Gaule: Give a brief description of the SR One fund and why it was developed to meet the needs of GlaxoSmithKline (GSK).
Phillips: SR One has been around since 1985 to pro-vide strategic insights for GSK and deliver a financial return. It is seen as a scientifc crow’s nest, looking at technologies four to fve years out which will be important for GSK. There is a strong drive in the pharmaceutical industry to externalise research and development (R&D) and GSK currently deploys its capital in a number of areas to drive new discoveries and these include R&D spend, fund-of-fund invest-ment and SR One, which does direct individual company investments.
The fund over the years has invested around $600m and has around $200m under management in 26 companies. We see around 600 plans a year, meet around 60 and invest in around six per year.
Gaule: What are some of the key industry drivers affecting your industry?
Phillips: SR One is helping drive R&D pipeline but it is also exploring new areas such as diagnostic business, vaccines, biopharmaceutical and the interface of IT and healthcare as we see this as an important strategic area for the business.
Gaule: Give a brief overview of the people in the team, the partners you work with and how you make an investment decision.
Phillips: SR One has nine professionals, six in the US (San Francisco, Boston and Philadelphia) and three in the UK covering Europe, so we are close to dealfow where innovation is.
The team are a mix from business, medical and investment banking background. There is a strong frewall between SR One and GSK, but with permission we can go to GSK R&D and bring that power to the business we invest in. As a partnership of nine, we agree on an investment which is then taken by the president of SR One to the GSK R&D president and ultimately to Andrew Witty, GSK’s chief executive, so it is a relatively slim and simple process.
Gaule: How do you see current market conditions in the sector?
Phillips: It would not be a surprise that capital has dried up but the bigger funds are still around. Some traditional investors have left the market but new corporate investors have entered, including Boehringer Ingelheim and Merck Serono, which are flling the gaps.
I always believe a good quality company, good management team, good intellectual property with a clear business plan and strategy is always going to get funded. With our fund and others around, good businesses will get funding.
Gaule: Give us some insight to a recent deal.
Phillips: Bicycle Therapeutics is an early-stage life sciences business and interestingly in this seed round Novartis, SR One, Atlas and SV Life Sciences have invested.
This is a heavy syndicate, which is important for fnancing the later-stage growth phases with investors which have potentially deep pockets for later stages.
Having two corporates in the syndicate also means the business will not be driven by the interests of one and the price will be determined by the high-est bidder, which may not be one of the investors. In this case as in others the drivers are fnancial and strategic, and over the years GSK has bought only two of the 75 businesses SR One has invested in but it has created important alliances to develop the discovery platform.
Gaule: What do you do to relax when you are not doing your venture deals?
Phillips: I play golf but have limited time to do that. I do coaching in rugby for my son’s school and chasing around a bunch of 18 year olds keeps me busy.