Sinclair Dunlop, Managing Partner at Epidarex Capital

Venture capital firm Epidarex Capital invests in early-stage life science companies, including university spin-outs, with a particular focus on under-ventured markets in Europe and the US. The firm has a presence on both sides of the Atlantic, with offices in Edinburgh, Scotland, and in Bethesda, Maryland.

In 2014, Biotech and Money spoke to Sinclair Dunlop (pictured), Managing Partner, about his ambitions for the fund. There have been some significant developments for the fund and its portfolio since that time. In recent months, this has included the exit of portfolio company Confluence Life Sciences following its acquisition by Aclaris Therapeutics in August 2017, the extension of portfolio company Topas Therapeutics’ Series A financing to €18 million in November 2017, and the IPO of portfolio company Apellis Pharmaceuticals, which listed on the NASDAQ in November 2017 following a $60 million Series E financing in August 2017. Meanwhile, three leading industry executives were appointed to Epidarex’s advisory board in October 2017: Dr William Sellers, William Burns, and Dr Frank Armstrong.

Biotech and Money caught up with Dunlop in November 2017 to learn more about the firm’s development to date and its plans for the future, its efforts to catalyse the investment community to fill the funding gap for early-stage life science companies, as well as the sub-sectors and geographical markets where Dunlop sees the most potential.

Please could you provide a brief overview of Epidarex, and an update on where the fund is at since your previous interview with Biotech and Money in 2014?

We are one of the most active early-stage life science venture funds on both sides of the Atlantic. We work closely, but not exclusively, with many of the top research universities in the US, particularly in areas like the mid-Atlantic. We are very active across all parts of the UK, but we see particular potential in the north of England and Scotland.

Since we last spoke, our model has been to continue to build our successful transatlantic portfolio of 15 companies, the majority of which are university spin-outs and where Epidarex led the investment.

We continue to be a very hands-on, company-building model. We work particularly closely with top researchers at various universities, and we are deeply involved with the technology transfer and out-licencing process. These university partnerships are centrally important to successful company creation.

How have you seen the investment landscape change over the last few years?

The market is relatively buoyant, perhaps more buoyant than it was four years ago, but there is still a high degree of variation. In some therapeutic areas, for example in immuno-oncology, there has been a boom. But both geographically and in terms of sub-sectors, there is quite a lot of variation; some sub-sectors are doing much better than others.

The Epidarex team sees several sub-sectors with unrealised potential, and where some investors have not been as active in the last four years. This creates some real opportunities.

There are also some very big differences geographically. The IP flow coming out of many of the top research universities in Scotland and the north of England is not attracting as much scalable risk capital, the like of which we provide, as some of the opportunities within the so-called Golden Triangle [of Cambridge, London and Oxford]. We are very upbeat about the north in particular.

You mentioned that some sub-sectors in particular have unrealised potential, would you be able to expand on that?

There are two types. The first type is where novel discovery and scientific innovation is moving ever faster and deeper. Even in areas like immuno-oncology where there has been quite a lot of investor activity, we have now seen the second, third, and fourth innovation waves of immuno-oncology, which are also throwing up some very interesting opportunities.

Then there are opportunities that currently receive less investor interest including, for example, innovative diagnostics and next-generation imaging technologies. We have a very exciting portfolio investment in Edinburgh, a company named Edinburgh Molecular Imaging. This company is in the optical molecular imaging space, which we think is a very exciting area and in which there hasn’t been that much investor activity until very recently. We’re now seeing significant industry investment and partnering activity in molecular imaging and related innovations.

So many of our investments are, I would say, slightly ahead of the curve. We’re definitely going in earlier, identifying the rising star academics and researchers at many universities. We like to support those researchers doing the most novel and interesting work that, in some cases, may not yet be investor-ready. We are very proactive in helping shape those opportunities, and often work closely with our university partners pre-spin-out; in other words, we are happy to do quite a lot of work to help shape the opportunity before we begin the spin-out process.

We also think immune tolerance is a very interesting area. Epidarex co-founded a portfolio company named Topas Therapeutics, a German company developing novel therapeutics for immune-mediated and autoimmune disease, harnessing some of the natural mechanisms found in the liver that promote immune tolerance to blood borne antigens.

Topas is another example of very exciting research in an area that we think is novel but perhaps hasn’t had as much interest from the investment community until recently. It’s an illustration of where we hope to add value, for example, by leading on forming a strong syndicate of co-investors, catalysing and scaling-up available capital to fund very exciting, early innovation.

In the previous interview with Biotech and Money you outlined your hopes of catalysing syndicates of investors to help bridge the funding gap, both internationally and within the UK. Have you seen progress in this area?

Yes, as mentioned, if you look at Topas, for example, the company has recently further broadened its syndicate of Series A investors up to €18 million. It’s a good example of where we’ve been delighted to bring some blue chip VCs and leading corporate venture funds alongside Epidarex.  

We also have at least two portfolio companies in which we led a Series A investment of approximately £5 million and now are looking at Series B follow-on rounds that would be significantly larger - these next rounds are going to be a welcome vindication of our early-stage model. It’s here that we see Epidarex playing an important role in filling the early-stage funding gap. Many venture funds prefer not to commit at such an early stage but these, of course, are very welcome partners for Epidarex when they come in to lead the next round. 

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