Valuations in the public life science market continue to decline and companies in the sector are becoming increasingly attractive to investors. The VC fund Sound Bioventures is now expanding its investment strategy to also invest in listed companies in the life science industry, from only focusing on private companies. BioStock spoke with Johan Kördel, Managing Partner at Sound Bioventures, about the company’s new investment strategy.
Sound Bioventures is a venture capital fund investing in private life science companies in Europe and the US. The focus is primarily on drug development companies in the clinical stage or about-to-be clinical stage.
The fund is run by Johan Kördel and Casper Breum, both most recently from the Lundbeckfonden Ventures, as well as Bibhash Mukhopadhyay, who has worked at AstraZeneca and Johnson & Johnson. In 2022, the team has also been strengthened with Ester Sklarsky and Thomas Tan.
In early 2022, Sound Bioventures raised EUR 110 million for the fund. Anchor investors were Novo Holding, Vaekstfonden, European Investment Fund (EIF), Saminvest, Ramsbury Invest and the founders Kördel, Breum and Mukhopadhyay.
Valuations are falling but innovations continue
In an interview at Nordic Life Science Days in Malmö, Johan Kördel told us that valuations in the public market right now are suppressed and that it is a good time to invest in biotechnology:
»It is a great opportunity and the innovations keep coming. Interesting research is conducted within the academia and there are exciting new things to invest in. If you have a longer investment horizon than a quarter, this is the sector you should be in«
Furthermore, he says that the tough investment climate in the public market is also reflected in the valuations of private companies.
BioStock has previously written about the turbulent financial climate and the broad decline of biotech shares, resulting in an increasing number of companies trading below their cash balances.
Interview with Johan Kördel
BioStock contacted Johan Kördel to learn more about the investment opportunities in biotech as well as Sound Bioventures’ portfolio and new strategy.
Sound Bioventures invest mainly in private companies, but has now also begun to look towards the public market and the opportunity to spin off public companies to the private market. Could you tell us a bit more about Sound Bioventures’ new investment strategy?
– We have long thought that many Swedish public biotech companies have been too highly valued. Over the past year, valuations have corrected and are now reasonable for a venture investor. We invest mainly in private companies but will follow them into the public market if it is best for the company. Being listed as a biotech company has its negative sides, so we prefer to avoid listing until it is needed.
»We have long thought that many Swedish public biotech companies have been too highly valued. Over the past year, valuations have corrected and are now reasonable for a venture investor.«
– When the market and analysts do not value the technology or certain projects in a listed company, we see an opportunity to spin out parts of a company to a private subsidiary and invite venture investors to finance the next stage of development. Today, valuations on the stock exchange are on par with the valuations of private companies. Just two years ago, many public companies were overvalued.
– We will go through the public portfolio of development projects to see if there is anything of particular interest.
Besides the low valuations right now, what is it that makes life science such an interesting area to invest in?
– Innovations in life science are continuously accelerating and it is an outstanding time to conduct both research and investments in this field. Who would have thought that it would only take a year to develop mRNA-based SARS-CoV-2 vaccines when it has historically taken at least 10 years to develop new vaccines? mRNA is just one of many new technologies that over the past 5-10 years have matured to the point that they now provide new types of drugs: gene therapy, gene editing, allogeneic cell therapy, and artificial intelligence…
»To be able to contribute to the development of new drugs is very exciting! I am passionate about helping people to a better life«
– To be able to contribute to the development of new drugs is very exciting! I am passionate about helping people to a better life – that is my biggest driver. Being able to capitalize on it at the same time is just a bonus.
How much have you invested so far and what does your portfolio look?
– We have made three investments – Artax Biopharma in Boston and two companies that have not yet been announced. We will make a total of 12-13 investments from our first fund within the next four years. A typical investment is 50-70 MSEK with a similar amount reserved in case follow-up investments are needed.
– We plan to invest one third in companies in Scandinavia, one third in the US and one third in Europe.
»We will make a total of 12-13 investments from our first fund within the next four years. […] We plan to invest one third in companies in Scandinavia, one third in the US and one third in Europe.«
Do you focus on any particular disease areas when investing in new companies?
– We are generally agnostic when it comes to indications, although each of the five of us on the investment team has different areas of interest. The key is that it should not be impossible to finance full drug development, i.e., that phase III does not cost more than a billion SEK. This means that we will focus on rare diseases with the potential for Orphan Drug Designation.
– Drug candidates with ODD are not only motivated to work due to the unmet medical need, but the ODD area has also several advantages that facilitate development, such as reduced costs for clinical trials, extra protection against competition even without patents, committed patient organisations, etc.
How long an investment horizon do you have and what do you do to take an active role in your portfolio companies?
– We always want a board position and always work actively with the management to give them access to our large network of experts, contacts at international biotech and pharmaceutical companies, investment banks in life science and our own experience from drug development. When we invest, we do it with a 2–4-year perspective. However, we do know that drug development usually takes longer and costs more money than originally planned.
»We always want a board position and always work actively with the management to give them access to our large network of experts«
You have a background as a Senior Partner at Lundbeckfonden Ventures and also in the pharmaceutical industry at Biovitrum and Pharmacia. How do you draw on your previous experiences in your role as Managing Partner at Sound Bioventures?
– Every day I am faced with new questions, that is what I enjoy about my job. But I am also faced every day with questions I have been through before, then the experience of management, drug development projects as well as international venture investments comes in handy.
The target size of the fund is EUR 150 million – what are the most important factors for you to achieve this goal?
– It is not easy to raise a first-time fund and it is thanks to our anchor investors that it has been possible.
– For us to reach the target size, we need to find more investors. Since Sound Bioventures is a new fund, we do not yet have a track record, but we have extensive experience in venture investments and have also made several investments together in the past. In this way, you can say that we have a solid track record. We have worked in the industry for a long time and have learned what works and what does not.
»We have extensive experience in venture investments and have also made several investments together in the past.«
– We have ongoing discussions with several investors, both in Sweden and abroad, and I hope and believe that we will reach our goal of EUR 150 million.
Johan Kördel will also participate in BioStock Life Science Fall Summit on November 29-30 at Medicon Village in Lund – register here to secure your place!The content of BioStock’s news and analyses is independent but the work of BioStock is to a certain degree financed by life science companies. The above article concerns a company from which BioStock has received financing.