Sofinnova launches digital medicine strategy

"Sofinnova has set up this strategy to capture enormous potential," Turner said, highlighting that the sponsor is always looking into new segments where there is good deal flow and a need for dedicated LPs.

Turner and fellow partner Edward Kliphuis joined the sponsor in mid-2021 to help set up the strategy, with backgrounds in molecular diagnostics and therapeutics.

Digital medicine will become the sponsor's sixth addition to its multi-fund platform of investment strategies, most recently following its Industrial Biotech and flagship Capital vehicles. 

All of Sofinnova's strategies have independent vehicles with many raising in the triple digits, said the sponsor, declining to comment specifically on how capital will be raised for this arm.

Investments

The strategy will invest at the intersection of biology, data and computation, with three main pillars of interest: enabling technologies; analytics; and treatments.

The strategy will target seed to Series A companies in the sector, deploying tickets of EUR 2m-EUR 8m with the aim of re-investing significantly in its best assets. Sofinnova has also adopted a seed pool mechanism that will allow it to put in a small ticket and work with founders to identify key milestones to de-risk.

It will also leverage the knowledge of Sofinnova's other platforms. Although it will not be investing in hardware or molecules, the sponsor has the core knowledge of how widely, for instance, a particular electrocardiogram (ECG) device is distributed or any disease spectrum, said Turner.

"We don't need to teach anybody on the investment committee what a protein is," Turner said.

Across its lifespan, the strategy will make eight to 10 investments via this seed pool with a further 12-15 beyond this. Around 70%-80% of its deployment will be in Europe, with the remainder for the rest of the world, including Israel and the US.

It has already made three investments: leading a EUR 13.8m Series A in Kiro, which extracts a better understanding of data from pathology tests; a EUR 12m Series A in DeepC, which helps radiologists automate workflows; and a USD 5m seed round into BioCorteX, which provides a sophisticated simulation of the gut microbiome.

Exit options

Turner is optimistic about exits in spite of the difficult equity-raising environment for small and large companies alike. "Initially we had a bullish approach to IPO," he said, adding that current markets make that more difficult. "However, we invest early stage so have a number of years ahead of us and massive potential exit options baked into the strategy."

Most of the companies in the strategy are expected to generate revenues very quickly, he said, adding that there are a lot of dialogues ongoing with later-stage private equity.

Other exit options include consolidating brick-and-mortar trade players looking to increase efficiencies of the system, traditional life sciences acquirers and pharma services business, as well as healthcare payors and big tech that are increasingly looking for ways to leverage patient data, optimise patient care and bring down costs.

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