DUBLIN – Even by any normal measure of European biotechnology investment, the first two quarters of 2020 were memorable. If it maintains the present momentum, Europe’s drug development sector is on course for a record-breaking year, having already raised $5.034 billion in publicly disclosed equity investments. That puts it well ahead of any other year – the sector edged to a new high in 2019 when it raised $7.739 billion over the full 12 months – but, of course, comparisons with any other year seem irrelevant. This year is like no other. The COVID-19 pandemic has changed everything.
And yet, European biotechnology investing has not only held up – it has boomed. Deals continue to be done at a hectic pace. Instead of being signed in plush lawyers’ offices, transactions are being hatched and completed from spare bedrooms and home offices. Hours spent on Zoom and other conferencing apps have replaced miles logged on the road pitching to investors. Publicly listed firms have led the way in terms of fundraising, but privately held firms have also raised large amounts of cash. (See European Biotech Equity Funding H1 2018–2020)
The only weakness for European biotech has been the IPO market. No transactions were completed during Q1 2020. Only a handful of companies squeezed through the window in Q2 2020, most notably Lausanne, Switzerland-based antibody-drug conjugate developer ADC Therapeutics SA, which grossed $267 million on Nasdaq, including the overallotment option, and Stockholm-based specialty pharma firm Calliditas Therapeutics AB, which raised $81 million on Nasdaq and another $9 million in a concurrent private placement on Nasdaq Stockholm.
There are now two parallel biotech economies in Europe, as there are elsewhere. One comprises those firms that are in hot pursuit of COVID-19 opportunities in drug and vaccine development. The other consists of those who are still pursuing business as usual in these most unusual times. Both sectors are thriving.
The urgency of the pandemic has brought some new actors into play. Kreditanstalt für Wiederaufbau (KfW) is probably not a name that would readily trip off the tongue of most European biotech watchers. It is, in fact, an economic development bank, 80% owned by Germany’s federal government (Germany’s states hold the other 20%) , and it put down about $380 million in return for a 23% stake in privately held Tübingen-based Curevac AG, one of two German firms developing mRNA-based vaccines for COVID-19. It dwarfs every other private equity deal completed in Europe so far this year. (See Top 10 Follow-on Offerings & PIPEs January – June 2019)
KfW’s move, which followed €80 million (US$89.9 million) in funding commitments from the European Union, put a line under a rumored attempt by the U.S. administration to buy the company outright, in order to secure exclusively for the U.S. all of its future vaccine supply.
As the EU’s intervention demonstrates, equity is by no means the only instrument for funding COVID-19 development efforts. Governmental agencies, most prominently the U.S. Biomedical Advanced Research and Development Agency (BARDA), nongovernmental actors such as the Bill and Melinda Gates Foundation and Coalition for Epidemic Preparedness Innovations (CEPI), have directed much of their grant-making activities toward companies developing vaccines or therapeutics for COVID-19. Large pharmaceutical companies have also stepped in with licensing deals involving equity investment, up-front cash and future milestone payments. The debt markets are another important source of cash.
Mainz-based Biontech SE, another German firm at the forefront of mRNA-based COVID-19 vaccine development efforts, has availed of a mix of debt and equity investment from investors and its licensing partners, Pfizer Inc., of New York, and Shanghai Fosun Pharmaceutical Co. Ltd., to raise about $600 million in total since the middle of March. Its share price, although down from a mid-March peak of $92 when Pfizer came onboard, has trended steadily upward since it disclosed its COVID-19 vaccine development plans. The stock (NASDAQ:BNTX) closed at $30.88 on Feb. 7, when it withdrew plans to issue up to 6.9 million shares. It was changing hands for $66.74 at the end of June.
Perhaps no European company has benefited more from the COVID-19 halo effect than Avacta Group plc. The long unheralded Wetherby, U.K.-based firm is developing both therapeutics and diagnostics for COVID-19, based on its Affimer technology, which comprises small protein-based antibody mimics. The company’s share price (London:AVCT) has increased more than sevenfold since the start of the year.
Business as usual investments
None of those investments has come at the expense of non-COVID-19-related biotechnology. Europe’s “business-as-usual” sector is also thriving, and it continues to soak up the bulk of equity funding.
Argenx SE, of Breda, the Netherlands, set a new highwater mark for a follow-on offering by a publicly listed European firm, raising $863 million, including the overallotment option, on the back of positive data from a pivotal phase III trial of the anti-neonatal-Fc-receptor antibody fragment efgartigimod in generalized myasthenia gravis. It smashed the previous record of $575 million, which rare disease drug developer Ascendis A/S, of Hellerup, Denmark, raised last year. (See Top 10 European venture rounds in H1 2020)
Allschwil, Switzerland-based Idorsia Ltd., raised $342 million on the back of positive data from a phase III trial of its dual orexin receptor antagonist, daridorexant, in insomnia. Subsequent to the share offering, a second phase III trial also had a positive read-out, and Idorsia plans to use the proceeds to prepare for a commercial launch of the drug. Abingdon, U.K.-based Adaptimmune Therapeutics plc was actually the second highest fundraiser after Argenx, taking in $356 million across two transactions, thanks to growing investor confidence about the prospects of its engineered T-cell therapies in solid tumor indications.
Its sister company, Immunocore Ltd., also of Abingdon, which is developing engineered T-cell receptors, was the second highest private equity earner. Although the company has been slow to make progress with its initial pipeline of therapies, which previously attracted $320 million in series A funding in 2015 and a slew of large partnering deals, its $130 million B series round represents an act of faith on the part of its investors in its new management slate and in its technology.