Innovation and Investment: Challenge and Opportunity for European Biopharma
A report from Biocom AG, the Berlin-based consultants and market analysts, shows that publicly listed European biotechnology firms raised a record €6.26 billion (US$6.8 billion) in IPOs and follow-on offerings during 2015. That’s an impressive 82 percent increase over the €3.44 billion raised in 2014.
It also shows that the European sector – at least the publicly listed part of it – has become increasingly globalized in its ability to access capital. The Biocom report notes how critical Nasdaq has become in the equation, for example. The 25 Nasdaq-listed companies – or 13 percent of the 191 European firms that Biocom tracked – raised €2.01 billion, or 32 percent of the money.
What does that mean for the biopharma sector in Europe? How can the industry maintain that level of success in generating cash, if not exceed it?
The answer, no doubt, lies in the imperative introduced above: innovation.
For European biotech, investing the capital it has raised in delivering therapeutic innovation to the market and to patients represents the best way of sustaining that flow of capital – and, maybe, of attracting more attention from home-grown European investors in the process.
Here are some of the European IPO and follow-on class of 2015, with the amount raised in U.S. dollars: Advanced Accelerator Applications SA, which garnered US$75 million, Oasima Pharmaceutical AB (US$9.5 million), Nabriva Therapeutics AG ($92.25 million), Celyad SA (US$100.1 million), Biotie Therapies Oyj (US$56 million), Summit Therapeutics plc (US$34.2 million) and Ascendis Pharma A/S (US$108 million).
Some of the biggest money was raised by these companies, which have set themselves apart in hot markets, a dynamic keenly recognized by investors:
- Cellectis SA – The French company raised US$228 million and already has several pharma deals in the works for its approach in the red-hot chimeric antigen receptor T-cell, or CAR-T, space.
- Galapagos NV – Based in Mechelen, Belgium, Galapagos attracted $US210 million and has become one of the hottest tickets in European biotech since unveiling positive phase IIb rheumatoid arthritis data for its selective Janus kinase 1 (JAK 1) inhibitor filgotinib (formerly GPLG0634) in early 2015.
- Adaptimmune plc – One of the leading companies in the sizzling cancer immunotherapy space, Adaptimmune, of Abingdon, UK, has focused on advancing candidates based on its T-cell receptor (TCR) platform. The company brought in US$191.25 million.
One quoted Sara Nunez Garcia, a senior associate at Sofinnova Partners in Paris, one of the biggest and most active European venture capital firms. Garcia was among the speakers on a financing panel at the Biofit conference in Strasbourg, France, in December (see Dos and Don’ts of Early Stage Investing, Partnering May Vary by Continent).
Sofinnova is open to early stage investments, Garcia told delegates, and makes six or seven per fund. "About half of them graduate to a series A round," she said. The main weakness she sees in many opportunities is a lack of a clearly defined clinical development or regulatory path. The preclinical end is usually "OK,” she added, although that could be better, too.
Science or technology that fails to measure up, along with untested leadership, make for sure-fire deal-killers in the venture capital world, noted Jay Lichter, managing partner with Avalon Ventures in San Diego, in the other Life Sciences Connect piece (Science, Management, Indication? Why VCs Might Say No to Your Deal).
Lichter said he always looks for first-in-class compounds. "I'm pretty much not interested in the fast-follower strategy," he said. "You don't get the pricing you need. You might be able to get some benefit from the product that's ahead of you, if it's in the same mechanism [of action]. You'd have some comfort that a phase II trial would likely work out. But if you're third or fourth on the market, your market share is going to be 10 percent or less, 5 percent."
He pointed to a recent pitch in the platelets/coagulation space. "There are plenty of products out there that people use all the time, and this guy comes up with an idea that's 7 percent better," he said. "I'm not going to spend time and money on incremental improvements on existing medicines."
And there is the challenge: How do companies get on Biocom’s list of top European IPOs for 2016? How do they ensure their preclinical work is better than “OK,” that their clinical and regulatory paths are well defined and that their focus is beyond incremental so that their assets attract the attention of biopharma investors like Sofinnova and Avalon? How do they ensure they have the right target, the right drug, the right translation to be “first-in-class”?
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