Latest trends in Biotech and their fundraising
Focus on the evolution of biology industry and their VC investments
Hello everyone !
To continue this series on the trendiest sectors of startups, we’ll analyse Biotech today ! 🔬
Biotechnology is a combination of life sciences and other disciplines such as AI, machine learning, biochemistry, biophysics or genetics. Globally, Biotech can therefore be applied to several sectors such as the Food industry, Energy or Health.
In this field, oncology is the most investigated therapeutic area. The majority of companies also focus on infectious diseases (14%) and the central nervous system (11%), areas where medical needs remain very strong in France. Thanks to their specialization, French Biotech also have strong expertise in certain genetic diseases, including rare and orphan diseases.
Very complex, these solutions rely on a strong technological base, requiring long development times and a significant capital requirement. That’s what we’ll see right here ⬇️
The Market
- Worldwide overview 🌍
The global Biotechnology market size was valued at USD 752.88 billion in 2020 and is expected to grow at a CAGR of 15.83% from 2021 to 2028. Healthcare related applications dominated the Biotechnology market with a share of 48.64% in 2020, owing to high penetration of biotechnology solutions in healthcare systems and commercial success of molecular diagnostics in disease management.
The major factors driving the growth of the Biotech market are favorable government initiatives, falling prices of DNA sequencing, increasing market demand for synthetic biology, and increasing R&D investments by public and private organizations.
- France, lagging behind in innovation ? 💡
In France, too few Biotech manage to develop properly and thus become biopharmas. In other words, too many companies remain stuck at the R&D stage and fail to transform into companies structured around production processes and marketing of products on national markets.
Indeed, to bring biomedicines to market, it is necessary to finance the clinical development phases, which are very long and costly. However, there are not enough funds in France, as well as in most of Europe. As a result, companies either sell their molecules, abandoning part of their assets to foreign big pharma, or they sell themselves, or they want to bypass the French stock market and head for the Nasdaq to raise funds more easily, with a very high risk of moving their headquarters to the US.
Nevertheless, in terms of the number of startups, France is the leader in Europe with about 700 Biotechs. And for good reason, the French market benefits from a multitude of assets : excellence in scientific research with centers in the world’s Top 10, a strong entrepreneurial dynamic and increasingly important public support, all in an environment benefiting from one of the best health systems in the world (French social security : always imitated, never equaled 😏).
The progressive opening of investment valves 💵
France and Europe are clearly not playing in the same league as the US in terms of funding. In 2020, venture capital deals in the US funded startups to the tune of €17.6 billion, while Europe only funded them with €6.5 billion. So the US funds almost 3 times more than Europe. Yes, this is hard. However, good news for France and Europe, the investment momentum is growing !
- In France 🇫🇷
France retains second place in the European ranking in terms of the number of companies financed by venture capital in 2020. France is also the leading European country and second worldwide, after the United States, in terms of the number of publicly listed Biotech. Biotech have been particularly dynamic in their execution, which has allowed them to gain investor confidence in the future of their sector. For example, SparingVision, raised €45 million in Series A to finance the launch of clinical studies for its gene therapy for retinitis pigmentosa. In addition, investors have recognized the capacity of French research to innovate. Thus, five INSERM-affiliated companies (Acticor Biotech, Alderaan, Aelis, Eyevensys, Imcheck) raised nearly 111 million euros in 2020 by attracting foreign funds.
- In Europe 🇪🇺
On a broader level in Europe, all companies in the sector have benefited from the confirmed dynamism of specialized funds and the return of generalist funds in the context of the fight against the pandemic. For example, BioInnovation Institute, financed by the NovoNordisk Foundation, the Dutch fund Forbion and the French fund Jeito Capital all invested in Dutch companies in 2020, such as Neogene Therapeutics, a company in the preclinical phase of research into cell-based cancer therapies (first round of financing at €93 million). Another example is the €114 million fundraising by iTeos Therapeutics in Belgium with American and European investors. This financing should enable the Belgian company to develop two drug candidates in immuno-oncology. And this momentum should continue into 2021 !
And right now, what are the investment theses favored by VCs on Biotech at the moment ?
Let’s take a look together 🕵️
1) Industrial Bio
To start this section, let’s take the example of heart transplantation : 50 years ago, Professor Christiaan Barnard succeeded in transplanting a heart into a human being, becoming one of the most famous surgeons in the world for having succeeded in this procedure.
Today, medical knowledge coupled with the advancement of technology allows us to consider immense possibilities such as the creation of synthetic organs. A startup company has developed an artificial heart so that it is no longer necessary to transplant a patient’s heart from another person. This is Carmat, a startup that has just raised 55 million euros to deploy its solution on a large scale.
Thus, beyond the surgical procedure, the creation of a substance compatible with the human body is now the basis of innovation in Biotech !
Let’s analyze the startups that promise to revolutionize this sector :
Membio (Ontario) : Globally, the current donation system is only able to meet 40% of the need for blood, representing over $60 billion in unmet demand. Founded in 2018, the startup aims to create blood cells to precisely ensure the world has an adequate blood supply. Amazing.
By cheaply manufacturing red blood cells outside the body, Membio hopes to produce an unlimited amount of red blood cells. There is no need for donors, blood collection, testing and processing. Moreover, this approach increases patient safety because the red blood cells created are free of pathogens and toxins. The icing on the cake is that cost-effective production on an industrial scale is envisaged ! 💉
➡️ The startup raised a Seed round of an undisclosed amount in 2020 with VU Venture Partners participating in the round.
Volumetric (Texas) : Founded in 2018, the startup has a Long-Term Vision to replace entire organs in patients from their own cells such as lung, liver, pancreas, kidney and heart. To do this, 3D bioprinting technologies are used to manufacture human tissues with complex networks of blood vessels. Currently, this technology produces patient-specific tissues to test the safety and efficacy of drugs. Patient cells are taken via biopsy, added to the 3D printed tissue, and then drug compounds are injected through the network of blood vessels to mimic actual drug delivery in humans. This offers predictive medical outcomes for cancer patients. Top. 👍
➡️ Volumetric completed a $136,400 Seed round in 2020 with Network VC.
Bios (Cambridge) : Born in 2015, this startup is positioned in the field of neural engineering to create the hardware and software interface between the human nervous system and robotics. Their team uses Machine Learning, neuroscience, and the experience of their surgeons/clinicians to solve the complex problems of integrating a bionic material within the human body. Their first product is the Prosthetic Interface Device (PID), a universal connector integrated directly into the arm and linked to the nervous system, in other words a “USB connector” for bionic arms. In fact, the startup aims to make bionic arms an extension of a person’s body that can be controlled naturally by the mind but also send natural sensations back into the body. It’s Anakin Skywalker who is going to be jealous. 🤖
➡️ The startup raised $4.5 million in 2018 with funding from several investors including AME Cloud Venture and Real Ventures.
2) Drug Discovery
Bringing a drug to market is both an expensive and time-consuming process. In fact, the clinical trial process where new drugs are tested on patients before being approved by the Food and Drug Administration (in the US) takes 9 years and costs an average of $1.3 billion. These clinical trials fail for several reasons, including :
- inability to recruit enough participants ;
- the harmful side effects ;
- difficulty in interpreting the data.
Failure in drug development for young startups is more important than for a large company, since with limited cash, failure of the drug candidate in a clinical trial often means that the company will not survive. This is why they rarely go public until they have at least one promising drug in the late stages of clinical trials.
As the global pharmaceutical market is growing rapidly and by 2050, perhaps 80% of treatments will come from Biotech, some startups have dared to enter this sector. Their technologies powered by artificial intelligence and machine learning have just the potential to accelerate a drug’s time to market in order to improve every step of the clinical trial process and find successful trials for the targeted medical treatment.
Let’s take a look at some of the startups that have positioned themselves on these topics :
Aqemia (Paris) : Founded in 2019, Aqemia is a drug discovery startup that wants to rapidly discover therapeutic molecules with a better chance of success. How ? Just as an AI can learn to play chess, the startup’s generative AI can identify the best drug candidate molecules for a given target among millions of potential drugs by predicting the affinity between drug target and molecule. 🎯
➡️ The startup raised €1.6 million (Pre-Seed) in 2019 with Elaia on the funding round.
Gilgamesh Pharmaceuticals (New York) : Founded in 2019, the startup relies on deep expertise in biochemistry and neuroscience, including psychedelic compounds, to develop innovative drugs. When you know that the psychiatric branch is one where the state of medical advancement is not a priority (as few people have mental problems compared to the number of people with cancers or diabetes), it feels great ! ☀️
➡️ Gilgamesh Pharmaceuticals completed a $27 million Series A in 2021 with Route 66 Ventures, Palo Alo Investors and Prime Movers Labs.
Inato (Paris) : Since 2016, the startup has been enabling pharmaceutical industry players to find hospitals to deploy their clinical trials. Currently, 5% of hospitals worldwide do 75% of clinical trials. Inato helps pharmaceutical companies to identify lesser-known sites that may also have potential. An international database of 200,000 hospital sites has been developed, sites at which clinical trials have already been conducted but which are not always on the radar of pharmaceutical companies. 🏥
➡️ The startup raised $14 million in 2020 (Series A) with funding from Cathay Innovation, Serena Capital, but also Fly Ventures.
Elemental Machines (Cambridge) : From the early stages of R&D to the manufacturing of a drug, biologists know that manufacturing conditions can be problematic. Indeed, if something goes wrong, it induces a slower time to market for innovative products and therapies meant to save lives. Since its creation in 2015, Elemental Machines has been monitoring the environment of a research laboratory : temperature, humidity, atmospheric pressure, light etc. The startup also offers to monitor freezers, refrigerators, ovens and incubators with alerts if indicators are exceeded. 🌡️
➡️ The startup raised $5.2 million (Series A) in 2018 with Healthtech Capital and KdT Ventures on the round.
3) Diagnostic Assistance & Digital Therapy
Startups in this category develop software, often associated with AI that uses databases to perfect itself. Their goal is to offer doctors more accurate and faster diagnoses. By limiting errors, the patient benefits from an adapted treatment since the margin of error is reduced. Above all, the costs for the health system are reduced since the patient will not have to consult other doctors or the need to use other drugs.
This software can be adapted to the whole of medicine but also on any type of support. For example, personalized DNA sequencing allows for better targeting of care to the patient. But also, the improvement of existing radiology equipment refines the diagnosis of radiologists once again for the benefit of the patient.
Let’s take a look at the startups that have developed along these lines of innovation :
Cardiologs (Paris) : Founded in 2014, CardioLogs® provides innovative software that enables any healthcare professional to accurately and reliably screen patients for cardiovascular disease. More specifically, it is a Machine Learning technology coupled with medical expertise to provide highly reliable electrocardiogram (ECG) interpretation services. That’s good timing, because it’s extremely difficult to be able to read them, even for cardiology doctors after X years of study ! ❤️
➡️ The startup raised a Series A round of $15 million with funding from BPI France, Idinvest, ISAI and Alven.
Lucine (Bordeaux) : Since 2017, the startup has been partially addressing issues related to the lack of medical treatments for the majority of pain-related pathologies. Using digital solutions (smartphone, virtual reality headset), Lucine is able to measure and analyze the level of pain of patients in order to propose treatments based on sounds, images or light. The goal is to get patients to produce their own painkillers via the production of oxytocin and endorphin. Nice. 🌈
➡️ The startup raised €5.5 million (Seed Round) in 2020 with notably the participation of Kurma Partners and BPI France in the round.
MdolorisMedical System (Nord-Pas-de-Calais) : To continue on the pain’s treatment, this startup is worth a visit ! Born in 2010, it consists in providing clinical doctors with technologies allowing a reliable, continuous and non-invasive evaluation of the pain and comfort of their patients when they are unable to express the painful feeling. This may be the case during general anesthesia, unconscious patients in intensive care, dementia or even Alzheimer’s patients. 👌
➡️ MdolorisMedical System completed a €9m Series A in 2018 with Seventure Partners and XAnge.
Gleamer (Paris) : Founded in 2017, the startup develops AI solutions to help radiologists and emergency physicians in their daily work. Specifically, algorithms help detect and localize abnormalities in medical images, in clinical use. As a result, practitioners can reduce errors and increase confidence in diagnosis, while saving time and improving the comfort of reading X-rays. In particular, their solution can reduce missed fractures during diagnosis by 30%. ⚡
➡️ The startup raised €7.5 million in September 2020 with XAnge as lead investor.
ExactCure (Nice) : Founded in 2017, ExactCure’s vision is to live in a world where every individual would have access to a fully personalized medicine. Currently, inappropriate medical treatments sometimes cause severe side effects, effects that result in 20,000 deaths and cost the public health system 10 billion euros per year in France alone. On a global scale, they are probably responsible for more than one million deaths and $1,000 billion in health care costs. Part of the solution lies in personalized medicine to predict the effects and interactions of drugs in each individual’s body.
That’s why ExactCure has created a “digital twin,” a non-intrusive healthcare solution that can predict in real time the effectiveness and interactions of drugs based on each individual’s specific characteristics (gender, age, weight, etc.). The solution takes the form of an app for the patient’s daily life and a SaaS dashboard for the healthcare professional. 📱
➡️ The startup raised €1 million (Seed Round) in 2019 with OneRagtime participating in the round.
SeqOne Genomics (Montpellier) : Since 2017, this startup has been dedicated to developing cutting-edge genomic analysis tools for clinical applications in cancer and rare diseases. The goal is to develop a genomic analysis system that significantly reduces the cost and resources needed to provide accurate genomic analysis to accelerate the adoption of personalized medicine. SeqOne even offers applications to analyze a single patient or an entire family to diagnose inherited familial disorders ! 👪
➡️ SeqOne Genomics has completed a €3 million Seed Round in 2019 with BPI France and Elaia.
Recent IPOs 📈
Europe has performed well recently as in 2019, several Biotech including four of them have successfully completed the IPO milestone : Medacta International (Switzerland), BioNTech SE (Germany), Genfit (France) and one last one that we will see right here ⬇️
Innate Pharma S.A. (France) : Innate Pharma S.A. is a Biotech specializing in oncology and wants to improve treatment and clinical outcomes for patients with therapeutic antibodies that harness the immune system to fight cancer.
The company has several candidate molecules in clinical and preclinical stages to fight cancers that are currently very difficult to treat. It has also pioneered the understanding of ‘’natural killer cell’’ (NK cell) biology and has extended its expertise to tumor microenvironment and tumor antigens, as well as antibody bioengineering.
➡️ The company raised €70 million on the stock market both on Euronext and also on NASDAQ.
Other European companies managed to reach this huge step in 2020 including Inventiva (France), Curevac (Germany) or Freeline Therapeutics. That same year, the market capitalization of French Biotech rose from €8.3 billion to €12.9 billion, which is really good for the future ! 👊
💡 Bonus : Drug Development’s Steps
Clinical evaluation of a drug candidate marks the beginning of its testing in humans. The objective is to evaluate the safety of the drug and its efficacy in healthy or sick volunteers. The drug can be marketed if its benefit/risk balance is positive, i.e. if its health benefits outweigh its potential drawbacks.
According to INSERM, clinical evaluation in France is based on three phases (I literally copied and pasted the text for lack of being clearer) :
- Phase 1️⃣ is conducted on about twenty volunteers, healthy or sick depending on the molecule being evaluated. The aim is to test it for the first time in humans in order to observe its evolution in the organism as a function of time (kinetics) and to evaluate its toxicity. For this purpose, the volunteers are generally accommodated for a few days in a specialized center in order to undergo a battery of examinations allowing the verification of a very large number of cardiac, respiratory, blood parameters…
- Phase 2️⃣ takes place in sick volunteers. The objective is to determine the minimum effective dose of the drug and its possible side effects. A first step determines the minimum effective dose for which adverse effects are unobservable or minimal. A second phase consists of administering this dose to 100 to 300 patients, if possible to seek therapeutic benefit.
- Phase 3️⃣ is the final phase before marketing. It allows the efficacy of the drug to be evaluated on a larger cohort of patients : from a few hundred in the case of cancer, to thousands for very common diseases like hypertension. Volunteers are usually divided into two groups in order to compare the efficacy of the drug candidate to a reference treatment (if one exists) or to a placebo. This phase often lasts for several years, while patients are recruited and their health status is monitored.
- Phase 4️⃣ exists after marketing. It monitors the long-term use of the drug under real-world conditions of use in order to detect rare adverse events, late complications, or even prescription bias.
And for the Covid point, Vaccine news and all that, I leave it to our journalist’s friends. 😎
Useful resources 🗒️
- 📈 France Biotech’s 2020 Study with lots of information on the French ecosystem in terms of market, financing and innovation
- 🔮 The excellent article from the A16Z Blog (Andreessen Horowitz, top US funds) on the 16 future trends in Biotech, medicine and healthcare
- 📚 The Book ‘’Tous guéris dans 10 ans’’, Doctor Fabien Guez (in French) who talks about technological innovations/startups in many medical specialties (ophthalmology, neurology etc) !
This article is finished ! Thank you for your reading, I hope you enjoyed it !
To continue the adventure, the next episode will focus on an important innovative sector which is very much in the news at the moment : Spacetech ! 🚀
