1:15 PM
May 25, 2017
 |  BC Innovations  |  Finance

Europe’s translational springtime

Early stage successes move Europe toward a sustainable translational ecosystem

Editor's Note: This article was updated on Jun 14, 2017 at 11:58 AM PDT

European science is showing early signs of translational growth, with VCs increasingly shifting their focus to preclinical assets. But investors are concerned the region still doesn’t have the supply of management talent or funding it needs to take early stage companies through development, which is what it will take to really boost the ecosystem.

The onus is on players across the spectrum, including investors, entrepreneurs and academic leaders, to capitalize on the momentum.

The key is both to make sure the right companies get funded and that investors have the right expectations. That means culling newcos early, providing more than drip funding to enable the necessary experiments to be done, and creating incentives to attract seasoned management teams.

“We are actually getting there,” said Antoine Papiernik, partner at Sofinnova Partners. “There are companies being funded with the right amount of money to do an ambitious plan. But the valley of death isn’t there anymore, it’s in the later stages.”

Nine European investors, CEOs and academic leaders who spoke with BioCentury were unanimous that the shift to early stage investing is palpable, and reflects seeds of change among researchers, who are becoming more commercially minded.

However, several stumbling blocks can still halt progress.

While scientists are becoming more entrepreneurial, it remains a challenge to build robust teams of experienced management.

According to François Thomas, president and managing partner of INSERM Transfer Initiative (ITI), more people in France are now inclined to start their own company rather than join a large one like Sanofi. “There’s a change in mentality,” he told BioCentury. “What could be an issue is that there’s a dearth of seasoned biotech executives and serial entrepreneurs -- there are not crowds of people you can find.”

At this year’s BioEquity Europe panel on translational science, Novo Seeds partner Stephan Christgau said he worries about the “legions of walking-dead companies” in Europe, which continue to exist because of a reluctance to kill projects and companies when needed. The problem is that the flood of moribund companies can turn off overseas investors, who need to expend extra effort picking out the jewels worth investing in. Novo Seeds is the early investment arm of Novo A/S.

Christgau told BioCentury another issue is that while he welcomes the influx of money for early assets, the expectations aren’t always properly aligned. He said funds that shift from late to early often bring the wrong set of priorities and the wrong talent base. “A management team for a Phase II isn’t always relevant to early stage,” he said.

Still, several initiatives are under way to boost those skills and create structures that foster interactions between industry scientists and entrepreneurial-minded academics. Their task is to create a new crop of companies that are not only based on innovative science -- a factor most agree Europe continues to produce in abundance -- but that can compete globally in a commercial setting.

“The real challenge for Europe is that pre- or even post-IPO, those companies are not in the same condition as their U.S. counterparts,” said Papiernik. “That’s much more difficult to crack, because it’s not just about the private venture money in there; it’s also about a whole ecosystem. And that’s going to take more time to solve.

“There are companies being funded with the right amount of money to do an ambitious plan. But the valley of death isn’t there anymore, it’s in the later stages.”

Antoine Papiernik, Sofinnova Partners



Early birds

BioCentury’s analysis of 2016 financing for European biotech shows VC funding for preclinical stage companies reached just over $1 billion in 2016, an 81% increase over the $554.7 million spent in 2015.

And while 40% of that was for series B and series C financing -- including $111.5 million raised in 2016 tranches of the $142 million B round for CRISPR Therapeutics AG and $100 million C round for Kymab Group Ltd. -- $393 million went to seed and series A to get new companies off the ground. The remaining $184.3 million was for undisclosed rounds.

The number of companies receiving funding rose 17% from 47 in 2015 to 55 in 2016, and the average amount raised per company increased from $11.8 million to $18.3 million (see “Preclinical Company Financings”).

But European preclinical companies also started to pull in some of the high-level financings that have been making a mark in the U.S. The top four companies in 2016 were higher than the top company in 2015, and five exceeded $50 million.

Behind CRISPR Therapeutics’ and Kymab’s rounds were a $95 million series A for Irish newco Carrick Therapeutics Ltd., an $85.7 million series C for Mission Therapeutics Ltd. and a $55.5 million series B for Autolus Ltd., all of which are cancer companies.

At least 12 early stage companies in the U.S. raised over $50 million in a funding round during 2016; three more raised $50 million.

CRISPR Therapeutics also led the European league in 2015, raising $58.5 million in series A and B rounds.

The focus on preclinical science continues the rise documented in last year’s European Translation Report, which showed more than $930 million raised by European investment funds between May 2014 and November 2015 for commercializing academic discoveries.

“Pharma decided that they’re very interested in buying this research; therefore that research is valuable.”

Antoine Papiernik, Sofinnova Partners


According to Papiernik, the trend is playing out in both the U.S. and Europe, and is partly the result of pharmas’ move to import innovation, which has prompted private investors to follow suit.

“Pharma decided that they’re very interested in buying this research; therefore, that research is valuable,” he told BioCentury.

Last year, BioCentury Innovations documented 15 funds dedicated to academic innovations, including four -- Apollo Therapeutics Fund, UCL Technology Fund, V-BIO Ventures Fund 1 and Oxford Sciences Innovations plc -- established in the...

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