Former Woodford-backed fund group Mercia pours millions into Nottingham biotech

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Mercia Asset Management, an alternative investment firm formerly backed by Neil Woodford, has ploughed millions into a Nottingham-based biotech firm.

The specialist asset manager co-led a £10m funding round for Locate Bio, investing £1.6m. Another £4m came from the firm’s third-party funds, including EIS and venture capital trusts. Private equity group BFG also invested £3m.

The company specialises in orthobiology, which is the use of biomaterials and cell-based therapies to develop ways to repair trauma.

Money has been pouring into UK biotech firms in the past 18 months as Covid-19 attracted a wall of cash into speculative drug and treatment development.

A record £2.8bn flowed into the sector last year according to the UK Bioindustry Association, more than double the £1.1bn in 2019.

Locate Bio is developing a range of therapies to assist patients with debilitating conditions. It currently has four products in late-stage trials, with two of these recently being fast tracked for use by the US Food and Drug Administration.

Following the funding round, Mercia now owns 18.1% of Locate Bio directly, and 24.6% in combination with positions in its managed funds. It first invested in the firm in 2018.

The AIM-listed manager was formerly heavily backed by Woodford, who held an 11% stake in his Equity Income fund and a smaller one in his Patient Capital trust, now managed by Schroders.

He dumped a big part of the tightly held stock in 2019 with Link Fund Solutions, which is overseeing the winding-down of the fund, offloading the remaining position a year later.

Its share price hit an all-time low of 14p in March 2020 but is now 90% up over 12 months, trading at 39p. This is still far from its high of 76p, reached a month after the firm was listed in 2014.

At the end of 2019, Mercia snapped up rival NVM Private Equity’s venture capital trusts in a £25m deal. The firm now manages £960m and has invested about £111m gross into its direct investment portfolio.