Sofinnova holds EUR 472m final close for Capital X

The fund was raised between March and September 2021.

Clifford Chance provided legal advice, while Triago acted as placement agent.

Sofinnova Capital IX held a final close in October 2019 on EUR 333m. The vehicle deployed equity tickets of EUR 25m-30m and will no longer make new platform investments following the launch of Capital X.

The fund exceeded its EUR 350m target, Sofinnova managing partner Graziano Seghezzi told Unquote. "We put a lot of consideration into what the right fund size would be in the context of our platform strategy," he said. "We did not want to change our investment strategy due to the size of the fund and we had to be disciplined. Our original EUR 350m target was a natural evolution from Capital VIII and IX. Yet given the strong demand and how quickly we were able to raise the fund, we agreed with our LPs to increase the size of the fund to EUR 472m. This will not change our investment strategy but it will give us more firepower, which is in line with the industry."

Sofinnova has now raised EUR 1bn across its funds across the past 12 months, the GP said in a statement. Sofinnova Crossover Fund I held a final close in March 2021 on EUR 445m, surpassing its EUR 400m target; the vehicle originally targeted EUR 250m but raised this following its EUR 275m first close, according to Unquote Data. The fund targets later-stage opportunities, typically investing in companies with plans to list within 12-18 months.

In addition, the GP manages its Italy-focused Sofinnova Telethon Fund strategy, as well as its EUR 40m MD Start III Medtech Acceleration Fund.

The GP has 18 investment partners and a total investment team of 29 people. The GP's European presence allows it to adapt to different markets and to engage with investors beyond Europe, according to Seghezzi. "Europe is a diverse continent where different rules apply in each country," he said. "Thanks to its diverse team, Sofinnova is uniquely positioned to operate locally and act globally. This allows us to attract US and Asian co-investors."

Investors
The fund is backed by pension funds, insurance companies, foundations, endowments, corporate investors, and family offices from Europe, Asia and North America, according to a statement.

"We are very happy with the re-up rate – we have had the vast majority of LPs re-upping," Seghezzi told Unquote. "In a way, it was an easy pitch, as we were keeping the same strategy and the same team. But at the same time, we wanted to broaden the LP base, so we made a concerted effort to bring in new institutional investors, new corporate and strategic investors, and also some large private family offices, which are becoming more and more important. We have also been successful in bringing in capital from Asia and the US."

LPs in Sofinnova's previous Capital funds include the European Investment Fund, Dansk Vækstkapital and BPI France, according to Unquote Data.

Investments
Sofinnova Capital X will continue Sofinnova's strategy of targeting biopharmaceutical and medical device startups. The vehicle expects to make 12-15 platform investments, in line with the number of deals made from its two predecessor vehicles, and can deploy equity tickets of EUR 20m-30m.

The fund will invest 70% of its capital in Europe and 30% in the US, allocating 75% to pharmaceuticals deals and 25% to medtech.

The vehicle targets seed and Series A investments. "We have a lot of experience in academic startups and we create companies that are starting up at European universities," Seghezzi said. "We are also experienced in spinoffs from pharmaceutical companies – we usually do two to three of these per fund."

Asked about the sectors and medical technologies targeted by the fund, Seghezzi told Unquote: "We focus on the medical needs: oncology, neurology and, increasingly, immunology. We also invest in rare and orphan disorders. When it comes to technology, we pay attention to cell therapies in oncology, where we explore next-generation therapies and cell therapies that could be useful, but we also look at different therapeutic areas."

The GP is optimistic about the prospects for the development of the European healthcare market, Seghezzi told Unquote. "Europe has become the second global hub of innovation: we have a well-functioning market, good capital availability, a strong amount of new companies created yearly, and a good amount of later-stage investments – so it's a strong self-sustaining ecosystem. LPs recognise this."

The market is also appealing from a pricing perspective, he added: "There is also an arbitrage in Europe from a pricing perspective; Europe remains consistently priced versus some other markets where prices have become higher compared with historical averages. We are investing in a promising, solid, and self-sustaining hub."

A more competitive market also comes with challenges, however. "As the market becomes more attractive to international investors in Europe, you need to manage competition," Seghezzi told Unquote. "The market is becoming more competitive, but prices are still reasonable and we continue to invest. On the positive side, we no longer struggle to finance our companies so that they can compete globally, which is why we have raised Capital X to continue supporting company creation."

The GP's recent activity includes participating in a EUR 65m early-stage round for Germany-based iOmx Therapeutics.

People
Sofinnova Partners – Graziano Seghezzi (managing partner).

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