YOUNG biotech companies need “patient investors” with “deep pockets” to weather today’s financial storms, the head of Novo Holdings Seed Investments has told the Optimum Perspectives podcast.
In an in-depth interview, Søren Møller said fledgling firms should accept it might be some time before investor confidence returns to the sector – and they need to plan accordingly.
Valuations of many smaller biotechs listed on stock exchanges are well down on what they reached during the ‘pandemic peak’ in 2021, when money flooded into the market on the back of the excitement caused by mRNA Covid vaccines, pushing up prices. Since then, prices have tended to drift down, in part because higher interest rates have reduced the appetite for growth stocks.
The downturn in public markets has affected the life sciences sector more broadly, including privately held companies, said Møller, with investors increasingly thinking twice about investing.
Speaking to Stephen Adams of Optimum Strategic Communications, he said there was “still money around for good companies” but that it “may take a little longer” to get financing from a suitable investment syndicate sorted out.
He said: “Companies have to be patient and do the hard work and reach out to many investors before they get the high-quality syndicate honed.
“That would be the top priority for any biotech company. Get deep pocketed, patient investors around the table and you can shoulder delays and ups and downs in the market.”
Companies should not expect sentiment to suddenly bounce back, he said: “It’s probably going to be a slow climb, so investors and companies have to prepare for that.”
But Møller was optimistic about the future of the European life science sector: “There’s still unprecedented innovation, and companies and investors have optimised their way to translate new innovation into products, so I am very confident on the long-term perspective of our industry.”
As its name suggests, Novo Holdings Seed Investments provides seed capital from Novo Holdings, which is responsible for managing the assets and wealth of the Novo Nordisk Foundation, one of the world’s largest enterprise foundations.
Seed Investments’ aim is to “identify, build and invest in exceptional start-ups” in the life sciences sector, principally in the Nordic region.
Seeds has “a very hands on” approach, said Møller, who hails from an entrepreneurial Danish family: his father ran a designer furniture firm.
Møller himself obtained a PhD in molecular biology from the Technical University of Denmark in 1997, before working as a postdoctoral fellow at Stanford University School of Medicine at a time the Bay Area was exploding with start-ups. The experience was pivotal: “This was very inspiring for me, and I just decided that industry was the right trajectory for myself.”
Novo Holdings Seed Investments has a team of highly experienced ‘entrepreneurs-in-residence’ (EiRs) who work directly with the companies Seeds invests in, often spending time in these firms’ offices.
This spreads vital business and financial knowledge to young biotech firms, whose founders frequently have a deep science background. But the flow is two-way, stressed Møller, with EiRs learning from each company they spend time in. Seeds nurtures its seedlings – but as they mature there is cross-fertilisation of ideas too.
Post-Covid, many Western governments are belatedly waking up to how important the life sciences sector is – both in terms of protecting people from health threats, and as a vital engine of future economic growth.
The Nordics are gaining a reputation as a great place for growing life science firms, and Møller said this was not down to chance but the result of “a bold vision” and “a long-term strategy” to make it happen: “The science has always been very strong. Over…many years the entrepreneurial culture has really developed, so young, talented scientists [now] definitely want to build their own biotech companies.”
To listen to the full interview or to discover past episodes of Optimum Perspectives Podcast, just click the link.
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