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1 March 2020 – www.plattform-lifesciences.de Plattform Life Sciences Technology – Financing – Investment in co-operation with Financing Life Sciences Building bridges Financial ecosystem China Start-ups’ quest We need “opportunity capital” A highly for success to finance innovation attractive field
Connecting Global Competence
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Editorial
Editorial
BioM inQlab
Crisis-proof! we guide you from idea to success
virtual incubator for the future of medicine
Startup Coaching
get hands-on support
Holger Garbs,
Mentor Circle
Editor Life Sciences
inspired by experience
Pitch Doctor
how to convince investors
In times of Corona, refugee chaos and sabre-rattling, it is difficult to spread optimism.
Depending on one‘s basic philosophical convictions, crises either bring out the good
(Jean-Jacques Rousseau) or the bad (Thomas Hobbes) in people. In the past few days, BioEntrepreneur Bootcamp
news have been dominated by reports of panic buying in supermarkets and panic validate your business idea
selling on the stock markets. At European borders, people are shooting with tear gas,
soon they will be closed completely anyway. Prudent reactions in times of crisis might
BioEntrepreneur Lounge
look different. What sort of times!
join the community
The biotech and medtech sector is also not unaffected by all this. In very practical
terms, for example, the analytica trade fair in Munich (and with it also Finance Days BioAngels
organised by GoingPublic Media AG) has been postponed from April to October. Due find the right investor
to that we are unfortunately unable to hand out our hot off the press edition of
“Financing Life Sciences” at short notice. But hand contact is currently not in anyway.
By the way, it is unclear how life science companies are currently getting to their cash m4 Award
cows in view of the ban on entry into the USA for Europeans. create the future of medicine
Nevertheless, on the following pages we analyse the current challenges and future
BioEntrepreneurship Summit
prospects of the financing situation for biotech, medtech etc. for you. We give advice
on how to improve the financial ecosystem (p. 10), highlight the advantages of connecting the ecosystem
cooperation between start-ups and corporates (p. 14), as well as the opportunities for
German biotech start-ups in the USA (p. 26). China is more interesting than ever, also
for German and European investors (p. 28). We present you exciting case studies
(pp. 38 and 40), and what is actually the situation regarding life science IPOs this year
(pp. 44 and 46)?
We need innovations. And we need capital to finance them. This does not work with
panic. So let us continue to believe in the good and stay calm. In these times more than
ever!
We wish you an exciting read.
garbs@goingpublic.de
BioM - accelerating medical innovation
01-2020 “Financing Life Sciences“ ls 3
www.bio-m.org
Content
3 Editorial 20 Start-ups at the analytica
Crisis-proof! 2020: See and be seen
Innovative life sciences start-ups
are ready to present their new
developments at the analytica
Introduction
A gap with causes trade fair taking place from 19
Dr Mathias Schott (photo) to 22 October 2020 in Munich
and Sebastian Sommer, 6 Open end Susanne Grödl, Messe München
FCF Corporate Finance GmbH Despite the good figures, the
Pages 12–13 atmosphere on the German 22 Portrait of the investor:
biotechnology market is rather Bayern Kapital GmbH
glum. But should it be? An interview with Andreas
Huber, Senior Investment
10 To improve the financial Manager at Bayern Kapital
ecosystem
We need “opportunity capital” 24 Portrait of the investor:
to finance innovation Andera Partners
Prof. Dr Dirk Honold, TH Common basic values and
Nürnberg, Oliver Schacht, Ph.D., renewal
BIO Deutschland, Dr Jan
Schmidt-Brand, Heidelberg 26 Building bridges
Pharma German biotech start-ups’
quest for success
12 A gap with causes Stefan B. Beerhalter, Charlie
German life science companies Cameron, German Accelerator
“The IPO took BioNTech onto the must raise more money abroad Life Sciences
international stage” Dr Mathias Schott,
Interview with Dr Sierk Pötting (photo), Sebastian Sommer, 28 “China is a highly attractive
BioNTech SE, and Michael Motschmann, FCF Fox Corporate Finance field of activities for inves-
MIG Verwaltungs AG tors”
Pages 16–18 An interview with Dr Jan zur
Hausen, EC Healthcare Fund
Financing
30 Is it only about numbers?
14 Start-ups and corporate The impact of liquidation
partners preference clauses in exit
A relationship of hope and transactions
challenge Dr Bernhard Noreisch,
Dr Anke Caßing, Dr Martin Jan-Phillip Kunz, LUTZ | ABEL
Pfister, High-Tech Gründerfonds Rechtsanwalts PartG mbB
16 “The IPO took BioNTech onto 32 Expert survey among life
the international stage” science investors
Interview with Dr Sierk A survey of the situation in the
Start-ups at the analytica 2020 Pötting, BioNTech SE, and life science finance market
Susanne Grödl, Messe München Michael Motschmann,
Pages 20–21 MIG Verwaltungs AG 35 Early-stage financing –
ten years of successful
disruption
A column by Dr Hubert Birner,
Managing Partner, TVM Capital
Life Science
4 ls 01-2020 “Financing Life Sciences“
Content
SPECIAL ADVERTISING SECTION
Capital Market & Investment
36 Who is Who in Life Sciences
Three industry players 42 Creating unique equity
introduce themselves stories
Meeting the standards of US Early-stage financing – ten years
companies investors capital markets of successful disruption
business promoters Dr Joachim Greuel, Dr Kerstin Dr Hubert Birner,
incubators accelerators Bode-Greuel, Thomas Loeser, TVM Capital Life Science
technology centers Bioscience Valuation BSV Page 35
start-up networks
business plan competitions 44 Life science IPOs in 2020
consultants lawyers An IPO is, as well as many other
service providers associations things, a question of professional
preparation and the selection of
advisors and partners
Klaus Rainer Kirchhoff,
Kirchhoff Consult
Case Studies
46 On the move
38 Talk to a physician from The long-list of IPO candidates
wherever you are keeps growing as investors‘ risk
KRY: A story of a Swedish tele- appetite is on the wane
medicine app capturing Europe
40 It is all about the quality of
Service Creating unique equity stories
medical decisions Dr Joachim Greuel, Dr Kerstin
Smart4Diagnostics GmbH: Bode-Greuel (photo), Thomas Loeser,
Intelligent containers for 48 Partner Portrait Bioscience Valuation BSV
human blood samples Pages 42–43
50 Imprint/company index
Plattform Life Sciences
Competence in Life Sciences. Since 1999.
An Initiative of
Life science IPOs in 2020
Klaus Rainer Kirchhoff,
Plattform Life Sciences is an official body of Kirchhoff Consult
Pages 44–45
BIO Deutschland e.V.
01-2020 “Financing Life Sciences“ ls 5
Introduction
Open end
Despite the good figures, the atmosphere on the German
biotechnology market is rather glum. But should it be?
The financing of life sciences companies is still a constant, almost eternal issue, or at least it feels like one. Even though
foreign venture capital funds are increasing their presence on the market, domestic funds are keeping their cards close to
their chests, while other, new factors are also just looming on the horizon. By Holger Garbs
A
t first glance, the figures from the
past year put the financing situati-
on of German life sciences compa-
nies in a rather positive light. According to
the figures published by the sector associ-
ation BIO Deutschland, German companies
being active in biotechnology, medical
technology or similar sectors managed to
collect a total of EUR 858 million in 2019,
EUR 525 million of which came from ven-
ture capital investments and the other EUR
333 million from IPOs. The problem? More
Photo: © iQoncept – stock.adobe.com
than EUR 186 million of these come from
just two IPOs, namely BioNTech, a Mainz-
based specialist company for the develop-
ment of immunotherapies, as well as
CENTOGENE, a company specialising in
the diagnostics of rare diseases. Both IPOs
took place on the New York Nasdaq, which
rekindled the debate surrounding the dimi-
nishing relevance of the local stock
exchanges (Deutsche Börse Frankfurt and
the multinational Euronext). provement of the political climate in Ger- my into focus; and it is here that the life
many this year. BIO Deutschland referred sciences can also make their own unique
A glum atmosphere despite the to this result as a “glum atmosphere” in contribution.
good figures? the sector.
Figures are one thing – what people make But why so glum? There are, after all, A lack of tradition and
of them is a different story. This can be also positive developments to be seen, understanding
seen in the recent survey of the biotech- even in the political arena. For instance, So what is the catch? Presumably (again)
nology sector in Germany published by the fiscal concessions for research have in the area of financing. This may be due
BIO Deutschland. In the survey, the come into force by now, and the German to the fact that there are still hardly any
association claims that about 90% of the Federal Government resolved on the venture capital funds in Germany which
companies asked rated their company’s targets and guidelines for its bioeconomy have taken it upon themselves to specialise
current and foreseeable situation as “good strategy in January of this year. The dia- exclusively in life sciences and in the very
to favourable or satisfactory to unchanged”. logue platform “Industrial Bioeconomy” cost-intensive field of medication develop-
About half of the entrepreneurs who parti- has also shown that it is very active. As a ment. Potential financiers are “put off” not
cipated in the survey also plan to increase matter of fact, the very declaration of the only by the immensely high costs of
their R&D expenditure, which is always a “Bioeconomy Science Year” by the Ger- research and development activities,
good sign. But where there is light, there man Federal Government brought both which can amount to several million euros
are also shadows: only 20% of respon- the challenges as well as the opportuni- before a new medication can be success-
dents answered that they expect an im- ties to achieve a more sustainable econo- fully introduced into the market. This is
6 ls 01-2020 “Financing Life Sciences“
Plattform Life Sciences
The mission: To provide a cross-channel connection between Life Sciences and the
knowledge and networks of corporate financing and the capital market
(E-)MAGAZINE – ONLINE – EVENTS – NETWORK
1 March 2020 – www.plattform-lifesciences.de
Plattform
Life Sciences
Technology – Financing – Investment
in co-operation with
Financing
Life Sciences
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Annual partners 2020
Annual partners online: www.goingpublic.de/jahrespartner-lifesciences
LIFE SCIENCE VENTURE CAPITAL
Introduction
Illustration: © Ico Maker – stock.adobe.com
also exacerbated by the long development classified as non-harmful for humans by increasing interest in life sciences inno-
periods and the high risk of failure. Never- numerous EU institutions. One exception to vations, providing start-ups with help and
theless, this area remains a dynamic one. this did emerge a few years ago as a sort of support, and not only to get them through
For instance, the red, pharmaceutical by-product of digitalisation, when fitness the arduous bureaucracy of approval pro-
aspect of biotechnology is not limited to apps and other aids and devices for elec- cedures. But the call for more institutional
the improvement of effectiveness of thera- tronic medicine suddenly became attrac- investors in life sciences refuses to fade
pies in personalised medicine; the white, tive and viable investment options; Berlin away. For example, it has long been called
industrial biotechnology can be used to in particular became a hot-spot for the for enabling insurers to invest in risk-
optimise industrial processes; green bio- digital health scene. The focus here was intensive assets like venture capital at a
technology can be leveraged to adapt on B2C business for a long time, though. In certain percentage rate. Specialised FOFs
agriculture to the new conditions created the meantime, global players such as could provide an added incentive for such
by climate change. In this context. the Amazon, Google and Apple, but also “big investors, as the limited scope of a venture
sequencing and the editing of human pharma” players such as Roche, Sanofi capital fund may represent an obstacle for
genome are seen as the greatest advance- and others, have shown their interest in institutional investors. It is indeed a step
ments in the field. Other trends can be innovation from the field of digitalised in the right direction that the European
observed in the fields of analytics, diagnos- medicine. Investment Fund is now the biggest inves-
tics and cancer treatments. Through the in- Digitalisation alone is no way to deve- tor of most European venture funds, but
creasing level of digitalisation and the use of lop a new medication, and the long and this should not be the rule.
artificial intelligence, whole industry sec- cost-intensive development periods mean
tors are beginning to meld together, which that, especially in the first decade of their Conclusion
creates new opportunities. But due to existence, life sciences companies do not It is not easy to find a new, positive trend
Germany’s slow progress towards digitalisa- make any profits. So how can an entre- in the financing of innovative life sciences
tion in comparison to other countries they preneur be expected to start a large ideas year after year. The field of financing
will not be discussed here further. business that does not generate any also has its long-term cycles, which them-
Germany has so far failed to establish a revenue when it is founded? Ultimately, selves cannot be altered by decisions
tradition (and probably also an understan- this can only work with an immense level such as research requirements or bio-
ding) of investing in life sciences. This popu- of trust and a lot of capital from specia- economy strategies in the short term. This
lar opinion has also branded pharmaceutical lised investors. The wheels and structures could also be due to something complete-
companies as “greedy swindlers”, even of the great, big financial world are slow ly different, key word “corona”. The stock
though the reality is that many innovative and cumbersome, especially when com- markets are plummeting, businesses all
medications now available on the market pared to the smaller venture scene. Estab- over the world are falling victim to
offer a treatment for illnesses previously lished FOFs can provide some help here, considerable losses in revenue. The
considered incurable, such as hepatitis C. and the fact that larger investors, such as frictions at the borders of Europe, com-
Overall, investing in pharmaceutical the KfW banking group, but also some pounded with a renewed influx of refu-
enterprises or biotechnology is considered insurers, have once again started to act as gees, will probably also be on top of the
to be unwisely. Another example of this from fund investors and thus invest more in agenda for the foreseeable future. The
the field of plant protection is the torpedo- growth sectors like life sciences indirectly, direct and indirect repercussions of this
ing of the Bayer/Monsanto merger and the is to be seen as major progress. Health are, sadly, still unclear; leaving the end of
ban on the use of glyphosate, a substance insurance companies are also showing this story wide open. Q
8 ls 01-2020 “Financing Life Sciences“
“We moved up our start-up with a neat idea.” We promote what’s moving North Rhine-Westphalia. Tanja Nickel and Katharina Obladen, founders of UVIS, disinfect escalator handrails with UVC light. The start-up benefits from the NRW.BANK’s early stage financing, which supports entrepreneurs in North Rhine-Westphalia with a wide range of development products. Moreover, the state development bank acts as an intermediary between companies and business angels, making them the ideal partner for private investors in search of new business opportunities.
Introduction
To improve the financial ecosystem
We need “opportunity capital” to finance innovation
When it comes to key areas of innovation financing, Germany exhibits structural weaknesses. Germany does indeed offer
a variety of different tools and programmes that provide direct federal or state financial support. Whether it comes in the
form of tax incentives for research and development or in the form of tax-funded government grants, this support offers
businesses a variety of opportunities to flourish. But small and mediums sized enterprises (SME) are burdened in particular
by the lack of clarity in the government support programmes at the state, national and EU levels. Germany’s venture capital
market is unfortunately small, both in an international comparison and in relation to Germany’s economic strength.
By Prof. Dr Dirk Honold, Oliver Schacht, Ph.D., and Dr Jan Schmidt-Brand
Photo: © Kurhan – stock.adobe.com
T
he German government has there- able to successfully translate their re- known as venture capital, VC) provided
fore introduced various funding ins- search findings into marketable products by investors who become partners or
truments in order to make Germany in a significantly shorter period of time in co-founders of the company. The only
more attractive for venture capital invest- comparison with their German counter- possible way to level the playing field is by
ments. The measures that support the parts. In particular when it comes to creating a more favourable environment
early start-up stage can, for the most part, markets that are heavily regulated by the for venture capital and/or for initial public
be assessed as positive. Measures target- government, the barriers to market entry offerings (IPOs) in early stages of com-
ing the later start-up and growth stage, are high, which means higher risks for pany development.
however, put research-intensive biotech- investors.
nology companies at a disadvantage, be-
cause such companies have high capital How do others do it?
requirements over a long period of time. Unlike in Anglo-American countries, Europe
What is still missing are risk-taking funding lacks for the most part a functioning
instruments that are capable of attracting innovation financing ecosystem which
larger volumes of primarily private capital stems from a shortage of equity capital
for innovation financing. available for development and growth
financing. The paradigm-shifting business
From R&D to the market models of companies such as Amazon,
The swift commercial exploitation of Facebook, Google and Tesla, and in the ABOUT THE AUTHORS
research findings is an important pillar of biotechnology sector Amgen, Biogen, Prof. Dr Dirk Honold is professor for cor-
a society’s innovative capacity. Break- bluebird bio, Genentech, Gilead, Kite and porate financing at the TH Nürnberg.
through innovations must become mar- others, are inconceivable in the absence Oliver Schacht, Ph.D., is CEO of Curetis N.
ketable in a globally competitive time of large sums of private venture capital for V. and president of BIO Deutschland.
frame. New start-up companies in the development financing. Such companies Dr Jan Schmidt-Brand is CFO of Heidel-
United States and China, for instance, are are financed through private equity (also berg Pharma AG.
10 ls 01-2020 “Financing Life Sciences“Introduction
into venture capital. The financial assets health insurance companies, CalPERS in
of private households totalled almost California (the pension fund of the state’s
EUR 6 trillion at the end of the first quarter public employees, which manages
of 2018. One possible approach could be USD 300–400 billion), TIAA (US pension
to establish a legal framework for Ger- fund for teachers and professors), Swiss
In Germany and Europe, man/European capital-collecting insti- Entrepreneurs Foundation (foundation
there is indeed a huge tutions to invest in venture capital. This supporting young companies) and the
relates both to investments in private Dansk Vækstkapital fund in Denmark.
amount of capital and companies via VC funds and investments Alongside the size of the fund and the
assets looking for invest- in listed companies by institutional inves- generated risk reducing diversification, it
tors. In the post-2008 era, however, funds would be possible to provide government
ment possibilities.
are in many cases prohibited from inves- support or guarantees like those seen in
ting in such classes of venture capital. the Danish fund model in order to provide
Another option is the introduction of tax market participants with a better tie-in
What should we do? incentives, especially ones that allow with previous structures.
In Europe, pension systems are usually private investors to offset capital losses
financed on a pay-as-you-go basis, which against other income or to exempt future Establishment of a “Germany/
means a key source of capital accumula- profits when they invest in the VC asset Europe Future Fund”
tion is missing, unlike, e.g., in the United class. Such incentives should apply to A third and important approach is the
States, where this very source of capital both the VC segment (pre-IPO) and invest- establishment of a “Germany/Europe
accumulation provides the foundation for ment via the stock market (development Future Fund” as a third pillar of pension
a very productive venture capital financ- and growth financing). In addition, the provision. In order to supplement the pay-
ing ecosystem. Such an ecosystem invol- “INVEST – Venture Capital Grant” pro- as-you-go system consisting of employee
ves traditional venture capital in the early gramme should be expanded to create and employer contributions as well as the
stage and institutional investors that more incentives for VC investment. low-yielding second pillar of self-provision
invest in innovative development through (based on contributions to the Riester
listed companies. These forms of financ- pension scheme and similar instruments),
ing open up the possibility for active VC a third pillar with a stronger orientation to
investors to recoup their investment and capital markets could be established. The
make a profit through cross-over rounds aim would be to pool assets from volun-
into early-stage IPOs, and enable growth tary employer/employee-financed pro-
companies to be financed through the If we want the German grammes in an innovation fund that
stock market up to market readiness or biotech sector to stay invests in a broad range of new technology
market penetration. In Germany and areas, either by taking a private equity
Europe there is indeed a huge amount of
internationally com- stake in start-up companies or by invest-
capital and assets looking for investment petitive, we urgently ing in the development and growth financ-
possibilities, e.g. insurers, pension funds ing of mature listed companies. It would,
and private individuals. They all could
need to revitalise and for example, be conceivable to place occu-
contribute to innovative capacity by reshape the financial pational pension schemes on an even
providing substantial inflows of capital. ecosystem. broader basis and allow them to make
such investments. An appropriate diversi-
Provide incentives to invest in VC fication in different sectors and com-
Government support is needed in order to Create “capital-accumulating panies would ensure a sound risk versus
make private investment in venture capi- institutions” opportunity profile. Such a possibility has
tal more attractive. Suitable measures Besides incentives to invest in venture already been realised in the United States
could, for example, convert private assets capital, which we prefer to call “oppor- by pension funds for public employees
tunity capital” (to counteract the empha- and other groups.
sis on risk implied by the more traditional If we want the German biotech sector
term), suitable capital-accumulating insti- to stay internationally competitive, we
tutions should be created. The core idea is urgently need to revitalise and reshape
that the high level of economic cash flow the financial ecosystem. This will only
in Germany is utilised to shape – and thus work if we manage to provide more ven-
Government support
safeguard – the future. It will be imple- ture capital. In order to do so, we propose
is needed in order to mented to support young, innovative to make new sources of funds available.
make private investment companies through the following models: Otherwise, government support (and tax
Innovation Norway (income from natural money) are wasted if promising start-ups
in venture capital more gas and oil sales), Australia’s Future Fund financed with subsidies go elsewhere to
attractive. (accumulation of trade surpluses), US grow and thrive. Q
01-2020 “Financing Life Sciences“ ls 11Introduction
A gap with causes
German life science companies must raise more money abroad
The fact that Germany’s life science industry is doing very well in European comparison is due to a few big deals. The latest
venture capital research by FCF Life Sciences shows a much different and quite disillusioning picture.
By Dr Mathias Schott and Sebastian Sommer
would be ranked among the top ten, while
Fig. 1: European Life Science Venture Capital Volumes over Time
UK and Switzerland each have three such
EURm # of Deals
3.500 3
350 deals and even smaller economies such as
the Netherlands have at least one.
3.000 3
300 The shortage of life science funding in
Germany is further illustrated by the fact
2.500 2
250
that a deal volume of EUR 10 million would
2.000 2
200
have already been sufficient to reach the
Average Annual Deal top ten ranking in 2019.
Volume (2001 -2019):
EUR 1,294m
1.500 1
150 However, the fact that BioNTech’s suc-
cess story puts the German life science
1.000 100
market in good light in an international
comparison should not be disregarded. As
500 50
early as 2018, a BioNTech deal worth EUR
0 0 222 million had already brought Germany
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
up in the rankings as the top deal. BioNTech
European Deal Volume European Deal Count
is a special driver for Germany but distorts
Source: PitchBook as of 14.01.2020, FCF Equity Research
the picture to some extent.
USA far ahead
N
o doubt, life science is currently and early-stage companies with a more
booming: 2019 has been the best attractive risk-return profile. An analysis of the fundraising activity in
year for European venture capital Germany tells a different story. Europe’s Europe might reveal first symptoms of the
funding for the past two decades with a biggest economy has recorded a total deal problem. It is true that European life
total deal volume of EUR 3.3 billion, and volume of EUR 1.5 billion over the past five science investors have been able to in-
the number of deals has never been higher. years, a third of the volume that UK life crease their fundraising activities and
The upward trend’s continuity is parti- science companies have raised. A closer raise about 60% more capital in 2019 (EUR
cularly remarkable: Apart from a cor- look reveals that two deals from the 3.9 billion) than in 2018 (EUR 2.4 billion) –
rection in 2017, the deal volume has Mainz-based oncology specialist BioNTech
steadily increased every year since 2011. – with an aggregated deal volume of approx.
Moreover, the funding volumes of the past EUR 500 million – account for a third of
eight years have all been above the average Germany’s life science deal volume, making
of EUR 1.29 billion of the last nineteen years. it a special driver for Germany. In five years,
Germany was not able to achieve the same
Germany’s special driver level of deal activity as the UK in 2019 alone.
The analysis from a regional perspective
provides more insight regarding the source of A different picture without BioNTech
the growth. At EUR 4.4 billion, UK life science As positive as this may be – without the
companies account, by far, for the largest EUR 288 million BioNTech deal in 2019, a
share of European deal volumes over the different picture of the German life science
last five years. Despite a remarkable in- sector emerges: Germany’s share in total ABOUT THE AUTHORS
crease in the number of UK deals in recent deal volumes would drop from 20% to 7%; Dr Mathias Schott is Director at FCF Fox
years, the funding volume has decreased the average deal volumes would decrease Corporate Finance GmbH.
at the same time, indicating that investors from EUR 28.4 million to EUR 9.7 million. Sebastian Sommer is Associate at FCF Fox
are increasingly targeting British seed- At the same time, not a single German deal Corporate Finance GmbH.
12 ls 01-2020 “Financing Life Sciences“Introduction
a trend that is in line with the increase in approximately EUR 108
Fig. 3: European Biotechnology & Pharmaceuticals
European deals and volumes. million invested in 2019.
Analysis in 2019 by Country excl. BioNTech Deals
However, there is still a considerable Again, the comparison
amount of catching up to do compared to with the USA is illumina- All Countries – Average Deal Volumes in 2019 by country
the USA. US funds are more active and ting: In the USA, the fund EURm
have been able to collect significantly volumes of the top five 2
29,4
Deals
more money than in previous years, also vintage 2019 funds are sig-
14 19,0
recording a new high in 2019 with EUR 13.8 nificantly higher (EUR 5.4 Deals
32
billion raised. billion), the investors Deals
16,0
Europe, and Germany in particular, collect around three times 8
15,4
Deals
appear more hesitant compared to the as much as their Euro-
20 12,4
USA: German investors accounted for just pean counterparts. An era Deals
79
10% of fundraising in Europe over the past of funds of more than “one Deals
10,9
five years. US investors, on the other billion US dollars” has 15
Without
9,7
hand, raised four times more than their long since begun.
Deals BioNTech
12
7,6
European counterparts during this period Deals
and 35 times more than German investors. Europe’s dependency 10
Deals
7,6
The specific funds and drivers behind the on the USA 3
6,7
Deals
European vintage 2019 funds may only be Analysing the origin of VC
2
3,5
impressive at first glance. After all, the top investments shows that in Deals
five of these funds raised a total of EUR 2.2 recent years, significantly 2
Deals
2,8
billion out of around EUR 3.9 billion. More- more capital has come 4
Deals
2,5
over, six of the ten largest funds raised in from foreign investors. In
11
2,3
2019 originate from the UK and France; 2019, the share of such Deals
1
Germany – with Wellington Partners and a “cross-border volumes” Deal
1,0
volume of EUR 210 million – ranks at the amounted to 63% in Euro- 1
Deal
0,2
7th place. pe, underpinning the fact
1 0,0
In line with the fundraising activities, that life science compa- Deal
the most active investor hubs also originate nies are simply becoming Source: PitchBook as of 14.01.2020, FCF Equity Research
from the UK (London, Cambridge and increasingly dependent
Oxford) and France (Paris) while German on foreign capital. Especially in later years, US investors were responsible for
hubs are not represented in the top ten. rounds – in which funding requirements around 50% of the cross-border volumes
Munich only ranks at 11th place with become larger –, cross-border investors in the top ten ranking in each year. In other
have become increasingly words, the European life science industry
important in European deals. is heavily dependent on US investors.
Fig. 2: Most Active European Life Science Countries (L5Y) Within Europe, the UK Within Germany, a weak home bias of
Top 5 Active Countries – Deal Volumes over Time and France are setting the German investors is a major cause of the
EURm tone as the major cross- problem. While British and French life
border investors. In 2019, science companies have drawn 50% to
3.000 2,868 Germany ranked second 60% of the capital raised from domestic
in Europe thanks to Frese- investors in the last five years, 66% to 84%
= 878 nius’ EUR 60 million Uni- of the invested capital was put in domestic
2.500
cyte deal. Not counting companies by British and French inves-
2,167
= 1,160 this deal, however, Ger- tors in this period. Such home-biased
1,944 many falls behind as in
2.000 investment activities support the dome-
the previous years. In stic market.
= 1,500
1,389 1,476 short, Germany is not a In contrast, German life science compa-
1.500 relevant cross-border in- nies have only obtained 25% of the capital
= 1,865
vestor and plays only a raised over the last five years from domestic
minor role within Europe. investors, and only 54% of the invested
1.000
capital was put in domestic companies by
The biggest and un- German investors during this period.
500
challenged contributor, It is a paradox that is causing problems
= 4,440
however, is the USA for the life science sector in Germany:
With EUR 683 million in- German investors invest more abroad
0 vested capital in 2019, the than the UK and France; at the same time,
2015 2016 2017 2018 2019
US leads the top ten ranking. German companies must raise more money
Source: PitchBook as of 14.01.2020, FCF Equity Research Throughout the last five abroad, and most likely in the USA. Q
01-2020 “Financing Life Sciences“ ls 13Financing
Start-ups and corporate partners
A relationship of hope and challenge
According to a recently published study by Wayra, the accelerator programme set up by Telefónica, major corporations
founded 264 new venture capital businesses in 2018. This leads to the clear conclusion that corporations are increasingly
turning to start-ups to boost their innovation capabilities. They are increasingly setting up accelerator-like structures which
assist external projects with know-how, financing and infrastructure. They can be found in all sectors with varying set-ups.
But, they have one thing in common: enthusiasm for start-ups, their innovative strength, culture and agility.
By Dr Anke Caßing and Dr Martin Pfister
marketing support to young entrepre-
Fig. 1: Acquisitons of HTGF Portfolio by Industry LPs
neurs. Even though corporations have a
hugely successful sales organisation at
their disposal, their sales approaches are
Industry LP A Industry LP B Industry LP C often not intended to bring disruptive
products to the market. Early adaptors
(2019) (2019) (2018)
must be addressed, and customers need
to be supported in establishing new appli-
cations. Customers of large corporations
Industry LP D Industry LP E Industry LP F
(2017) (2016) (2015)
More
Industry LP G Industry LP H expected
(2015) (2015)
In total, LP’s invested > EUR 138 million into portfolio
Source: HTGF
A
t High-Tech Gründerfonds, we are as their proof of market, especially when ABOUT THE AUTHORS
seeing the increasing interest of it offers recurring revenues. However, Dr Anke Caßing holds a doctorate in bio-
corporations in the start-up according to the Wayra study, start-up logy and studied economics. Before becom-
scene, too. The third fund has attracted founders are often disappointed by large ing an investment manager, she developed
investments from 32 corporations (LPs). corporations. Although no specific rea- the product portfolios of international life
Some of these have their own corporate sons are given, experience has shown that science companies, ensuring their future
venture capital (CVC) arm, whilst the start- culprits are long decision-making proces- growth. At High-Tech Gründerfonds, she
up activities of others originate from the ses or unpaid preliminary qualification is responsible for ten early-stage invest-
top management or are coordinated by BD. studies. For the start-up, the corporation ments in biotech and medical technology.
In addition, we are seeing a multitude of might look like a black box once a product Dr Martin Pfister studied medicine and
collaborations, licensing agreements, invest- offer is sent in; when and which feedback pharmacy at the University of Greifswald
ments and M&A. All have huge potential. will be given is hard to predict. To ensure and New York University and received his
However, where two cultures meet, there its chances, the start-up needs to have a Ph.D. in immunology at the University of
will be different expectations and mis- product champion in the corporation Leipzig. Dr Pfister is co-founder of two
understandings. driving the decision process and turning successful start-ups in the field of diagnos-
successfully tested products into some- tics and market intelligence (exit 2018).
A big corporation – truly your best thing purchased regularly. He manages a portfolio of twelve biotech,
customer? According to the Wayra study, corpo- medtech and digital health companies at
Many start-ups see a customer-supplier rate investors also fall short of expec- High-Tech Gründerfonds and is a member
relationship with an established business tations when it comes to the sales and of the board in three growth companies.
14 ls 01-2020 “Financing Life Sciences“Financing
expect free product trials, which start-ups porations investing early in the start-up’s over a major corporate partner is great for
would not need to give. This fact can reduce life cycle. With their specific internal the reputation of a start-up. Nevertheless,
initial start-up revenues substantially. know-how, they are more confident than a institutional VCs take a critical view on
However, we see that start-ups benefit financial investor that certain risks will be specific rights for strategic investors.
significantly when it comes to joint resolved in due time. These early invest- They may not restrict flexibility in the exit
developments (R&D), production and ments are highly welcome because they process. For instance, there should be no
process optimisation. What is happening help to bridge the early valley of death specific one-sided veto rights. Any right of
in the mid-cap sector is also interesting: which many start-ups face. However, early first refusal should be limited with a tight
more and more companies, not normally investments also require many years of temporal element allowing the start-up to
familiar with the start-up ecosystem, are patience until the returns materialise. explore alternative options. Call options
opening up. Lean decision-making proces- German companies are particularly already negotiated with the corporate in-
ses often make up for any lack of dedi- active: according to the Wayra study, vestment should include a drag-along
cated structures, such as a venture capital about one quarter of all European deals clause requiring the strategic investor to
team. In this setting, everything must involved German corporations. In High- sell their stake with no strings attached
work out: supporting potential start-up Tech Gründerfonds’ portfolio, our industry when sums are offered that significantly
partners is often closely tied to their own LPs have participated in 141 financing exceed the amount agreed for the call
target markets, and their enthusiasm rounds, while overall, we have seen 1,500 option.
quickly disappears when they are con- follow-up financing rounds (cf. graph). The opinions expressed here are those
fronted with too many uncertainties. There typically is a strategic element in of an investor and based on the HTGF
CVC investments. This is usually taken portfolio. What is true for good manage-
Investments by corporations – care of by the corporate venture worker ment is even more important for any
a “bear hug”? securing internal commitment before pur- exchange between start-ups and major
Recent developments in the corporate suing the potential investment any further. corporations: open and frank exchange
venture arena have resulted in more funds That can be advantageous – as long as the about expectations, and aligning all
in fund investments and more money flow- CVC acts like a “financial” investor, which parties with the common ultimate goal:
ing directly into start-ups with many cor- is the case more and more often. Winning the exit. Q
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“The IPO took BioNTech onto the
international stage”
Interview with Dr Sierk Pötting, BioNTech SE, and
Michael Motschmann, MIG Verwaltungs AG
BioNTech was essentially founded on a “green field” in 2008, with an initial investment of about EUR 150 million. Following two
further rounds of financing in 2018 and 2019 and a successful IPO at the Nasdaq in October 2019, the company currently
reports a market capitalisation of about EUR 8 billion. By the end of 2019, BioNTech employed 1,300 people.
was right and I accepted immediately.
At that time, BioNTech had about 320
employees.
What can entrepreneurs learn from
BioNTech’s success story?
Motschmann: The success of BioNTech is
based on a mixture of organic knowledge
and buy-and-build. We took the oppor-
tunity to acquire parts of the company
that were available at the right time which
we would otherwise have had to develop.
For example, we acquired EUFETS GmbH
located in Idar-Oberstein in 2009, allowing
Dr Sierk Pötting (le.): “The IPO was a logical consequence of our capital needs.”
us to engage in in-house production.
Furthermore, we purchased Berlin-based
Plattform Life Sciences: Your declared goal Based on a business plan, Thomas and JPT – Jerini Peptide Technologies, which
is individualising cancer treatment. How Andreas Strüngmann, together with the was immensely important for the diag-
far have you come? MIG funds, provided the company with a nostics division. It is not mandatory to
Pötting: By now, ten of our 20 product can- 90:10 ratio of an initial financing of EUR develop units yourself that are available at
didates are at the clinical trial stage. The 150 million. The underlying condition was a good or even attractive price. On the
next target is moving the first product the introduction of, amongst other things,
candidate into phase III this year. We are technologies and patents in coordination
making good progress. with university partners.
Can you remember your first steps in How did you come to join the company,
2008? Would you be able to outline Dr Pötting?
where the idea BioNTech came from and Pötting: I met Ugur Sahin in 2007, before
what the first steps were? the company was founded, and he asked if
Motschmann: We had met the researcher I would like to become the CEO of the com-
couple Ugur Sahin and Özlem Türeci pany he was intending to found. However,
earlier in 2006 during the financing for even though my heart really is in such
Ganymed. After the Strüngmann family projects, I was still looking to expand my ABOUT THE INTERVIEWEES
office and the MIG funds were invested in personal toolbox at that time. I am a physi- Dr Sierk Pötting has been Chief Financial
Ganymed, we continued talks with Ugur cist, I was working for McKinsey, and my Officer (CFO) of BioNTech SE since 2014.
Sahin about other business and product last project there was the Hexal-Sandoz Michael Motschmann has been a member
ideas. A presentation by Ugur Sahin, now merger in 2005. Afterwards, I worked of the supervisory board of BioNTech SE
CEO, on innovative technology and plat- for Sandoz-Novartis in Holzkirchen and since 2008 and is a board member of MIG
form approaches in oncology given to the the USA. In 2013, the chairman of the Verwaltungs AG that has been investing
Strüngmann family was the starting shot BioNTech supervisory board, Helmut into BioNTech through the MIG funds 7, 8,
for the founding of the BioNTech AG. Jeggle, contacted me again. The timing and 9 since 2008.
16 ls 01-2020 “Financing Life Sciences“Financing
other hand, this requires a certain amount
of financial backing that many young
companies do not have.
Pötting: We had a visionary founder with
an incredibly long-term strategic plan.
Thanks to his experience with Ganymed,
he knew that he would need an investor
with long-lasting intentions for his new
project. He created this basis with the
family office Strüngmann and the MIG
funds. He had confidence in his plan and
initiated the right steps and acquisitions
at the right time.
Motschmann: Moreover, Helmut Jeggle
from the family office Strüngmann consi-
Photo: © Nasdaq
derably contributed his know-how and
vast network to the strategy at a very
early stage. He was chairman of the super-
visory board from the first day on and is
also a founding investor. His contributions
to the strategy were significant, and he How far open were the doors of inves- immense amount of time and capital. That
was always available as a sparring partner tors in 2016? Some of the deals were is why dreams of a visionary like Ugur
for the team. The company developed a tickets worth a three-figure million Sahin can only be turned into reality with
clear financial plan. Even though EUR 150 amount, were they not? the freedom of action as a visionary
million is a large amount of money, it will Pötting: The stepping stone was the Genen- investor. You can only achieve that as a
run out eventually. One of the important tech partnering deal. It made us part of team, it’s impossible to do by yourself. A
decisions was finding the right partners at the right league and we became more smaller investor, just like the MIG funds,
the right time. visible on the US market. After that, we gets the opportunity to shape the success
were in-demand and the challenge was to story by becoming part of the project. But
How difficult was it to find partners convince potential investors in a series of we cannot finance the company from top
being a relatively unknown company? talks, or in other words to engage in inves- to bottom like a large family office can,
Pötting: When our platforms had reached tor education and investor relations. It because we neither have the necessary
a certain level of maturity in 2014, the was especially important to new investors capital nor do our statutes allow us to
search for partners started. Prior to that, that the Strüngmann family remained to invest in listed companies, for example.
we were in somewhat of a “stealth mode”. be clearly committed to the company. On Moreover, we are a venture capital inves-
We did not have a website, and occasio- the other hand, it was important to us that tor that invests into earlier, less capital-
nally sent out a press release, after an the investors had a long-term interest in intense stages. We, Athos and MIG, once
acquisition for example. We closed the advancing the products to the point at sold Ganymed as a whole as the capital
first collaboration deal – a TCR Discovery which they can be marketed, that their requirements of later clinical develop-
programme – with Eli Lilly in 2014. That mind-set matched ours, and that they are ment stages would have just become
was our break-through. Shortly after, we productive and constructive cooperation exorbitant.
started a collaboration with Genmab for partners.
bi-specific antibodies, and in the same year Motschmann: We wanted to still have the Success is not created on a drawing
with Sanofi for messenger RNA. The largest option of entering the capital markets at a board but is the result of hard work and
platform deal was the one with Genentech later stage. During the phase of contacting making the correct case-related decisions.
in 2016 for just over EUR 300 million. With and managing investors, board member What were matters the company
the exception of Eli Lilly, all these co-opera- Sean Marett, technically co-heading management and the consortium of
tions were cost sharing/profit sharing deals, Business Development, contributed consi- investors always agreed on, what
i.e. not licence agreements, and almost all of derably. All – back then three – board caused the most major discussions?
them were 50/50 deals. We definitely wanted members really did a superb job. Pötting: The most decisive discussions
to remain an equal partner because we were held in the supervisory board, the
believed in our technology – and that has What are the lessons learned for you as strategic body. Until three years ago, both
not changed. Our collaborators in the phar- an initial investor and original supervisory our supervisory board and management
maceutical industry are assisting us in board member? board had three members each. We
clinical development – they are true part- Motschmann: In light-hearted words I would discussed growth, investor basis, strategy,
nerships. There are, however, many more say: Make brilliant investment decisions and, if required, implemented decisions
product candidates that we develop with genius people. But it is actually not quickly. For example, when we discussed
independently. that simple. Biotechnology requires an the purchase of a production company,
01-2020 “Financing Life Sciences“ ls 17Financing
the decision was made almost immediately.
BioNTech SE (ISIN: US09075V1026)
We bought, restructured, and integrated
the company and thus were able to treat
our first own patient in our first clinical trial
an estimated one or two years earlier than
would have been the case if we had to use
an external service provider.
Motschmann: There is no blueprint for
biotech companies. The decisions that
must be made are highly individualised.
Everyone on the supervisory board,
meaning Christoph Huber, Helmut Jeggle,
and myself, can contribute something in
different areas. Dr Ulrich Wandschneider
has been supplementing the supervisory
board for three years now.
Pötting: Many questions arise for the first
time. For example, in our case it was the
filling of vaccines. Needless to say, we are
Quelle: Tai-Pan
talking to all large bottle filling compa-
nies, but if you are talking about quantities
of 20 millilitres, 90% of suppliers are ruled The IPO in the USA took place in autumn How have investors of the MIG funds
out. These may seem like trivial and already 2019. How satisfied have you been with been benefiting from the success of
answered questions, but you need to share price developments since then? BioNTech so far?
address these again if you are looking to in- Pötting: The IPO was a logical conse- Motschmann: By having a high increase
troduce entirely new treatment approaches quence of our capital needs. Eleven studies in value of our investments! For us,
to the market. and ten product candidates in clinical BioNTech is a great success story. There is
trials create an immense need for capital. hardly anything comparable in the
Looking back, what were the most The IPO in the USA brought BioNTech financing of European biotechs. It is my
important milestones for the company? onto the international stage and sign- task as member of the supervisory board
Motschmann: There is, of course, the seed ificantly increased our brand awareness. to serve the shareholders and to support
financing of EUR 150 million, giving us the Motschmann: The market dictates the the development of the company. The
security and peace of mind to develop a share prices, and is to be assessed by ana- decisions as to when investors will benefit
company under the radar and to appear lysts. We are satisfied with the direction from MIG funds are made by other people
once you are able to satisfy expectations. the company is heading. But it certainly is within MIG AG at a later point. I assume
Further milestones were the early vertical special to see a company listed on the that some investors of the MIG funds
strategy, scientific validation through market at this evaluation, eleven years have also invested into other companies
partnerships, and the first Nature publi- after it was founded. This is also true for via the stock market on the back of the
cation. Those were followed by BioNTech Germany as a business location, as we not enthusiasm for the company and its
signing seven collaboration agreements only have our headquarters in Mainz, but vision.
with big pharma, a series A round and an also sites in Munich, Idar-Oberstein, Berlin,
IPO. And in each clinical study, the first and now also in Halle. Additionally, we The share price has more than doubled
patient is always a major milestone. have a small office in San Diego. since the IPO. What further potential is
there for investors?
Motschmann: We definitely have to refer
you to analysts at this point. We cannot
and must not comment on share prices.
But I can tell you that we continue to
believe in the company and the enor-
mous potential it has. I am convinced
that BioNTech has the potential to
become a leading company in the onco-
logy sector.
Dr Pötting, Mr Motschmann, thank you
for the interesting interview. Q
Met for a stimulating discussion: Karin Hofelich (GoingPublic Media AG), Michael Motschmann (MIG Verwaltungs AG),
Dr Sierk Pötting (BioNTech SE) and Mathias Renz (GoingPublic Media AG). The interview was conducted by Mathias Renz.
18 ls 01-2020 “Financing Life Sciences“^ƉĞĂŬŝŶŐŽĨŚĞĂůƚŚLJ ŐƌŽǁƚŚ͘>Ğƚ͛ƐƚĂůŬ ĂďŽƵƚŽƵƌůŝĨĞ ƐĐŝĞŶĐĞƐĞdžƉĞƌƟƐĞ͘ ttt͘'^ͳDZ> Z͕>tz Z
Financing
Start-ups at the analytica 2020:
See and be seen
Innovative life sciences start-ups ready to present their new developments at
the analytica trade fair taking place from 19 to 22 October 2020 in Munich
For start-ups, the contact to customers, other manufacturers or investors can be equated to their life’s blood. Trade fairs are
a particularly good way to build up and maintain a vital business contact network. The analytica trade fair gives young
companies from the fields of medical technology, analytics, software and biotechnology an opportunity to present
themselves in the framework of its “start-up hour”, set up by GoingPublic Media AG. By Susanne Grödl
for personal contact with new, hitherto
unkown business ideas and especially
the people behind them. Quite often,
start-ups have a completely different and
more visionary way of tackling current
problems, which can also help medium-
sized enterprises or even huge corpora-
tions to overcome their own innovation
deficits. Especially the larger corpora-
Photo: © Messe München GmbH
tions are always interested in innovative
solutions they could combine with their
product portfolio.
It is not unusual for long-standing, fruit-
ful and also strategic partnerships to have
started from a simple handshake at a trade
fair. The chance to acquire patents is ano-
ther reason for established companies
S
tart-ups often use trade fairs as a establishing long-lasting connections and
marketing instrument. Young entre- creating trust still requires face-to-face
preneurs use them to enter the interaction. This also applies to analytica,
market and make important contacts. the world’s leading trade fair for labora-
Despite modern connectivity and media, tory technology, analysis and biotechnology,
which will take place from Monday,
19 October to Thursday, 22 October at the
START-UP HOUR TIMES AT THE ANALYTICA, Munich Fair Grounds. The fair offers young
BIOTECH FORUM, IN HALL A3: companies a chance to present their speci-
Tuesday, 20 October, fic products, services and applications to
from 3 p.m. to 4 p.m. a broad and international specialised ABOUT THE AUTHOR
Wednesday, 21 October, audience. This gathering of the biggest Susanne Grödl is project manager of the
from 1 p.m. to 2 p.m. names and brightest minds in the industry analytica trade fairs at Messe München
Thursday, 22 October, ensures that these start-ups do not waste GmbH. In this position, she is respon-
from 1:05 p.m. to 2:05 p.m. their efforts on idle chatter. sible for the leading international trade
You can find more information at Many experts taking part in trade fairs fair analytica in Munich and the leading
www.analytica.de/en/supporting-program/ do not only look for established and fami- regional trade fairs in China, India, Vietnam
focus-days-events/finance-days/ liar companies, but also consciously look and South Africa.
20 ls 01-2020 “Financing Life Sciences“You can also read
