Latest / BioSpace / Inside Germany’s biotech capital infrastructure and innovation engine
Transcript
- speaker-0: Hi, my name is Jennifer Smith-Parker, Director of Insights at Biospace, and you're listening to Denatured. In this episode, you'll be hearing from Regina Hoditz, Managing Director at Angelini Ventures, and Sophia Ianadou, VC partner at Endera Life Sciences, as they explore Germany's biotech and life sciences ecosystem. They discuss the science, infrastructure, and policy changes needed to help European companies scale globally while staying rooted in Europe. Hi Regina and hi Sophia and thank you so much for joining this episode of Denatured where we're going to be digging into Germany's biotech, healthcare landscape, life sciences and trying to understand better about its correlation to the rest of the European investment community. So I appreciate you both being on here and if you can introduce yourselves that would be great. So Regina we'll start with you. speaker-2: Thank you very much, for actually having us on the podcast. Germany is an area that's very important to me. I've been actually investing from here for the last 25 years, initially for German Biohauthaus, then for Atlas Venture, also partly being based out of London. Then coming back to Germany to help build what's now Wellington Partners Life Sciences. From there, transitioning to support Angelini Ventures, also out of our Munich office that I'm heading here. to do investments on the biotech stage. Latest investment from Angelini Venture Society is a radio farm company here in Munich called Nuclideo. speaker-0: Perfect. Sophia, go ahead and take it away. speaker-1: Thank you very much Jennifer for the invitation to this podcast. I'm very pleased to be here. So I'm Sofia Ioannidou. I'm a partner with Andera Life Sciences. Andera Life Sciences is a VC investing in biotech and medtech from early to late stage across Europe and also a bit in the US. And for us as well, Germany is a very important geography. We've been investing since inception of the activity 25 years ago. up until today and we're going to talk about examples in this podcast. speaker-0: Exactly. So thank you so much, both of you. Great introductions. So both of you invest heavily in European life science, but what makes Germany such an important part of the continent's innovation engine right now? Yeah. speaker-2: I think can start with that. think Germany has always been really, really important in the innovation ecosystem in Europe. And this is not only because it's just the German speaking region is the largest single language region that we actually do have in Germany. But also in Germany, what we actually do have is you have several academic centers that are linked to hospitals. And we've also seen in the first wave of biotechs already in the 1997 to 2000s that that link could always been exploited very well. And on top of that, a lot of the groundbreaking science comes from the German speaking region. So that goes back to nucleotide based chemistry leading to drugs with companies like Ribofarma that ended up in an island company that Atlas Venture was investing in. And that actually took over the German entity and several other nucleotide based drug companies, even predating that an investment I did in the late 90s. basically what ended up being silenced therapeutics or Regontex. So this is definitely be a stronghold. But also if you go to antibody engineering company that both Zanderra and us were involved with like U3 Pharma here in Munich was based not only on kind of the inside of axol-o-ric into the receptor space around the EGFR and her two has three receptors, but also very, very strong antibody engineering skills that after the acquisition of U3 Pharma actually ended up. being the backbone of what's now Daichi's franchise around the ADCs. so also leading to gene editing that was actually developed between Vienna and Berlin. So again, there are several companies in the space. One of the ones that I had the pleasure to help building is seamless therapeutics actually in Dresden. So there are several fields and Sophia has a couple of other themes that I haven't touched on. But I just think the link between science and clinic. and also very good startup funding has certainly helped. speaker-1: Yes, totally agree with what Regina said. I think that I would add the fact that Germany also has a tradition in some more established players also in pharma, but also medtech. So we can talk about Mark KGAA, Beringer, Bayer, but also on the medtech side with Siemens, Helkineers, V. Brown, Frezenius. So there is a tradition also in. industry for more established players and also infrastructure in terms of clinical trials and also manufacturing CRO CDMOs that helps this industry flourish. So adding to the science component that Regina well explained, there's also infrastructure and an industry tradition that helps the ecosystem develop. speaker-0: when we had our first conversation unit comes up repeatedly as a major hub. So what specifically makes it such a strong place to source, build, and scale life science companies? speaker-1: I'll start on this one and Regina, feel free to chip in. But it's a lot of the elements that we mentioned in the first question. So first of all, science coming from leading universities and research institutes like the IMU, the TUM, Max Planck, biotech centers like the EasyB in Martins Reed, where companies like ⁓ Tubulus and Siron from our portfolio company, from our portfolio are located. Also. Meta companies as well. want not to forget the Meta companies. And again, we've got examples in our portfolio such as Yenavalve and Trikir. So there's access to great science, concentration of science in a small location and concentration of talent, which is very important. And to that, I would add access to capital through local VCs. German players like Wellington are established in Munich, but also international players like us. We've got an office actually with my partner, Olivier Litschka, right in the middle of the IZB in Martinsried, but also Forbion, EQT have offices in Munich. So this concentration of science, of people. Capital, I think, is what makes Munich special and home to a number of success stories. speaker-0: I'm actually curious too, if you talk about the investment aspect and have local investors too, and I just want to circle back to that because from my understanding, Germany has strong local first round backing from regional funds or state related capital institutions. So how important is that early domestic support in creating investable companies? speaker-2: I think that early support is very important and this is actually quite strong in Germany. So if I actually had to advise founders with regards to the public funding where to go, Germany would definitely be a place to go. So not only do we have a good granting scheme with several of the companies that also jointly with Andera that we have exited like Regontech and also several of the the METEC companies have benefited from state systems be that GoBio. be that exist foundation grants that actually have helped to get the science out of university. This can be really a grant that go into the millions, but then also Germany's home to the largest seed fund in Europe, the HDGF. also in ⁓ several of the companies also that we've jointly invested in this with Andera and also others, we have a number of the local investment funds that's called them like Bayern Kapital, NRW Bank. and also the Deep Tech and Climate Fund. It's a bit of a mouthful, but still, they are also big sources of money. All three of them have actually invested with us in nucleidium and that has actually helped to build a syndicate of raising over 90 million Swiss francs in this case because they're holding companies in Switzerland. So nearly $100 million basically into a first really institutional round of a company which would not be possible without government support. But going back to the local early stage funds scene, there are funds like the Karma fund, like the Khan fund and several other really local seed funds that actually have the partners, they have a lot of operational experience. They come out of the ecosystem that Sophia has been very well describing. And this is also really important that at early stage to have operators that can really help to shape products and projects so that actually by the time they reach Sophia's or some of our colleagues' they look as investable propositions. And there in Germany, we do have some money, but honestly, we have too little money and we have too little of that. And I think the translation in Germany actually is, there could be even more coming out of that if we had more of those early hands-on seed funds that can actually help us to share opportunities. speaker-0: that's an interesting point you were saying of, we've talked a lot about the, I say great capabilities, but at least the really strong support, kind of the ecosystem within Germany, but also you you under that point as well, Judina, about where there could be room for improvement essentially too. So I'm curious, just when you take out now a broader view and looking at Europe, where it's produced examples like BioNTech and then companies like Tubulus, which I'm sure we'll talk about in a moment, Jack, and those drawing broad cross-border support. So what does that say about generally about the contents ability to build global winners as analysts would say? speaker-1: It says that cross-border support and having European funds collaborate between them is very important for building these European-based global winners. And Regina and myself are both familiar ⁓ with Imcheck and then I can also talk about Tubulis. But the two companies had a lot in common in that they were both university spin-offs from European centers. ⁓ tubules from ⁓ LMU Munich and FMP Berlin and then Imcheck from the Cancer Research Center of Marseille. They both developed very original science into the clinic and they were acquired actually after the proofs of the first promising clinical data. They had predominantly European teams with some US members as well and importantly cross-border European support. They both started, both companies started with pure European syndicates and then added US investors along the way. But this initial support from ⁓ Europeans across the continent was very important to build a solid foundation and then to bring US investors on board to further scale the companies. speaker-2: just wanted to echo that. think what Sophia is saying is actually something here in Europe that we shouldn't forget in the good times and in the bad times. The investors that are local do help, but if it becomes too local, it's also not good. So one of the things that I really always appreciate is actually to have the access to knowledge, to network, to clinical centers, to regulatory expertise throughout Europe via the syndicate and also to talent because I mean in Europe. Even if Munich is a great hub and even if there's a lot of smart people in Paris, having the chance to draw from different geographies is actually really important. actually even finding a way to work together with our colleagues in the UK, even if that has become more difficult, is something that I think is a foundation that is needed for companies to grow to a stage where they can easily then deal with having US management. Because more often than not, we've also seen that just simply transplanting European size to the US. is not necessarily leading to the results that you want to have. There are positive examples. So for example, if you have a company that's built in Europe, that's not in a major hub, then you're much better off in building your team either in one of the European hubs with European support or directly going to Boston. So we've done it successfully with a former portfolio company Seamless, where we really had to very carefully recruit a team. around the CEO in the US without losing the technology knowledge that we actually had on the gene editing side for seamless in Dresden, but we could not have built a team in Dresden. So this is also something to kind of say in Europe, if you're not in a hub, you need to make a choice where you're going. And you also need then investors that can help you beyond your local ecosystem. So the point I really want to make is if you have only local investors, if you can't actually draw into different talent pool and capital pool. you will exhaust your universe pretty quickly. And we see that more often than not, also in other geographies. We have several Canadian companies. Sometimes you see it with companies that are based in a certain geography where there's a lot of local investors around that are incentivized to actually work together, but don't want to let anybody else in. Sophia and I have seen a number of those also in Europe. It is important that you actually have enough input and enough capital on an international level. And the successful companies that have exited. like Imcek and Dubaliz that Sophia was mentioning before. These are the ones that have those broad syndicates that helped them to see beyond their own borders. speaker-1: Absolutely, and I think we're saying the same thing with Regina. On my end, I want to emphasize that, of course, going beyond local is crucial in developing further. But again, we have good capital available in Europe, and it's actually good to see that European funds can collaborate between them to push companies further and develop them to a very good point. before bringing US capital in, not wanting to underplay the importance of US capital, but I think that to build true European champions with a good anchor in Europe, it's also important to have strong European VCs there to develop them at the scale of things. speaker-0: Yeah, very much Sophia and Regina, thank you. I definitely heard these sentiments about how important it is to have that strong European capital base, potentially before moving to or getting involved with the US. And I hear that being echoed, and that's great to hear. I also wanted to understand better about the hubs as you're mentioning, I think really great commentary there, Regina, just about when it comes to Europe and the way the hubs are essentially compared to the US. Europe moving closer to a US style hub model with very specific cities or has it always had these specific cities that have had some centers for innovation? Are they narrowing or are increasing? speaker-1: Inevitably, it is moving closer to the US model. Although the US model is pretty extreme with essentially two hubs, Boston and San Francisco. We've all heard anecdotes of VCs based in Cambridge saying that they would only invest in a radius of one kilometer from their office. So obviously, Europe is very far from this model, but I think that inevitably, hubs are developing and Munich is one of them in Germany. probably Paris and Lillian in France, then there's the golden triangle in the UK. So inevitably, especially when success stories are materializing, then you have the spillover effect and new companies get created in the same region. So inevitably, I think it's moving towards that direction, which for me is a good thing, but not to the extreme of the US market. speaker-0: Yeah, that does make sense. That does seem unlikely with all the mass of Europe if we're talking about the number of countries just to have narrowing it down to just two polar ends. speaker-2: Honestly, because now we've actually been saying a lot of friendly comments, I think on Europe, onto an important point here, Jennifer. Over the last years, we've seen regulations in Europe and local government regulations promoting parochial structures where people have to invest extremely locally. There's a lot of restrictions. So several funds that have been raised in certain geographies. have to work around the obligations to invest 70 % of the money that they have to do locally. We have survived Brexit where basically we've been cut off from an important funding part by again schemes that actually are allowing us not to invest, some of us, not to invest in the UK. Luckily for Mangilini Ventures, we can invest on a global basis. We're not restricted there. But several funds that have European money have restrictions on how much money has to go to Europe, has to go to certain sub-regions in certain countries. And this is something which is not helping. It's not helping what we've been discussing about that we need this exchange. It's not helping because it's fostering a investment culture where basically you make your own decisions on allocations rather than on merits. And it is also potentially limiting companies to actually get crucial input early on because all of the local investors will actually flop and actually invest into one or two of their local heroes. and thereby also limiting the number of companies that can be created there. So I'm a big, big proponent of the European idea. I'd like to be also open for the EU to be open for business with the UK, with the US and with Asia. The more open markets we can have on the innovation side, the better it is. And the global climate is not all for that. But if we don't help ourselves by making the regulations within Europe even tighter. We're actually going to fall far behind. And this is something with Germany. In Germany, still everybody wants to be their own hub. And it will not be possible to have five or six life science hubs in Germany. It's simply not feasible. speaker-0: Yeah, that's actually such an interesting point, Regina, actually, and it parlays quite well for the last question that I have, actually perfect. And that is just if Germany wants to produce more life science stories that stay rooted in Europe, so what matters most now? Is it talent, capital, or policy support? Which is interesting what you mentioned. speaker-1: From my point of view, all three, but I would like to emphasize capital and Regina mentioned early capital, which may be missing to do this translation from my university science into something that looks like a product or on its way to being a product. But I would also like to emphasize the need for more growth capital in Europe. So growth capital to support companies. beyond series A and B. And again, going to my previous point in that being important to create success stories that are well-rooted in Europe and not having them disappear in the US too early. what this means essentially is a need for large European funds that are able to support three-digit figure rounds. And this can be helped also from public policies and initiatives, especially initiatives that are designed to mobilize capital, also institutional capital. And there have been some in Germany, like the WIN Initiative or the TB Initiative in France, that are initiatives to mobilize insurers to invest in venture capital funds that will then invest in large rounds. I would emphasize capital, but I think all three, so talent as well as policy support are also important. speaker-2: Yeah, I can only echo on the slide with regards to capital. While I was representing our industry as the spokesperson of the German Private Equity and Venture Capital Association, we were able to actually get a several year commitment from the German government to support the startup and venture industry in Germany with 10 billion, which has helped to create HDGF, some of those co-investment facilities. This is very important. Also an opportunity structure around. a KFW capital to actually invest more into VC funds and larger VC funds in Germany and actually a fund-of-fund initiative that has also been powered by private money to do that. But this is compared to what has been invested in the U.S., what has been invested in other countries, still very, very small. And this actually needs to grow with the size of the opportunity that can be created here. And I think also with regards to regulation. There's still a lot of regulation that makes it quite difficult to attract talent. Way how you can actually get people to repatriate people to Germany, how you can actually take stock options and give stock options, how you can actually tax people at an exit is still not in line with what people would expect on an international level. And so there's a lot to be done there. And I think it is important that the startup industry doesn't always kind of come last. And in Germany, this is still very often the case. So staying there on the forefront and making sure that whatever regulations are done, especially when it comes also to employment law, when it comes to the freedom of movement of talent between countries, which has been restricted severely by the latest tech consequences that we have in Germany, is something which is really hampering the industry. And so I think it is really important that somebody within politics also takes really a stand and says, I'm supporting the startup and innovation ecosystem and we thoroughly need this. speaker-0: Well, on that end, that's an excellent call to action. So thank you for ending on that note. And thank you, both of you, for really discussing the opportunities, but as well as the challenges in Europe and specifically what's going on in Germany. So if you'd to listen to more episodes of The Natured, please turn into biospace.com. Thank you.