Andreas Munk Holm opens the episode by introducing Charles Dunn, Principal at SV Health Investors, and Ruth McKernan, CBE and Operating Partner at SV Health, former CEO of Innovate UK. SV Health is a transatlantic healthcare specialist with a focus on company creation and full-spectrum biotech investing. Notable wins include the exit of SV-created EyeBio to Merck & Co for up to $3bn including $1.3bn upfront, and the recent launch of SV’s newest company creation Draig Therapeutics, a UK-based neuropsychiatry company, which recently announced its $140m Series A financing.
From Pharma to Venture: Why SV Health Combines Company Creation and Later-Stage Investing
SV Health’s approach blends early-stage company creation with later-stage venture investment. Charles emphasizes that this structure allows:
Diversified risk for LPs: Early-stage opportunities carry higher risk but higher upside; later-stage investments provide more stability.
Learning across stages: Experience in late-stage investing informs early-stage decision-making, and vice versa.
Flexible company formation: SV Health creates companies across different development stages, sometimes even after Phase 1 data exists, as with Draig Therapeutics.
Ruth notes that this multi-stage approach helps identify opportunities that might not neatly fit into traditional categories, giving them a competitive edge.
Europe’s Edge in Biotech
SV Health highlights the strengths of Europe, particularly the UK:
Scientific talent and research quality: Four of the top ten global research universities are in the UK meaning it punches above its weight.
Company creation potential: Translating foundational science into companies applying the growing entrepreneurial spirit.
Transatlantic perspective: While early investment thrives in Europe, growth-stage capital often requires US investors due to deeper pools of capital.
Biotech Market Dynamics and Therapeutic Focus
Charles discusses the state of biotech investing:
IPO window has been closed: Seeing some green shoots now and general
market environment is improving.
Post-COVID correction: Markets overvalued biotech during COVID, followed by a period of consolidation.
Emerging trends: Neuroscience and psychiatry are rising, while oncology has more competition and available assets.
Opportunity in psychiatry: Digital tools and biomarkers now allow better patient stratification, making neuropsychiatry more investable.
This context frames SV Health’s focus on therapeutics with clear clinical and commercial potential.
AI in Biotech: Practical, Not Hype
Ruth provides examples of AI applications:
Speech analytics: Measuring depression severity and type through response patterns.
Large language models: Simplifying complex scientific discussions for investors, reducing weeks of work to minutes.
Company Creation Case Study: Draig Therapeutics
Draig exemplifies SV Health’s approach:
Scientific co-Founders: John Atack and Simon Ward, co-founders of Draig Therapeutics and former co-directors of Cardiff University’s Medicines Discovery Institute, developed promising molecules at Cardiff University.
Strategy: SV Health identified the three strongest assets being developed at Cardiff, structured the company, and supported the $140M Series A.
Execution: Ruth served as interim CEO; a strong team was built quickly, leveraging SV Health’s network.
Scientific promise: Assets were highly advanced, reducing risk and increasing potential upside.
Charles emphasizes that the company’s success relies on combining strong science with an experienced team to hit value inflection points efficiently.
Balancing Portfolio and Returns
SV Health maintains a diversified portfolio strategy:
Company creation investments: Higher risk, high reward driven by lower
valuations, potential 10x+ returns. SV Health often receives founder shares, adding another return layer.
Later-stage investments: Lower risk, lower upside, providing stability across the portfolio.
Platform vs. therapeutics: SV adopts a product centric approach with a
greater focus on therapeutics companies.
Capitalization, Milestones, and Kill Criteria
SV Health’s disciplined approach ensures scientific and financial rigor:
Approach to syndication: SV takes a company-specific approach, focusing on financing needs first.
De-risking milestones: Predefined scientific experiments guide go/no-go decisions.
Capital planning: Funding aligns with achieving value inflection points.
Kill criteria: Companies pivot, repurpose molecules, or shut down based on data, avoiding wasted investment.
This structured methodology enables SV Health to manage risk while maintaining high scientific standards.
Neuropsychiatry and Europe: Timing is Right
Draig reflects a perfect moment for neuropsychiatry investment:
Scientific advances: Biomarkers and digital tools improve patient stratification.
Increasing mental health demand: Global rise in psychiatric disorders increases societal and market need.
European ecosystem potential: Better registries and pre-consented patient populations can accelerate clinical trials and reduce costs.
Charles highlights that European growth-stage capital remains a gap, especially for scaling these companies without US relocation.
Key Takeaways
SV Health combines early-stage company creation with later-stage investment to diversify risk and leverage learnings.
Europe’s scientific talent is world-class, but growth-stage capital gaps limit scaling potential.
Neuropsychiatry is emerging as a high-potential field, aided by biomarkers, digital tools, and patient registries.
AI has tactical applications in biotech but is not a substitute for strong therapeutics.
Disciplined milestones, kill criteria, and structured capital allocation are essential for successful biotech venture creation.
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