8 Federal Food, Drug, and Cosmetic Act (2001).
9 IMS Health, MIDAS, MAT.
10 Yorkshire Forward, Healthcare Technology Industries: Mapping Study 2006.
11 This includes Biotechnologically based procedures or developments, especially the more medically and organism
based “Red Biotechnology” sector.
12 Source: Sami Hamade - Developing medical technologies, presentation.
13 American Heart Association and the National Heart, Lung, and Blood Institute.
14 Eucomed, 2008, www.eucomed.org
15 McKinsey, (Internal Docment), 2008.
16 The Outlook for Medical Devices in Western Europe.
17 Eucomed, 2008, www.eucomed.org
18 EVCA: Benchmarking Study 2008; Kortum S. and Lerner J.: Does Venture Capital Spur Innovation?, NBER Working
Paper No. 6846.
19 For a comparison of the venture capital investment activity in the UK and the US see the forthcoming report from
the Council of Science and Technology: Corporate Venture Activity in the UK.
20 www.yorkshireuniversities.ac.uk
21 www.yorkshireuniversities.ac.uk/unis.php
22 www.russellgroup.ac.uk
23 www.fusionip.co.uk/OurPartners/NikkoNPIVenturesLtd
24 www.yhef.co.uk
25 www.yorkshirepost.co.uk/businessnews/Young-firms-that-welcome-a.4823985.jp
26 www.syif.com/news/news271.asp
27 www.fusionip.co.uk/News/Axordia+Sale.htm?p=1
28 www.intercytex.com/icx/news/releases/2008/2008-12-22
29 www.platform-diagnostics.com/about-overview.htm
30 www.kirkstall.org
31 The University of Sheffield: U-Inspire – Knowledge Transfer Newsletter, Issue 4, Summer 2008, p12.
32 PWC: 11th Annual Global CEO Survey 2008. Pharmaceutical and Life Science Summary.
33 www.bloomberg.com/apps/news?pid=20601203&sid=a5VZKJLMOfkY&refer=insurance
34 Interview with Kai Ingo Seidel from Close Bothers in Going Public, Special Issue 11/2008, page 26-27.
35 Transkript 2009 (Vol. 15), Nr. 1-2, p.6.
Abbreviations
AIM – Alternative Investment Market
CAG – Compound Annual Growth
CEO – Chief Executive Officer
DTI – Department of Trade and Industry
EBITA – earnings before interest, taxes and amortisation
EVI – European Venture Intelligence
FDA – Food and Drug Administration
GDP – Gross Domestic Product

37
GNP – Gross National Product
HE-BCI Survey – Higher education-business and community interaction survey
hESC – human embryonic stem cell
IP – Intellectual property
IPO – Initial Public Offering
KfW – Kreditanstalt für Wiederaufbau
LSE – London Stock Exchange
Ltd – Limited
M&A – Mergers & Acquisitions
OECD – Organisation for Economic Co-operation and Development
ONS – Office for National Statistics
Plc – Public limited company
R&D – Research and Development
SYIF – South Yorkshire Investment Funds
UKTI – UK Trade and Investment
WHO – World Health Organisation
WRSTF – White Rose Technology Seedcorn Fund
YABA – Yorkshire Association of Business Angels
YHEF – Yorkshire & Humber Equity Fund

Grant Thornton is a leading business and financial adviser,

delivering unparalleled service standards and tailor-made
solutions to over 40,000 corporate and individual clients. It is the
UK member of Grant Thornton International, one of the world’s
leading international organisations of independently owned and
managed accounting and consulting firms.
38
Quotec is a technology and innovation strategy consultancy that
utilises a wide network of technology and market experts to assist
SECTION SEVEN SPONSORS
industry and the public sector in technology commercialisation

and knowledge transfer. In the area of health technology Quotec
develops and manages industrial innovation programmes for
the UK Department of Health. These include the Small Business
Research Initiative and other elements of the Invention for
Innovation (i4i) programme. Quotec also works directly with
health companies large and small on technology development
and exploitation. It provides help and support for many small
technology based companies seeking investment finance.
BITECIC provides specialist R&D services to support organisations

aiming to take new concepts through to market in all areas of
healthcare and medical device technology. Drawing on expertise
from a world-class team of business, clinical and research
personnel, BITECIC applies its regional knowledge to developing
and managing the local, national and international collaborations
that will add value to its customers.
NOTES
L.I. Group
St. John’s Innovation Centre
Cowley Road
Cambridge
CB4 0WS
United Kingdom
www.li-group.co.uk
info@li-group.co.uk

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L.I.

The Healthcare Technology Venture Market

Access To Finance For Healthcare Technologies Programme

3.2.7. Medical technologies in the UK..................................................................................... 11

Partner, Grant Thornton UK LLP

as of Jan 2007 – Nov 2008

markets will undoubtedly influence the venture capital

This report analyses the European healthcare technology

Secondly, the results from the analysis provide the basis

Finally, the report gives a detailed overview of the regional

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

Figure 1 – Health expenditure as a share of GDP, 2006 (Source: OECD)

diffusion of medical technology was responsible for

extends the scope of medicine to conditions once

3.1.2. The UK pharmaceutical industry

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

Corporation Country Sales (£m) Market share (%)

Table 2 – Employment in the UK pharmaceutical industry (Source: ONS,2008)

1 Pfizer US 1,091.5 9.3

2 GlaxoSmithKline GB 1,056.9 9.0

3 Sanofi-Aventis FR 782.0 6.7

4 Astrazeneca GB 667.6 5.7

5 Novartis CH 458.9 3.9

6 Roche CH 438.2 3.7

7 Wyeth (acquired by Pfizer) US 387.0 3.3

8 Merck & Co US 353.0 3.0

9 Lilly US 344.5 2.9

10 Boehringer Ingelheim DE 267.6 2.3

11 Johnson & Johnson US 256.5 2.2

12 Schering Plough US 252.5 2.1

13 Novo Nordisk US 218.0 1.9

14 Bayer Schering DE 195.1 1.7

15 Abbott US 167.8 1.4

16 Teva IL 136.3 1.2

17 Bristol-Myers Squibb US 114.5 1.0

18 Mundi Int. US 113.8 1.0

19 Gilead Sciences US 105.0 0.9

20 Servier FR 102.3 0.9

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

Figure 4 – Key health sector focus 12

Pregnancy, blood glucose, heart valves, cardiac surgery systems, minimally-invasive

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

global market share. Eucomed has also stated that the

Figure 6 – Location of European medical technology companies

At present it is estimated that the UK has 2,000 companies

SECTION THREE THE HEALTHCARE TECHNOLOGY SECTOR

Total Europe 434,560 100% 498,863 0.09

Table 6 – Workforce in medical technology companies (Eucomed,2008)

3.3. Medical technologies Yorkshire and

a substantial role in the attractiveness of the area for new

It should be noted that there are a number of companies

SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES

Origin of healthcare technology companies Percentage

Table 7 - Origin of UK-based healthcare technology companies

Across the different healthcare technology areas there is a

Entrepreneurs who start a company in the UK can benefit

The total disclosed amount invested in the 2,070 recorded

Figure 10 – Distribution venture capital investments across sectors

Number of venture capital backed deals 3,668 1,076 29%

Number of investments with disclosed deal

Average investment amount (£m) 3.9 2.9 74%

SECTION FOUR THE FINANCING CYCLE OF HEALTHCARE TECHNOLOGY COMPANIES

Healthcare technology sector

Total deal amount (£m) 433.61 168.62 168.63 96.36