Special issue of the
with Bernd Wegener
& Co-Founder of Deutsche Biotech Innovativ AG
Board Member of BPI (The Association of the
German Pharmaceutical Industry)
CEO & Co-Founder of B.R.A.H.M.S AG
A follow-up to our interview published one year ago in
on after a failed »Cold IPO«
> How the former BRAHMS leaders found it hard to convince German
investors to participate in their business model via a public capital
increase at the end of 2015
> How they nonetheless finished a phase 1 study of their lead
sepsis drug candidate
> How Deutsche Biotech Innovativ AG (DBI AG) plans for the future
> Some thoughts on tax incentives, old managers, attitudes and
industry know-how of investment managers
Dr. Bernd Wegener
CEO of Deutsche Biotech Innovativ AG (DBI AG)
by Marcus Lippold
[iito] Business Intelligence
Public Capital Increase in 2015: a Disaster? Yes, and No!
Lippold (Q): Dear Dr. Bernd Wegener, thank you very much for agreeing
to a follow-up to the interview we both did about a year ago!* Back
then you were in the process of publicly raising a capital increase.
The aim has been to raise €20m to advance the portfolio of
your Germany-listed holding company “Deutsche Biotech
Innovativ AG (DBI AG)”. Would it be right to call this
capital increase a disaster?
Bernd Wegener (A): I surely do not like the word "disaster". But
considering that we tried to raise €20m and ended up with just
€2m, it might be called something like that.
Note: The complete interview from September 2015 can be found
http://www.life-sciences-europe.com/newsletter/lse-newsletter-511001s1.html and discusses in detail
the founding, corporate structure and strategy of DBI AG.
got €2m. What were the cost associated with the capital
A: Actually, one of the two million Euros we got, came from ourselves,
from the founders of DBI AG. With regard to the cost of the capital
increase: these were in the normal range with about €300k.
Ultimately this boils down to €700k net of additional,
»external« money instead of €18.7m. What
did you do afterwards?
A: Although we hoped for more, we had a »plan B«.
We put up some more of our own money and we concentrated our activities
on one product, adrecizumab, our antibody for the treatment of sepsis,
which is in development by our subsidiary AdrenoMed AG.
Adrecizumab is a partial adrenomedullin (ADM) inhibitor with the
interesting feature that ADM itself is the respective marker for the
use of the drug. So the drug target is at the same time the marker
triggering its use.
What were the reasons for raising just €2m instead
A: Several things came together, which played a critical role:
1. We did not find an anchor investor who was able to do a scientific
due dilligence; one signal for less specialized funds.
2. At the time of our capital increase, presidential candidate Ms
Clinton in the US made some critical remarks about drug pricing. And as
a result biotech shares went down and two US-based funds who at first
agreed to support us, finally did not sign the capital increase.
3. The know-how to put a value on a preclinical biotech company is
difficult to find in Germany.
back, do you think that your promotion of the capital increase
– the »Roadshow« – has been
A: I guess so. We had a well-established professional PR/IR agency.
Over a period of six months we had meetings with potential investors in
all major European financial centres. Maybe one thing we could have
done differently: it may help to get a »big name«
investment bank, to reassure the potential investors with the brand of
You just mentioned that it is not easy to find qualified investors in
Germany. Can you give an example?
A: Yes, we had meetings in places like Munich or Hamburg. And there
were 20 or 30 people in the room, who did not know about sepsis.
This would not happen in the US with potential life science investors?
A: Definitely not. It’s a little bit tricky for us presenting
our company in this context.
Did you think about lowering your offering price for the new shares,
when you realised demand for the shares had been low?
A: No, we carefully evaluated our portfolio and agreed on what we
considered to be a fair price. We really didn’t want to give
away the store for free. And who knows – sometimes life is
funny – as we have now moved our lead candidate successfully
through a phase 1 study, maybe we simply end up richer ourselves,
because we did not place more shares?!? .
The DBI Portfolio
Today and Options for the Future
Let’s talk about your situation today. As you have focused
your resources on your lead sepsis drug candidate, are the other
projects of DBI AG dead now?
A: No, definitely not. But we do not have the resources to really push
them forward at the moment. Accordingly, we try to do our best to keep
these projects alive and advance them. However, because of the
resources at hand, they are in some kind of waiting position while we
focus on adrecizumab.
One option still is to have another capital increase, but this time not
a public one. We are thinking about this and also about our ability to
participate with our own money to keep our share in DBI AG. But no
final decision has been made yet. And if we go for a capital increase,
the money would most likely be used to advance adrecizumab into phase 2
and not for other projects.
What is the status of your sepsis antibody product as of today?
A: We used the money from the capital increase and some of our own
money to successfully complete a phase 1 study of adrecizumab and right
now we receive a lot of interest from potential partners. At the moment
we are actually discussing to raise more money – about
€10m – to open up the option to move the product
further into a phase 2 study. An early out-licensing or partnering
agreement could also be an opportunity for us.
Is it really possible to finance a phase 2 study on your own?
A: Again we are lucky, because of our indication. In a sepsis trial,
you will know within a maximum of 12 days whether your drug works or
not. It would be impossible for us to move into later phase research in
areas like cardiovascular or metabolic diseases.
All options are open at the moment, right?
A: Yes, I think so.
And as far as I am perceiving it, the industry today is open to do
partnering and licensing deals at every stage of development
– sometimes even pre-clinical. Five or six years ago
everybody said at partnering conferences, that you need phase 2 data to
really have big pharma consider a deal, but this changed totally.
A: Definitely. As I said, we now have a lot of interest for our drug
candidate, and at a later state of maturity the appropriate decisions
will be made.
Some Thoughts on
How to Finance a Biotech Company in Europe?
Dr. Wegener, given your experience with your latest capital increase of
DBI AG as well as your prior history with BRAHMS, what are your
thoughts about the financing options for biotech companies in Europe,
and especially in Germany?
A: It is well known and much discussed that financing is a critical
point for biotech ventures, and a very problematic point indeed in
Europe and Germany. As everybody will tell you, money is all over the
place in Europe, and for sure in Germany. So the funds are definitely
available. But to get access to this money as a life science company is
far from easy; especially when you are looking for conditions, that
seem acceptable to you as a founder and entrepreneur.
A: I think there are several reasons, including:
> There are few biotech/life science funds in Europe and these
few funds find it difficult to raise capital.
> Most general investors have little or no biotech industry
know-how and are often surprised by the long time span until a
successful exit is possible.
> There is a lot of risk aversion with regard to high-risk
investments in new product development.
> Tax regulations, especially with regard to the treatment of
losses incurred, are not favourable.
> Venture capital (VC) is often not really helpful for young
Okay, let’s stop with your list, before it gets too long and
start with your last point. Why is VC often not helpful for young life
A: The investment horizons most often do not really fit! VC firms must
deliver for their investors within the time frame of the respective
fund. This time frame is most likely not totally in line with the
financing needs of the company. And the problem only multiplies with
several VCs invested in one firm.
You had your share of experience with regard to this. You had
to sell BRAHMS, because one of the investors needed cash and therefore
had to realise his investment. We spoke about that in our last
interview. What about the often cited risk-averse attitude in Germany?
A: In general the German investors are inclined to prefer investments
with a lower risk profile. I suppose this general statement is true.
However, one should expect that a high possible return of investment
should attract at least some investors. Regarding the
investor’s willingness to take risks, the biotech
industry in many cases directly competes with Medtech or IT investment
possibilities, – the resulting benefit-risk balance is not
always in favour of the biotech industry.
Is this related to the missing industry know-how of the
investors in the life sciences space?
A: Yes, this may be one reason. As we discussed before, having
professional investors in a room that don’t know about
sepsis, rather indicates that they are not very much into the life
sciences industry and is a little bit scary. And this certainly
reflects to some degree the status of the innovative biotech industry
– within the German industrial landscape, and in German
politics as well.
How many investment funds focussed on life sciences are based in
Germany? Not even ten, I suppose!?
A: Certainly not.
There are Strüngmann and Hopp, two family offices. Who else?
Creathor Ventures, Charité Fonds/Peppermint, MIG Fonds, TVM
– although TVM moved most of their operations out of Germany
– and...? The High-Tech Gründerfonds for the seed
phase and some funds as tools of business development in the federal
states, without enough money to move molecules into later phases. Some
Swiss-based funds with more money and industry know-how?
A: Yes, and in other European countries the situation is
not much different. Just two or three really relevant funds
specialised in life sciences in each economic region. At BRAHMS, for
example, we had a Swiss-based major investor. When you look to the US,
you probably find more specialised life science funds, know-how and
dedicated life science capital in Boston or San Francisco alone, than
in the whole of Europe.
In addition – or maybe also as a result of this –
the US funds find it very easy to refinance themselves, while this
seems to be more difficult for the few European life science funds.
What is the most critical point with regard to the political framework?
A: Definitely tax regulations. It seems incomprehensible that
investments in ships enjoy a lot of favours in Germany and when I
finance my biotech investments with my own – already taxed
– money, I am lost and on my own. I risk it all, without the
chance to recover at least some of the potential losses on the tax
front. Without fair and relevant tax incentives for high-risk
investments I can see no big future for real innovative life science
developments in Germany on a larger scale. In particular the treatment
of losses incurred is not favourable and this should be changed. And I
repeat myself, this is an investment that I make from already taxed
Okay, your message is clear. Do you see any real hope for changes in
the short or medium term?
A: I do not know.
Too Old to Die,
too Young for Rock’n’Roll?
are the young founders & leaders in the
»innovative« biotech industry?
Are the life sciences an industry of 50+ years senior level
In discussions about innovative industries, based on
break-through R&D, we probably read about – or think
about – young, dynamic, risk-taking, fast-growing and
fast-moving firms, moving into yet unexplored territory. Founded by the
upset, angry, young and brave women and men, longing to push
themselves to new frontiers. Okay, that may sound a little bit
melodramatic and like a B-movie plot?!
But in reality, when I attend meetings at business partnering
conferences or talk to senior level managers at trade fairs, the
likelihood is close to 100% that I am not the oldest person
involved, and I am 51! And when I think of industry people I know below
the age of 30, nearly no top manager or corporate leader springs to my
mind. Is this a "young and innovative" life science industry, that
lives up to the letters of these words?
A: Mr. Lippold, I wonder about this myself. During the last years I
have worked with a network of business angels – they are all
quite old, to be honest – and I am also involved in the
CBF-Fund in Berlin, which is managed by Peppermint. I have to admit
that I haven’t seen a serious business plan from founders in
Biotech below the age of 30 for years. At least I can’t
A: One reason might be that the new generation of leading scientists at
the Charité in Berlin – where I have some insights
– tends to move more into the areas of digital health and
medtech. Actually, this is not my core field of experience.
Another reason may be that people like me and business angel, who are
friends of mine, are a little too old to get really in touch with these
young students of today. Maybe we are living in worlds that are too
Finally, the risk-averse attitude of Germans may be one of the
clichés that simply are true?!
Where do the »good« potential entrepreneurs
– people who come up with technical innovations and at the
same time have a business talent – end up?
A: As indicated before, these days they seem very much focused on
software apps related to medtech devices; – and it is
probably easier to get the critical mass, the financing and a realistic
timeline to move such a product to the market. Especially, the
investments in hardware, production and regulatory processes are
definitely not as high as in pharma development. However, time will
tell how much those apps and health IT products will be regulated like
medical products in the future. The discussion is right now just
Will there be a new German company. bringing a small-molecule or
biological molecule to the market on its own, and growing afterwards to
build a portfolio?
Dr Wegener, let us close with the question, whether there will be at
least one German drug company, which will be able to bring a small or
large molecule to the market on its own, within the next decade;
– and afterwards will be able to grow and build up an own
drug portfolio, to really become an independent pharma company?
A: I may not be the right one to answer this, as DBI AG has at the
moment no resources and intentions to bring the lead product to the
market on its own. And as discussed in our first interview, we actually
incorporated all different projects at DBI AG as legal entities under
the umbrella of the holding company. So, basically we look for
asset-centred partnering to reach our markets.
In Germany, no company has done the trick. Actelion has done
it in Switzerland, but in Germany?
A: I have no idea.
At least companies like AiCuris and Phenex have licensed out their lead
candidates with quite good partners and deals, and at the same time
were able to keep going and work on other projects.
Then there are the platform technology and service providers like
Miltenyi, Qiagen, MorphoSys and Evotec, from which only two are in the
business of developing drugs. MorphoSys and Evotec are even trying to
move some products forward on their own, although both rely on the main
business of offering their technologies and services to other players.
Finally, there are labtech players like Eppendorf, Sartorius or
Stratec, who are not working on »content« at all,
providing research and production tools. Some kind of business, German
companies have always been excellent at.
A: Yes, I certainly agree with you. But we should not forget that a lot
of important approved drug products today end up in German and Swiss
business groups at the end of the day. Roche, Novartis, Bayer,
Boehringer and Merck are major players, who today often own marketing
rights to products that have been researched and developed in North
America or somewhere else. Accordingly, no need for tears and false
understatement. But a need for young blood is surely there!
Let’s hope for the best.
Mr. Wegener, thank you very much!
A: Thank you.
This interview took place via phone on Thursday, 28 July 2016, in
A first complete English version has been produced on 6 September by
Marcus Lippold and has been checked and corrected by Bernd Wegener and
his team on 9 September 2016.
The final version has been produced on 14 September.
This interview has originally been published as a Special Issue of the
[LSE] Newsletter on 15 September 2016 at
© 2016 by [iito] Business Intelligence
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