Famed investor Mellon plans £100M fund for small biotechs

Jim Mellon wants to put his theory that British and European biotechs are undervalued to the test. The famed investor is trying to raise up to £100 million ($150 million) for a new fund dedicated to small biotechs in the United Kingdom and the rest of Europe.

Jim Mellon

Mellon made a mint in Russia and emerging markets in the 1990s--his estimated wealth is now around £800 million--but in recent years he has become increasingly vocal about biotechs. The 2012 book "Cracking The Code"--which Mellon co-authored with Al Chalabi--was based on the hypothesis that biotech is "the single biggest trend to affect mankind ... and there are fortunes to be made." Now, Mellon is working to raise £50 to £100 million to capture a slice of the gold rush.

"There is nothing in the U.K. like this. It is going to invest purely in small biotech companies in the U.K. and Europe," Mellon told FT Advisor. Charlemagne Capital--the investment group Mellon founded and now serves as nonexecutive director--already has a fund comprised of major biopharma companies with "fortress-like balance sheets [and] solid dividend payouts." And Mellon intends to put the head of the Big Pharma fund--Andy Smith--in charge of the new biotech investment vehicle.

The expansion from relatively safe, large pharma stocks into riskier, unquoted biotechs is reminiscent of the model pursued by Neil Woodford's fund. Having built his first fund around the likes of AstraZeneca ($AZN) and GlaxoSmithKline ($GSK), Woodford is now planning a high-risk, high-reward vehicle that will allow him to get deeper into small biotechs. For British biotechs used to scrabbling around for cash, the arrival of two early-stage funds would mark a welcome shift in fortunes.

- read the FT Advisor article