While Neovacs received €963,000 for a personalised medicine project in rheumatoid arthritis, Deinove was paid €1.4 million for a second generation biofuels project.
“OSEO is playing a critical role in financing very innovative projects,” Guy-Charles Fanneau De la Horie, CEO of Neovacs, a 1997 spin-out from Pierre & Marie Curie University, Paris, told Science|Business. “Whilst you are assured you will get the money if you reach the milestones, it is limiting the risk.”
OSEO’s approach to reducing the risk to the public purse at the same time as providing validation and encouragement for private investors and facilitating access to bank finance, could be an important model for the European Commission’s attempts to push through a pan-European venture fund for high tech start-ups. OSEO itself says its approach is tailored to the needs of high tech companies “where the market provides only an imperfect response,” - a shortcoming that is evident across the European Union.
The payments to Neovacs and Deinove were made under OSEO’s Strategic Industrial Innovation Programme, which aims to promote the development of “European Champions” – that somewhat elusive entity which has long been at the heart of French industrial strategy. OSEO aims to pick and out fund technologies which have potential but would not commercialised without public money.
Other projects funded under the Programme include €9.8 million for Solca, which is developing manufacturing methods for thin film photovoltaics; and €10 million for APAS-IPK, a consortium which is developing protein kinase drugs for treating cancer.
Meanwhile, Neovacs hopes to open up another arm of the immune system to the effects of vaccines, providing new treatments for diseases such as rheumatoid arthritis and Crohn’s disease that are caused by the body’s over-production of inflammatory cytokines. The company’s cytokine vaccines do this by prompting the immune system to generate antibodies against these cytokines and neutralise them.
Last week the company announced it had triggered the €963,000 payment on completion of the first milestone in a €7.9 million project, that aims to find biomarkers that will enable treatments for rheumatoid arthritis to be personalised according to the stage of the disease and the impact of previous treatments on the immune system. As leader of the project Neovacs’ share of the funding is €6.4 million.
The work is being carried out in collaboration with the French diagnostics Biomedical Diagnostics, which has already received European marketing approval for blood tests that assess if patients have become resistant to anti-TNF alpha monoclonal antibody drugs.
De la Horie believes this highlights one of the important elements of the OSEO funding, which is that it requires and enables companies to collaborate. “It is also preferred that there are academic partners,” he said.
While one third of OSEO’s backing is a grant, the remainder is a loan. Again, this limits the risk to the public purse, whilst ensuring there is a return if technologies are successful. “The loans are only paid back in the case of success, and they are on very good terms,” De la Horie said. OSEO further reduces its risk by only part-funding projects. “You never get more than 50 per cent, which means you need other sources,” said de La Horie.
OSEO’s strict approach to giving out loans in tranches and checking milestones have been reached before handing out the next installment, provides validation for projects, building confidence in the technology and helping companies to attract private investors. The checks to ensure work is complete are akin to venture capitalists carrying out due diligence, notes De la Horie. “Progress needs to be acknowledged by independent experts and financial information reviewed by independent auditors.”
Neovacs was awarded the OSEO money in October 2008. This set the company up to go public on Euronext Paris in April this year, although the constrained state of the market meant the company had to scale back the amount raised from €20 million to €10 million.
Deinove too, has joined Euronext Paris since being awarded €6 million for its share of a €21.4 million project to develop second generation biofuels from wood. The company raised €12 million in its initial public offering (IPO) in April.
The importance of the OSEO funding in underpinning Deinove was acknowledged by CEO Jacques Biton, commenting when the company’s first half financial results were published yesterday (22 September).
During the first half of 2010, Deinove reached a number of key technological, financial and collaboration milestones. “Thanks to our IPO and the receipt of grants-in-aid from OSEO we have secure financial resources of around €20 million; we are confident that [this] will cover the needs of out R&D programmes for the coming three to four years,” Biton said.