TVM Capital: Investment Strategies, Relationships with Big Pharma and Biotech Financing




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Video title: TVM Capital: Investment Strategies, Relationships with Big Pharma and Biotech Financing
Released on: February 25, 2010. © PharmaVentures Ltd
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  • Summary
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  • Participants
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In this episode of PharmaTelevision News Review, Fintan Walton talks with Dr Axel Polack, General Partner at TVM Capital. Filmed at BioBusiness 2010 in London, England, they discuss:

• TVM’s investment strategy

• Platform companies

• The effects of the economic crisis

• Milestones, exit strategies and the lack of an IPO market

• Relationships with big Pharma

• Financing in the biotech sector

• Opportunities in the future

TVM Capital's investment strategy, Platform companies, The effects of the economic crisis
Fintan Walton:
Hello and welcome to PharmaTelevision News Review here at BioBusiness in London. On this show I have Axel Polack, who is General Partner at TVM Capital Venture Capital Firm based in Munich. Welcome to the show.
Axel Polack:
Thanks for the invitation.
Fintan Walton:
Axel Polack, you're obviously an venture capitalist who invests in biotechnology companies, just to start with just give me some sort of indication of what sort of company you'd like to invest in?
Axel Polack:
TVM Capital have several strategies but me personally I am interested in so called platform companies, companies which allow on the basis of one technology to create multiple product opportunities.
Fintan Walton:
So clearly that's really at the very early stage, that's at the important interface between disruptive technologies potentially changing the way in which new medicines can be discovered, now potentially so there is huge opportunity, as an investor and taking into account the climate that the biotech industries has gone through in the last 18 months 24 months has it been much different in 2009 then say 2006 or 2005?
Axel Polack:
I mean the investment mood changes and swings back and forth between on the one hand products and place that develop things through to Phase IIB to sell it off and of course this kind of multi product place platform games that are eluded too earlier. And in the last year of course when the bottom [ph] fell outs of the financial crisis almost nothing of that type was created. There was no money around the table, all the venture capitalist held their money back and focused on their portfolio. So I think this is a bad time to talk about platform creation in 2000 late 2008 or early 2009 but I think we had a good run with this type of companies between '06, '05 through to '08 even with exits of this type of company in these years.
Fintan Walton:
So therefore your current focus is on those companies that are already been established, that already have venture capital backing and to make sure that they ultimately go on to succeed?
Axel Polack:
Of course like everybody else we are focusing on the portfolio, we are focusing on the exit strategies and we try to make the place that we have started a success.
Relationships with big Pharma, Milestones, exit strategies and the lack of an IPO market
Fintan Walton:
Right. Now what's important here presumably this ultimate success is going to get your money back, but there are milestones that need to take place within the company as a sign that this going in the direct direction clearly the type of company you described is of interest to you but also hopefully is of interest to pharmaceutical companies can see the value in the technology, has there been a shift in the way venture capitalist like TVM Capital they look at companies and the relationship that they have with big pharma companies because ultimately it's the big pharma companies interest in the technology is vitally important, have things changed in recent years particularly when the pressure has been on to look for performance?
Axel Polack:
Early on now since more than seven-years we at TVM Capital have focused on pharma as our customer. So view pharma and of course the medical system as our clearly as our customer. So of course IPO markets have been important in the past but it had turned out over the past couple of years that this was just another financing but in the end as our companies like Sirna and like Sirtris for instant got bought as a public company at a premium by pharma. So I think pharma is our customer and this is why we have to focus on the interaction with pharma. And the better the interaction the earlier we cut a deal with pharma, but of course without selling the crunch when its early the better it is for our exit benefit.
Fintan Walton:
So the lack of an IPO market doesn't concern you?
Axel Polack:
The lack of an IPO market means that this intermediate step of financing might be missing and that's of course troubling us there is no doubt about it, because the exits like (indiscernable) in Germany could only happen on the basis of the investment done at the public markets.The private sector wasn't big enough, wasn't powerful enough in the financial sense to sustain these type of companies who had huge burn rates Phase III programs ongoing and then embarking on venture stream products, so this is
Fintan Walton:
So IPO to you is not necessarily mean an exit, it means that the investments that you have go on to bigger things?
Axel Polack:
Ideally of course an IPO is an exit, but show me the IPO's in the past five-years when this took place.
Financing in the biotech sector.
Fintan Walton:
Right. Obviously there have been a few IPO's and often that price went South rather than North unfortunately. So it is a complicating factor, but then let's go back to this the development of the companies that you've tried to invest or you have invested in. We talked a little bit of the collaboration that can take place and you've said you have established a collaboration with pharmaceutical industry, part of that collaboration obviously is the typical type of collaborations that take place from licensing and so forth or just basic collaborative R&D arrangements, but is it also important for these companies for the pharmaceutical companies to co-invest to come in on additional rounds of financing primarily not just simply because there is more money come in but it helps to establish price around the technology?
Axel Polack:
But one has to differentiate between two types of company, if we have a company which is formed on CD product then of course a collaboration with the pharmaceutical company is relatively difficult early on in the process, because as I just mentioned you are selling off the crunch [ph] you're probably too early, you get trapped in the deal and you don't get your full value out of the deal in the end. So in the end the good collaboration for us from our point of view as VC's and VC backed companies with pharma are in the case of the more broader companies where we can partner the one product and keep the other and then in the end can attract a full value out of the perceived lead molecule. So this is always difficult with all the option, the difficulty with the option deals now if you have optioned out everything what is left to in the end sell to another party so the only customer in the end is the one who took the option. And then you have to have a pre negotiated deal in place that still keeps you upside intact and I think that's the most difficult art now going forward and to a kind of (indiscernable).
Fintan Walton:
So what you are describing obviously are the different potential difficulties with these sort of deals but in the end when you look at and you've been in this industry for sometime and acting as a venture capitalist for 10-years is your are you optimistic about the biotech sector you are particularly from within the European sector which where you are active or do you think that we've really now peaked and maybe there is a stage now of decline for biotech companies or have things changed completely?
Axel Polack:
Well I switched in the mid 90's to the commercial sector. And periodically the VC sector and biotech was declared dead as a (indiscernable) so having seen now I don't know three or four down turns in my personal career and it always recovered and always swung back, I don't think that this sector is completed dead but I think we are facing a major difficulty at the moment and that is the financing of the VC's. The returns of especially the European part of the industry weren't that great recently and to catch up with the financial crisis this leads to funding draft of the VC's and I think that's our biggest obstacle to overcome and I hope that the pharmaceutical industry sees this gap and helps out in this situation and we've seen it now with all the option fund and interactions with VC's that they have clearly realized this problem. Tony Rosenberg this morning said yeah the VC's are not investing in early stage companies anymore, but on the other hand they didn't buy our early stage companies when we had them for sale, yeah. At that time when we had our first round of platform deals for sale we were told show be 2B data and that was a very bitter experience i personally also made in this game that we realize that the platform companies are there at 90's they are very hard to sell in the early '01, '02, '03 years.
Fintan Walton:
But also when we look at the industry which is important to see how the pharmaceutical industries challenges have changed, then will people will always say they were always there because they need to get products on to the market, but productivity you know still an issue from in terms of products coming through the pipeline, there is still this unsatisfied need from medical perspective, so does that, that key driver was changed I suppose is that big pharma companies can no longer just can expect to see products that are out there in Phase II and Phase III they have to move closer to the companies that you are investing in, they have to move closer to the ones that got the technology platforms in order to grab those technologies and isn't it true that you've talked about acquisitions is now become more or less imperative if you look at the behavior of pharmaceutical companies that they have to land grab basically the platform technologies that are out there, if you look at things like Merck's acquisition with Sirna [PharmaDeals ID = 25670] was a classic example of trying to land grab a technology.
Axel Polack:
We've been investors in Sirna and suppose one of my first things I've was very much involved in at TVM Capital. So yes I think you are absolutely right they need this new disruptive technologies to create the kind of next generation of product, on the other hand as Tony Rosenberg said today they are rather slow in adopting this type of new technologies and this is why they all create now this early scouting functions in order to explore this room with different troops then their own R&D folks. And it's just interesting to see what they are going to do with all of this and whether they will in the end whether this in the end will lead to a benefit for our companies or whether they will again just wait till some of these products will have hit the market and then they suddenly wake up and will try to look for opportunities in this space and for the enabling technologies behind these products. I don't know when, we don't have the time to wait another 5 to 10-years till pharma wakes up and then decides to invest into the sector of the new technologies and this is the big of the dilemma here between the two camps now.
Opportunities in the future
Fintan Walton:
And I just want to just a reminder of you is that they want to see Tony Rosenberg talk about Novartis and business development licensing activities, they can watch our sister program on that which is coming up in your screen right now, but going back to your perspective of the industry, we are sitting here in 2010 looking forward into this, the rest of this decade what's your vision and what's going to happen in the future?
Axel Polack:
First of all I think that this truly disruptive innovation will still and always pay out, I am sure about this. But it's a way of catch and I've seen in my career about 5 to 10 of this type what I am talking about like Sirna like we've seen Sirtris probably in the antibody space and the second and third generation of scaffold space there are others. But we have to watch out for these opportunities and try to get them to flourish and I think that's what I truly believe in and that there is a market for this type of for this type of companies also in 10-years from now.
Fintan Walton:
Axel Polack, thank you very much indeed for coming on the show.
Axel Polack:
You are welcome.
Axel Polack
General Partner
Dr. Axel Polack joined TVM Capital in 2000, and is a General Partner for life sciences in the firm's Munich office. He is a member of the Board of Directors of Noxxon Pharma AG(Berlin, Germany) and Genetix Pharmaceuticals Inc. (Cambridge, MA), and Invendo Medical (Kissing, Germany). He also represents the interests of TVM Capital with f-star. Dr. Axel Polack's main scientific fields of expertise are molecular and viral oncology, oncogene activation, gene regulation and molecular immunology. He works intensively on the assessment of new investment opportunities in those areas, while also providing support to existing portfolio companies. Before joining TVM Capital , Dr. Axel 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. Axel 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. Axel Polack is also a member of the board of the German Vaccine Research Foundation (Hanover). Dr. Axel 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.
TVM Capital
TVM Capital is a global venture and growth capital firm with a 25 year operating track record. From its headquarters in Munich, and office in Boston, TVM Capital have financed more than 250 emerging companies in technology and the life sciences. During the last 15 years, TVM Capital have become increasingly specialized in these two attractive high-growth sectors. TVM Capital's 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.