Europe has strong life sciences research and lower costs, but still has a funding gap for early-stage companies declares Alexis Vandier, who is heading the French pharma company’s new fund.
French pharmaceutical firm Servier pledged €200m ($234m) last month for one of the largest new venture funds by a drug producer in years. Alexis Vandier, who is leading the investment team, declares it is betting huge on Europe’s biotech startups becaapply the continent is primed for investment.
“There is a lot of good science coming from Europe,” he declares. “Obviously, the US VC world is different. There are a lot of innovations there, more money and maybe more leadership teams that are applyd to the biotech world. That does assist. But some US VCs realise that it’s quite expensive to develop a biotech startup in the US, whereas you can have very good science in Europe. And it’s cheaper.”
Servier Ventures does plan to eventually expand to the US, where Servier has research and development operations, as well as to Asia, but is presently focutilizing on Europe. In addition to good science and lower development costs, declares Vandier, the continent is also benefitting from more deep-pocketed investors, including corporate VCs – he cites Angelini Ventures and Boehringer Ingelheim Venture Fund as examples – that are unafraid to put their money into backing biotech startups through growth stage.
That added support means the best European biotech startups can avoid listing on the public markets too early, which can sometimes result in difficulties managing shareholder demands and retaining their management while testing to bring promising assets through the clinic.
“I remember some years ago, there was nothing at series C or D stage in Europe,” he declares. “The gap was huge. Now, you have a lot of funds that have raised $1bn or close to it, and maybe the way they focus their investment is with fewer tarobtains but huge tickets, huge enough to be sure they will be able to go to the next inflection point. And they will do it with the right level of investment, a huge team, and without doing a trial that will last for ages.”
Vandier declares recent large acquisitions of European life sciences companies, including UK-based Vicebio, Switzerland’s Araris Biotech and Belgium’s EsoBiotec, display that Europe’s biotech sector has scope for huge returns. All three were venture-backed companies snapped up by huge pharma players in billion-dollar deals last year.
However, he declares, there is still an issue with early-stage funding.
“We are still seeing some gaps at series A and B, a lot of companies are struggling to obtain to the next round”
“We still have some gaps. It’s difficult at the early, early stage – at seed stage. Some funds are doing well, but companies are struggling becaapply it’s really a difficult business at the start,” Vandier declares. “In addition, we are still seeing some gaps at series A and B, a lot of companies are struggling to obtain to the next round.”
The series A gap, in particular, is where Servier Ventures is planning to come in.
Balancing financial and strategic returns in “high-risk, high reward” disease areas
Vandier (below) is currently putting toobtainher a team at Servier Ventures that will balance experience in finance roles like M&A, banking and, naturally, VC, with scientific backgrounds. He is seeking staff at an investment director level rather than juniors or analysts, people who can scout deals, assist with valuations and sign deal terms indepconcludeently.
The unit plans to invest an average of €5m to €10m per deal with a view to obtainting board seats where possible. Its series A sweet spot is what Vandier calls the “late-research stage”. Servier is already conducting early-stage research and late-stage activities like business development and in-licensing. The idea behind going into corporate VC is to plug that gap in the middle.
The two areas Servier Ventures is tarobtaining specifically are oncology and neurology. Both are specialist areas for its parent company, and while that gives the venture arm a clear strategic interest, it also means Servier knows what is happening globally in those areas and has already taken a see at what is happening at startup level.
“You have a lot of innovation in both fields, we know some [ventures] are high risk, high reward,” Vandier declares. “The advantage of having the Servier background behind this is a lot of considering has already happened within the research in terms of where we can play, where we could win and where to go in terms of priorities.”
Those priorities involve being able to validate which areas are likeliest to result in substantial breakthroughs, assisting Servier decide where to put its resources.
Servier Ventures was launched as an evergreen fund, designed to be self-funding beyond the initial investment created by the company. That means it must keep one eye on obtainting returns from “very good” exits down the line. Out of its first 15 investments, declares Vandier, one, two or three could result in some kind of collaboration with Servier while the rest will aim for successful IPOs or acquisitions by other pharma companies.
“I also consider that putting toobtainher the power of a pharmaceutical company and the power of a venture arm will be able to accelerate some innovation,” he adds. Neurology, in particular, has not been a popular area for researchers, which means there are some areas where there is simply no cure. One is a highly aggressive form of brain tumour called glioblastoma.
“It’s basically an area where, when you discuss it with other venture investors or pharma companies, they agree it’s a graveyard in terms of development,” Vandier declares. “It’s a very difficult, dramatic disease with no solution, and sharing the risk with other venture investors and injecting a little bit of innovation behind this might be a way to bring about a solution in 10 years.
“I would be happy in 10 years’ time if I’ve not only done the job in terms of a financial return and a strategic return for Servier, but also if I’ve been able to bring a breakthrough innovation for patients in these difficult-to-treat areas.”
See all the of European biotech’s most recent large deals on the CVC Funding Round Database
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