ABN AMRO pulls out of life science start-ups

Dutch bank ABN AMRO is one of Europe’s leading life sciences investors, with 30 start-ups to its credit. Now it is pulling out to focus on larger, lower-risk private equity buyouts of profitable mid-size biotechs.

One of Europe’s long running and most supportive early stage life sciences investors, the Dutch bank ABN AMRO is leaving the field in favour of private equity buyouts of mature mid-sized biotechs.

It has spun out its early-stage life sciences portfolio to a new, independent venture capital firm, Forbion Capital Partners. The new fund starts life with Euros 200 million under management, including ABN AMRO’s existing portfolio of companies, which was valued at Euros 90 million on transfer.

Along with ABN AMRO, which has a 25 percent shareholding in the new fund, the other founding investor is Coller Capital.

“We have a new name, but the same business carries forward, with the same group of people,” Christina Takke, Principal at Forbion, said to ScienceBusiness. “ABN is still a cornerstone investor and we have got a commitment from them.”

Over the past seven years the ABN AMRO Capital Life Sciences team has made more than 30 investments across Europe and the US, with members of the team have serving on the board of directors of nearly all the portfolio companies.

Recent investments include leading the second round Euros 40 million fundraising of the Danish company Santaris Pharma, the Euros 22 million first round raised by Amsterdam Molecular Therapeutics and the Euros 13 million second round of PanGenetics BV.

Forbion will invest between Euros 3 – 10 million from first round fundings onwards, in technologies that serve unmet medical needs, which will comprise 70 percent of the portfolio, and medical devices that will make up the remainder. The firm will maintain its geographical focus in north west Europe and the east coast of the US. It is continuing to assess potential investments that have carried over from ABN AMRO and Takke said she expects to make the first independent investment quite soon.

The disposal leaves ABN AMRO free to focus on the fashion for larger private equity management buyouts or buy-ins, in established, profitable companies worth between Euros 30 million – Euros 500 million. “While recognising Life Sciences as an interesting investment segment, the bank has decided to change its captive position to a limited partner role,” said Gerben Kuijper, Chairman of ABN AMRO Capital.

But he insisted the bank still has confidence in this asset class, hence the decision to remain involved as a cornerstone investor in the Forbion fund.” This team has a proven track record of profitable investments and we firmly believe they will be able to deliver attractive portfolio returns in the future,” said Kuijper.

Takke says investing in early stage technology companies demands different skills from those required to make a turn on larger private equity buyouts. But the bigger difference between the two is the size of the investments.

Although the process of finding exits for investee companies is still fairly fraught, Takke believes natural selection means the companies that have survived the capital drought of the last five years are in a much better shape now. “It is an interesting market to invest in, because the prices are still attractive.”

And she says, there is more realism about valuations. “Before prices were too high – but not because the science or potential products were no good, but because the level of risk was underestimated.”

Now, investors not only have more specialist knowledge, they also have a track record behind them to inform future investments. One aspect of this increasing specialism is that serious venture capital investors are very involved in monitoring portfolio companies and helping them to progress.

At the same time Takke finds that early stage companies looking for funding are likely to be in better shape. “The process is still in development, but in the Netherlands university technology transfer offices are becoming far more professional. Universities are facing far more external pressures to commercialise research and they are prepared to devote resources to this.”

Although it does not plan to make seed investments, one of the investments Forbion has inherited is the Euros 13 million BioGeneration Ventures Fund, set up to invest in Dutch start-up and early stage life sciences companies. The fund was financed by the Netherlands Genomics Initiative (NGI) and the Netherlands Organisation for Scientific Research (NWO) in combination with the holding company of Leiden University and ABN-AMRO Capital Life Sciences as the lead private investors.

The fund was established in December 2006 to address the paradox that although the Netherlands' universities and research institutes perform cutting-edge research, there is a poor track record in commercialising that knowledge and generating economic value.

The scope of the fund includes applications in pharma, food, agriculture and industrial biotechnology. “We know from experience that it is hard to get new life sciences companies firmly on their feet,” said Diederik Zijderveld, director of the Netherlands Genomics Initiative (NGI), when the fund was announced.

“Generating a steady flow of new economic activities is a central objective of the NGI strategy and therefore NGI and NWO as governmental organisations have taken the initiative to set up this dedicated fund.”

London-based Coller Capital, founded in 1990, is a specialist in private equity secondaries – the purchase of original investors’ stakes in private equity funds (venture capital, buyout and mezzanine) and the acquisition of portfolios of companies from corporate owners or backers.