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Truffle Capital's first closing raises $102M for biotech and med-tech investments


By Nuala Moran
Staff Writer

LONDON – Truffle Capital announced the $102 million first closing of its new Biomedtech fund and said it is in line to reach the final target of $240 million in 2018.

The first three companies already have been set up and financed by the fund, which will back 12 university spinouts in total.

"I'm pleased because it always takes time to raise money," said Philippe Pouletty, co-founder and CEO of Truffle. "Investors are never in a hurry when you are fundraising; it's only at IPO they want to rush.

"I'm also pleased because I think $240 million is realistic for the final target, given the discussions we have been having," Pouletty told BioWorld.

The demographic of the potential investor base has shifted since the last time Paris-based Truffle raised a fund. Previously, there were tax breaks for wealthy individuals investing in technology funds. However, the incentives for retail investors have largely been revoked by French president Emanuel Macron, since he came into office in mid-2017.

On the other hand, Truffle has attracted the attention of a strategic Asian investor. "This is the first time we've had interest in Asia – it's an investor who I can't name, but [who] will help us access Asian markets with our companies' products," Pouletty said.

"It's good because Asia and China are not easy; they don't invest in European or French funds. But also, these are difficult markets to crack."

Despite changes in the tax regime undermining the retail investor segment, there remain significant government incentives and a receptive environment for young technology companies in France.

That feeds directly into Truffle's strategy, which involves scouring patent filings of leading European and North American universities, taking worldwide, exclusive licenses to the best intellectual property and then forming startups, based in France, and chaired by Truffle executives.

"We're going to stick to the entrepreneur investor [model], compared to the traditional VCs, which in general in Europe invest in existing companies," Pouletty said. While most private investors shun immature technology emerging from university labs, Truffle is focused on finding breakthroughs that could address big medical needs, he added. "We are not risk-averse at all."

All in-licensed technologies are vested in separate entities. "Regardless of the origin of the IP, our companies are based in France, because France is the best country for startups," said Pouletty.

In addition to receiving 30 percent R&D tax credits, 10 Truffle health care companies have between them attracted €120 million (US$144 million) in grant and loan funding from French government and EU sources.

For example, investee company Pharnext SA, a specialist in drug repositioning, is leading a €10.4 million project funded by the French innovation agency, Oseo, which aims to develop a diagnostic and a therapeutic for Alzheimer's disease.

"The first €30 million funding for any company is one-for-one equity vs. nondilutive financing. That means we can be sole investors for a number of years, and then lead [subsequent] funding rounds," Pouletty noted.

In addition, while France has a good supply of managers, if the required expertise is not on hand, it is possible to attract skilled executives to come and live in France.

There will be one change to what went before: whereas previous Truffle funds invested 50-50 into med tech and biotech, the new fund will be 70-30 in favor of med tech.

That is reflected in the three companies already formed by the new fund, of which two are in med tech and one biotech.

While Pouletty was not prepared to discuss details of their respective technologies, Holistick Medical is a cardiovascular devices specialist; Artedrone is developing a neurovascular device; and Nanosive is applying nanoscale drug delivery in dermatology.

Pouletty said the shift in emphasis reflects the fact that convergence of fields, including microrobotics, artificial intelligence, wireless communication and digitization, is throwing up med-tech companies with breakthrough technologies that are more differentiated from their peers than is the case in biotech.

"The next revolution in med tech will be similar to what has happened to Boeing or Airbus cockpits. You still need pilots, but the flight from San Francisco to Paris can be fully automated," said Pouletty. "The same is going to happen in med tech, for example in wirelessly connected prostheses. What is manual today, will be automated tomorrow."

The sharper focus on med tech also is inspired by two notable exits for Truffle in the past year. In October, Stryker Corp. acquired control of Vexim SA, a specialist in titanium implants for repairing spinal fractures, for €183 million. Truffle co-founded Vexim in 2006

Before that, in May, Boston Scientific Corp. acquired Symetis SA, a specialist in minimally invasive aortic valve implantation devices, for $435 million cash. Symetis was founded in 2001, as a spin-off from Zurich University, Switzerland.

"We've been very successful with med tech," said Pouletty. "We've had good success in, too, but with devices, from filing IP to finished product is two times faster."

New EU regulations on medical devices that came into effect in May 2017 will make it more exacting to get marketing approvals. Companies are required to present data for independent external scrutiny, rather than operating a self-certification system, as was the case previously.

Truffle is aware of, but not concerned about the implications of the new rules, Pouletty said. "All our products are complex and need clinical trials, so the changes in EU regulation will make little difference. At the same time, U.S. approvals are getting easier, and the Chinese market is opening up, so we can develop for three markets in parallel," he said.