RESPONSIBLE INVESTMENT POLICY

1. Introduction

Medicxi’s mission is to bring novel therapies to patients in need. We do this by creating, investing, and supporting biotech companies along the full drug development continuum, from discovery stage all the way to pivotal studies and registration. Medicxi believes that incorporating sustainability considerations into its culture and business decisions will help generate additional value for its stakeholders and portfolio companies. This policy sets out Medicxi’s approach to incorporating environmental and social factors into the Medicxi investment process for all assets under management. It is designed to comply with the Principles of Responsible Investment (PRI) and is focused on the pillars of Governance, Strategy, Risk Management and Metrics.

Governance

• Board

Strategy

• Environmental risks and opportunities
• Social risks and opportunities
• Engagement strategy

Risk Management

• Screening
• Due diligence

Metrics and targets

• Monitoring

2. Governance

The Board primarily focuses on the oversight of the sustainability factors to be considered during the investment process. As such, Medicxi’s investment recommendations contain a section on the sustainability risks and opportunities of the transaction. These are identified in the screening and due diligence work undertaken by the investment and/or operations team as part of the risk management considerations during the investment process. All Medicxi entities are subject to local laws and regulations of the jurisdictions in which they are based, and they are required to have a robust governance framework in place that is proportionate to the nature, scale and complexity of their business. Medicxi is committed to investing in portfolio companies that adopt a robust governance framework including, where appropriate, the necessary systems and controls and policies and procedures as may be required, and which are in keeping with the size and stage of the relevant portfolio company.

3. Strategy

Medicxi is a signatory to the PRI. This is a core component of the responsible investment strategy and includes a commitment to implement the following six principles (Principles): Principle 1: We will incorporate ESG issues into investment analysis and decision-making processes. Principle 2: We will be active owners and incorporate ESG issues into our ownership policies and practices. Principle 3: We will seek appropriate disclosure on ESG issues by the entities in which we invest. Principle 4: We will promote acceptance and implementation of the Principles within the investment industry. Principle 5: We will work together to enhance our effectiveness in implementing the Principles. Principle 6: We will each report on our activities and progress towards implementing the Principles.

Environmental risks and opportunities

As a business Medicxi employs less than 50 people and has offices in London, Geneva and Jersey. The use of natural resources is therefore limited. The Medicxi Funds typically invest in portfolio companies that have a very small number of employees and operate on a virtual basis and so the direct use of natural resources is also limited. The back-office functions and the pre-clinical/clinical research and development work is outsourced to corporate service providers and contract research organizations (“CROs”). The CROs undertake pre-clinical and clinical stage trials on behalf of the portfolio companies and the environmental impact from such trials can be significant.

Social risks and opportunities

Social considerations relate to how Medicxi manages its relationships with employees, suppliers, customers, and the wider community. There is a clear social purpose to Medicxi’s business model in financing the development of new drug candidates which address unmet medical needs. Medicxi considers these relationships as fundamentally important to maintaining a sustainable business model. The Medicxi Funds typically invest in early stage portfolio companies that only consist of a handful of individuals and therefore there is little opportunity to impact the diversity of the portfolio company workforce. However, this is actively monitored (see Metrics & Targets section for approach to monitoring) and where it is possible to engage, that opportunity is taken.

Engagement strategy

Where environmental and social factors are within direct control of Medicxi a strategy is in place to monitor emissions and diversity & inclusion. The process is more complex where Medicxi has an indirect influence (eg minority interests in listed companies and supplier relationships). The CROs represent the bulk of economic activity within the portfolio managed by Medicxi. Due to the highly specialised nature of the novel therapies being financed there is a vast range of CROs that our portfolio companies work with. This is necessary to ensure the appropriate technical expertise is sourced. However, this does impact the influence that portfolio companies can bring to bear on any given CRO. Nevertheless, it is Medicxi’s strategy to engage with portfolio companies on their use of CROs where possible and to influence improvement in their sustainability performance. As part of the risk management process (explained further on in this policy), the material CROs are reviewed, in conjunction with the portfolio companies, to identify those policies which are in place to cover their key sustainability risks and that these are adequate. Trade-offs can occur between sustainability risks and opportunities. This is a highly judgmental consideration and is subject to the facts and circumstances of any given situation. For example, a highly specialized CRO with the technical ability to trial a lifesaving treatment may not yet have established a remote, decentralized trial system. The trade-off would be to incur higher emissions in order to trial the potentially life-saving treatment.

4. RISK MANAGEMENT

Risk management is the process through which sustainability risks and opportunities are identified, assessed and managed. A sustainability materiality assessment has been undertaken and is reviewed periodically. This informs the periodic sustainability reporting that Medicxi has committed to undertake as part of becoming a signatory to the PRI. In respect of the investment activities of funds’ managed by Medicxi, there are two areas of consideration: pre-investment and post-investment.

Screening

In order to comply with the screening policies of Medicxi’s existing investor base, Medicxi has adopted a negative screening policy that excludes investments into the following activities and/or industries:

• exploration of oil and/or gas;
• pornography;
• the manufacture, distribution, sale or supply of offensive armaments, weapons, or similar military equipment; and/or
• tobacco products.

As an investor primarily in biotech companies, it is not expected that the above exclusions will negatively impact the primary business of Medicxi. Each Medicxi fund has its own negative screening policy which could exclude activity more specific to the investment strategy of the relevant Medicxi fund.

Due diligence

Medicxi’s asset-centric investment model, which prioritizes virtual companies using outsourced service providers and have minimal fixed cost liabilities, means that there are typically limited operations to complete due diligence on in prospective portfolio companies. Nonetheless, the sustainability risks and opportunities related to the prospective investment are always considered as part of the investment process. This is typically a subjective consideration of material sustainability factors and consequently the level of diligence conducted will typically reflect this subjective assessment. Medicxi has a moderate sustainability risk appetite. The firm’s objective is to ensure, to the extent it is commercially reasonable and practicable, that portfolio companies improve their sustainability performance during the period in which a Medicxi fund is an investee. Medicxi requires certain rights, confirmations, representations, undertakings and warranties to be provided by portfolio companies and management at the outset of an investment and these are enshrined in the definitive legal documentation for during the investment process. Medicxi’s reputation as a responsible investor is of paramount importance to the firm and no investment will be made which materially conflicts with established sustainability practices.

Post-investment

Medicxi is committed to investing in and building portfolio companies that adopt and integrate good sustainability practices that are proportionate to the scale of the relevant portfolio company’s business. The firm’s objective is to ensure, to the extent it is commercially reasonable and practicable, that portfolio companies are operating in accordance with good sustainability practices by the end of the period in which a Medicxi fund is an investee in order to maximise value for all stakeholders. Medicxi believes that it will be well placed to achieve this objective by implementing robust governance/information reporting processes in portfolio companies and actively engaging with the key stakeholders and management teams of portfolio companies throughout the period in which a Medicxi fund is an investee.

5. METRICS & TARGETS

Medicxi is committed to managing funds which promote environmental and social considerations. The establishment of metrics to measure sustainability performance for each Medicxi fund is a critical method of monitoring the sustainability practices of portfolio companies. The typical operations of Medicxi portfolio companies are usually limited and therefore the data quality is high for direct metrics (diversity, labour rights and scope 1 & 2 emissions) and these are collected via information reporting. Most Medicxi portfolio companies will conduct outsourced preclinical and clinical stage trials by engaging with CROs and therefore an estimation methodology will typically be applied to determine each CRO’s sustainability performance in relation to the specific trial that they have been engaged to implement. Medicxi funds may hold minority shareholdings in publicly listed companies and, in such circumstances, the access to relevant data is limited to the public disclosures made by such publicly listed companies. On this basis, each Medicxi fund will seek to measure and understand its impact so that it can improve the sustainability performance of Medicxi portfolio companies to maximise value for all stakeholders.

6. POLICY REVIEW

This responsible investment policy was adopted in 2022 and will be periodically reviewed to ensure it is kept up to date.

7. CONTACTS

Enquiries: info@medicxi.com