Last year turned out to be an extremely busy year for deals involving Scottish science and technology companies.
Investors ploughed funds into new and established players providing a major boost for the sector. But there were also sales which saw Scottish-owned firms absorbed into UK and international companies and groups.
One of the biggest – if not the biggest – investment deal was the £33.7m pumped into Edinburgh-based anti-cancer medicine developer NuCana Biomed Ltd.
The deal included a “substantial investment” from major shareholder, Paris-based Sofinnova Partners with additional funding coming from Hong Kong-based Morningside Ventures and Edinburgh-based angel investment syndicate, Alida Capital International.
The Scottish Investment Bank, the investment arm of Scottish Enterprise, has also backed the Series-B funding round.
NuCana Biomed, which is developing compounds which can bypass key resistance mechanisms associated with anti-cancer drugs, said the Series-B funding will be used to expand the clinical programme of its lead product, Acelarin, which has shown “exceptional results” in patients with a range of cancers which were resistant to all conventional therapies.
Hugh Griffith, who founded NuCana, is already a multi-millionaire after taking another Scottish company, Bioenvision, from start-up to a global, fully integrated, NASDAQ National Market-listed biopharmaceutical company.
He was instrumental in increasing Bioenvision’s market capitalisation from US$22m to US$345m in five years, culminating in the company’s successful acquisition.
Business angel group Archangel Informal Investment invested £2.8m into three start-up companies, Blackford Analysis, Calcivis and NCTech.
Blackford is a software developer targeting the medical sector and is a spinout of Edinburgh University; Calcivis, which is based at Edinburgh BioQuarter, specialises in dental technology; while NCTech has developed the first fully automatic 360 degree camera, the iSTAR.
Archangel was also involved in a £560,000 funding injection for Livingston-based web filtering company Bloxx together with Braveheart Ventures and Scottish Enterprise.
Scotland also received a boost when Cambridgeshire-based biotech firm Cellexus relocated to Dundee. Cellexus, a supplier of single-use, disposable bioreactors used in the cell culture process, decided to move north to tap into Dundee’s reputation as a life sciences hub.
The availability of financial support – the company has received equity funding of £250,000 from the Scottish Investment Bank, the investment arm of Scottish Enterprise – was also instrumental.
The most high profile takeover was that of Edinburgh-headquartered chip designer Wolfson Microelectronics, which was bought by US technology firm Cirrus Logic in a £291m deal.
Texas-based Cirrus Logic, which develops high-precision, analogue and mixed-signal integrated circuits for a wide range of electronics, viewed Wolfson, which makes audio chips for consumer electronics, as a natural fit.
Wolfson had struggled to regain ground lost from the rapid demise of Canadian mobile phone giant Blackberry, and the loss of the contract and the faster-than-expected transition to 4G smartphones benefiting a competitor had led to losses totalling £12.5m for the year.
In another deal Missouri-headquartered technology and engineering firm Emerson acquired Stirling-based gas analyser and monitoring systems firm Cascade Technologies.
The deal was a boost for AIM-listed Braveheart Investment Group, which received £389,655 for its holding in Cascade and around 40 of its private clients also received a windfall after selling out.
It had invested a total of £149,969 in 2006 and 2008 into the company, which had originally been spun out of Strathclyde University’s physics department in 2003.
During the year Archangel and Scottish Enterprise sold their stakes in Edinburgh-based Flexitricity to Swiss firm Alpiq in a cash deal worth £15.57m.
And Glasgow-based anti-piracy and hacking software developer Metaforic was sold to a subsidiary of Inside Secure SA, France.
More often than not the sale of a Scottish science or technology business is good for the founders but is it good for Scotland?
Julia Brown, senior director of life sciences and chemicals at Scottish Enterprise, argues not all entrepreneurs who grow companies want to stay on with the company once it gets beyond a certain size or gets into developing itself more commercially.
“They like the start-up size and I think it is about recognising that and having the ecosystem where people who have been successful can come back round and invest in new opportunities and move forward,” she says.
“We have seen that with Hugh Griffith and NuCana.
“He has taken something forward and has come back and is creating something else. He may do the same thing again and again and again. So it is about keeping that talent pool in Scotland so they can be involved with many more opportunities.”
Brown says it is not necessarily a bad thing for a Scottish company if it is acquired.
“Investment does come into Scotland as a result so I think we should be welcoming that rather than worrying about it.
“It is not a static thing so I think you have got to see money and ownership flow.”
A number of Scottish companies that have been acquired over the year have been supported by Scottish Enterprise and received public funding and it could be argued the end result is it doesn’t generate value back in Scotland.
But Brown thinks that is quite a crude way of looking at it.
“There is value created in the people.
“There is value created in what is done with the money that is created in that deal. Quite often the assets do stay in Scotland and are given a new lease of life.”
Calum Paterson, chief executive of Glasgow-based venture capital group Scottish Equity Partners, argues you can justify public support for these companies by saying that is a good thing for the economy.
“It is a good thing to encourage innovation.
“It is a good thing to encourage enterprise and research and development.
“Not all companies can go down the path where they scale and become a very substantial entity in their own right and retain their independence.
“That doesn’t mean it is not a good thing.”
He also believes Scotland has exactly the same capability as any other small country building large technology or life science companies.
“If you look at some of the fantastic businesses that have been built over the years – Stagecoach and Wood Group and Cairn Energy and others – absolutely Scotland has proved itself highly capable of building world-class companies.
“Can it do it in technology? I think it is already doing it to some extent.”
He may be biased because SEP is an investor in it, but Edinburgh flight search specialist Skyscanner now employs more people than Wolfson in the city.
“It is arguably bigger than Wolfson with over 600 employees and has very significant potential to grow and flourish and become a very substantial company.
“The way they use technology is quite unique.”
Andrew Sloane, who is a partner with law firm Morisons and specialises in start-ups, says business angels in Scotland are still there and still active.
“They have had a few more successes but there is still a constraint on their capital levels because they have not had as many exits as they would have hoped to.
“But there are some more positive indicators in their portfolios.
“They have got more optimism around being able to create some value in their portfolios.
“Two years ago they were saying we are just not open to new investment even though we would like to do them.
“Now they are willing to go back into their own reserves and already deep but well mined pockets and do a bit more new investment.”
Fraser Lusty, who is an adviser with Edinburgh-based business angel syndicate Equity Gap, says it had its strongest and most volume-led year of transactions last year.
“That speaks well of the underlying strength of the market,” says Lusty, whose syndicate was formed by Jock Milligan in 2010.
“We started off with a dozen members and we have now got a portfolio of 11 active companies and 63 members,” he says.
It doesn’t specialise in any particular sectors but has invested in a number of technology companies including Insignia Technologies, which is developing a range of sensing technologies.
It is also an investor in Edinburgh-based biotech company Neurocentrix, whose major focus is in developing medicines to alleviate severe and chronic neuropathic pain experienced by cancer patients.
Lusty is encouraged by the amount of innovation in Scotland.
“Yes, it has been good to see. There is no shortage of opportunity.
“I think the wider ecosystem – for want of a better word – is strong and robust.
“I think there is both recognition and desire to have an SME-led growing economy and part of that will be driven by emerging sectors.”
The life sciences sector is certainly flourishing if the record turnout of nearly 800 people for the annual Scottish Enterprise Life Sciences dinner is an indicator.
Brown says she believes the event is the biggest of its kind in the UK.
She says she feels positive and optimistic in terms of what has happened in the last 12 months.
“We have seen lots of different pieces of news around in investment.
“Mature and less mature companies have been raising finance in quite a competitive market,” she says.
Scottish Enterprise’s investment arm, The Scottish Investment Bank, has invested £6.3m in the last year in 26 life science companies leveraging over £46m from other investors.
“That is positive and we want to see that maintained,” she says.
Brown and her colleagues at SE look after 158 account managed life science companies and 74 chemical science companies.
They are a mixture of small and large companies and pre revenue companies.
Dr Graham McGlashan, an associate and patent attorney in Marks Clerk’s Glasgow office, says one trend he is seeing is quite a few spinouts which started life a few years ago are getting to the stage where they have moved on from their basic concept and now their own innovations are coming through.
Another trend he has seen is a very large number of intellectual property (IP) filings, particularly in the oil and gas and cleantech power sectors.
“It will be interesting to see how those trends keep on going with the recent drop in oil prices.
“It will be interesting to see whether the downscaling by several large firms will lead to a drop in IP filings or whether it will mean there are lots of motivated people who are maybe looking to do their own thing.
“It is good fertile ground for people to come up with their own ideas – maybe ideas that have been sat on for some time – and they could make a go of it.”
McGlashan says the number of spinouts from universities remains comparatively low and certainly not at the same level as the big heyday between 2000 to 2005.
Combined spinout numbers for Edinburgh, Glasgow, Strathclyde, Aberdeen, Dundee, St Andrews, Heriot-Watt and Stirling have fluctuated over the last five years.
In 2008/09 there were 14 and the number in 2009/10 shot up to 23.
There were 16 in 2010/11, 18 in 2011/12 and 14 in 2012/13.
Derek Waddell, chief executive of Edinburgh Research and Innovation, whose primary role is to commercialise research and academic expertise at Edinburgh University, says it had three spinouts in 2013/14 and two about to be signed in the 2014/15 period.
“We may complete another two before the end of our financial year (July 2015), but they could slip to 2015/16.”
A big focus for Brown in the last year has been looking at the amount of engagement between companies in Scotland and its academics.
In the autumn she did a presentation at the Glasgow University industry engagement day which was attended by over 300 people.
In her presentation Brown summarised data which showed Scotland does fantastically well on publications and when it collaborates with international companies the publications which result from that are high profile.
“But the level of collaboration is virtually non-existent that involve Scottish based companies,” she says.
“There is a huge disconnect.
“So my message to the academic community was we are going to have to do a lot more to address these issues and also the company base in terms of realising the assets on their doorstep and how to better engage with them.”
One of the initiatives to address that is the creation of new innovation centres by the Scottish Funding Council in partnership with Scottish Enterprise.
There are now eight centres which have received a total of £110m in initial funding to take them through the next five years.
The idea behind the programme is to bring together academia and business to enhance innovation and entrepreneurship across Scotland’s key economic sectors, create jobs, and grow the economy.
Each innovation centre will provide demand-led solutions to problems faced by industry.
They will provide industry and academic secondments, industrial studentships, spaces for physical collaborative work, and shared access to critical equipment.
The Digital Health Institute will develop technology-based solutions to help health and care staff meet the demands of Scotland’s aging population.
The institute, a collaboration between Edinburgh University, Glasgow School of Art, NHS24 and a consortium of other universities, has received £11m from the SFC.
The centre has created a digital health exploratory to identify potential projects.
The first project, The Future Ambulance, is consulting with paramedics and patients to help improve the ergonomics of the ambulance itself and develop new devices.
Stratified Medicine Scotland aims to help the future diagnosis and treatment of disease by creating personalised and more effective forms of treatment based on the genetic make-up of patients and their differing responses to drugs.
The SFC is providing £8m of funding to Glasgow University over five years to back the creation of the SMS-IC. Currently based in the Thermo Fisher Scientific site at Paisley, the centre is relocating to the new South Glasgow Hospitals campus in 2015.
The Centre for Sensors and Imaging Systems (CENSIS) is based at the University of Glasgow. Sensors and imaging systems underpin a wide range of industries including oil and gas, food and drink, life sciences, and transport.
CENSIS – headed by chief executive Ian Reid – aims to work on 150 RD projects bringing new products to market during the next five years.
The SFC has pledged £10m up to 2018.
It is supporting a number of studentships in new industry-focused research degrees.
The new degree, an engineering doctorate in sensor and imaging systems, begins in September 2015.
CENSIS has secured additional funding from the SFC for up to 20 MSc student places, focusing on sensors and imaging systems as well as learning how to be entrepreneurs.
MSc bursaries are also available for well qualified students.
CENSIS is already working with Scottish Water and Strathclyde University on a project to monitor water pumps and prevent them from breaking down; with Findlay Irvine and the University of Glasgow on a monitoring system for roads and runways; and with Optos and the University of Glasgow, undertaking groundbreaking eye camera research which could make retinal scans more easily accessible to remote locations and the developing world.
CENSIS plans to get more involved by providing in-house technical resources for projects, especially for SMEs which may not have enough of the key engineering resources available.
Reid says: “Scotland has a rich research base of industrial renown and we are clearly strong in sensors and imaging systems research.
“Our job is to harness that potential and create tangible economic value, by giving the research being undertaken in universities across the country a business focus.
“We want to make Scottish companies more competitive and help them access new markets by tapping into the expertise incumbent in our academic institutions.
“Equally, our universities and students stand to gain from increased exposure to the commercial world.”
The Industrial Biotechnology centre, which will work with businesses to improve manufacturing processes with minimal impact to the environment, is based at Strathclyde University.
At the launch of the centre the findings of an independent forecast claimed it could create 1,500 jobs and boost Scotland’s economy by £130m over five years.
The centre’s chairman, Ian Shott, said the project aimed to raise the estimated turnover of industrial biotechnology-related products from a current value of about £190m to between £2bn and £3bn by 2030.
The Oil Gas Innovation Centre, which is based at Heriot-Watt University, received an initial investment of £10.6m.
Chair of the centre, Paul de Leeuw, points out that investing £5m a year through OGIC is a fraction of the £20bn spent by the UK oil and gas industry in 2013 in exploration, development and production.
But he said even a small budget can make a very big difference to universities and companies in Scotland, as well as major operators, if the money translates into business results.
The OGIC will interact with more than 2300 operators and service providers.
It aims to get 100 projects up and running in the next five years with half of them involving early-stage assistance providing funds for new research of up to £20,000 which businesses will match.
It anticipates creating 500 new jobs by 2018 through the projects.
The Scottish Aquaculture Innovation Centre (SAIC) has received initial funding of £11.1m.
The centre, which is headed by Heather Jones, is headquartered at Stirling University but the organisation will be spread across the country with possible sites at the Scottish Association for Marine Science in Dunstaffnage, the North Atlantic Fisheries College in Scalloway and the Marine Environmental Research Laboratory at Machrihanish.
The industry members of the SAIC consortium have identified four priority innovation actions including the improvement of sea lice control and rapid detection methods for viral pathogens and diseases.
The Data Lab, based at Edinburgh University, has received an initial investment of £11.3m.
It is dedicated to helping Scotland capitalise on the growing markets in analytics and big data technology and will have hubs in Edinburgh, Glasgow and Aberdeen.
It aims to deliver more than 100 collaborative innovation projects, educating more than 1000 professionals and organising workshops and high profile events for academia and industry.
The Construction Scotland Innovation Centre (CSIC) is based at Edinburgh Napier University and has initial funding of £7.5m.
Interim chairman Bill McBride, who is managing director of the Westcrowns Group, says lots of people and companies have great ideas but may lack the skill-set to move on from concept to prototype and, ultimately, commercialisable products which generate profits and jobs.
He believes the bottom line is where the success of the centre will be measured.
Companies to watch
DestiNA Genomics
CEO: Hugh Ilyine
History: DestiNA Genomics is a spinout of the University of Edinburgh.
It was founded by Professor Mark Bradley, Dr Juan Diaz Mochon and Hugh Ilyine in 2011, based on the ‘SMART Base’ chemistry discovered and patented by the university, and licensed to DestiNA for the novel detection of nucleic acid biomarkers valuable to detect cancers and infectious disease.
The founders believe the technology can be developed to provide error-free, faster diagnostics, and will enable the company to become a global player in the US$8bn molecular diagnostics market
The company’s HQ is in Edinburgh, with a subsidiary, DestiNA Genomica, in Granada.
How many people do you employ and how has that changed from a year ago?
The company has eight staff, all are bilingual or trilingual, and in connecting Edinburgh with Granada, it has opened up the ‘north-south’ bridge for future markets throughout the English-speaking and Spanish-speaking worlds.
How have you been funded so far and by whom and what have you raised in total?
DestiNA Genomics has been funded by a mix of founders, angel investors, the Scottish Investment Bank (SIB), Old College Capital and trade investor Master Diagnostica of Spain.
Through to the most recent funding round of €1.2m in 2014, DestiNA has been supported with investment of £771,000, comprised of £327,000 of equity and augmented with £445,000 of grant funding.
If you did get funding how easy or difficult was it to get?
Gaining funding has been a challenging process.
However, for early-stage and ‘high-risk’ companies it has been forever thus.
We are very pleased now, however, to have both trade and venture fund investors, in conjunction with the SIB.
Is your company making revenue yet?
The company is currently in a development phase, and is yet to launch molecular diagnostic kits. Our first commercial assay is planned to be for colon cancer.
What are your plans for 2015?
The key 2015 milestone for the company is to demonstrate the performance of the company’s patented ‘SMART Bases’ and custom probe technologies for a number of cancers, when using human tissue samples.
Are you optimistic/neutral/pessimistic about 2015 and why?
We are optimistic for our performance in 2015, following our successful fundraising in 2014, and continuing strong growth in the molecular diagnostic market.
We are very confident the unique nature of the DestiNA chemistry in providing faster and improved detections of cancers and infectious diseases will open up many commercial opportunities for collaborations, licensing and supply of our patented reagents.
UWI Technology
CEO: Pete Higgins
History: After coming up with idea of the UWI Label in March 2008, Pete Higgins incorporated UWI Technology, where he is founder and CEO, in August 2009.
The UWI Label knows when a container has first been opened, shows you through a series of progressive green squares how much time has elapsed and once it reaches its ‘use within’ period the final square turns red warning it is not safe to consume or use.
Originally conceived with food packaging in mind, it is aerospace and life sciences, both highly regulated, which UWI has targeted as first route to market.
How many people do you employ and how has that changed from a year ago?
The Edinburgh company currently employs two full-time staff, Higgins and chief science officer Dr. Sergey Gordeyev.
There is also a team of research scientists working with UWI in Finland helping to develop the technology behind the label.
UWI is is looking to employ eight to 10 staff by the end of 2015.
How have you been funded so far and by whom and what have you raised in total?
Higgins personally funded development of the label for the first two and a half years before receiving its first round of investment of £50,000, which was needed to go towards a SMART Feasibility Award in 2011.
It has since won £50,000 in a Barclays Bank competition; raised £355,000 from Aero-Den LP, a US angel syndicate specifically set up to invest in UWI; received match-funding from Scottish Investment Bank’s SEED Fund and the Scottish Co-investment Fund; and received investment from high net worth individuals, all totalling £1.268m.
If you did get funding how easy or difficult was it to get?
The investment raised in 2014 was probably easier than the previous round in 2012, but did take longer.
Do you have any sales yet? No.
When do you expect to have them?
Late 2015, early 2016.
What are your plans for 2015?
Increase senior management team; produce manufactured UWI Label prototypes in mass volume; run trials with potential customers in aerospace and life sciences; first revenue.
Are you optimistic/neutral/pessimistic about 2015 and why?
We are very optimistic about 2015, having closed our investment round late last year, we are already hitting the ground running with our goals for the year.
Not only will we have the enlarged management team, we will be surrounded by a tremendous collection of HNW investors ready to add value to the business when required.