Two firms in The Mercia Fund’s portfolio have merged, supported by a new funding round of £3.6 million.

Hybrid Biosystems and Myotec Therapeutics have joined forces to form PsiOxus Therapeutics.

This transformational merger is supported by a new funding round of £3.6 million from Imperial Innovations, Invesco Perpetual and the Mercia Fund, a founding investor in Hybrid.

The merged business and new funds will be used to develop a pipeline of therapeutic treatments for cancer and wasting diseases, and in particular, helping to advance two promising treatments including one targeting cachexia, a wasting disease that is the direct cause of death in 20 to 40 percent of all cancer patients.

The Mercia Fund was the founding investor in Hybrid and has supported it since its origins as a spin-out from the University of Birmingham.

The fund has worked closely with the founding management team to develop its product strategy and was instrumental in building out its management base and leading the merger and investment transactions.

Hybrid directors Mark Payton of The Mercia Fund and Phil L’Huillier of Cancer Research Technologies will join the newly formed PsiOxus board, together with Charles Swingland as an independent director.

Dr Michael Moore, chairman of PsiOxus said: “As a combined entity, we have the clinical trials expertise among our scientific founders to develop promising new therapeutics to treat cancer and other serious diseases.

“We now look forward to advancing this product pipeline through the clinical stages ahead.”

Dr Mark Payton, fund principal of The Mercia Fund said the treatment had huge potential.

He added: “PsiOxus has the potential to transform the treatment of cancer and cancer cachexia.

“Hybrid represents a typical Mercia Fund investment, technology derived from world leading research with solid proof of principle established.

“This merger now takes Hybrid to the next level of realising its goal of demonstrating true patient benefit from its products that benefit from years of targeted development.”