Managing partner of o2h ventures on making first longevity investment in Five Alarm Bio and the wider challenges facing venture capital investment.
British antiaging biotech startup Five Alarm Bio (FAB) recently closed a seed funding round from investors including Cambridge Angels, Meltwind, o2h Ventures and SyndicateRoom, among others. The funding follows a $450,000 Biomedical Catalyst grant from Innovate UK, awarded to FAB early last year to develop its technology as a treatment for chronic wounds.
Based on breakthrough advances made by its founder Dr William Bains in understanding of how age-associated chemical damage accumulates in cells and tissues, FAB is developing a small molecule approach aimed at boosting our defences as we age, to ultimately extend the healthy lifespan of our bodies.
A key player involved in orchestrating the round was o2h Ventures. The Cambridge-based investment firm specializes in biotech and FAB is the first longevity-specific investment it has made.
Longevity.Technology: o2h ventures is part of the o2h group of companies, which also includes contract research services and an incubator for biotech startups. The goal of the group is to nurture and invest in emerging life science and tech companies, spanning biotech, small molecule and biologics developers, digital health and software companies. To find out more about o2h and its first investment in longevity, we spoke to the managing partner of its therapeutics division, Sunil Shah.
Having initially started out in angel investment, o2h ventures has grown into two funds, both targeting early-stage ventures in the biotech space.
“We invest into pure play drug discovery and therapeutics, where companies are developing an asset and looking to develop to a clinical trial or proof of concept,” says Shah. “We also look at companies that have some kind of technology platform, like AI and machine learning and quantum, which are trying to improve the drug discovery process.”
A platform and therapeutics company
Shah explains that FAB technically fits into both investment categories.
“FAB is essentially developing a platform around a particular area in the antiaging space,” he says. “It also fits as a pure play therapeutics company, but there could well be multiple projects that come on the back of it and be driven towards the clinic.”
The recent investment will drive further research into FAB’s proprietary approach, testing new compounds for their ability to extend the healthy lifespan of cells in vitro and improve their function in disease relevant models. Having known FAB’s founder for many years, Shah explains that Bains was a key driver behind o2h’s decision to make its first investment in longevity.
“William is genuinely one of these brilliant, extremely clever people – in terms of science ability, he has it all,” he says. “When he came to me with this idea for a company in the longevity space, I really wanted to get involved. I was already interested in the longevity space but hadn’t invested in the field yet – it had been quite hard to find obvious early-stage opportunities to invest in, which have some kind of translational therapeutic window.”
Worm healthspan boosted by 40%
Once Bains was also able to demonstrate positive results in the lab, including a test compound that improved the healthspan of worms by 40%, Shah knew it was time to get some proper funding into the company. Recognizing that Bains’ strengths lay more in the science than the day-to-day running of a biotech startup, Shah brought in pharmaceutical drug discovery and development expert Dr Janette Thomas as CEO.
“At the same time, I offered to invest in the company and brought in a couple of other investors,” he says. “With the seed funding in place, plus the grant that the company won, we are now off to the races. Having a full time CEO means that William is fully engaged on the science – we now have a couple of scientists also working on the biology with him, with first data expected soon.”
FAB has also secured a Kickstarter award from o2h, which aims to support creation of novel IP around the chemistry by providing cost-effective access to a large inventory of chemicals and reagents for synthesis.
Investing in longevity
When it comes to investing in longevity, one of the major concerns for an investor like Shah comes down to the opportunity to partner with pharma in the future.
“We always look to invest very early, but longevity is quite a broad area, and our hope is always to be able to partner with pharma at some point,” he says. “There are a lot of diseases can be addressed within longevity, so if you can find an indication that can provide a short-term clinical trial in a rare disease, for example, then that’s where it becomes more interesting for early-stage investors. Because if you can see a clinical goal, then that’s something you may be able to partner with pharma on.”
Of course, says Shah, there are also opportunities for early-stage longevity investment from very wealthy individuals.
“There are family offices and high-net-worth individuals that will throw a lot of money at the space just because we’re all getting old,” he says. “They’ve got a lot of money, and they want to live healthier and longer. I’m turning 50 next month and I know exactly where they’re coming from!”
For some “pure play” longevity companies, Shah suspects that it may even be easier to get an ultra-high net worth individual to fund a clinical trial than trying to focus on partnering with big pharma.
“There are a lot of people who will invest in this space, not because it may or may not make them money, but because they are hoping it might help them extend their lives,” he says. “There is huge amount of interest in space, but there’s also a lot of noise, so for professional investors like us you really need to show proper scientific, clinical validation and a path to monetization.”
Venture capital faces challenging times
With venture capital funding plummeting in biotech and longevity in the last year, how does Shah feel about the current state of VC investment?
“I recently went visit some of the big LPs in USA, those big players who invest into biotech funds and other funds in general,” he says. “Company valuations have been hit hard, due to Silicon Valley Bank and other things, so the LPs exposure to venture capital is higher as an asset class. On top of that, interest rates are going up, so they need to allocate money to fixed income.”
Shah says that this means LPs are now less likely to make new investments into other VC funds.
“Although VC funds globally have money today because everyone was topping up their funds over the last few years, if they try to raise more money, I think it’s going to be very, very challenging because the LPs are overexposed. If the VC funds are not going to get topped up in the way that they were in the last three or four years, that’s going to have even more of a squeeze on VC funding for the next few years.”
On the other hand, says Shah, family offices are still investing, so there’s still money out there for good companies. He also believes that the UK may be somewhat protected from the venture capital hit, partly because the valuations in the UK tended to be much less “frothy” than in the US, but also due to other factors.
“We’ve remained very disciplined in our investment approach, and a lot of our projects are getting funded for their next rounds, which is really good,” he says. “There are so many EIS funds and venture capital trusts in the UK, which all raised a lot of money, and are extremely well topped up – they’re turning money away! These tax efficient funds, I think, are really keeping the market in the UK buoyant and ensuring that the good companies will continue to get funded.”