Family Office
Family Offices’ Quiet Power Behind Life Sciences
A recently-announced major investment into the UK's life sciences sector by a Middle East sovereign wealth fund made headlines. But family offices have been quietly working in the space for years. And the latest developments show how important these custodians of "patient capital" are.
Alastair Graham is founder of Highworth
Research, the database of single family offices with which
this news service is exclusive media partner. Last year we broke
ground with the story of
the family office linked to the BionTech/Pfizer vaccine
breakthrough. Recent moves by sovereign wealth funds have caught
headlines but, as Graham notes, family offices have been involved
in the space for years. (See
a previous example of his writing on the topic.)
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On 24 March the UK government and an Abu Dhabi sovereign wealth
fund, Mubadala
Investment Company, announced a “sovereign investment
partnership” in life sciences with the UK, with an initial
capital contribution from Mubadala of £800 million ($1.1 billion)
and with a further £200 million coming from the UK.
The investment by two state-owned institutions is potentially
high risk but there are mitigating factors, not the least being
the interest by government in sponsoring the life science sector
for public health reasons. Additionally, there is an encouraging
commercial background. According to EY, the biotech industry has a
predicted growth rate of 15-20 per cent per year. More than 700
biotech companies are listed on stock markets internationally, so
exit routes are available.
Moreover, when a patent expires on a conventional pharmaceutical
drug, generic copies can be produced at massive price discounts.
This is not the case with biotech drugs. When a biotech drug goes
off-patent, it is much more complex to produce what is known as a
“bio-similar”, and in the US, the manufacturer has to put any
“bio-similar” through clinical trials. This is of great interest
to an investor because it means that the commercial life of a
successful biotech drug could be much longer than that of a
conventional pharma drug.
Mubadala and the UK government may be newcomers to the biotech
investment party but single family offices have been investing in
the sector for years. As many as 151 out of 860 or 17.5 per cent
of all single family offices in Europe invest in healthcare,
according to the Single Family Offices Database from Highworth
Research, and 54 [family offices] or 6 per cent invest in
biotech.
The rewards, although rarely gained, can be enormous. Dievini
Hopp Biotech, the family office of Dietmar Hopp, a co-founder of
the software multinational SAP, has been funding the German
biotech company Curevac since 2010. On 29 March, Curevac’s market
cap was $16.09 billion, valuing Hopp’s stake at $7.88 billion.
Curevac is a leading contender in the coronavirus vaccine
market.
The same applies to Athos Service, the family office of the
German Strüngmann brothers. Athos has been a major investor in
BionTech, the developer of the Covid vaccine now marketed by
Pfizer, for years. On 29 March, BionTech’s market cap was $23.05
billion, valuing the Athos stake at $10.96 billion.
Not only patience counts in investment in biotech. Access to
knowledgeable advisors is also a basic prerequisite. The Mubadala
and UK government £1 billion fund will, without doubt, benefit
from partnerships and co-investment opportunities with family
offices; FOs have been investing in the healthcare and the
biotech sectors in some cases for two or more
generations.
Of the 54 single family offices in Europe on Highworth’s Single
Family Offices Database which are investors in the biotech
sector, 16 or 30 per cent were established by families whose
original source of wealth was a pharmaceutical or biotechnology
company. These families have had skin in the game for
years.
The Strüngmann family, with their multi-billion dollar BionTech
holding, have been owners of pharmaceutical companies for two
generations. The Bagger Sorensen family have owned a
pharmaceutical company for over 100 years. The French Mérieux
family, whose family office is Compagnie Mérieux Alliance, are
third generation investors in the pharma and biotech sectors.
Waypoint Capital Holdings, the Swiss family office of Ernesto and
Donatella Bertarelli, having sold their family biotech company
Serono for $20.2 billion to Merck in 2007, is now a major
investor in the biotech sector.
A further Swiss family office of the Mauvernay family,
Après-demain SA, has been investing in the pharmaceutical sector
for two generations and owes its unusual name to a recognition
that patient capital is indeed a prerequisite for supporting
early stage healthcare companies. The family office’s principal,
Thierry Mauvernay, comments: “As my father used to say, in the
research field we do not work for tomorrow but for
'après-demain'.” He adds that long-term investments in
healthcare, sometimes with a venture philanthropy or impact
influence, are best suited to family-run enterprises. “These
types of decisions should not be based on the expectations of
investors and non-family shareholders.”
It appears that co-investment partnerships with family offices
with long experience in investing in healthcare could be a wise
early decision for the new £1 billion fund from Mubadala and the
UK government.