Where is the Money Going in Biotech? A Peek into European VC Strategy

Hubert Birner, Managing Partner at TVM Capital Life Science, discusses his strategy to adapt to the European funding constraints and the areas with most potential for biotech investment.

TVM Capital Life Science is a venture capital firm focusing on biotech, pharma and medtech. With over €900M under management and offices in both Munich and Montreal, TVM has a great insight into biotech trends across continents.

As Managing Partner at TVM, Hubert Birner led the Series A fundraisings of Direvo and Jerini, two of the largest transactions in the history of German biotech — sold to Bayer for €210M and to Shire for $521M, respectively, back in 2008. Since then, he’s seen the biotech market go up and down, including the massive biotech market drop in 2016 that has led analysts to call it the “worst financial year for biotech in a decade.” But Birner is optimistic that we will soon leave it behind.

My expectation is that 2018 and 2019 will be better,” says Birner. “There’s a lot of capital coming back to the market, we see a lot of new activity in Germany, we see a lot of new activity in France. I’m skeptical that for the time being we’ll see much more activity in the UK, given the Brexit issues, but I’m taking a positive view in the next couple of years.

Adapting to the times, his firm’s latest fund, TVM VII, shifted its focus from investing in all stages of development to financing single-asset companies to get drugs up to proof-of-concept in humans, when they’re at a better position to be acquired or licensed by big pharma.

We believe this project is one way of dealing with the capital constraints you have in Europe, and in other places like Canada,” explains Birner. “We can now finance with $10-20M an asset all the way from IND stage to Phase II (…) on our own. That is a big advantage.

The ultimate goal is to speed up the time to exit. Whereas most biotech investments don’t give a return until 7-10 years have passed, TVM is actively looking for companies with the potential to exit in just 3-4 years. “That’s our primary objective: how fast can we exit? How fast can we add value with our investment?

For Birner, the best areas to make such fast exits are cancer, central nervous system disorders, and rare disease. The firm portfolio includes European biotechs such as Noxxon Pharma in the field of immuno-oncology, AL-S Pharma developing what could be the first drug for ALS, and Centogene working on the diagnosis of rare disease.

But Birner has a clear favorite. “The one with most potential for us is oncology,” he says. We have a lot of interest from pharma, and a lot of the public research is going back into oncology, with immunotherapies as the primary drivers. The deal flow has tripled for us in the oncology companies in the last two years.

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