Financing

The financial situation mirrors the growth trend: in 2014, around €445m was invested in German biotech companies compared (2013: €401m) to the year before a significant plus of 10%. The private firms in particular have gained the most – they increased the amount of raised money by 26%: The public capital market shows a divided picture: on the one hand, the German biotech sector finally saw new listings, but on the other hand follow-on and other financings via the stock exchange decreased in 2014 by 30%. A new development was seen with regard to public funding: with €44m, the share of this money significantly decreased  by 10% for the first time in ten years.

Fig. 11: Sources of financing for dedicated biotechnology companiesQuelle: biotechnologie.de

2014 was the year that the US stock market boom arrived in Germany. For the first time since 2007, the list of publicly traded German biotech companies grew by three. But they all chose a stock market launch far from their home markets. Two companies went public in the US (Affimed, Pieris) and one floated on the exchange in Amsterdam (Probiodrug). A total of €70m in captial was raised during the three listings. Heidelberg-based Affimed took a detour by founding a dutch holding – Affimed Therapeutics BV and raised €43.5m on NASDAQ. Before the stock market launch, it closed a financial series E round and a loan – worth €22m in total – to generate some financial scope. Aeris Capital, BioMedInvest, LSP Life Sciences Partners, Novo Nordisk A/S and Orbimed came in as investors. Halle-based Probiodrug on the other hand raised a total of €23.2m via its IPO on Euronext/Amsterdam, despite turbulent capital markets at the time. The collected money will flow into Probiodrug’s lead product PQ912 in particular, as well as in the development candidate PQ1565. The low-molecular glutaminyl cyclase inhibitors are aimed at the treatment for Alzheimer’s patients. The same indication is planned for the monoclonal antibody PBD-C06 which targets against pyroglutamate and is also in the clinical pipeline of Probiodrug.

Tab. 4: The highest capital increases of publicly traded dedicated biotechnology companies in 2014Quelle: biotechnologie.de

With regard to follow-on and other financings via the stock market, compared to 2013, the situation in 2014 was worse. In total, the listed companies only raised €152m (-30%). In 2013, the sum was €218m. The highest amount poured in was by capital increase of PAION AG. The company received net proceeds of €46.3m. The money will be used primarily for the further development of Remimazolam in the US and the EU. A surprising coup came from Hamburg-based Evotec AG at the end of 2014. The company announced a strategic alliance with French pharma concern Sanofi and the acquisition of the Toulouse plant of Sanofi counting a total of 200 employees.

With reference to privately financed firms, the year 2014 heralded a new upswing trend. With 18 financing rounds,  a total of €172m was raised. In comparison to 2013, this sum meant an increase of 26%, but still does not reached the level of capital raised in 2012 (€205m). As in the previous year, all investor funding – with one exception – was earmarked for drug developers. But in the field of industrial biotechnology, the company BRAIN AG drew attention to itself with two acquisitions. In July, the company took a majority holding in AnalytiCon Discovery, a specialist of natural products based in Potsdam. In November, the Zwingenberg-based firm engaged into the industrial enzyme producer WeissBioTech GmbH located in Ascheberg.

Albeit far less than the previous year, investments were dominated by the two most active German family offices Strüngmann and Hopp. In 2014, only five of 18 rounds saw a participation of these investors. Nevertheless, they took part in the largest financing round of 2014. In March, the Berlin-based Glycotope raised a total of €55m. The fresh capital injunction basically came from Jossa Arznei GmbH, which is located in Munich and belongs to the Strüngmann Group, and from ELSA GmbH, owned by Berlin investor Andreas Eckert. The money will be used for clinical Phase IIb studies of the two anticancer drugs Pankomab-Gex and Cetugex. In addition, the fertility hormone FSH-Gex will also be moved into phase III studies, and, if successful, will be marketed from 2017.

In addition, via its investment company AT NewTec GmbH, the Strüngmann family office became involved in the Munich-based Isarna Therapeutics GmbH, which emerged from the former company Antisense Pharma. Under the new name, the firm succeeded in raising a total of €13m. MIG fonds were also among the investors. The capital will be invested in the clinical development of DNA-based drugs. To date, Isarna has two molecules in the preclinic.

Tab. 5: The highest venture capital funding of privately owned biotechnology companies in 2014Quelle: biotechnologie.de

Fresh funds also were provided for Curetis AG in Holgerlingen, which is predominantly financed by institutional investors. By 2011, the molecular diagnostics specialist had already raised €24m from Forbion Capital Partners, the Roche Venture Fund and CD Venture, a fund owned by Christoph Boehringer. In 2013, a further €12.5m was collected and HBM was won as new lead investor. In 2014, the company again closed a €14.5m financing round. This time around, Germany’s largest biotech company Qiagen also participated as investor. The money will be used to strengthen further international marketing of the DNA-based test systems for the analysis of clinical samples.

Furthermore, a number of start-ups also succeeded in securing seed financing, partly with the support of the federal High-Tech Gründerfonds (HTGF). This also included Myr GmbH from Burgwedel, which raised €7.9m of capital. Alongside HTGF, the Russian investor Maxell Biotech Venture Fund also took part in the round. Ayoxxa Biosystems GmbH, another HTGF financed company, succeeded in closing a series B financing round of €11.3m. Apart from former investors HTGF, KfW, NRW.Bank and Wellington Partners, the Swiss investors network b-to-v Partners, the venture capitalists Creathor Venture, HR Ventures, BioMedPartners AG and Grazia Equity GmbH as well as some private investors, among them the Qiagen founder Detlef Riesner, took part for the first time.

Tab. 6: Mergers involving German biotech companies in 2014Quelle: biotechnologie.de

The two start-ups Imevax from Munich and Zellkraftwerk from Hanover enjoyed a further multimillion funding within the framework of the BMBF-financed founding initiative GO-Bio. In 2014, Imevax – a spin-off from the TU Munich – succeeded in closing a financing round of €7.5m, in which Wellington Partners, BioMedPartners, EMBL Ventures and Santo Venture Capital, another investment company of the Strüngmann brothers, participated. Another GO-Bio winning team from Bonn, now running a young company under the name of Rigontec GmbH, also secured a financing round in 2014. They raised a total of €9.5m. Among the investors of the RNA specialist were the HTGF and the Boehringer Ingelheim Venture Fund.

With the participation of the Bavarian Patentallianz GmbH, the LMU and the Max-Planck-Society, the MODAG GmbH from Wendelsheim managed to raise a state funded seed financing of €8m. The joint project of the LMU and the Max Planck Institute of biophysical chemistry in Göttingen – started in 2014 – aims to develop a new therapy for Parkinson’s disease. The start-up was decorated as the winner of the PEP Award 2014 in the category “founding projects in the seed phase” for its new Parkison’s therapy approach. PEP is a promotive programme of the BMBF. Also recognised in this initiative was the NEUWAY Pharma GmbH, which is the first biotech start-up realised by the Life Science Inkubator at the research centre caesar in Bonn. With the help of the incubator, the ZNS focused company already secured a €2.3m seed financing. In 2014, the firm managed to close a series A financing of €2.7m. Wellington Partners participated as lead investor.

Lophius Biosciences GmbH, a diagnostic company with a focus on T cells, which was founded by scientists of the University of Regensburg, secured a smaller fincancing round of €2m. VRD GmbH from Heidelberg, which is already engaged in the start-up, was once again the lead investor. Further financiers included the HTGF, the S-Refit AG from Regensburg as well as another former investor.A combined seed and series A financing of €1.7m was announced by the Cologne-based vaccine developer CAP-CMV GmbH. The round was led by the Charité Biomedical Fund, which is managed by Peppermint VenturePartners (PVP). Further investors included NRW.Bank, Creathor Venture, KfW and private investors. The start-up was founded in 2013 by CEVEC Pharmaceuticals GmbH and is focused on the development of new vaccines for the treatment of human cytomegalovirus (HMCV).

An alternative financing source was unlocked by Oaklabs GmbH in 2014. The bioinformatics company founded in the federal state of Brandenburg in 2011, raised €300,000 through a campaign on the German crowdfunding platform seedmatch.de, which was given as a convertible loan. In 2014, the Radebeul-based company Riboxx GmbH also started a crowdfunding campaign on this platform and managed to secure €1m during the first months of 2015.

All these developments show that the financial situation of companies significantly ameliorated – in spite of the still existing criticism with regard to unsufficient framework conditions. On the one hand, there is the possibility of new listings for German companies – mostly because of the positive trend in the US and Europe. This opens new exit routes for investors and gives alternatives to trade sales. But the Frankfurt stock exchange is still not an attractive option for local firms. It remains to be seen if the new pre-IPO platform will change this situation. On the other hand, privately financed companies saw a significant upswing in 2014. Although there were almost no large double digit financing rounds closed, a number of promising start-ups and young companies secured comparably high series A financing rounds with the participation of diverse investors. The dominance of family offices seen over the few last years clearly decreased in 2014. Instead, former biotech founders, corporate venture funds as well as foreign investors have engaged more and more. Another good sign is the positive development of state funded start-up projects – whether it’s via the HTGF, the BMBF initiative GO-Bio or the Life Science Inkubator in Bonn.