Sofinnova Partners, a European venture capital firm specializing in life sciences funding, has expanded its investment activity to include digital medicine startups, starting with three European companies in whose financings the firm has taken leading roles.
Sofinnova would not disclose the size of the digital medicine fund—which Bloomberg News has reported as having raised €150 million ($163 million), citing an unnamed source, that would amount to a relatively modest six percent of Sofinnova’s more than €2.5 billion in capital under management.
Edward Kliphuis, one of two partners overseeing Sofinnova’s Digital Medicine Strategy, told GEN Edge the new fund will be scaled up to fund about 15 companies.
“We define digital medicine as the integration of advanced computational techniques into medicine, and advanced computational techniques can be anything from AI, machine learning, data analytics,” Kliphuis said. “The purpose of this is really to provide personalized, efficient, and effective healthcare and improve patient outcomes at the same time, whilst reducing cost.”
He said Sofinnova will prioritize its digital medicine investments in three areas. One is enabling technologies that include data capture, data dissemination, and generating new inferences from biologic data.
“You can define these broadly as the picks and shovels,” Kliphuis said.
The second area is analytics designed to predict a point of disease onset earlier, treat disease more effectively, and intervene with treatment at the point when it’s needed. The third is treatments: “We believe digital really has a potential for not only capturing new ways of treating patients, but also addressing co-morbidities.”
“The majority of these solutions are designed to augment and complement traditional medical practices, providing physicians and other healthcare professionals with the tools and resources they need to make more informed decisions and provide better care to patients,” Kliphuis added.
Until now, he said, digital medicine investments could only occur on the fringes of Sofinnova’s other life-sci strategies: “The majority of these opportunities fell by the wayside. We saw the increase of opportunities in this domain, and we saw that we did not have a product to cater to founders’ needs here, which is why we decided to develop the strategy.”
Declining VC investment
Sofinnova’s goal of building a leading presence in digital medicine has been made more challenging by the decline of the financial markets, reflected in part in reduced VC investment since the market peaked in 2021.
Professional services firm EY recorded a 37% year-to-year decline in the total value of U.S. and European VC deals, to $16.88 billion in 2022 from $26.62 billion in 2021. Late-stage financing rounds accounted for just 31% of last year’s VC deals, down from 34% in 2021 and 58% in 2012. The number of VC deals in the U.S. and Europe fell 18%, to 761 last year from 930 in 2021.
“It is hard right now in venture investment,” Kliphuis acknowledged.
That difficulty has increased following the collapse of Silicon Valley Bank, which filed for Chapter 11 bankruptcy last month. “SVB was not a pleasant experience for any of us, and it is definitely a reset of this market,” he said.
Yet Sofinnova expects its digital medicine strategy to succeed despite, and ultimately outlast, the current bear market.
“We bring to the table a deep understanding of the technology and the go-to market. That’s what we bring to the founders that we work with. That helps them and us to create value that can ultimately benefit patients in need,” Kliphuis said. “There is right now the challenge in the market at large. But we still believe that we’re in a strong position to support founders with meaningful innovation to really weather the storm.”
Sofinnova insists it will not pursue investment in digital medicine at the expense of its existing five strategies:
- Capital—Serves as a founding and lead investor in early-stage biopharma and medtech start-ups focused on therapeutic technologies deemed to be groundbreaking.
- MD Start—In-house accelerator focused on building therapeutic medical device or “medtech” startups.
- Crossover—Investment in later-stage biotechs and medtechs that show “game-changing” science with initial proof of concept.
- Industrial Biotech—Early-stage investments deemed to enhance sustainability in the chemicals, agriculture, food, and materials sectors.
- Telethon—A collaboration with Italy’s Telethon Foundation to invest in innovative Italian biotechs toward translating research in rare genetic disorders into preclinical and clinical development of treatments.
Capture all innovation
Proud life science investors for the past 50 years, Kliphuis says he wants “to capture all innovation in life sciences that contributes to patients and contributes to outcomes of individuals and thereby support founders building solutions. This is an addition that basically allows us to capture a part that we couldn’t capture before in a very bespoke way and serve founders, and ultimately patients, in a new way.”
The digital medicine strategy marks the first expansion of Sofinnova’s investment activity since Apollo Global Management took a minority equity stake in the firm and committed up to €1 billion (about $1.1 billion) in managed capital to its investment funds—a deal intended to raise Apollo’s profile in the life sciences.
Through the partnership, Sofinnova—which celebrated its golden anniversary last year—gained access to Apollo’s global investment platform spanning credit, equities, real estate, and other asset classes, as well as its expertise in investment networks and capital markets. Sofinnova continues to operate independently from its headquarters in Paris, with offices in London and Milan.
Sofinnova is not the only VC firm that has stepped up digital medicine investment in recent months. General Catalyst, a Cambridge, MA-based VC firm with more than $24.8 billion in assets under management, joined University of California (UC) Davis Health in November to announce a partnership through which the healthcare provider agreed to work with companies in General Catalyst’s portfolio to advance AI and digital health innovations in areas that include healthcare delivery, research, education, public service, and ongoing efforts in operations, patient care, and outcomes.
UC Davis Health joins several other U.S. healthcare providers—Intermountain Healthcare, Jefferson Health, HCA Healthcare and WellSpan—that have partnered with General Catalyst in recent years.
Also investing in digital medicine companies is Intel Capital, the investment arm of Intel. Since 2021, Intel Capital participated in a $320-million Series D financing for Biofourmis, which develops digital companion therapeutics to augment existing and upcoming novel therapies and delivers virtual care. Intel Capital also joined in the $15-million Series A round of VeriSIM Life, which has developed BIOiSIM, an AI-based drug development platform.
Sofinnova’s digital medicine strategy will focus on leading seed and Series A financings in its preferred investment range of between €2 million to €8 million ($2.2 million to $8.7 million).
Sofinnova has disclosed three digital medicine companies in which it has led investment rounds:
- Deepc, which helps healthcare systems develop and integrate third-party artificial intelligence (AI) technology into existing workflows through its deepcOS® platform. Munich-based Deepc has completed a €12 million ($13.1 million) Series A, whose proceeds are intended to expand its geographic coverage and develop additional features.
- Kiro, the Paris-based developer of an AI platform providing decision-making support for clinical labs, health professionals, and patients. Kiro has raised €13.8 million ($15 million) in Series A funding, intending to further develop the platform, expand beyond its 150,000+ monthly active users, reinforce its leadership position in France, expand commercial operations in Europe and prepare to enter the U.S.
- BioCorteX, developer of the Carbon Mirror computer simulation platform designed to inform clinicians on drug-bacteria interactions and improve their patients’ responses to treatments. London-based BioCorteX has completed a $5 million seed funding led by Sofinnova with Hoxton Ventures, designed to fund further development of the platform.
While all three funded companies are based in Europe, Sofinnova will also invest in companies based in the U.S. and Israel—two countries where healthcare systems have been early adopters of digital medicine technologies.
Kliphuis joined Sofinnova in 2021 from M Ventures, Merck KGaA’s corporate VC arm, where he specialized in investments in digital medicine companies, including developers of the first FDA-approved videogame therapy. Earlier, he was part of the Life Sciences securities team at Kempen & Co, a pan-European merchant bank.
Kliphuis’ partner, Simon Turner, also joined Sofinnova in 2021 after consulting for companies seeking to develop partnerships with digital health companies. He previously worked at the External Innovation Department of Baxter International.
Turner and Kliphuis are joined in the firm’s Digital Medicine Strategy by senior associate Javier Nunez-Vicandi, MBBS. A former clinical doctor at Oxford University Hospital Trust, Nunez-Vicandi later worked at M Ventures and then became the first employee of Heal Capital, where he played an active role in growing the €100 million (about $109 million) early-stage healthtech VC fund from zero to 12 investments.
“We will build out the team,” Kliphuis said. Sofinnova will not disclose how large of a team it ultimately plans to build in digital medicine.
“Our pitch, in a nutshell,” says Kliphuis: “We spot promising technologies in their early stages, and then bring these technologies to product-market fit. That’s what my partner Simon and I have been doing, and that’s really what we’re committing to here again.”