Nordic Biotech: the search for the holes in the market

News Editor Thomas Lau spoke to Florian Schönharting, a partner at the Nordic Biotech, a fund that has invested in Denmark’s Gastrotech BipPharma - a biotechnology company that recently merged with US biotech firm DOR BioPharma. Nordic Biotech, a specialised biotech venture capital fund focusing primarily on Nordic countries and the EU, has invested in Gastrotech since its inception in March 2003.

What criteria do you have when it comes to selecting your investment? Where are your geographic focuses?

We have a focus on the Scandinavian markets and rest of the Europe. We can also do the US market. We focus on drug development and linked diagnostics.

How much of rate of return do you expect from your investment?

We want at least 20 per cent rate of return per year. We expect two to three years for each new investment to bring in returns.

When it comes to the management of the potential companies, what kind of people are you looking for?

I think we would like to have people who have been exposed to the industry and also to Wall Street and to the financial community.

What other elements do you look in potential investment?

The focus has to be about what is the greatest business opportunity that the competition in various markets has not covered yet. It all comes down to the CEO, the technicians, and the scientists to find the holes in the market.

How much money do you manage? And how much does Nordic Biotech typically invest in the new company?

Right now we have about $120 million. We would spend from $200,000 to one million typically.

You have plans to take these companies to the public market?

I think the answer is definitely yes, as the public market is more suitable for raising capital. To be in the venture capital community is not the same as the public space. So whenever we have a start-up it has to be ready - that means being in late stage clinical trials, with clinical data and a product profile that we can explain very clearly to public investors.

Seed funding is risky, why are you doing it?

We are not interested in the risky side. There was a bubble in 2001 that led to all business models becoming very risky. But it doesn't have to be like that. We have less than 10 companies. We have an average holding period of two to three years, so there is no law that said it has to be very risky or take a very long time.

And I think the key is that great opportunities are few and far between. That the biggest lesson we learned from the industry is that you cannot invest 10 to 15 billion in venture capital with very high return. The bottom line is there aren't a lot of great opportunities.

What do you foresee Nordic biotech will become in say 5 years' time?

I think that opportunity in the biotech field is limited and I don't think we will be a huge company.