VC Profile: Sofinnova Partners

Sofinnova Partners held a final close for its flagship early-stage venture healthcare fund, Sofinnova Capital IX, on €333m in October last year. The fund backs seed and series-A rounds in healthcare startups, specifically in the biopharmaceutical and medical device sectors, providing tickets in the €25-30m range over the life of the company. Sofinnova aims to fund up to 15 life sciences startups with the new fund.

The vehicle represents a step up from predecessors Sofinnova Capital VII and VIII, which closed on €260m and €300m in 2012 and 2015 respectively, but is not exponentially bigger. Says Graziano Seghezzi, Sofinnova managing partner: "We now have five fund strategies and have built a one-stop service. Instead of increasing the size of our capital funds, we created new sector- and segment-specific vehicles with a dedicated team to address a broader part of the market."

The VC has raised around €900m in the past three years and therefore had to double the size of its investment team. In that time, Sofinnova completed nine exits, for a total enterprise value of €4bn. Notable exits included the sale of Breath Therapeutics to Zambon in July last year, and ReCor Medical to Otsuka Holdings a year prior.

Sofinnova Partners specialises in life sciences, with a focus on biopharmaceuticals, medical devices and industrial biotechnology. Fully owned by its managing partners, the VC has more than €2bn under management. Headquartered in Paris, with further o›ces in Milan and London, the majority of its investments are in Europe, while 30% of companies backed are based outside of Europe, primarily in the US.

The diversification strategy was initiated in 2017, with the establishment of Sofinnova Industrial Biotech I, a €125m fund dedicated to startups involved in the transformation of renewable raw materials, as well as Sofinnova Crossover I, a fund investing in pre- and post-IPO companies that closed on €275m in 2018. The latter vehicle looked at a different market segment altogether, backing companies with reduced clinical risk when compared with the flagship Capital funds. The VC is currently finalising the fundraise of Sofinnova Telethon Fund I, a fund dedicated to seed investments for Italy-based companies specialising in gene and cell therapies and orphan diseases. It held a €90m interim fund close in Q3 2018 and is expected to hold a final close on its €100m target in early 2020.

The VC also launched Sofinnova MD Start III, a medtech acceleration fund that closed on €48m last year. The MD Start team was formed in a joint venture between medical device companies Medtronic, Sorin Group and Sofinnova in 2010, but joined forces with the VC in 2019.

Funds raised, 2010-2020 (source: Unquote Data)

Adapting to the market
Sofinnova's diversification strategy was devised in response to the new opportunities offered by the European VC market, says Seghezzi. Discussing Sofinnova Crossover I's strategy, Seghezzi says: "The early-stage funding is available now, while money for late venture rounds is not yet easily available. Via this fund we are investing in companies with clinical-stage assets typically looking to list them within 12-18 months, most likely on Nasdaq directly."

The allocation strategies of LPs, keen to build deeper relationships with their managers, also played a part in driving the move to a one-stop shop. Sofinnova's historical LPs responded positively to the option of backing several funds, says Seghezzi. "LPs like the consistency that Sofinnova offers, targeting the same geographies in which it has been investing for decades. Moreover, our multi-fund strategy gives LPs a chance to diversify their investments with a trusted partner." In terms of LPs backing the VC for the first time, Seghezzi says European family o›ces have been more prevalent for recent vehicles. There was also a surge in commitments from US- and Asia-based LPs, including endowments, family o›ces, insurance companies and funds-of-funds.

Seghezzi believes much has changed in the European VC market for life sciences over the past 5-10 years: "Investors have bigger pockets, with US and Asian VCs also actively investing in this space. This environment leads to higher valuations, and syndications are bigger." Europe still has a limited ecosystem of serial entrepreneurs, but improvements on this front have been noticeable: half of Sofinnova's current portfolio is led by serial entrepreneurs, a much higher proportion compared with a decade ago, according to Seghezzi.

And there is still much room for improvement, Seghezzi says: "It would be greatly beneficial if Europe had e›cient public markets. We also hope a greater number of institutional backers, insurance and pension funds, will increasingly invest in life-sciences venture."

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Send to  

• Topics
• GPs
• France
• In Profile
• Exclusive
• Sofinnova Partners