International investment bank RM Global (RMG) has announced the closure of a second financing round of $34 million for its RMGP Biopharma investment fund. $64 million has been raised to date for RMGP Biopharma, whose purpose is to invest in companies at the FutuRx biotech incubator in Ness Ziona, and its graduate companies.
The idea of a special fund was formed in 2016 by Yaron Breski and Assaf Keret, managing directors of RMG's Israel office since 2013. The model of investment in companies linked with a specific incubator is unique. In the conventional model, incubator franchise holders invest in all of the incubator's companies and make follow-on investments in companies of particular interest to them. The FutuRx franchise holders - leading medical fund OrbiMed, Johnson & Johnson Innovation, and Takeda Ventures - are doing just this. RMGP Biopharma, on the other hand, is bringing capital and connections to the table without being a franchise holder, and is therefore under no obligation to invest in every company in the incubator.
The first financing round of $30 million for RMGP Biopharma was held in 2017. "The idea was to raise the first amount quickly, because the incubator was already working, and we didn't want to miss opportunities," Breski says. "We boarded a train already traveling at high speed, so we started working before the ink on the first investment documents was dry. We very much hoped, however, that the fund would be bigger, so that we would be able to allocate a third of the capital for supporting companies already in the incubator and two thirds for follow-on investments."
"Globes": What is the mix of your investors?
Breski: "95% are life sciences investment institutions, life sciences funds, or non-mega pharma companies operating in a specific geographic region who want access to our portfolio. The investors are from the US, Israel, South America, and Asia."
Keret: "We believe that we'll be able to bring $3 from our investors for every dollar that the fund itself invests, and also gain access to know-how and expertise through them.
"For example, the technology of TNIK, which is developing a new cancer drug, came from a research institute in South Korea through our connections. We hope that more products will reach the incubator in this way, specifically more products from South Korea. 50% of the incubator's products come from universities and research institutes in Israel, and 50% from overseas."
Check Point cofounder Marius Nacht's aMoon fund is one of the concerns that invested in RMGP Biopharma. "The focus on groundbreaking pharma technologies in early development is an important element in the Israeli health-tech industry ecosystem," says aMoon cofounder Yair Schindel.
What investments have you already made?
Breski: "We took part in the investment rounds of BiomX, which is developing treatments based on bacteriophage - bacteria-eating cells that can be used as antibiotics. This special company raised $24 million when it was still in the incubator, and $32 million more since it graduated from it. This is a lot of money for an Israel drug company, and certainly in comparison with the stage the company has reached."
Other investments by RMGP Biopharma are in Mitoconix Bio, which treats nerve system degenerative diseases (Alzheimer's Disease, Parkinson's Disease, and ALS), and Pi Therapeutics, which treats cancer. Companies in which the fund invested while they were in the incubator, but which have yet to make headlines, are Bsense Bio Therapeutics, based on technology developed at Tel Aviv University - a drug with a new action mechanism for treatment of neuropathic pain; PiNK Biopharma from Ben Gurion University of the Negev, which has discovered a mechanism that activates immune system cells against cancer cells, opening up a new option for immunotherapy; and ImmPACT-Bio, which has developed a mechanism that improves CAR-T technology, and is likely to expand the types of cancer that can be treated with this technology.
Companies like BiomX and Mitoconix have already raised large amounts of money in their initial financing rounds. What comes next for them?
Breski: "We want to bring investors who can support the companies until they hold IPOs. Such companies require a lot of time and money, plus investors able to manage this risk correctly. Our goal is to support 'Death Valley' until they find such an investor. Meanwhile, it looks like it works."
"There are brilliant fund managers"
Keret: "You can see the development of the market. The Israeli funds are generating nice returns for their investors. There are brilliant fund managers. This is a very risky sector, so not everyone succeeds in the end, but that's what they're expected to do - take risks.
"We see a lot of creative financial models: in FutuRx, the funds cooperating with hospitals, iincubators that integrate financial concerns, large companies, and hospitals for activity in digital health, where there are extraordinary opportunities in Israel.
"There is another change taking place - a realization that the clinical trials model is not sustainable, not just because of the price, but because there are so many trials that a company finds it difficult to get to patients. Alternative solutions will be needed, such as working with databases from the real world using tools like artificial intelligence."
Published by Globes, Israel business news - en.globes.co.il - on April 8, 2019
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