Tate & Lyle Ventures and Scottish Enterprise hope to prosper from the emerging market for dissolvable and edible films as a delivery mechanism for active ingredients, with the acquisition of BioFilm Limited.
BioFilm, a subsidiary of Devro, claims to be the only fully integrated manufacturer in Western Europe of edible films for use in the nutraceutical and medical markets.
It will now be run under the joint venture by a newly formed company called BioFilm Holdings Limited, which plans to invest £3m (€4m) in the business.
While the North American market for edible films is well established, following the launch of a breath freshener film in 2001, the European market remains small.
However, Tate & Lyle considers it an exciting area with potential for growth in Europe. It said some analysts estimate the total market could reach $500m (€339m) this year, and $2bn (€1.36bn) by 2012.
David Atkinson, managing partner for Tate & Lyle, said: "The edible film market is fast-growing, particularly in North America, and enjoys an excellent fit with our Fund's focus on biomaterials.
"BioFilm also provides a unique opportunity for us to enter the European market, which is currently small but we believe is likely to follow North American trends."
The use of edible films has some significant advantages over the pill form. They are easier to use, especially for people who find it difficult to swallow tablets, and in some cases have a better absorption through the buccal membrane on the inside cheek.
They also have cost benefits, according to Tate & Lyle, providing a 10 to 20 per cent cost reduction.
However, Atkinson told NutraIngredients.com that he does not think films will ever take over from the popularity of pills as a delivery system because of their restrictions in terms of dosage and loading.
Jonathan Lloyd-Hirst, investment manager at Scottish Venture Fund said: "The Scottish Venture Fund was set up as a market making mechanism to attract new investors to Scotland. We are therefore delighted to be investing for the second time alongside Tate & Lyle Ventures in a Scottish company, BioFilm."
Trevor Morgan, CEO at BioFilm, said: "We are delighted that we have been able to attract such high calibre investors, who bring with them the resources and experience to develop BioFilm into a world class producer of highly differentiated dissolvable film products for a wide range of markets."
Tate & Lyle Ventures and Scottish Enterprise were part of a consortium which invested in second round funding in Scottish marine biotechnology company Aquapharm Biodiscovery in July 2007.
BioFilm is being acquired a nominal initial consideration plus a sum in respect of working capital. The agreement provides for a further potential payment to Devro in the event of a subsequent sale of the business.