Life Sciences Outlook 2012 Dutch biotech companies ... - NautaDutilh

“We also have ourselves to blame,” says a partner
of one such fund. “In the past decade, returns on
investments in European life sciences or biotech have
just not been good enough. The top funds have done
well, but on average it has been a loss-making affair.”
Big Pharma steps in
Another increasingly active class of investors in
biotech companies are the corporate venture capital
arms of Big Pharma. 8 Their importance is illustrated
by the fact that, in 2010, 12 of the 20 largest venture
Some VC firms respond by differentiating their funds’
strategies in order to better match their investors’
preferences. Whereas in the past venture funds that
invested in both ICT and biotech were common,
today we see specialized funds (sometimes even
within a single VC firm) that invest in just one type of
company, e.g. only privately owned, only late-stage,
or only early-stage companies, and even funds that
invest only in publicly listed companies.
The void left by institutional investors and the venture
capital funds they back has been filled, to some
extent, by the emergence of new types of investors
in life sciences. Family offices and informal investors
(‘business angels’), though professional, are not
driven solely by returns on their investments, but may
also be attracted to biotech’s promises of significant
benefits for humankind. Investments from charities
such as the Bill & Melinda Gates Foundation and the
Michael J. Fox Foundation for Parkinson’s Research 7
can also be quite substantial.
rounds included a corporate venture investor. 9
This trend is in line with Big Pharma’s strategy of
outsourcing larger parts of its research and earlystage
development efforts in order to address the
overall decline of its R&D productivity. “R&D in startup
biotechs is done by people who are very focused
and driven; the survival of their company depends on
their achievements. That gives very different results
than you get from researchers in Big Pharma whose
job is relatively secure, and who need to operate in
a bureaucratic environment where decision making
is slow and subject to corporate politics,” says one
interviewee. Indeed, the primary mandate of some
corporate VC funds is to invest ‘strategically’
(i.e. in line with corporate strategy), rather than to
‘just’ generate financial returns.
However, this does not mean that corporate VCs
stake a claim to and are able to control the destiny
of every biotech company in which they invest.
Usually, they invest alongside ‘traditional’ VCs,
sometimes even together with the VC fund of one
of their competitors. Of course the participation of
multiple strategic players early in the game creates
some challenges in relation to the company’s future
destination. Some ‘traditional’ VCs only want to let
corporate VCs participate if there are at least two of
those, in order to maintain competitive pressure and
7) See: http://www.tobbb.com/content/nieuws/2012_04_17_to-bbb_receives_michael_j_fox_foundation_funding_for_parkinsons_disease_
research.pdf
8) Another way in which Big Pharma invests in biotech is through ‘traditional’ VCs. See for example: ‘Index Ventures Launches New €150m Life
Sciences Fund, with Investments from Two Leading Pharma Companies alongside Existing Anchor Limited Partners’; http://www.indexventures.
com/news#news/index/news_id/321
9) Ernst & Young: ‘Beyond borders - Global biotechnology outlook 2011’, p.66.
Life Sciences Outlook 2012 Dutch biotech companies: from start-up to exit
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