speaker-0: My name is Jennifer Smith-Parker, Director of Insights at Biospace, and you're listening to The Nature. In this episode, you'll be hearing from Thierry Ligel, Managing Partner at Kerma Partners, and Ksenia Pavletic, Partner and Chief Commercial Officer at Jato Capital. We dive into France's biotech ecosystem, exploring what's driving its momentum, how science and capital are coming together to support company building, and what still needs to happen. for more early innovation to translate into investable scale.

speaker-1: bio.

speaker-0: Thank you, Thierry, and thank you, Ksenia, for appearing on this episode of Denatured, where we're going to be discussing European financing, and particularly honing in on France for this episode. So if you can introduce yourselves, that would be great. Thierry, we'll go ahead and start with you.

speaker-2: Hello, I'm Thierry Laugelle. By background, I was educated as a scientist. I'm pharmacist and pharmacologist. I'm currently in charge of CURMA partners that I have co-founded 16 years ago. I'm managing partner there. So my profession is a venture capital investor for a long time in the European setting.

speaker-0: Perfect. Gizana, if you can go ahead and take off.

speaker-1: So nice to meet you. My name is Xenia and I'm also a scientist by training. I'm actually an engineer. As a by background, I am an ex-operator. I spend all my professional life, first of all, working in a big pharma, always in more business roles. Then I went into the startup world where I was the CEO of a women health company based out of Geneva. And I'm currently general partner at J2CAP.

speaker-0: Okay, so let's go ahead and start off. Those are great introductions. So we're going to be honing in on France on this episode and then its greater connection to the rest of the pan-European financing environment. So France's biggest advantage today is its quality of life, sorry, its quality of its science or the fact that its ecosystem now has more ways to finance and de-risk early company building.

speaker-1: Quality of life for sure is great in France. It's actually both. It's a quality of science that has been always extremely high in France. We know that the French basic research in oncology, immunology and virology is on par with some of the best countries and continents in the world. I would say what has changed in the last five to 10 years, it's everything around and it's especially the ecosystem that was built around the science. We have a health innovation 2030, the program that was an initiative that was launched by the government where they put, I believe, seven billion behind the health science. And the mandate was to actually ⁓ translate the pure science into ⁓ something that is lot more scalable and create the ecosystem that can take the ideas from academia into biotech world. I think that what we've seen as a result, it's also the the venture capitalist ecosystem is growing in France and having more and more funds able to significantly more finance some of these biotech companies that are coming out of the French science. Nevertheless, think France, as much as the whole Europe, it's still at the beginning of this journey. I would say there is a lot more that we need to do in order to catch up with maybe some countries like in US that is getting closer to not just doing a great science, but actually doing great companies and delivering great products for the patients. And hand in hand with that goes also the talent that you can attract into France that is able to do that.

speaker-2: I can only confirm everything that was said. ⁓ There ⁓ has been this 2030 initiative that is definitely driven by the government as a long-term strategy ⁓ planification, which is of course very important for this kind of industry building initiative. in France like in other countries. So it's definitely showcasing that France and French government put a priority on development of this industry. And this is because in France, just as it is in many other European countries, the potential for maintaining and developing the health tech and biotech industry is relatively good or is very good. So it is even more strategically important for France and other European countries to bet on this industry and bet on the development of this industry that France is doing hopefully the right way and will continue to do so. And the quality of life is okay.

speaker-0: Indeed, that's the perfect way of saying it. So let me ask when you're talking about the strength of the quality of science, how much of that biotech strength comes from institutions like Pasteur, Inserm, or university spin outs versus newer company building ecosystems?

speaker-2: I will have a bias because at Kerma we do a lot of academy spin-outs. So this is really our know-how. But I would say statistically in our deal flow generation and our pipelines, most of company building are from academic origin. The real industry spin-out, asset spin-out from industry is a minority, a small minority. This may change with some mega trends like Chinese assets incorporation, which is obviously an important change in the environment today. But overall in the past, have mostly started companies from academic assets. And France and Europe in general offer a variety of high quality science, which is ⁓ large enough, broad enough, diversified enough to to give us ample opportunities to start a company.

speaker-1: mean, of the companies actually company creation is still coming out of academia. Despite the fact that the healthcare industry in France, it's a very strong, strong one. We have some of the lead companies, the pharma companies in the world from France. The spin out from the industry, let's say, as a basis for creating the new companies is a minority for the moment.

speaker-0: Yeah, I'm hearing that with a number of the discussions I'm having in this series right now in Europe. The spin-outs from academia are incredibly strong. And I'm curious to plug that further where Paris remains an obvious center, but how much real momentum are you seeing in hubs like Lyon or Marseille or the wider region?

speaker-2: So yes, as you said, Paris is a hub, course, but science can come from a good in France and it's true in all Europe. And this creates the complexity and the wealth of this ecosystem where there are lots of, I would say hundreds of possible geographic origins for good science in Europe. So this adds ⁓ a layer of complexity because we just can't focus our efforts on the Oxford or Carb Bridge or Boston or San Francisco. We have to travel and meet many people, but it's actually part of the fun. We're discovering new places every year. And we are surprised with excellent science from places that we didn't know. just a year ago, so that's great. And this means also diversity in culture and diversity in scientific, in way to address science. So Europe has really something possibly different from US and from other countries as well, and China in particular today. So we have to understand better our strengths and different, to be stronger in the future.

speaker-0: curious when you're talking about just now focusing on what maybe France can do better in regard to the broader kind of investment landscape. saying not only talking about the US, but China and more of a global environment. And I'm wondering, is France at this point positioned to capture a bigger share of the biotech capital or does it still need to prove it consistently, scale winners? ⁓

speaker-1: think France is very well positioned to capture the bigger share of biotech capital. It's also on top of the excellent science that Thierry was also mentioning. I think that the matured a lot in terms of some the, would say, institutional investors, some major institutional investors. getting more and more aware and open to healthcare. For example, including banks and some of the insurance companies. That is also thanks to the program, France 20th Year 30. It's also thanks to the initiative of TB, Filiq TB helped to raise the awareness of healthcare and understanding of the healthcare industry among some of these major institutionally investors. Cause it's very important to understand these. Unlike in the US, France doesn't benefit from the direct pension fund allocations. So there is a real need for the education and understanding of our industry and our business among some of these very, I would say, ⁓ general institutionally investors. And there, France has done a major shift in the last, I would say, five years. Second thing, think beyond the science, what's also very strong in France, and you should not forget about it. mean, France has an industry. You have Sanofi, have Servier, have Ipsen. I mean, you have, you know, among the top 20 companies in the world, you have quite a few coming out of France on a scale. It is a big country, but nevertheless, it's much smaller than the U.S. and you still have a... quite a strong healthcare industry here. So in terms of the, I would say, ⁓ country effort, access to the capital, sophistication, growing sophistication of the investors, strong industry, strong science, all these ecosystems need to work together. There, would say France has done a lot. And my view, of course, you know, it's not just because I'm sitting here in Paris, but my view in terms of looking at on a European scene, France is a leading country here for sure.

speaker-0: Perfect, yeah, and that does make sense to me, especially as you're mentioning those three top companies right off the bat that are long-standing players within the pharmaceutical environment. So to drill down a bit more specifically on each of your funds here, so Thierry, Conama, as you mentioned earlier, has long focused on building companies early. What does France still need to do though to turn more academic innovation into investable biotech?

speaker-2: work hard maybe.

speaker-1: It doesn't go well with the quality of life.

speaker-2: I will not enter into this debate. But working hard is obviously a good way to make it happen. And actually, it's only half a joke because it's a matter of entrepreneurial efforts and energy spending. So I think if we look at the reservoir of academic assets and academic science or project available or potentially available in Europe. I have no statistics to share, but for me it's obvious that we are in a relatively uncompetitive market. If we compare it to the US in particular, where high quality science is extremely competitive in terms of company creation. In Europe, good science is not necessarily seen as a reservoir for building companies. Good science is good science.

speaker-0: Interesting.

speaker-2: is a reservoir for pay publications, good science discussions, debates, and et cetera. So the entrepreneurial efforts, energy, and spirit is different in Europe compared to the US, even though it's growing and changing gradually. But so working hard is again the real answer because with more work and more entrepreneurial resources and efforts, we would just build more companies.

speaker-0: I'm also curious whether if our tech transfer issues any part of that too, because I've heard that in some other European part of the series, part of this country's too, that sometimes a tech transfer network is a bit of a stumbling block in some countries. Is that at all the case in France?

speaker-1: I mean, Terry probably, I don't know, we have maybe similar views, maybe not. I think it can get better because I think, you know, when you discuss with the transfer office from a major academic institution in France, you know, to spin out an idea out of the academia into a biotech, takes you, I think you're happy if you conclude the agreement within a year. If you go that to probably do it in three months. After one year, the problem is that these academic founders, need to raise money, they need to attract capital. When you drag negotiations for one year, everyone gets fatigued, including the investors, because we move on. mean, we don't have time to wait for someone for one year to come out of academia. I don't know which contract. So I think that efficiency and speed still can get better.

speaker-0: That's fair. Now, Ksenia, let me turn to you on that point. with JTOS, that was founded to address the capital gap at critical stage of five years on. And I'm curious here with a 1 billion fund final closed, so congratulations, and tripling that at AUM 1.6 billion, is that gap actually closing or just shifting later?

speaker-1: think we would like to close it, ⁓ but you need more than one. J2 is not enough. I would say when you look ⁓ at in terms of the European ⁓ funds, we account for 7 % of the global market versus 60 plus percent coming out of US. and actually 15 % or close to 15 coming out of China. So we are half of what the Chinese and in terms of science, we just spend, I don't know, last 20 minutes talking about how great the science is. So I think that there, it's really, we need to get closer to close this gap. And that's exactly what Jato has been said to do because Again, there is great science, there are phenomenal funds. example, Kurma is one that are actually there in order to see the companies, start the companies and etc. But when the companies have advanced further in the development, they are de-risked, but they need substantial amount of capital. And unfortunately, until now, and still, this is still the situation with Europe. There is a lack of this big access to the capital in Europe and many companies have to go to the US. Once all the Europeans have taken the risk to create them. For us, this is exactly where, what is the role of JATO here. And our strategy is with such a big fund to deploy a significant amount of capital behind the companies that are delivering on the science. We can, for example, go up to 150 million per company, if this is the company. And this is exactly the amount of capital that one would need when you are further in the clinical development.

speaker-0: And speaking about that in a sense of the type of, you said, capital that's needed as you progress. So Thierry, and for the final question today, so considering that Krulama has just closed the buyer fund for 250 million in a tougher fundraising environment, what does this final size indicate to you about investor appetite for early stage biotech right now?

speaker-2: It's an interesting question because we celebrate it as a very nice event to have a €250 million final closing for BioFund4. Again, it's a different positioning than Jeto, so very early stage and probably for us is the right size for Euro. But many of the journalists who cover the news said that Kerma BioFund4 before missed the target of 250. Rather than seeing it as a well, there is a nice find.

speaker-1: That's a problem of Europe. The glass is always half empty.

speaker-2: That's my perception. Okay. so I think telling this anecdote is the way to answer your question, which is probably hard to raise money for early stage fans in Europe today. And I believe some of our colleagues are struggling to raise this kind of funds for good and bad reasons because Of course, for early stage funds, the financial return is relatively unpredictable. You add risk, so you hope you add return, but you add risk. So some people may be very adverse to risk and this is unfortunately what we may suffer. So no, it's not probably not easy to raise funds for early stage venture investments these days. in Europe, but I don't know if it's much easier in other countries. I just returned from a long trip in China where they believe in progress, they believe in future, they invest heavily. But I met many people who just said to me that venture investment returns in biotech is very chaotic, even though of course some fans are performing extremely well. But by definition, it's a risky business.

speaker-0: But I'm going to end at an optimistic point because you said there's great science, there's great quality of life, there's a lot of potential. We are seeing both Kodama and Jato really investing into the ecosystem here. So there's a lot of potential for keep on building on the great science. So thank you so much, Thierry, and thank you so much, Ksenia, for joining this episode of Denatured. If you'd like to listen to more episodes, please turn into biospace.com.