DUBLIN – Truffle Capital closed off its fifth Biomedtech fund with a €250 million (US$279 million) raise, which it will deploy in about a dozen companies located mainly in France. The fund took a little longer to close than originally planned but it is significantly larger than it had originally intended. “Our initial objective was €200 million,” Truffle Capital CEO and co-founder Philippe Pouletty told BioWorld.
The cash came from private sources. Unlike many European funds it did not obtain any funding from the European Investment Bank, which can limit a fund’s flexibility. Some €40 million of the total came from two Asian investors, located in China and Thailand. It plans to maintain a 70:30 split between med-tech and biotech investments. This is driven in part by investment-horizon considerations. “Drug development takes a little longer than devices,” Pouletty said. With a 10-year fund duration, too many biotech investments could create an exit pile-up.
The relative dearth of venture capital for med tech is an additional consideration and allows Truffle to source innovations from the top tier of U.S. and European universities. About 60% of the intellectual property it licenses comes from the U.S., Pouletty said, but the fund is continuing its longstanding practice of building companies in France, where it can avail of a supportive ecosystem with nondilutive funding to support innovation.
For example, Paris-based Holistick Medical is commercializing technology that originated in Boston. It is developing a closure device for tissue defects, which involves the minimally invasive delivery of an adhesive patch which is cured or fixed with ultraviolet light. The company is applying the technology to the repair of Patent Foramen Ovale, a defect in the septum that divides the atria in the heart.
In addition to the U.S., France, Switzerland and the U.K. are among its top sources of innovation. But IP negotiations are still much faster and more efficient in the U.S., said Pouletty. The IP to the Holistick technology was held across four Boston institutions, including Harvard University, Brigham’s and Women’s Hospital, MIT and Boston Children’s Hospital. Yet the whole process “took 92 days with Christmas in between,” Pouletty said. It helped that the four stakeholders nominated a single body with the mandate to conduct license negotiations. “I wish the CNRS [Centre national de la recherche scientifique] and the European Universities had the same result-oriented efficiency, which is not always the case,” he said.
Truffle’s investment approach allows it to retain a majority stake in the ventures it backs, often all the way through to an exit. “We are not that interested in syndication,” Pouletty said. “We like to be the only investors for many years.” That allows it to retain more value. “If you syndicate too early, when things do not go well, you can say you were not the only stupid investor in town,” he joked. “If things go well, you end up with 5% of the company.” Four and half years after Abivax SA’s IPO, for example, it still retains a 46% stake in the Paris-based drug developer. Truffle’s €35 million investment is now valued at about €94 million.
IPOs are a rarity, however, and trade sales continue to represent the most obvious exit route. Obtaining a listing on Euronext can be problematic. The IPO stage is not the issue, he said. “When it becomes complicated is the secondary offering.” Many Euronext investors expect a generous discount at that point. “That’s a big flaw,” Pouletty said.
Truffle’s preferred domains in which to invest are clearly defined. “In med tech, it’s exclusively interventional medicine,” Pouletty said. It steers clear of diagnostics and imaging technologies that do not have a therapeutic effect. Complex prostheses, microrobotics, minimally invasive devices, AI and interventional imaging are all on the list. In biotech, its preference is for immunology. “That’s where our expertise lies,” he said. Because Truffle is invariably the sole investor in a company, it can appoint industry and clinical experts to the board, and it can exert a level of control that most venture capital investors do not have. That is in keeping with its high-engagement style of investing.
The present fund had a first close of $102 million early last year, at which point it had already invested in three firms, Holistick Medical, as well as Artedrone, which is developing microrobotic technology for minimally invasive treatment of brain lesions arising from stroke and aneurysms, and Skinosive (formerly Nanosive), which is developing technology sourced from Yale University for encapsulating active ingredients within polymers with strong adhesive properties.
It has since added two more firms to its portfolio. Bariatek is attempting to recapitulate the effects of bariatric surgery with minimally invasive devices that can be endoscopically implanted. PKMed is developing a bioactive implants that allow for the long-term delivering of therapeutic payloads or devices.
For small companies, developing disruptive technologies is actually a lower-risk strategy, because they at least offer the opportunity of high impact and high reimbursement. “We don’t want marginal innovation,” Pouletty said.