Venture backed biopharmas garner some of the biggest PE investments in Q4, study

By Gareth Macdonald

- Last updated on GMT

Related tags Finance

Are private equity firms hot for biopharma?
Are private equity firms hot for biopharma?
Two venture capital-backed biopharma firms were among the top five investments by European private equity funds in Q4 according to analysis by Dow Jones.

Ganymed Pharmaceuticals, which develops mAbs for cancers and infectious diseases, and protein-based therapeutics firm Covagen joined Spotify, Zalora and Intelligent Energy on the top five list of private equity investments, receiving €45m and €34m, respectively.

Germany-based Ganymead announced that existing investors had stumped up additional funding in November, explaining that the money will help it prepare for Phase III trials of its throat cancer treatment – IMAB362 – and fund development of a companion diagnostic.

Similarly, in December, Covagen reported that exiting investors – including the Novartis Venture Fund – and new backers had given it the cash to take a candidate rheumatoid arthritis antibody – COVA322 – into clinical trials.

And last month Covagen – whose antibodies are bi- and tri-specific molecules made using its FynomAB platform - announced that Baxter Ventures had also joined the financing round, which now stands at around €44m.

For the uninitiated, a private equity (PE) fund invests in private or public companies. Venture capital (VC) investment is a subset of private equity that is usually attracted by start-ups thought to have a good idea, but deemed too much of a risk by other investors.

While it is true that VCs and PEs have differing strategies – some invest for the long term and others only keep their holding for a few years – the overriding aim is to generate profit for the individuals and organisations that have contributed to the fund.

Healthcare investment up

Dow Jones declined to comment when asked whether PE firms are starting to see biopharma as increasingly attractive, but did say that such firms invested more in VC-backed biopharma firms last year than they did in 2012.

Data provided by Dow Jones.

In other industries​ an influx of PE investment is often seen as an indication that the funds involved expect signigicant growth in the medium term. However, it is usually also accompanied by concerns that investment from such organisations may only last for a few years.

Whether this pattern is repeated by the PE investors in the two European biopharmas remains to be seen. Both have been backed by organisations that have other healthcare interests - the Strungmann Group owned ATS Beteiligungsverwaltung GmbH - which invested in Ganymead - and Baxter and Novartis, which stumped up for Covagen. 

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