Investing For Life: Q&A With Sofinnova Chairman Antoine Papiernik

Paris-based Sofinnova Partners, a life science venture capital firm, has been an early investor in companies such Genentech and Biogen, and now has over $2.5 billion invested in sciences, primarily in healthcare and sustainability. Antoine Papiernik, Sofinnova chairman and managing partner, speaks with Global Finance about the state of life sciences today and in future.

Global Finance: How are macro conditions such as interest rates impacting your work? 

Antoine Papiernik: Interest rates do not directly impact our industry because the cost of goods of those products is a small fraction of the value of the product. What is impacting us instead is the Inflation Reduction Act [a 2022 US law that includes a cap on drug costs and spending] for reasons that are not directly linked to inflation. The Inflation Reduction Act reduces the overall time that a pharma or biotech company can market their products before prices are pushed down.

Today, valuations are low. If you take the 1,000 Nasdaq-listed companies in biotech, they have lost half a trillion in market capitalization. Yes, it is a big deal but that’s the same amount of market cap evaporation that a company like META experienced. To put things in perspective: If these 1,000 companies manage to survive, the number of products that ultimately are going to really create something fabulous and save people’s lives will be huge.

GF: What is the current environment for life sciences IPOs?

Papiernik:  Now it’s the ice age for IPOs. There are no IPOs, at all. And that’s a problem, because companies need to get funded. My job is to transform our clients’ cash into performance. I need to be able to do that either through the sale of stocks on the stock market or selling [a company] to a big pharmceutical player. Right now, this creates a ceiling to an industry because you cannot take a company public.

GF: How does climate change impact your vision or your investing?

Papiernik: There are so many things today that you wouldn’t know that are extracted from petroleum. It’s scary, but that’s what it is, and this must change to reach net-zero. If you look at our portfolio, we have about 25 companies in that field, I am always so impressed with what these people produce. I spent my career funding people who are developing new drugs to treat patients, but saving the planet is also important. Fortunately, people have now caught on to the fact that it’s important, and that biotechnology can support fighting climate change.

GF: What’s the dynamic between startups and big players in this field?

Papiernik: I think the industry has changed a lot over the last few decades. Of all the products that are being brought to the FDA in the US, the great majority—70% to 75%—comes from small innovative biotech companies, and some of them have then been acquired. But the old model—where pharma was doing research with a big R&D team and looking at biotech as a cute little thing on the side—is gone. The bigger players completely understood that they need the smaller biotechs and for that reason, the relationship is not big pharma versus small biotech anymore.