Forbion holds first close for Growth Opportunities Fund

The fund is targeting €250m, was launched in February 2020 and aims to hold a final close by the end of this year.

The fund is domiciled in the Netherlands and Loyens & Loeff are providing legal advice. Forbion has engaged Cebile Capital as a placement agent.

"This fund is the first in a new strategy – our other funds focus on the early stages, including clinical testing through to proof of concept in small patient populations," Sander Slootweg, managing partner and co-founder at Forbion, told Unquote. "But what comes after this is companies that need to develop their products in stage three and four. For example, one criterion for us to invest will be that there are already initial patient data that prove safety and efficacy, so that there is less risk – it's more of an execution play."

Forbion also made a number of hires to build up its growth strategy team, which is headed by general partner Dirk Kersten. He joined the firm in 2018 from Inkeft Capital and had previously spent 12 years at Gilde Healthcare. Wouter Joustra, general partner, and Anastasia Karpova, principal, both joined Forbion's growth fund team from Kempen Capital Management in 2019. Forbion has also appointed two new operating partners: Carlo Incerti, former chief medical officer at Sanofi-Genzyme; and Patrick Vink, former chief operating officer at Cubist Pharmaceuticals.

Forbion will also work on deploying the fund in partnership with its advisory group, comprising investors and advisers in the European pharmaceutical sector. The group consists of Onno van de Stolpe (CEO of Galapagos), Jan van de Winkel (CEO of Genmab), Tim van Hauwermeiren (CEO of Argenx), Werner Lanthaler (CEO of Evotec) and Maarten de Jong (Moelis & Co).

Asked if the fundraise saw any impact due to the coronavirus pandemic, Slootweg told Unquote: "We were expecting there could be an impact from the coronavirus pandemic, but we found the fundraise to be quite efficient and relatively smooth. Given that we are active in a space that has the attention of the world, in terms of developments of therapeutics, vaccines and so on, a lot of LPs have decided that this is an asset class they want to keep backing, as well as from a social responsibility perspective. It made it easy to join as a new LP or to re-up."

However, Slootweg expects the pandemic will have an impact on the healthcare and life sciences investment market, since drug development has found itself at the forefront of public debate. "There has been a lot of debate, especially in Europe, around drug pricing – some of it has been quite confused and people have mixed up market abuse by smaller companies who bought the rights to 'old' drugs and then arranged for market protection as an orphan drug, thus tripling or quadrupling the price, with the debate about drugs where hundreds of millions have been invested to get a drug developed.

"Now everyone is seeing how much effort is going into developing the coronavirus vaccine and people are better appreciating what it takes to develop innovative medicine," Slootweg said. "There will also be continued pressure on healthcare budgets, so it will be increasingly important for us to factor in the reimbursement level and strategy that we will pursue, so that the offering makes sense and it's not just a nice innovation, but really pays off in the healthcare system."

The GP's previous vehicle, Forbion Capital IV, which is part of the GP's strategy focusing on earlier-stage companies, held a final close in September 2018 on €360m, surpassing its target of €260m. "We have made 11 investments out of a planned 15 – we had a slightly higher average ticket size than anticipated, so we will end up making 13-14 investments in total. We will come back to market relatively soon, but we don't plan to be on the road for both funds at the same time."

Investors
The vehicle's LP base included a number of investors who have backed previous Forbion funds. These include Pantheon, KfW Capital and the European Investment Fund (EIF). New investors include pharmaceutical companies Eli Lilly and Horizon Therapeutics, as well as Belgian Growth Fund and New Waves Investments.

The fund has 15 LPs in total at first close, around 60% of which are existing investors. European LPs make up 60% of the fund's investors, while 40% are from the US.

"I believe there will be co-investment opportunities, more so than in the other strategies, since this is our most scalable strategy as the drug development gets more expensive at the later stages," Slootweg told Unquote.

LPs in Forbion's previous funds include Netherlands-based institutional investors ASR Nederland and Stichting Pensioenfonds TNO, as well as Kempen Capital Management, according to Unquote Data.

Investments
The fund will make investments in three categories: private growth capital for mature clinical development companies; pre-IPO funding; and capital injections in companies that are already listed on European stock exchanges but which Forbion considers to be undervalued.

The fund will deploy equity cheques of €15-30m on first closing, but will up the minimum ticket size to €20m at the final close. The fund plans to invest in 8-12 companies, and will focus on syndicated rounds of €100-200m.

"When we talk about IPOs, we mean the Nasdaq, since the European exchanges have not been as good for life sciences companies," explained Slootweg. "Substantial IPOs and follow-on offerings have continued to take place on the Nasdaq and this has not seen any slowdown – the Nasdaq biotech index reached its all-time high during the crisis. Individual companies have been affected as clinical studies have been delayed, but that is less grave than for companies in aerospace or more affected sectors."

Asked about the fund's investment pipeline, Slootweg said: "In terms of dealflow, we expect to close the first investment in the next several months and we are aiming to have done three deals by the end of 2020."

The fund will target returns of 2.5x money and net IRR of 25%. It will have a three-year investment period and is likely to have relatively short holding periods.

Forbion's previous investments include participating in the £100m round for UK-based cancer immunotherapy developer Achilles Therapeutics, as well as the €116m round for Netherlands acute kidney injury treatment developer AM Pharma.

People
Forbion – Sander Slootweg (managing partner, co-founder); Dirk Kersten, Wouter Joustra (general partners); Anastasia Karpova (principal); Carlo Incerti, Patrick Vink (operating partners).

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