Abingworth has raised $ 582 million for its second clinical co-development fund. The fund, ACCD 2, enables Abingworth to make triple-digit million investments in advanced clinical programs.
Based in London, Abingworth embarked on a clinical co-development investment in 2009. Initially, Abingworth used money from its venture capital funds, but by 2016 the strategy had matured to the point that it created a dedicated $ 105 million clinical co-development fund. The new, much larger ACCD 2 allows Abingworth to continue making late bets at a time when table stakes are higher than in the past.
“[The larger fund] just allows us to participate, âsaid Tim Haines, president and managing partner at Abingworth. âThe size of transactions is certainly increasing to some extent. And I think we’re probably going to do bigger deals. We can directly make some agreements by ourselves. ”
Abingworth has already invested through its co-development portfolio companies Avillion and SFJ Pharmaceuticals. Co-development companies both fund and facilitate clinical trials, taking on all clinical and regulatory risks in return for a pre-agreed return if the drug is approved. In the future, Abingworth may also invest directly.
The sweet spot for investments is in the range of $ 100 million to $ 200 million, Haines said, although Abingworth has increased to $ 250 million in the past. By investing directly, Abingworth will be able to support businesses that have the internal resources to run a program but need capital.
When Abingworth first embarked on clinical co-development, he primarily worked with pharmaceutical companies that had more clinical applicants than their budget could support, given the desire to limit spending to protect profit by action (BPA). Rather than running clinical programs that suppress PSE, the pharmaceutical companies partnered with Abingworth and only paid if the project was successful, at which point the cost of the transaction could be written off against sales of the product.
Abingworth still works with pharmaceutical companies, but they’re not the only game in town anymore. âWhat has changed quite significantly is the interest in biotechnology,â Haines said. âThe motivation is slightly different there. Obviously, most biotechnology is unprofitable, so the issue of earnings per share is less critical. But what we are able to do is significantly reduce the dilutive impact if they were to go out and raise funds on the public market.
Haines cited Apellis Pharmaceuticals as an example of why biotechnology is interested in the funding option. In 2019, SFJ, in its first partnership with a pre-revenue biotech, provided Apellis with upfront and short-term payments to support the development of APL-2 in hematology indications in exchange for a chance to receive regulatory approval stages.
âWhen we closed the transaction, the market capitalization was approximately $ 800 million. Today, [itâs $3.8 billion] based on data generated from the capital we provided to them. So they saved a huge, diluted impact, âHaines said.
Abingworth has had an ACCD 1 release so far and four more deals are still pending. Taking into account the investments made from venture capital funds, Abingworth completed 11 deals, of which seven were completed. One deal failed, but the rest returned capital, generating “very good returns for the funds,” Haines said.
Despite the yields available, Abingworth is among a small number of investors to target the space. Blackstone, who backs SFJ with Abingworth, is active in the industry, but the risk – and the need for in-depth expertise to mitigate it – is a potential deterrent for new entrants.
âYou really have to be able to assess the likelihood of success for these products, because if we’re wrong, we don’t get anything, we get no feedback. So in some ways it’s kind of a business type model where you really have to dig into the clinical data. [and] likelihood of success, âHaines said.
The ACCD 2 news comes months after Abingworth raised a $ 465 million venture capital fund.