DUBLIN – Forbion Capital Partners closed its third co-investment fund at €75 million ($85 million), with the cash earmarked for up to six pre-selected, late-stage portfolio firms in need of growth capital before an exit.
The new fund is tied to Forbion's Capital Fund II, which it closed in July 2010 at €136 million. It is still raising funds for the Forbion Capital Fund III, which had a first closing last year at €92 million.
Three companies have already received cash from the new co-invest fund, including cardiovascular drug developer Dezima Pharma (Naarden, the Netherlands), mobile diabetes management specialist Cellnovo Group (Swansea, UK), which took in €31.6 million in an IPO on Euronext Paris in July, and Exosome Diagnostics (Cambridge, Mass.).
The structured co-funding activity has been a feature of Forbion's investment approach since the firm, based in Naarden, the Netherlands, was spun out of ABN Amro bank in early 2007. The first two co-investment funds raised €54 million and $50 million. Founding investor Coller Capital, of London, acquired co-investment rights initially, and, following some early successes, that option was extended to other Forbion investors. "This co-investment concept is something that is in high demand with our investor base," Forbion managing partner Sander Slootweg told Medical Device Daily.
Investors gain additional equity in companies that are already well known to Forbion's investment team and that are nearing a potential IPO or trade sale. The usual duds that populate any VC's portfolio are screened out.
Other firms that have received cash from earlier co-investment funds include Amsterdam-based Uniqure and Biovex , pioneers, respectively, of gene therapy and oncolytic viral therapy. Uniqure then raised $180 million in an IPO and follow-on offering on Nasdaq, while Amgen (Thousand Oaks, Calif.), acquired Biovex in a trade sale worth up to $1 billion – that deal was vindicated in April, when its melanoma therapy T-vec (talimogene laherparepvec) received a favorable 22–1 vote from an FDA advisory committee.
The movement of European companies and assets across the Atlantic is nothing new to European investors, but it is now being accompanied by the movement of American money in the opposite direction. U.S. investors are increasingly becoming active players in funding European biotech – through Nasdaq, through venture capital investing and through investing in companies quoted on European exchanges. That support is having a positive impact on the investment climate.
"My sense is it has improved, and it will improve further," Slootweg said. Valuations of privately held U.S. firms are now a function of the public markets, whereas in Europe, the scarcity of capital is still the overriding factor.
Although the U.S. remains the outright leader in terms of developing "unicorns," or companies with valuations north of $1 billion, Europe is a good market to be in from a venture capital standpoint. "There are really very good quality European companies," Slootweg said. And there is still less cash chasing attractive assets in Europe than in the U.S. "We like to look at the ratio of fundable companies to active VCs," he said.
Deal flow "is more substantial than ever," Slootweg said. The emergence of large investment funds such as Oxford, UK-based Woodford Patient Capital Trust plc and Dublin-based Malin Corp. plc, both of which invest large amounts in private and public firms, has not created a new form of competition for deals. "It's an interesting niche, but it's more an outlier if one considers the overall investment space in Europe," Slootweg said.
From a macroeconomic standpoint, the intermittent jitters in the Eurozone has had an impact on some American investors. "It's affecting our ability to raise funds as a Euro-denominated VC," Slootweg said. On the other hand, the European Central Bank's quantitative easing program, which has weakened the Euro on foreign exchange markets, works in favor of European VCs. //