TVM Techno Venture Management has expanded its biotechnology portfolio at a cracking pace since 1997 when its ecu 92.5 million TVM III fund began investing.
Spurred by the unprecedented levels of biotechnology and life sciences investment opportunities available both in Germany and elsewhere in Europe, TVM in the spring of 1998 launched a dedicated biotechnology vehicle, TVM Medical Ventures (TVMMV), which closed on DM120 million (ecu 61 million) in the late summer. TVMMV had already invested in six companies by early December.
Dr Helmut Schuhsler, head of TVM’s life sciences team, detailed the factors that prompted TVM to raise its first pure biosciences fund. TVM, one of Germany’s leading IT venture groups, from the early 1990s, undertook a small number of European biotechnology investments. When the firm launched the TVM III fund, TVM’s biotechnology business had developed to such an extent that its managers judged it appropriate to allocate around 35% of the vehicle for biotech and life sciences investment. Within the fund’s first year of operation, its biotech allocation had been fully deployed in ten investments, thanks to the increased volume and quality of deal flow generated by the sector in Germany. In view of this strong deal flow, and the relative paucity of specialist biotechnology investors in its domestic market, TVM decided to raise a sector-specific fund to capitalise on the opportunities available in Germany and the German-speaking markets.
TVMMV was raised predominantly from German institutions, among them the Allianz insurance group, Dresdner Bank and TBG, although it also attracted non-domestic institutional funds from sources including Bank Vontobel of Switzerland. Private investors contributed DM20 million of the fund’s total.
Dr Schuhsler pointed to two principal factors that, allied with Germany’s traditionally strong science base, might explain the current dynamism of the country’s biotech sector – Quiagen’s successful 1996 Nasdaq IPO, which provided a high-profile role model for would-be entrepreneurs, and the proliferation of government subsidies, grants and co-investment schemes. “The market has undergone a 180% about-face”, said Dr Schuhsler. “Until 1996, no one was really backing biotechnology in Germany, whereas today there are perhaps 20 professional investors sourcing biotech and life sciences deals”.
Continuation of the biotech boom will largely depend on whether investors can demonstrate viable routes to liquidity for their current portfolios. The acid test is likely to come in 1999, since Dr Schuhsler estimates that between ten and 15 German biotechnology companies plan to approach the public capital markets during the course of the year.
Although TVM’s principal focus is on Germany and the German-speaking markets, the fund’s remit also permits it to invest in other European markets, primarily France and the UK, as well as the US and Israel. So far, TVMMV has backed one unquoted German company, Centres for Medical Innovation, and one Austrian venture, Intercell, as well as participating in pre-IPO financings for Medigene and Evotec Biosystems. The fund has also completed two deals outside its core geographic region, investing in an Israeli company, Peptor, and in IDR Inc, a US/Hungarian enterprise.