Wednesday, September 19, 2007

Sofinnova Partners Talks China

Add Sofinnova Partners to the list of venture firms taking more than a casual interest in China.

Today the firm announced hiring Chika Yoshinaga, MD, as vice president, Asia. A native of China who had moved to Japan, Yoshinaga will manage a Sofinnova office in Shanghai.

Life sciences investors have definitely taken a strong interest in China over the past few months. Essex Woodlands Health Ventures has invested in two China-based companies, according to VentureWire Lifescience. Meanwhile, Burrill & Co. continues to explore investment as well as business development opportunities through its Burrill Greater China Group.

But Sofinnova may be the first life sciences investor to actually set up shop in China. Again, according to VentureWire, Highland Capital Partners reportedly will open an office this fall, but the firm has invested solely in technology companies in China up until this point.

In hiring Yoshinaga, Sofinnova gains a VC who understands the Asian market. She was most recently deputy managing director at NIF SMBC Ventures in Japan, and her portfolio includes four companies in Europe and one in the U.S with names such as Acorda Therapeutics, BioXell and Innate Pharma.

IN VIVO Blog spoke with Sofinnova Managing Director Antoine Papiernik about the move.

IN VIVO BLOG: How did this arrangement come about?
Antoine Papiernik: Like everyone else who has been looking at China—because you cannot not look at China—we took numerous trips to China. We had this policy that every partner had to go to China and see it for themselves, both for the IT and the life sciences field, to get a sense of what was happening there. We came to a number of conclusions. IT is buoyant. In fact, maybe it’s too hot, but certainly things are happening. But the life sciences industry is completely at the start of things and if there was one place to start we thought it would be there. (VentureOne has some figures on this.)

IVB: How did you get to know Chika Yoshinaga?
Papiernik: We had worked with Chika for many years and she is a really special person. She is Chinese born and educated as a medic. and she has been working in Japan for the last four or five years for NIF. We invested together in several companies and we got to know her and like her. One thing led to another. We thought her experiences were at least as good as anyone looking at life sciences right now. We all decided: why not explore the possibility of doing business in China and planting an office there?

IVB: What sort of companies will you invest in?
Papiernik: “We may not restrict ourselves to what we do in Europe which is more drug discovery, drug development-oriented companies. We may explore a broader field of opportunities that we think may be better fitted to the Chinese market. (Contract research organizations, sales and distributors of devices are possibilities.) Today we are in the exploration stage and it’s too early to make conclusions on that front. Everyone there is on the same level, and the people who are active in China are doing a variety of things that can look quite eclectic. We will explore more over the next few months, and while we already have deal flow, a lot more things are going to start coming our way.”

IVB: How much of your funds might go to China?
Papiernik: “The bulk of what we do is investing in Europe. That is our key strategy and will remain our key strategy. Today we do invest 20% outside of Europe. Most of that traditionally goes in the U.S. So it’s probably out of that pool that any investments would come. We don’t have any set percentages. What is not going to change is our main focus is in Europe.”

IVB: Are you looking to invest in companies based in China or to pull technology out of China for companies based elsewhere.
Papiernik: “If such an opportunity exists on the business and development front we won’t refuse. That is another good thing about having someone on the turf."

IVB: Any concerns about intellectual property protection?
Papiernik: “Things are changing there. We think that things will become more Westernized in that respect and that any intellectual property needs to be protected the best we can. We will not do anything where the IP would disappear or be copied. That is another reason why the drug discovery play may not be the initial direction we take.”

IVB: Are there sufficient capital markets to support your companies after investment and to allow you to exit?
Papiernik: “If you take a five- to 10-year perspective I am absolutely certain there will be opportunities for people like us to make money in this market.”

IVB: Will you invest elsewhere in Asia?
Papiernik: “We also have a Japanese deal flow and thanks to Chika we’ll remain interested. They may not be deals located in Japan. It could be in-licensing or out-licensing technologies in Japan. (See more on specialty pharma players here.) We have (an IT-based) deal in Singapore. And all of us have looked at Indian deals. Again, our focus is Europe so the best opportunity we see is to have someone there.”

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