Andera Partners is a leading European investment firm specializing in middle-market, growth and small-market private equity investments, as well as mezzanine debt, life sciences venture capital and energy transition infrastructure. It manages EUR 4.5 billion in assets for institutional and private investors.
What is the primary reason behind the ongoing challenges in the biotech funding environment?
The funding environment for biotech has been cyclical, with periods of more intense growth followed by more challenging times. Fifteen to twenty years ago, most new drugs came from the pharmaceutical industry, but today, biotech companies are responsible for 75% of new drug development. While the public market was more vibrant in the years following the pandemic, it has been more cautious recently. However, growth in biotech continues, and products are still being developed, although investors are now more selective. Despite this, the fundamental basis for the industry remains healthy, and the need for innovative products in biotech and medtech persists.
The cycles of funding and growth are nothing new, with M&As continuing to be a constant in the industry. The industry has seen dramatic changes, but many biotech and medtech companies continue to thrive. Although public market growth has slowed, there are still positive examples of companies going public and succeeding, even in tougher market conditions. The key to navigating these cycles is careful asset selection, which can lead to long-term success in the biotech field.
What is your criteria when picking a biotech to invest in?
Our approach to investing has not changed much despite the current challenges. We typically invest in companies at a preclinical or early preclinical development stage, carefully selecting from around 1,500 proposals each year. We make about five to six investments annually, so our process is highly selective. We balance our portfolio across different indications, stages, and geographical areas, focusing on both biotech and medtech. We look for assets that are not only innovative but have the potential to become real drug candidates or medical devices that can change patients' lives.
We take a medium to long-term approach when investing in private biotech companies. Our strategy includes keeping reserves to continue financing companies if needed. We aim to stay calm and focus on the right selections, not getting discouraged by short-term market fluctuations. While some areas, such as obesity, are heavily talked about, we ensure that our investments are diverse, with a mix of early and late-stage companies in different therapeutic areas like rare diseases, cardiology, and neurology.
Certain biotech companies seem to be focused exclusively on their science, potentially neglecting business strategy. What message would you like to send them?
If a team is inexperienced, early-stage funding can help bring their ideas and technologies forward. However, it is essential for the team to think about the product that will ultimately help patients. A balance between science and product development is crucial, and that is why early financing stages often bring in people with different expertise to complement the scientific team. Our role as investors is not just to provide funding, but to help craft the company by assembling a team of experts in science, development, IP, regulatory matters, and commercialization.
It is not enough to focus purely on science. The regulatory path for developing a drug is the same for biotech companies as it is for big pharma, and high hurdles exist to ensure patient safety. Successful biotech companies must combine science with a robust product development strategy. It is our job to help teams navigate these challenges and turn their innovations into marketable products. With experienced CEOs and teams, the naivety that may have once existed in early-stage companies is becoming less of an issue.
Is the absence of a capital markets union in Europe a major impediment for local biotechs?
While it is true that Europe does not have a Nasdaq-like capital market, that does not necessarily make it more difficult for biotech companies to succeed. Many European companies are successfully attracting American investors and collaborating with them to list on the Nasdaq when the time is right. The challenge is not a lack of capital but the absence of a single unified market. In Europe, we have experienced investors and large funds capable of raising significant amounts of money to support biotech companies, even in late-stage developments.
A good example is a recent case where we raised $200 million to support a Phase 2 epilepsy drug. Despite challenges, we were able to build the company and bring the drug to market within two years. This demonstrates that large funding rounds are possible in Europe, and companies can successfully secure financing. While the US has the advantage of a more developed capital market, Europe is still home to extremely innovative companies with strong entrepreneurial foundations, and I am optimistic about European biotech's future.
Do you believe Europe could become as strong in life sciences as the United States?
While the US currently leads in life sciences due to its established capital markets, Europe is making significant progress. Ten years ago, attempts like Euronext to create a strong capital market for biotech did not succeed as planned, primarily due to a lack of coverage and specialized investors. However, there are now large, capable funds in Europe that can raise substantial amounts for biotech ventures. I believe that, while Europe does not yet have a market like the Nasdaq, its biotech sector is thriving with very innovative companies, skilled entrepreneurs, and strong investment opportunities.
We are not waiting for a perfect capital union to emerge. Instead, we are focusing on creating successful companies with the help of experienced founders, managers, and investors. Europe's strength lies in its ability to innovate and foster collaboration, and I am confident that European biotech will continue to succeed and become even more competitive in the global market.
