By Hui Cai, Vice President of Corporate Alliances and Head of Communications, WuXi AppTec
“Since the late 1990’s there’s been a lot of change on the VC side in Europe. Those players that are still here have weathered the adverse market conditions of the past. They have gained a lot of experience and scars and gray hairs, but are now well positioned, I think, to lead the charge going forward.”
For Sander Slootweg, co-founder and managing partner of Dutch venture capital firm Forbion Capital Partners, Europe has become a fertile ground for life science innovation and investments. Founded in 2006, Forbion has played a very active part in fostering healthcare innovation in Europe.
The firm invests in cutting edge life science and biomedical companies with a strong focus on product development. Forbion specializes in evaluating and funding late stage preclinical and early stage clinical development programs, as well as medical device companies with a special focus on interventional devices in cardiology, gastroenterology, and pulmonology that are close to market approval.
The Forbion team is currently focusing on the firm’s latest fund, which raised US $208 million in April 2016 to invest in European, U.S. and Canadian private companies developing novel drugs, medical devices, and diagnostics.
Slootweg – who co-founded ABN AMRO Capital Life Sciences in 2000 and Forbion in 2006 – currently serves on the boards of Forbion’s portfolio companies Replimune, Xention Discovery, Ario Pharma, Pulmagen Therapeutics, and Oxyrane. In addition, the celebrated life science investor and dealmaker was responsible for two of Forbion’s more recent exits: Dezima Pharma B.V. was acquired by Amgen in 2015 for up to US $1.55 billion, and Biovex, Inc. was sold to Amgen in March of 2011 for US $1billion.
I recently spoke with Slootweg about Forbion’s collaborative approach to strategic investments, the firm’s role in fueling Europe’s biotech ecosystem, as well as the unique characteristics of European venture investment.
Hui Cai: Forbion has made a lot of news in the past few years. Can you share its investment strategies?
Sander Slootweg: We have three strategies. We have our main funds – one of which we just closed in 2016 – which invests in medtech, new therapeutics, and also a little bit of new diagnostic platforms. We invest across all stages, from early to quite late stages. For example, if you look at medtech, we could invest in things that have just been approved for marketing of sales, especially in Europe.
On the earlier stage side we also run a joint venture with BioGeneration Ventures, which looks at university spinouts and seed stage opportunities in the Netherlands, Belgium and Germany.
Looking at the later stages of investing, we have several more opportunistic co-investment funds. We can put these to work if an existing portfolio company that typically has been funded by one of our main funds has shown good data, is de-risked, close to an exit, and needs one more private round before it can reach the point of a likely exit.
This year is more focused on investing from our new $200+ million fund; we have eight investments in the new fund already, and we are working hard to make more investments and to build value in that new portfolio.
Hui Cai: Forbion’s investments are diverse across sectors and stages. Do you have a general theme on building and growing entrepreneurial companies?
Sander Slootweg: I think that’s difficult to answer in general. But what I can say is that the right management team is always important, and at some point you really need to decide if a company is more of a product company, or whether it has platform capabilities that need to be set up in a broader sort of way with a different type of management team.
One example is we restarted the gene therapy company UniQure in 2012 with the aim to set it up as a broad platform company that could manage a broad pipeline of exciting gene therapy projects, but could also do transformative industry collaborations. We needed to decide who would do their in-house manufacturing of these gene therapies, so that required a completely different setup. We quickly grew the company to 180 to 200 people, and that requires different skills from management. There, you really need more managers, people who can actually put organizational structure to this, and who can make sure that it doesn’t become a bureaucracy, and that all these projects are properly prioritized and resourced.
Hui Cai: Is global strategy a big part of Forbion’s portfolio companies?
Sander Slootweg: We still have a pretty traditional view of the world, so when we build our companies, the primary markets we consider – in terms of developing these on our own – are Europe and North America. And then looking more east, I think we would prefer to partner.
I think that companies do need to have a global view, but they cannot stretch themselves too thin. Developing something in the Europe or the U.S. is already a significant task, and there, we try to find the best attributes of both markets, and as I said, sometimes, for instance, for medical devices, that we source later-stage medical device opportunities in the U.S., and we then help them to navigate the European regulatory market to get their device approved as swiftly and as efficiently as possible in Europe.
Sometimes for certain drugs developed by EU companies, we feel that the U.S. is the prime market, and therefore, the company needs a foothold in the U.S. But Asia, that’s yet another level of challenge, and there, our preference has been so far to work with partners, and so on a per product or per company basis trying to find a partner who can get a product across the regulatory hurdles.
Hui Cai: What’s your view on opportunities in Asia?
Sander Slootweg: We are actively looking at all the developments in Asia, and then also, of course, the substantial markets. Japan has certainly has been one of the bigger markets, but now China is growing very rapidly. We’re interested in considering future possibilities of investing in local companies there, but again, preferably, certainly initially, with a partner.
We are trying to become more familiar with that part of Asia, and hopefully at some point we’ll forge a partnership to become more active in investing in local opportunities. I think for now, it’s mostly around our existing portfolio to do Asian rights deals with partners on a product-to-product basis. At some point in time, we would like to find a corporate or venture partner in China.
Hui Cai: Let’s go back to the European and U.S. investment markets. How do they differ?
Sander Slootweg: Since the late 1990s, there’s been a lot of change on the VC side in Europe. I think a lot of traditional players have left or have moved to other geographies or have shifted their emphasis from investing in Europe to investing more in the U.S. or in Canada. The industry has changed, and those players that are still here have weathered the adverse market conditions of the past. They have gained a lot of experience and scars and gray hairs, but are now well positioned, I think, to lead the charge going forward.
If you look at the industry’s performance by geography you can now see that a lot of European VCs, actually, for the last couple of years, have even outperformed U.S. VCs across the board. So, I think the firms that are left standing are well positioned and well equipped to show very good returns going forward.
If you look at the supply and demand equation, I think there’s much less capital available in Europe to fund the European life sciences companies that are still privately held compared to the U.S. So, there’s more money available in the U.S. to fund interesting and new life sciences companies. That means that we can really pick and choose the best of the best companies to fund, and at relatively attractive valuations.
On the exit side, I don’t think we’re bound to exit via European pharma or to list only on the European exchanges. We can look across the globe, and now with the JOBS act and everything, you can also more easily list a European company on NASDAQ if that’s deemed appropriate or the best way to grow the company. So, I think Europe has become quite an attractive place for investing, and the players that are still left are stronger than ever.
Hui Cai: How does early innovation in the U.S. and Europe differ?
Sander Slootweg: If you talk about the actual inventions that are done in academic centers, I don’t think there’s a lot of difference there. I think in the way these are commercialized, and then the type of spinouts that you see, there is a big difference.
What you do not see so much in Europe is the big, bold bets. The way some of the leading U.S. VCs structure deals is they just gather the people and IP, and they put $50 million or $80 million, or in some cases $100 million behind it so that they have the staying power to really transform these early ideas and these inventions into products and then bring them sufficiently forward.
That’s what’s lacking in Europe. On the other hand, I think because we’ve come through this post-2000 and post-internet bubble downturn in Europe with very little funding being available for the life science companies, what we are very good at is leveraging investor dollars, or euros, in this case, to the max.
In Europe, we are being maybe a little bit too conservative in the budgets, and on the U.S. side there’s maybe still a little bit too much exuberance in how much money is spent on these early ideas to get them somewhere, and I think that makes them also a little bit too much dependent, many times, on the IPO markets. That’s the main difference I see. It’s not in the actual inventions and how they are done, but it’s more in how companies are built from these inventions.
Hui Cai: Is there anything that keeps you up at night?
Sander Slootweg: It’s always a good question that we like to ask people that we interview for CEO positions. But, the honest answer is nothing work-related. I think we work hard, but then there’s also a time to let go, and so I never wake up in the middle of the night with sweat on my forehead because I’m worried about a certain portfolio company. As long as we keep doing the right things, I’m optimistic that Europe’s life science ecosystem will continue to flourish.