TVM Capital: Axel Polack. Investing in developing exciting life science products and companies who aspire to be innovative leaders.




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Video title: TVM Capital: Axel Polack. Investing in developing exciting life science products and companies who aspire to be innovative leaders.
Released on: May 01, 2013. © PharmaTelevision Ltd
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In this episode of PharmaTelevision News Review, filmed at BioEurope Spring 2013, in Barcelona, Spain, Fintan Walton talks to Axel Polack, Partner at TVM Capital.
TVM capital's funds and investment strategy
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at BioEurope Spring, in Barcelona, in 2013. On this show I have Axel Polack, who is General Partner at TVM, welcome.
Axel Polack:
Welcome Fintan.
Fintan Walton:
Axel, you are in the business obviously of venture capital, just to start with just remind us what TVM is about, what you are focused on and tell just a little bit about some of the funds that you've got and particularly your new fund?
Axel Polack:
Well TVM is one of the oldest venture capital companies in Europe with a strong presence on the East Coast in the US and more recently also in Canada. We are now investing from fund number VII, TVM Life Science VII, which enjoys a first closing March last year and we have a portfolio of around 30 companies, seven of which are public the rest is private, again East Coast and European based.
Fintan Walton:
Okay, so you have seven funds, six of which are just investing, are doing follow through funding?
Axel Polack:
Still active in follow-on investing is fund V and VI and there we are very proud that we can still support our companies in these portfolios and we are actively working with these companies, I am on the board of two companies of the fund V and the rest of my board seats are in fund VI.
Fintan Walton:
Okay, now obviously as you said you are one of the oldest players you've obviously built up a lot of experience in that time of dealing with biotech and what has that experience taught you, and what lessons have you learned that are now being applied to your new fund, fund VII?
Axel Polack:
So first of all we look back on our 118 deals all together, of course also done by my predecessors in the past, so we have at TVM quite a database of things, what to do and what not to do, and I mean first of all in the past our exits were driven by the IPO market, NASDAQ, Frankfurt, Zurich, not the smaller exchanges, the major exchanges and we were very good players and it was about a probability within our portfolio to get public of one out of four.
Fintan Walton:
Right.
Axel Polack:
That has apart from the US market where we see some resurrection of the IPO market, for the European side of things this window is presently completely and utterly closed. So we have to re-think the model now, I mean we have to go for a model that our customer is the pharma acquirer, it's the top 10, top 20 companies in the world who can afford a company, a product at proof-of-concept stage in the range of plus/minus a 100 million, 200 million something in this range, that is what we have to ask for given the risk profile of our business.
Fintan Walton:
Right.
Axel Polack:
So what we are looking for at the moment is projects which are post lead optimization and can be put into the clinic within six months plus/minus and can be analyzed in the clinic for proof-of-concept in man, in patients in a time period of three to four-years and a relatively, yes shall I put it not an exuberant investment.
Fintan Walton:
Right, just explain because I mean obviously people are familiar with now in a project funding, the approach that TVM has taken towards that could you just explain that to our audience?
Axel Polack:
Yes, first of all project funding is sometimes a bit misleading and I just want to reiterate here that we want to invest clearly into companies, but the companies and the companies own the project, the asset, lock stock and barrel, no strings attached, that's number one, the company has a typical company structure, but it is as virtual as possible to serve the purpose of getting to proof-of-concept in man, and that is the, that is what it's all about, so we have it as small as possible as advisor supported as possible and of course our partner, our strategic fund partner Eli Lilly comes into play who help us also as a kind of externalized clinical development department in the development of our compounds with the fund.
Fintan Walton:
Right, so Eli Lilly plays an important part in selection of these investments?
Axel Polack:
Yes.
Fintan Walton:
Right.
Axel Polack:
No, not in the selection of the investments it is at a discretion of the fund.
Fintan Walton:
Okay. So this is obviously is an, its evolved out of the past, so if I was a biotech company, typical the biotech company may be I've got a platform and from that platform I am hoping to generate leads that ultimately end up, what should I do, how should, what would you expect that company to do in terms of its funding, what advice would you give it in terms of where it should get its funds from and where TVM plays a role?
Axel Polack:
That is one of the most critical questions in the industry, what to do with a platform company which has used up let's say 20 to 30 million to build the platform, has invested of course for validation purposes into certain assets, into certain clinical, preclinical stage therapeutics and now needs per shot 10, 15 million of equity financing to get to the proof-of-concept data point that the acquirer on the industry side expects, and there is a big dilemma here because this type of company will only be able to afford, if they have very good investors, to push two of these through the pipeline, if two fail, usually it's only one, then it's the end of the company, so that is not a good model if we think about the plethora of possibilities a very good platform can deliver and we just see now with the siRNA world with what Alnylan is doing that exactly this with a lot of money can be done, but who in Europe has a lot of money to do so, so I would propose the model that the platform guys do the discovery business and that the project focused company financing guys do the development and that we clearly separate discovery from development from a fund perspective, with this our platform company has multiple shots on goal and we let them participate in the upside and they don't have to dilute their equity position in-house with their clinical development investment, and the clinical development guys have a clear pathway to proof-of-concept if they do it right and if they do it at a very cost efficient, in a very cost efficient manner they can make real money, and so it's a win-win situation for both groups.
Fintan Walton:
Right, just that's interesting because obviously we might get back into funding models in a moment, but just to look again at your fund, fund VII, so you made it clear what type of stage you want the products to be in?
Axel Polack:
I said it, yes.
Fintan Walton:
We are then what is the what is the preferred therapeutic focus?
Axel Polack:
We are, well we are.
Fintan Walton:
Or even technology base, is it biologic?
Axel Polack:
Yes, okay I understand the question, we are agnostic when it comes to therapeutic indications, but we would avoid 'me too's', reformulations and the kind of older low hangings fruits we would rather go for the first in class highly innovative compounds where we think we have now the right set up to go for proof-of-concept in a clever way. So we are back into innovation with this fund and we want to pursue innovation and not the specialty pharma, you know what I mean, repurposing of compounds et cetera, so this is not on our agenda for the moment.
Axel Polack's perspective: Funding environment in biotech landscape
Fintan Walton:
Right that's for others to play in. So just talking about others playing in this field, because obviously what the industry as it goes through this change, this landscape that's could be being created, partly because the IPO market has dried up, partly because pharma companies are becoming more dependent on externalized research, from your perspective is the funding environment maturing into a stage which allows the field of biotech to be a sustainable model?
Axel Polack:
Well I mean it's a big discussion that we all have at the moment how sustainable is the whole thing and I mean it's a fact of life that at the moment funds are getting smaller and the available amount for biotech investments is getting also smaller, yes so this is, there are big players surviving there is no doubt about it, they get fresh money, so I think a new cycle starts now because with this new vehicles which are out there with a more focused investments with a more yes centric to development, centric to discovery, et cetera, et cetera, we are kind of back into a new cycle that will deliver hopefully faster, better, quicker returns for our investors and that then might again initiate a bigger cycle, but at the moment of course for everybody who is looking for money be it on the fund side, or be it on the company side it's a very difficult environment, a fact of life, yes.
Fintan Walton:
Indeed, I mean I suppose part of my question really is about adaption and realizing what that landscape is, and I suppose part of my question really is, is that relationship between pharmaceutical companies and organizations like yourselves which have a common interest in taking products forward into the clinic and obviously into the market ultimately, so are you observing a change in the landscape where there is a better adaption, I mean we all recognize that there are it's not a perfect landscape, but is the landscape changing so that there is an improved way in which biotech companies can remain sustainable?
Axel Polack:
The adaption of the customer need is what I think is needed now, always important, and I think that's ongoing and this is what brings the two world's may-be more together today in terms of really really looking into what is the need of my marketing partner in the end, if I am not one of the odd players who go for ultra orphan in certain diseases which is I would say a different playground which with completely different rules to it, yes, and pharma is looking into this and some have adopted an orphan, ultra orphan strategy some have not, so this is something that is open and I think that is really still open for innovation where small companies can push it through with the public market only to the market on their own, but in the classical model of big markets and therapeutics of big indications I think we have to listen to the needs of the pharma partners and have to adopt to it and go into deals earlier with creative deal structures et cetera, et cetera, apart from our own structure, I think it is more generally spoken now.
Fintan Walton:
Right. I suppose the other the bit again I am trying to get close to is the interest that pharmaceutical companies have in working closer with venture funds, creating their own venture funds, corporate funds and so forth, has that behavior improved the environment for investment?
Axel Polack:
Of course, I mean look at it I have now some investments where several even several corporate funds are in and, I mean when I started in the business we all thought A) we should stay away from corporate funds because they are dangerous and the devil and what god knows what and now we've learnt really wonderful to work with, they are a huge knowledge behind these guys, it's great, then we thought but you only can take one, you only can take one now we have several works as well, no problem. So I think yes this has improved of course the financeability of companies because the endorsement that you get for the financial community by the decision of a corporate fund to move forward with an investment is of course unbelievably good, it is a very, very good step and we have to watch out of course that they don't get special rights in this and all of this but this is all taken care of and we all know this and it's not an issue I would say at the moment in dealing with the corporate venture groups.
Fintan Walton:
Right, I suppose in the end whether you are a VC like yourselves or whether you are a pharma company there is a risk profile across the products that you are trying to take forward and of course the whole game in a sense is to reduce that risk as much as possible, so that and ultimately get that product on the market, so I suppose cooperation between all parties who are interested is paramount now, while in the past may be it didn't, it wasn't so critical, now it's even more critical and maybe it's part of the learning process of how to do drug development at this time?
Axel Polack:
Fully agreed.
Axel Polack's views on drug development life cycle
Fintan Walton:
So one of the issues that often people come up with is the development cycle, we all know it takes long time to take drugs to market, TVM and other VCs, private equity groups are under pressure from their LPs to turn around money pretty quickly, so how do you resolve that, in some ways one could argue that instead of having a 10-year cycle one should have a 20-year cycle for a fund?
Axel Polack:
First of all I think if our LPs would be in the growing wood business it would be very good, because then they would understand that longer cycles are probably better, but unfortunately they are not, might have pension funds that have pay outs every month and so I understand the need that we cannot go beyond the 10-year model that we have, but we want to adopt to this now that we limit our investment cycle to something in the three to five-years range, to come to proof-of-concept instead of earlier with predefined entry and exit point that I have explained to you, with the six months from IND to proof-of-concept in man model, we have a clear focus which can be done within this time frame and which would allow us to capitalize on the investment quicker and this was also one driving force behind setting this strategy or embarking on this strategy.
Fintan Walton:
Right, this the TVM Life Sciences VII fund scale is it below 100 million or above 100 million at this stage?
Axel Polack:
Above 100 million so far.
Fintan Walton:
Okay, and adopting this model that you've described to us how optimistic now are you with that model, I mean obviously you have to have some element of optimism, do you think this is it, this is the model that will yield the results?
Axel Polack:
Well, what shall I say, this is the model we have thought about capital efficiency, we found a solution, duration of the investment we discussed, I think we found a solution, the partner and exit structure with strategic partners and listening to what the partner is telling us et cetera, so we have tried to put a strategy in place. So I think three of the major problems that are out there with this, with all the companies that are, I mean partly also in our portfolio, we have addressed with this strategy. Is this the one fits all forever, who knows, yes I mean if the market completely changes again and goes back into buying or being able to sell platform companies at the public markets like we were in 2000 or in the mid of that early 2000 years probably it will be another strategy, but I think we have to, as VC's also, and I would like to put one one word here in, the majority of our investments will follow the strategy that I have just lined out, but we have clearly a pocket to go for true innovation and how true innovation looks like and how it translates into the market in the end I cannot tell you today and there has to be an opportunistic investment strategy and possibility for each and every fund, because if you look back the real big exits have been done with completely disruptive innovation, so we have to watch out and you have to be able to invest, select, identify, identify, invest and grow also these things, but of course keeping in mind of what I've said in order to make it a financial success in the end.
Fintan Walton:
Axel Polack, thank you very much indeed for coming on the show.
Axel Polack:
Fintan, thanks it was a pleasure.
Fintan Walton
Dr Fintan Walton is the Founder and CEO of PharmaVentures . After completing his doctoral research on the genetics of cell proliferation at the University of Michigan(US)and Trinity College (Dublin, Ireland), Dr Walton gained broad commercial experience in biotechnology in management positions at Bass and Celltech plc (1982-1992).
Axel Polack
General Partner
At the time of recording this PTV interview Axel Polack serves as General Partner at TVM capital. Dr. Axel Polack joined TVM Capital in 2000. As an investment manager he is in charge of investments in project-focused companies as well as traditional venture capital investments. Dr. Polack's expertise is based upon scientific training in various disciplines, broad understanding of the drug development process (molecular and translational medicine) as well as commercial experience resulting from his strategic and operational responsibilities as a board member as well as a member of management in various startup companies. Dr. Axel Polack joined TVM Capital in 2000. As an investment manager he is in charge of investments in project-focused companies as well as traditional venture capital investments. Dr. Polack's expertise is based upon scientific training in various disciplines, broad understanding of the drug development process (molecular and translational medicine) as well as commercial experience resulting from his strategic and operational responsibilities as a board member as well as a member of management in various startup companies. Additionally to his entrepreneurial capacity within the portfolio and company management he is focusing on sourcing and assessment of new investment opportunities. Dr. Polack is a member of the Board of Directors of Noxxon Pharma AG (Berlin, Germany), Invendo Medical (Kissing, Germany, f-star (Vienna, Austria), Bluebird Bio (Cambridge, MA, USA) and Probiodrug AG (Halle, Germany). Before joining TVM Capital, Dr. Polack was General Manager of Innovative Technologies Neuherberg GmbH (ITN " now known as Ascenion). Ascenion acts as a marketing partner to research institutions of the Helmholtz-Gemeinschaft, for example, GSF " National Research Center for Environment and Health GmbH, which licenses patents and fosters start-up companies. In the eight years prior to Ascenion, Dr. Polack was the deputy head of the GSF " Institute of Clinical Molecular Biology. He holds a doctorate summa cum laude in medicine from the University of Freiburg and a Second Thesis (postdoctoral lecture qualification "Habilitation") in the field of virology. Dr. Polack is also a member of the Governance Committee of Systems Biology Ireland (SBI). Dr. Polack's doctoral thesis was honored with the Goedecke Research prize for outstanding fundamental research in medicine. In 1995 he was appointed assistant professor/private lecturer ("PD") by the Ludwig-Maximilian-University in Munich. Since 1984 he has co-authored more than 50 publications in peer review journals.
PharmaVentures
PharmaVentures is a corporate finance and transactions advisory firm that has served hundreds of clients worldwide in relation to their strategic deal making in the pharmaceutical, life science and healthcare sectors. Our key offerings include: Transactions / deal negotiations; Product / technology valuations; Deal term advice; Due diligence & expert reports; Strategy formulation; Alliance management; and Expert opinion for litigation/arbitration cases. PharmaVentures provides the global expertise to ensure our clients generate the highest possible return on investment from all their deal making activities. We have experience of all therapeutic areas and can offer advice on both product and technology commercialisation.
TVM capital
TVM capital is a global venture and growth capital firm with a 25 year operating track record. From their headquarters in Munich, and their offices in Boston and most recently also New York, they have financed more than 240 emerging companies in technology and the life sciences. During the last 15 years they have become increasingly specialized in these two attractive high-growth sectors. Their key objective as investors is to enhance company growth by harnessing the power to innovate at all levels technological, strategic, marketing and geographical- incorporating effective international management and securing adequate financial backing.