The VCT, which invests in unquoted companies in the healthcare sector, has raised 10m since it was established in 2001. The healthcare sector includes companies at various stages of development in areas such as the development of new drugs and the supply of specialist software to the pharmaceutical industry.
The directors of the VCT regard the health industry in the UK as second only to the US in terms of venture capital financing and the development of pharmaceutical and bioscience companies. They believe now is an appropriate time to raise more money due the relatively stable economic outlook and the introduction of the enhanced income tax reliefs for VCTs, which will last until April 2006.
One advantage a top-up issue has over a new VCT is that investors can gain access to an existing portfolio of 12 companies. Companies with an experienced management team, a good business plan, products based on patented intellectual property , revenue and growth potential and the potential to make profits within two to four years stand a good chance of making it into the portfolio.
As a specialist product, this may be useful for VCT investors who see that there is an increasing demand for healthcare products and services with technical and medical advances throwing up opportunities to market innovative products. Generalist VCTs are less likely to invest in this sector because a great deal of industry knowledge is needed to assess companies and generalist managers may not have this.
However, in addition to the usual risks of investing in unquoted companies, there are some sector-specific risks. Some health products need to go through clinical trials and this may be a long process and could result in the product being found unsuitable for marketing to the general public.