LP Profile: Novo Holdings

Established in 1999, Novo Holdings is a Denmark-based investment firm, interested in private equity investments that focus on healthcare. It is the holding company of the Novo Group, including Novo Nordisk and Novozymes, and is fully owned by the Novo Nordisk Foundation.

Its DKK 104bn investment portfolio includes life sciences and financial investments, with the life sciences portfolio amounting to DKK 58bn in investments in companies at all stages of development. It also manages a DKK 46bn portfolio of financial investments, which include investments in equities and bonds, among others.

"We are reviewing many opportunities in private equity and see a lot of interesting deals in 2019," says Samir Kamal, senior director in the principal investments team. He says Novo Holdings is looking to do one or two investments in private equity as an LP over 2019.

"We do co-investments with GPs where we are LPs," says Kamal, "but also with other sponsors. We are active owners and always support our portfolio companies through being members of the board."

The Danish investor has plenty of capital to deploy, though the pace of deployment depends on available investment opportunities. "Some years we invest larger amounts, and other years we are less active," says Kamal. "I think in 2019, we will make some deals but not as many as in 2017." He says 2018 was a busy year for Novo Holdings, as it increased its activity in the life sciences sector, making 30 new investments, and it now own stakes in more than 100 life sciences companies outside the Novo Group.

Novo Holdings generated a 1% investment return from its investment portfolio in 2018, with life sciences investments specifically returning 4%.

The life sciences investments are broken down into three investment areas: Novo Ventures focuses on venture investments in Europe and the US; Novo Seeds specialises in early-stage startups in the Nordic region; and Principal Investments invests in cash-flow-positive, larger enterprises. Investments in growth equity also fall under the Principal Investments area.

"A large part of our portfolio is in direct investments, acquiring majority and minority stakes in both public and private businesses," says Kamal. "We also do some selective LP investments in order to support our direct investments."

Seeds of success
Novo Seeds invests as an LP in venture funds, where the strategic focus is on the Nordic region. It also focuses on creating biotech startups by combining pre-seed grants, awarded on behalf of the foundation, and investments in early-stage (pre-proof of concept) biotech and medtech companies.

Novo Seeds launched a DKK 1bn impact fund in 2018, under the name Repair Impact fund. It targets companies that develop early-stage therapies to combat antimicrobial resistance. It also made six new investments and re-upped in two portfolio companies over the same year.

Within principal investments, Novo Holdings invests in privately owned and publicly listed companies, with a blend of minority and majority stakes. The principal investments portfolio also consists of minority positions in Symphogen, Synlab and ERT, among others.

As for Novo Ventures, it recently led a CHF 20m series-B funding round extension for Swiss biopharmaceutical company NBE Therapeutics. During 2018, Novo Ventures added 16 new private investments to its portfolio.

The investor currently maintains around five GP relationships. "The GP relationships may have an origin in Europe, but they invest globally, with many of them also covering the US market," says Kamal.

Co-investment focus
Novo Holdings recently co-invested in partnership with Cinven, where Novo Holdings invested for a 24.9% stake in Cinven's shipping container business Envirotainer. Cinven drew capital from its sixth fund to wholly acquire the business from AAC Capital Partners for an enterprise value of around €1bn. Novo Holdings is an LP in the fund Cinven used for the acquisition.

"Building a good team is important when it comes to co-investments. We need to be very sharp in order to be an efficient and good co-investor, and we need to almost marry the GP," Kamal says. He also highlights that Novo Holdings in many ways must operate like any other GP, in terms of conducting thorough due diligence and having a quick investment-making decision process.

Novo Holdings is aiming to focus on delivering a scientific, social and humanitarian impact. It has revised its responsible investment approach in 2018, in a bid to demonstrate the rising focus on corporate social responsibility. "We have incorporated environmental, social and governance criteria in our investments, and we have a strict policy on how we do due diligence," Kamal says.

Novo Holdings' team consisted of 68 employees, from 11 nationalities, as of December 2018 – almost a third (31%) are women. The investor is also interested in promoting diversity and inclusion, and says it has updated its recruitment guidelines accordingly.

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