In 2018, Maven invested £500,000 into Liverpool ChiroChem (LCC) through the Northern Powerhouse Investment Fund (NPIF). LCC are global innovators that produce chiral small molecules for biotech/pharmaceutical R&D. Their specialist products can be used as building blocks, fragments and screening compounds to enable small molecule drug discovery. We liked the company’s vision and we were keen to support their growth aspirations as they were making significant steps forward in their industry. Since then, we have invested a further £500,000 into the business which has continued to see steady growth. This year however, the COVID-19 outbreak did present several challenges for the business.
In this article our Portfolio Manager, Simon Robb, discusses how the investee business had to adapt through the pandemic.
COVID-19’s impact on business
Like most businesses, LCC had its fair share of challenges as a result of the COVID-19 outbreak. The first hurdle was concerning product development. Ordinarily, the bulk of LCC’s new products are developed at the University of Liverpool. Larger scale production is then completed at the Company’s own labs in China. However, as China entered lockdown late last year, the business had to move production back to the UK to ensure operations were maintained. LCC benefitted from its experiences in China, having foresight of what the likely impact on supply chains would be as a result of COVID-19, many weeks before the UK experienced its first cases. Critical to LCC’s ability to navigate through this unprecedented period was staying agile. As the UK then entered lockdown in March the business was able respond quickly and move production back to China where restrictions had begun to ease. Health and safety considerations were put in place where necessary, requiring employees to meet social distancing requirements. Beyond the obvious challenges of product development and sales, from LCC’s side, many of the business’s customers were also directly impacted. Labs were closed, distribution channels impacted, staff furloughed, and communication channels disrupted.
Working closely with LCC through this period has been educational, instructive, dynamic and challenging (at times). For example, the UK lockdown came into effect just as our follow-on funding round was being finalized. We were left with no choice than to complete the entire documentation process remotely. At a personal level, I have still not actually met several of the professionals involved, which is rare for a transaction of this type.
In many respects all the key stakeholders have been brought closer together by being kept apart. Through increased dialogue on a distanced basis, there has been a greater understanding of each other’s needs and expectations. Whilst face to face meetings will always have their advantages, the pandemic has shown that there are certainly ways in which communication can be timely and effective without having to be there in person.
Finding a new normal
Notwithstanding the multiple operational challenges, LCC has adapted well to operating effectively in the “new normal”. The Business Development team, spearheaded by the CEO, have been effective in winning new business despite the continuing operating challenges. An impressive range of new customers have agreed contracts and further new orders are expected from the large global players. Despite limited lab capacity, the product catalogue continues to grow, and the reputation of the senior management team is building.
LCC are fortunate to have recruited an FD in late 2019, who has previous experience of working with institutional investors and understands the need for enhanced communication whilst we are all working remotely. The management team rose to the challenge incredibly well, setting up a Scientific Advisory Board with some of the country’s leading industry specialists to build better dialogues and create new commercial opportunities.
The business has been able to provide solutions where numerous other operators have struggled, with some of their clients advising that their compounds have worked where supplies from other specialists had failed. As a result, their reputation, in a highly specialized marketplace, has been enhanced.
Despite the many challenges faced by the global pandemic, the business has adapted to difficult market conditions, and differing geographic requirements, whilst also managing a demanding customer base. LCC’s products are critical building blocks in the discovery, evolution and development of new drugs across multiple therapeutic indications, such as oncology and neurology.
NPIF Maven Equity Finance is supported by the European Regional Development Fund, in collaboration with the British Business Bank. The Fund is designed for small businesses that need equity finance to grow and can invest £50,000 - £2 million to support start-up and established companies based across the Northern Powerhouse aiming to create jobs and contribute to the economy.
The Northern Powerhouse Investment Fund project is supported financially by the European Union using funding from the European Regional Development Fund (ERDF) as part of the European Structural and Investment Funds Growth Programme 2014-2020 and the European Investment Bank.
If your business is in need of finance to help unlock its growth potential, NPIF Maven Equity Finance may be able to help. Contact Maven’s local team today on 0161 233 3500.