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[LSE] Interview

Special issue of the [LSE] Newsletter

[LSE] Interview with Bernd Wegener

> CEO & Co-Founder of Deutsche Biotech Innovativ AG
> Board Member of BPI (The Association of the
    German Pharmaceutical Industry)
> former CEO & Co-Founder of B.R.A.H.M.S AG

A follow-up to our interview published one year ago in September 2015.

Moving on after a failed »Cold IPO«
in Germany

> 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

Twitter iito Bernd Wegener

Dr. Bernd Wegener
CEO of Deutsche Biotech Innovativ AG (DBI AG)

by Marcus Lippold
[iito] Business Intelligence

DBI’s Public Capital Increase in 2015: a Disaster?  Yes, and No!

Marcus 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  at and discusses in detail the founding, corporate structure and strategy of DBI AG.

Q: You got €2m. What were the cost associated with the capital increase?

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.

Q: 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.

Q: What were the reasons for raising just €2m instead €20m?

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.

Q: Looking back, do you think that your promotion of the capital increase – the »Roadshow« – has been adequate?

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 the bank.

Q: 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.

Q: 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.

Q: 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

Q: 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.

Q: 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.

Q: 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.

Q: All options are open at the moment, right?

A: Yes, I think so.

Q: 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?

Q: 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.

Q: Why?

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 companies.

Q: 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 science companies?

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.

Q: 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.

Q: 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.

Q: How many investment funds focussed on life sciences are based in Germany? Not even ten, I suppose!?

A: Certainly not.

Q: 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.

Q: 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 income.

Q: 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?


> Where are the young founders & leaders in the »innovative« biotech industry?

> Are the life sciences an industry of 50+ years  senior level managers?

Q: 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 remember.

Q: Why?

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 much apart?

Finally, the risk-averse attitude of Germans may be one of the clichés that simply are true?!

Q: 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 evolving.

Mission Impossible?


> 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?

Q: 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.

Q: In Germany, no company has done the trick. Actelion has done it in Switzerland, but in Germany?

A: I have no idea.

Q: 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.

Q: Mr. Wegener, thank you very much!

A: Thank you.


This interview took place via phone on Thursday, 28 July 2016, in German language.

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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Marcus Lippold
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