The last few months have seen a flurry of fundraises from European life sciences investors, culminating in huge investments by Forbion and BioInnovation Institute this week.
The end of 2020 seems to be heating up fast in the biotech investment scene. The BioInnovation Institute in Denmark bagged €470M as part of a ten-year investment from its parent organization, the Novo Nordisk Foundation. This is a move to establish the institute as an independent organization and let it receive investments from external investors to fund biotech startups.
Meanwhile, the Dutch VC firm Forbion raised a €460M fund. Having started fundraising in October, it’s the fastest ever closing from the company. According to Sander Slootweg, Managing Partner at Forbion, this was partly due to growing interest in the European biotech sector.
“Europe is seen as very attractive currently because good quality assets can be sourced 40% cheaper compared to equivalent US assets and the cost of running a biotech business in Europe is 50% lower compared to the US,” Slootweg said.
This is just the latest in a long string of fundraising announcements in the last two months from European biotech investors. These include Novalis Biotech (Belgium), Start Codon (UK), Jeito Capital (France), TVM Capital Life Science (Germany), Fountain Healthcare Partners (Ireland), and Peregrine Ventures (Israel).
Why are we seeing so many funding announcements from life sciences VCs this season? One reason is that uncertainty around the first waves of Covid-19 cases in spring and early summer led many venture capital firms to hold back announcements until now.
“I think people are synchronizing their announcements after the summer,” noted Hubert Birner, Managing Partner at TVM Capital Life Science.
“We could have announced it in July, but we decided to do it in October. We were hoping normality would come back to business amid [the pandemic].” As Birner explained, such an announcement would have gone unnoticed among the constant stream of Covid-19 news.
The same thing happened earlier this year. Big life sciences VCs were very quiet about their fundraising during the pandemic chaos of April and May. The only major exception was Kurma Partners, which announced the final closing of a €160M fund in April. The company had already disclosed commitments for around 90% of that fund’s target as early as December 2018.
This relative quiet was then followed by a burst of announcements in summer. For example, Eir Ventures launched in July, around the same time as other funds closed by Forbion, Epidarex, and BioGeneration Ventures.
The recent investments in the BioInnovation Institute and Forbion are bigger than most others seen this year, aside from the Dutch Life Sciences Partners, which put together a €528M fund in March. Slootweg sees these funds getting even bigger going forward.
“There is a trend of consolidation of the VC industry where the bigger funds get bigger and increase their offering to their investors and the smaller funds struggle to raise subsequent funds,” he explained. “This has to do with a critical mass of people and skills on the teams, market reach, and increased regulatory hurdles for VC funds.”
While Covid-19 has affected fundraising announcements from biotech investors, their operations have been able to continue for the most part.
“While the Covid-19 pandemic has presented many challenges, including difficulty in meeting with people face-to-face, we have been extremely pleased by the deal flow we’ve seen in Europe and remain on track,” said Rafaèle Tordjman, CEO of Jeito Capital. “It’s an exciting time to be an investor in biotech, as we are seeing more innovation and exciting science than ever before.”
Worldwide lockdowns seem to be causing little negative effect on funding across the biotech sector. In fact, there’s been a massive increase in healthcare investments this year.
“The Covid-19 pandemic has put healthcare front and center,” said Tordjman. “Investors are paying attention to healthcare like never before and are increasingly looking to invest in the sector.”
Big pharma companies are additionally leading many of the VC firms’ fundraising efforts. Examples include Eli Lilly backing TVM Capital, Sanofi funding Jeito Capital, and Novartis collaborating with Start Codon.
“Our companies are not in a sector that follows the general economic cycle, nor are the buyers of our companies — big pharma. So acquisitions of our companies will continue at a steady pace,” said Slootweg.
“Big pharma is always on the lookout for the next groundbreaking technology, but getting access to such technologies can be a challenge,” added Daniel Rooke, co-founder and COO at Start Codon.
“Investors can offer such access, given their links to institutional organizations and early-stage communities as a whole, and this presents opportunities for big pharma that are now, I think, more widely recognized and accepted than might have previously been the case.”
The impact of Covid-19 on industrial biotech VCs has been more complex. For example, the European Circular Bioeconomy Fund closed the first €82M of its €250M target in October; its fundraising had been delayed by half a year due to the pandemic. Meanwhile, meat alternative investors such as Lever VC have seen a boom in interest.
As we move into 2021 — and towards Brexit — it’s unclear whether VC funding announcements will again drop over the next few months. However, Birner advised to expect more in the new year after the pandemic’s second wave.
“I would wish to see some new teams and new approaches, and that people will be able to raise money to refresh the face of the industry and have more competition,” he said.
“I was hoping to see a bit of that coming out of the UK, but I think as long as Brexit is unclear, that will take some time. Maybe Germany will have one or two new fund managers and maybe we’ll see something out of Switzerland.”
This is an updated version of an article published on the 25th November 2020.
Cover image from Anastasiia Slynko