New Investment Fund Aims to Unlock Billions in 'Trapped' Biotech Capital

In a bold move to address the growing issue of stagnant capital in the biotechnology sector, a new British investment fund has launched with the aim of freeing up an estimated $30 billion trapped in struggling publicly traded biotech companies. Alis Biosciences, the London-based fund, plans to offer innovative solutions to return capital to shareholders while still supporting the development of promising scientific assets.

Targeting 'Zombie' Biotechs

Alis Biosciences has identified approximately 300 listed, development-stage biotechs that have experienced significant setbacks, resulting in depressed stock prices and market capitalizations ranging from $5 million to $100 million. These companies, often referred to as "zombie" biotechs, typically hold cash reserves between $10 million and $400 million.

Nicholas Johnston, founder and board member of Alis, stated, "We founded Alis Biosciences to alter the status quo, where tens of billions of dollars of investors' funds are trapped in moribund listed life sciences and biotech companies."

Innovative Strategies for Capital Recovery

The fund proposes three distinct structures to address the needs of struggling biotechs:

1. Structure A: Returns most uncommitted cash to shareholders, with residual work sold back to interested shareholders. Alis retains a stake in the resulting company.

2. Structure B: Quickly returns cash to shareholders and winds down the company, with Alis retaining the intellectual property.

3. Structure C: To be offered once Alis is publicly listed, this option retains about 40% of cash for further clinical development while distributing the remainder to shareholders along with equity in Alis.

Annalisa Jenkins, chair of Alis and former head of research at Merck Serono, emphasized the need for creativity in addressing this issue: "This needs to be solved if capital is to be effectively recycled within the capital market ecosystem to finance exciting new science that has the potential to succeed and deliver investor returns."

Industry Impact and Market Response

The launch of Alis Biosciences highlights a growing trend of investors and analysts scrutinizing underperforming biotech companies. Other firms, such as Tang Capital Partners, BML Capital Management, and Soleus Capital Management, have also been applying pressure on company boards to unlock shareholder value.

While Alis's approach draws from private equity tactics, the fund plans to differentiate itself by listing on public markets "in due course." This move could provide a unique opportunity for investors to participate in the recovery of trapped capital across the biotech sector.

As the pharmaceutical and biotech industries continue to navigate challenging market conditions, the emergence of specialized funds like Alis Biosciences may signal a shift in how investors and companies approach the management of capital in high-risk, high-reward drug development ventures.