LONDON – One of Europe's leading medical institutes, the Karolinska in Sweden, has secured $128 million for its spin-out companies from Thailand's Charoen Pokphand Group (CP Group), in an unprecedented investment by an Asian company in European university technology.

Under the deal, transacted by the institute's technology commercialization arm, Karolinska Development AB, Chia Tai Medicines Holding Ltd., part of CP Group, has made a commitment to co-invest up to $100 million in existing and future Karolinska portfolio companies, with the first investment expected to complete in early 2015 and the full amount to be invested within five years.

In addition, CP Group's Chinese subsidiary Sino Biopharmaceutical Ltd. will make an immediate investment of $8.5 million in Karolinska Development shares, for 9.1 percent of the equity.

Following this investment, Karolinska Development will seek shareholders' permission to issue convertible bonds worth $54 million, of which another CP Group company, Chia Tai Resources Ltd., has agreed to take up $20 million, subject to conditions.

"This is an unprecedented deal that will pave the way for innovation and to transfer that innovation to Asia," said Bo Jesper Hansen, chairman of Karolinska Development. "Our contact surfaces with the Asian pharmaceutical industry will increase, which is of great importance in our mission of bringing innovative developments into this rapidly growing part of the world," he said.

"We are bringing in a partner who shares our long-term view of innovation. They will support Karolinska Development and also the individual portfolio companies in which they become co-investors," Hansen told BioWorld Asia.

The deal builds on an existing research agreement with CP Group and the Karolinska Institute. Tse Ping, vice chair of CP Group, said he is "very excited" by the prolific pipeline of research emerging from the medical school and "fully committed" to a long-term strategic relationship with Karolinska Development.

The only other European University to have secured such a large investment for its portfolio companies is Imperial College London. Its technology commercialization arm, Imperial Innovations plc has raised £346 million (US$552 million) since going public in 2006. Imperial Innovations also invests in intellectual property arising in other UK universities.

Hansen must now secure agreement from shareholders at an extraordinary general meeting to the issue the convertible bonds, and to take up the $24 million of bonds that remain after Chia Tai Medicines' allocation.

"It's my expectation it will be approved, but there's no guarantee," Hansen said.

The deal with CP Group has taken some time to complete and has evidently led to internal discord at Karolinska Development, with the then CEO Torbjörn Bjerke leaving the company at the end of September, and board member Klaus Wilgenbus taking up the post of acting CEO.

Hansen commented at the time of Bjerke's resignation that Karolinska Development needed, "To change the governance structure of the portfolio companies and develop a new, more stringent investment strategy."

That strategy, presented to Stockholm, Sweden-based Karolinska Development's shareholders on Oct. 21 will see the company balancing longer-term investments in orphan drugs against investments in companies that have entered third party agreements or have marketed products, where Karolinska Development can expect shorter-term exits.

Karolinska Development also undertook to be more actively involved as an investor and to broaden access to capital by seeking syndicated financing with other life science investors.

Hansen said the investment by CP Group should not be read as an inability to raise money closer to home, but as a strategic long-term partnership that will enable Karolinska Development to put money into products that address global unmet medical needs.

Products of interest to Asian markets will be added to Sino Biopharmaceutical's existing portfolio of modern Chinese medicines and conventional pharmaceuticals.

Hansen hopes the investment by such a prominent Asian company will both attract existing shareholders to subscribe to the bond issue and also provide validation to leverage in money from other U.S. and European investment firms.

Chia Tai Medicines Holding Ltd. has taken a snapshot overview of the Karolinska Development portfolio, which currently includes 33 programs, of which 16 are in clinical development, some platform technologies and a number of medical devices.

"They are now doing diligence to get full insight and will make their own valuations," Hansen said.

Sino Biopharmaceutical bought the $8.5 million of Karolinska Development shares in the private placing at SEK13 per share, which is 4.4 percent lower than the share price at the closing of NASDAQ OMX Stockholm on Nov. 4, 2014, and 10.7 percent higher than the average price from Oct. 8 to Nov. 4, 2014. Hansen said that SEK13 per share was an 80 percent premium to the price when the two companies began their discussions.

Karolinska Development shares (KDEV.ST) rose by 18 percent to SEK16.10 after the CP Group investment was announced on Nov. 5, 2014.