In June 2019, Vesalius Biocapital III announced the close of its third and largest fund, securing €120m of equity commitments. This includes €30m from the European Investment Fund (EIF), the EU’s official agency for the provision of finance to small and medium-sized enterprises (SMEs).
The European life sciences venture capital fund targets later-stage companies in drug development and diagnostics, but this fund signals a change in pace as it expands its coverage in medtech and digital health.
Since 2007, the fund has invested in like organisations such as Forendo, a clinical stage drug development company focusing on novel women’s health treatments; Mecuris, which is developing an easy-to-use online platform for customisable, 3D printed orthotics and prosthetics; and Sword Health, a physical therapy provider which pairs AI-powered digital therapists with human clinical teams to boost patient recovery. Its first two funding rounds raised over €150m and contributed to the development of more than 20 companies.
Medical Technology spoke to Vesalius venture partner Marc Lohrmann about the latest fund.
Chloe Kent: Vesalius recently wrapped up its third and largest fund– what has the process behind this and the events leading up to the securing of the €120m?
Marc Lohrmann: Based on the positive track record of the heritage funds of Vesalius Biocapital and the evolving investment strategy focused on later-stage European life science companies, the managing partners were successful in retaining a large number of investors from these heritage funds.
We also secured, for the first time, an investment by the European Investment Fund. We are glad that we were able to attract such high-profile investors. And the recent deals to date, plus a follow-on financing of SWORD Health by a well-known West Coast VC, Khosla Ventures, prove that our investment strategy is paying out.
CK: Why is Vesalius moving toward funding more digital health operations?
ML: Funding of drug development companies remains an important part of our investment strategy. See our investment into Forendo Pharma, syndicating with Novartis Venture Fund, M Ventures, Novo Seeds and recently Sunstone.
However, we see a lot of value in digital health companies developing cutting-edge technologies, often combined with certain device pieces, to help patients to recover more quickly or provide a better care management for patients suffering from chronic conditions. We aim to create a nicely balanced portfolio of companies in drug development, medtech & diagnostics and digital health.
CK: Which are the most exciting digital health companies you’ve worked with lately?
ML: SWORD Health is providing a real difference to rehab patients after surgery and beyond, and is one of the few digital health companies that ran a conclusive clinical trial. DEARhealth, started by medical doctors, is currently deploying at several provider systems in a wide variety of chronic indications. It addresses all of the Triple Aim goals; improving the patient experience of care; improving the health of populations; and reducing the per capita cost of health care.
Deals that we will soon announce are also best in class and always, as a principle, help patients and doctors.
What is the European Investment Fund?
Across the EU, SMEs make up 99% of all businesses and employ approximately 65 million people. The EIF supports SMEs throughout the EU by improving their access to financial backing. It doesn’t do so by donating to these organisations directly, but by using venture capital funds and private banks as intermediaries and awarding them cash grants to distribute to SMEs.
SMEs are vital to the Europe 2020 Strategy, under which EU member states are committed to creating jobs, an inclusive society and to encouraging eco-friendly economic growth. The EIF funds SMEs across the pharmaceutical and medtech space and beyond, but concentrates its investments in companies focused in technology and life sciences.
The EIF has two main statutory objectives; foster EU objectives in fields like entrepreneurship, R&D and innovation; and generate an appropriate return for its shareholders through commercial pricing policy and a balance of fee and risk based income.
The organisation was established in 1994 to promote the development of SMEs, and has been working closely with the European Investment Bank (EIB) since 2000. The EIF has become the EIB Group’s financing arm, with the EIB holding 66% of its share capital. The European Commission holds 25% while the remaining 9% is owned by other banks and financial institutions.
More than one million SMEs have benefitted from access to finance medicated by the EIF.