This week we interviewed someone who is passionate about startups that are transforming innovative ideas into commercial success with real-world benefits, as well as new ideas around life science technologies. Andreas Jurgeit, Investment Director of the Life Science team at Merck Ventures BV, Amsterdam, The Netherlands, a subsidiary of Merck KGaA, Darmstadt, Germany (for simplicity called M Ventures in the US and Canada), will be speaking in the Synthetic Biology Investor Panel (sponsored by Alexandria Real Estate Equities) at SynBioBeta SF 2017 on October 4th.
M Ventures’ Life Science team focuses on investments outside of the realm of drug development, ranging from process solutions to novel modalities. Among the companies in their portfolio is Indi Molecular, which secured $11.5 million in Series A funding to develop small peptides that act like antibodies, but offer advantages such as superb selectivity, high binding affinity, and fast development at a lower cost. The peptides have the potential to spark a new era of vastly more sophisticated diagnostics, rationally designed therapeutics and biological tools.
More recently, M Ventures joined an investment round ($13 million in series A financing) in DNA Script, whose technology is enabling the production of DNA much faster and with a lower error rate for applications in drug discovery and development, industrial and food technologies, and DNA data storage.
Check out our interview with Andreas and register for SynBioBeta to learn more.
Tell me about your background; how did you become interested in life sciences investment?
I initially trained as a scientist with a background in Molecular Biology/Biochemistry followed by a PhD in Virology but I am now already in my 12th startup year. I got in touch with the startup ecosystem already during my PhD – my supervisor was part of the founding team of a venture backed company, 3V Biosciences in Zurich. We worked on the identification of broad-range antiviral targets and drugs applying Systems Biology. 3V isn’t your usual European venture backed company – KPCB and NEA have been on board basically from inception. Working with this team allowed me to have a glimpse into the biotech world and at the end of my PhD I knew that an academic career wouldn’t be my first choice any more.
After a short Postdoc I started to work on the financing side at a Swiss VC, Redalpine Venture Partners, and followed the usual path from Analyst to Investment Manager working on life science as well as IT opportunities. From a business perspective and looking back I actually faced the steepest learning curve evaluating the commercial aspects of IT deals, a great experience.
At one point, one of our portfolio companies, Redbiotec, was looking for a replacement for their Business Developer and what started as a temporary operational “experience” ended up to be a 2.5 year placement and an exit to Pfizer. So over nearly ten years I had multiple roles on both the financing as well as the startup side.
In mid-2016 I joined Merck Ventures BV, Amsterdam, The Netherlands, a subsidiary of Merck KGaA, Darmstadt, Germany (for simplicity called M Ventures in the US and Canada) as an Investment Director in the new Life Sciences team investing into the non-therapeutics part of the life sciences VC business (M Ventures operates a separate fund focused on therapeutics investments).
What are some of the most interesting companies in M Ventures’ portfolio?
To best answer this question, it may help to first provide a bit of background about our fund. M Ventures is a quite diverse fund – although we are a corporate VC fund, we are an independent entity with a “Chinese wall” in place. As a 300M Euro early stage evergreen fund we rely on returns, hence we always invest with value creation in mind – like any other VC would do as well. We operate strategically in that we focus on topics which could be relevant for Merck KGaA, Darmstadt, Germany in a 5-10 year horizon; but we don’t engage in BD type deals, such as option deals etc.
Like any other VC, we like to syndicate and help our companies actively by contributing to the board of directors and, if beneficial, open doors to the Merck KGaA, Darmstadt, Germany organization. Our activities also reflect the interests of Merck KGaA, Darmstadt, Germany – we have four teams: Healthcare, active since 2008/9 with a portfolio of 25+ companies; Performance Materials (Merck KGaA, Darmstadt, Germany is the global leader in e.g. liquid crystals); New Businesses (focusing on opportunities outside of current Merck KGaA, Darmstad, Germany business, e.g. digital health); and Life Science, which I am part of (focusing on the non-drug domains of biotech: such as platforms, novel modalities or anything else which doesn’t have a clinical development path (yet)).
This broad scope is also reflected in our portfolio – in the Healthcare portfolio, a company such as UK-based Artios is doing very exciting work on DNA damage repair. Or Akili from our New Businesses portfolio builds clinically-validated cognitive therapeutics that look and feel like high-quality video games.
And with a little bias I am obviously very excited about Indi Molecular’s fully synthetic binder platform and DNA Script, our newest addition, developing de novo synthetic nucleic acids using an enzymatic technology – a foundational technology for synthetic biology.
Which technology, product or service has excited you recently?
One can answer this question looking at two different focal points – the midterm investment horizon of 5-10 years and the long-term vision of how science and technology will influence our future. I am very excited about the promise to transform biology from an empirical trial & error approach to an engineering-like science. This is also a good example of a field with tangible, investment-relevant opportunities as well as long-term impact. Hence no surprise we are present at SynBioBeta – it is no question for me that Synthetic Biology will transform how we do science, and eventually will impact many domains of our life up to the food we eat or the clothes we wear. One example of a technology that I recently ran into and immediately found exciting is anything around DNA synthesis – I expect novel technologies in DNA synthesis to be as catalytic for biology as Next Gen Sequencing a few years back.
Can you tell us about Indi Molecular?
Indi Molecular is a great example what we want to achieve with our investments – to act as a catalyst, enabling new technologies that potentially impact how we do science and extend our capabilities beyond what’s possible today.
Indi is based on research from Jim Heath’s lab out of Caltech. The foundation is a platform allowing for the creation of fully synthetic binders, called PCCs, relying on a non-biological process. PCCs combine the benefits of antibody-like binding with the flexibility and chemical properties of small molecules. All you need is the sequence of your target – the rest relies on a unique target-catalyzed click reaction.
Chemically speaking the binders are marcrocycles that can be applied for a variety of applications from lab tools (affinity binders or detection agents) to in vivo PET imaging and, one day, potentially therapeutics.
The beauty of Indi’s binders is not just the high affinity and selectivity down to single amino acid specificity but also the speed and efficiency of the platform – within just weeks one can achieve pM binders that can be produced in a fully chemical process – highly reproducible, no expression system required and the chemical stability opens up completely new applications, such as POC diagnostics stable at room temp for many years. With the A-round we specifically focus to scale the platform so that everybody who needs a binder for any sort of application soon does not have to rely on e.g. antibodies any more.
What’s challenging about investing in life science companies?
As an investor one always keeps the exit in mind and with visionary fields such as synthetic biology, timing can be an issue – in contrast to e.g. classical biotech/healthcare investments, life science companies very often have to show commercial validation before being considered as an acquisition target. Whereas in drug development, acquirers are usually comfortable to pay a premium long before commercial validation is in sight.
For me personally, life science investing is about building realities and not just good stories – extraordinary science will always be the foundation of every good investment, but especially in the life sciences one also has to consider market dynamics, business models and flawless commercial execution. A sound commercial vision and plan to execute is as important as the science.
How do you know what an early stage biotech company is actually worth?
We are an early-stage investor but already when evaluating an initial investment we have a close look on future funding needs and the long term value creation over multiple funding rounds. Valuations are only a benchmark and deal structures have to ensure that a company stays attractive for syndicates with the resources available required to build the case. We focus on long term value creation and ensure that all key players – founders, management team and key individuals are well incentivized. We are all sitting in the same boat and in a successful case, all parties should benefit.
Any sort of valuation method is only a tool to ensure balanced and realistic terms for all parties involved. Financial methods such as a DCF are usually not too relevant for an early stage investment since they typically depend on assumptions that are too unpredictable at that stage.
I would advise every startup to research comparables and put them into the context of revenue, market and funds raised – this usually provides a solid foundation for an informed discussion.
What are you most looking forward to at SynBioBeta SF 2017?
Exchanging ideas with interesting people with the potential to change not just how we will do science but so many other aspects of our daily lives.0