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Sofinnova Closes $312M 7th Fund; Bets on Life Sciences

By Cormac Sheridan
Staff Writer

Europe's cash-starved biotechnology sector has another €240 million (US$312 million) to aim for, following Sofinnova Partners' successful closing of its seventh fund.

For the first time, Paris-based Sofinnova is focusing exclusively on life sciences, having previously invested more than a quarter of its capital, including its €260 million sixth fund, in IT.

"Life sciences is what has provided most of the returns at Sofinnova over a long period of time, across all of the funds," managing partner, Antoine Papiernik, told BioWorld International.

Even so, raising the cash was difficult. "Venture is bad enough as a swear word. Life science is worse," Papiernik said. Add the word "Europe," and the proposition becomes even more difficult to sell.

Nevertheless, Sofinnova Partners' track record at making money got the fund over the line. Over the past 23 years, its compounded annual rate of return on life sciences investments has run at 15 percent. "Not many people can say that," Papiernik said.

Its recent exits include device company Corevalve, which was sold to Medtronic Inc., for up to $850 million; antibiotic developer Novexel SA, which was sold to AstraZeneca plc for up to $505 million; gastrointestinal disease specialist Movetis NV, which Shire plc acquired for €428 million; ophthalmology drug developer Fovea Pharmaceuticals SA, which Sanofi SA acquired for up to €370 million; and women's reproductive health specialist PregLem SA, sold to Gedeon Richter Nyrt for up to CHF445 million (US$477 million).

Collectively, those transactions represent a combined enterprise value of $3.6 billion. "No one made more money than us on those deals," Papiernik said.

The fund will continue doing what it has always done, while taking account of the shifts in the industry landscape. Europe will remain its principal geographical focus and will account for about two-thirds of its investments. The U.S. will account for most of the remainder.

The fund will invest in between 15 and 20 companies. Its average will be €15 million to €20 million per company, although not all firms will necessarily receive that amount. It will continue to focus on early stage investments. "We typically are a Series A investor, and we will remain a Series A investor," Papiernik said.

However, those investments can involve big pharma spinouts – a feature of European drug development – as well as classical start-ups and newly formed companies emerging from restructuring events. Novexel, Movetis and PregLem all had their roots in the pharmaceutical industry. Their relative maturity can offer faster exits than innovative platform companies, Papiernik said.

Papiernik characterized the current realignment in drug development as a division of labor. A distributed sector of small companies, all of which need capital, will be responsible for early stage research and development, and big pharma will do late-stage development and commercialization. It will not return to early stage research, with large R&D facilities. "They've been there, done that and changed their mind – and rightly so," he said.

Building large biotechnology companies with large R&D organizations is also a thing of the past. "This model is gone, and those with that model are gone," Papiernik said.

People remain at the core of its investment philosophy. "One thing that works for us and is difficult to let go of is we back entrepreneurs. We don't back assets," he said, citing Actelion Ltd., of Allschwil, Switzerland, as one example. "We saw a great team, and that team performed. We can see those examples again and again."

Big pharma will remain the obvious exit route for most investments, although it will also look to the public equity markets on a tactical rather than a strategic basis. "I absolutely believe big pharma will be there for our compounds and our companies because they absolutely need to be," Papiernik said.