In this episode of Conversations in Healthcare, Naveed Saddiqi from Novo Ventures discusses how their investment strategy involved during the pandemic.
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The life sciences sector has demonstrated how it can mobilize its resources to tackle the greatest healthcare challenges in recent history–a global pandemic. A key component of that effort has been the translation of brilliant ideas into clinically meaningful solutions.
A key catalyst in that translational process is the venture capital community that not only provides financial resources, but also network and management support to advance the development of new medicines and treatments. In collaboration with One Nucleus’ OnHelix conference, Mike Ward spoke with Naveed Saddiqi, a senior partner at Novo Ventures.
How does Novo Ventures fit into the Novo Nordisk Foundation ecosystem, and how does that differentiate you from other venture capital organizations when supporting life science companies?
Novo Ventures is an early- to late-stage venture investor, part of Novo Holdings. Novo Holdings is the holding company of Novo Nordisk.
We at the holding company level have about $75 billion of assets under management (AUM), of which 13 billion is dedicated to sort of specific direct life science investments. We are ourselves owned by the Novo Nordisk Foundation, which is one of the top life science foundations globally. It’s bigger than the Gates Foundation and bigger than the Wellcome Trust.
Our mandate at Novo Holdings is to generate for-profit activity and returns, which then can be invested in the not-for-profit by Novo Nordisk Foundation towards a very significant life science grant giving activities. They run between half a billion and a billion dollars of grant giving every year, as well as impact and social impact investing.
Within Novo Ventures, we have one of the oldest teams within Novo Holdings that has been investing in life sciences. We started about 20 years ago, and these days we’re investing between $400 to $500 million annually in life sciences. It makes us one of the top, most impactful investors in life sciences. We were investing principally in Europe and the United States and we’ve now just started activity in Asia as well.
In terms of the scope of the investments, we do both private investing and public investing. It makes it a little bit unusual compared to normal venture capital groups, because we have both activities within our team. There are different partners who focus on different aspects there, but we have four offices, one in Copenhagen, one in London, one in Boston and one in San Francisco. We’re pretty much covering, I would say, some very significant life science hotspots by having local offices there. We are a team of 26 with 20 investment professionals, all MDs, PhDs in that scope.
I’ll give you a sort of idea of the scope of the activity that we’re doing. This last year we invested 570 million of which we did 39 public company investments and 33 venture financings. We have an evergreen structure, and it’s also safe to say that we are a very significant player in the companies that are going public on NASDAQ. Last year we had nine companies that went public on NASDAQ from our private portfolio. We invested in six IPOs, and this year we already have had five companies go public on NASDAQ, and we’ve got a couple more coming down the pipe, just this quarter. This gives you a little bit of the overview of Novo Ventures and how it sort of sits in the ecosystem.
A lot of pharmaceutical companies have their own corporate venture capital activities, but it sounds like Novo Ventures is not a traditional corporate venture outfit. How would you differentiate yourself, for example, from M Ventures, which is Merck?
We are not a traditional corporate venture group, so we’re not strategic to Novo Nordisk activities. We are actually just a normal investment firm. Our mandate is to generate returns in life sciences for the Novo Nordisk Foundation. We are kind of area agnostic. We’re not tied to the strategic objectives of what Novo Nordisk is doing. We are a profit motive investor.
How has the pandemic impacted both the cadence of your investment activities and the focus on which assets you now look to support?
When this first arose, if we cast our minds back to last, late February, early March, as things were evolving and really hitting us. Everybody was a bit startled at the speed of the impact. Every week, we saw that for a little while there was a bit of a temporary cause in activity or slight reduction. Because of the type of investor we are – evergreen – and do both private and public investing, we took a very early decision that this was actually an opportunity for us to not slow down and to continue to invest through the cycle and be more active than ever. We ended up exceeding what we normally do, which is $400 to $500 million, with $570 million that we put away last year.
In terms of the rest of the market, it kind of caught up and the whole life science sector itself had a record year in terms of investors investing in the space. While the pandemic obviously had a very significant impact on all our lives and on society and economies in general, it really did shine a light on the importance of the sector to bringing solutions to the table at early-stage research, which resulted in companies like Moderna coming to the fore with vaccine solutions.
“While the pandemic obviously had a very significant impact on all our lives and on society and economies in general, it really did shine a light on the importance of the sector to bringing solutions to the table at early-stage research, which resulted in companies like Moderna coming to the fore with vaccine solutions.”
For us, it was really reaffirming the reason why we’re here, which is to bring innovation to the forefront so that it impacts society in general. There was never a better example of that than last year when the need for innovation and why we’re doing it was exemplified in our daily lives. We didn’t really slow down. The areas of change and focus of where we were investing, well, we did think about it. We had a sort of a view that there were certain areas that were going to result in more activity.For example, we invested in a company called Eargo in the United States which went public subsequently. This was a remote hearing aid company where you could get a hearing aid in your home, without having any interface with going to a shop or a specialist to see them. You could do it all virtually. That was a classic example where their business really boomed because of that type of activity.The other area was that, we were investors in MD Live, which is the second-largest telehealth company. They really came into their own last year with that scope of activity. As you know, you couldn’t go and see your doctor in the clinic. Telehealth really came back and they really grew, in fact, it resulted in an acquisition. We were able to sell the company this year to Cigna for a very profitable sale.
It did put a spotlight on antivirals and antifungals as well. Because again, this is an area that more recently after people had thought, okay, well, HCV seems to be in a good place. HIV, we seemed to have found solutions and people have sort of, the spotlight had gone away a little bit from this area, but antivirals came back again for us. We’ve been kind of looking there, antifungals, we were investors in a company called FTG, which deals with rare molds, which are firstly, severe fungal infections that can occur in the Intensive Treatment Unit (ITU) setting. Patients are very vulnerable. They cause high levels of mortality. It did put a focus back on certain areas, but we continued to invest quite across the board in oncology, auto-immune diseases, gastrointestinal (GI) diseases, across the board.
Have you been able to do some new things during the last two years?
Yes, of course it’s a consideration if you’ve never met a management team in person and you just have a virtual roadshow and a virtual diligence exercise, it’s not the same as an in-person meeting. But we adapted very, very quickly. In fact, we didn’t make that a barrier and it didn’t really stop us from investing. It is fair to say that those relationships where we had known companies before and have seen them before, they were placed at a little bit of an advantage because we had met them, we had had a bit of a history there.
By no means did it stop us still looking at those securities where we’d never met the team and we did make investments like that. We hired people in our team like that as well, who now we’re getting to meet them in person. They’re not just virtual pixels on a screen. Yes, I think we adapted, but there was a certain advantage if there had been a prior relationship.
The above is a partial transcript from this interview, additional questions discussed include:
- Are there any sweet spots for Novo Ventures? Are there any areas that either have been recently deprioritized or that you’re not that interested in?
- Could you explain what the whole investment process looks like?
- How often is your response to a pitch, “not just yet,” rather than “no?”
- What are the most interesting developments in life sciences research that excite you?
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