Ansbert Gadicke is a logical fellow. He became a doctor because his calling is to help people, but he realized he could only do so much as a research physician. What else could he do, he wondered, to have a bigger impact? The logical question produced a simple answer: become a venture capitalist and help promising biotech companies become a reality. And so MPM Capital was born.
That was 10 years ago, when Gadicke was just 33 years old. Today, the German-born physician sits at the helm of what is believed to be the largest biotech venture firm in the world. MPM boasts a staff of 28 investment professionals and $1.2 billion under management. That figure will grow to near $2 billion when MPM closes its third venture fund, expected to close in the first half of this year, putting it ahead of well-regarded competitors such as Prospect Venture Partners, which turned heads last summer when it closed on a second fund of $500 million.
With such a large bankroll and so many investment pros, MPM has taken the top of the hill of life sciences investment. Other VCs in the segment have no choice but to pay attention to what Gadicke and his troupe are investing in, lest they get trampled under foot.
A number of factors have come together – including the collapse of the dotcom balloon and the unraveling of the human genome – to bring life sciences investing front and center.
He’s soft spoken, but Gadicke is direct and to the point: “I think we will deploy a very large, probably the largest, amount of venture capital in the health-care industry over the next years,” he says.
That doesn’t mean that he and his colleagues are going on an investment binge. Far from it. “We did three investments per partner for the last year and a half, but now we are slowing down to two investments [per partner] per year,” he says.
Gadicke focuses on start-up companies in the biotech and pharmaceutical space, as well as spinouts from large pharmaceutical and biotech companies. He is more interested in product-focused companies, like BioMarin Pharmaceuticals Inc., than pure technology companies. BioMarin, which develops enzyme therapies for genetic diseases, is one of his biggest hits – generating a 16x return on MPM’s initial investment of about $7.5 million. BioMarin is also his favorite investment because it was turned down by other VCs who didn’t do enough due diligence to appreciate its potential, he says.
Gadicke plans on concentrating on central nervous system, cellular therapy and oncology companies in the future. The attraction for him is that these areas have major medical needs that haven’t been fully addressed, and he’s starting to see breakthroughs in R&D.
Driven by logic, Gadicke is less prone to bet on a deal that “may” be huge but has little data to support its claims than he is to invest in a company with a quantifiable potential success rate. Example: the industry average when brining a compound into human clinical trials is a 5% to 10% success rate. But with enzyme or protein replacement therapies, the success rate is in the 70% to 80%. He made three investments in the past year in companies that the numbers show have a high likelihood of success: Centagentix, a Boston-based genomics company focusing on diseases of aging and the genetics of extreme longevity; Kourion Therapeutics, a Dusseldorf, Germany-based biotech company in the cord blood stem cell sector; and Mindset BioPharmaceuticals Inc., a Jerusalem-based company whose products target the treatment of Alzheimer’s Disease.
Because he focuses on start-ups, Gadicke works closely with the management of his portfolio companies, trying to map out their strategic directions. In the case of cord blood stem cell company ViaCell Inc., he proposed and helped execute the merger between one of his existing portfolio companies, t.Breeders, which develops cell amplification technology, and Viacord, which is in the business of banking cord blood. His goal was to create a single company with strong technology but also a solid consumer business (blood banking) that generates cash flow. “The merger would not have happened without Ansbert,” says Marc Beer, CEO of ViaCell. The company, which has raised $65 million in VC, plans to go public later this year. The deal should generate a 5x to 10x return on MPM’s $15 million investment, Gadicke says.
The most important lesson Gadicke has learned in the venture business comes from a strikeout, rather than a homerun. “We missed the public market window for LXN, a company where we had developed a great product … so we had to sell it and we only got back the money we put into the deal,” Gadicke explains. Now he makes sure to focus on getting his companies financed for the long haul.
Founding General Partner, MPM Capital
Investment focus: Biotech and pharmaceutical companies
Biggest hits: BioMarin (NASDAQ: BMRN), Medigene AG (NMarkt: MDG), Transkaryotic Therapies Inc. (NASDAQ: TKTX)
Board seats: Biovitrum, Centagenetix, DoubleTwist, Endeavor, Genteric, Kourion (11 total).
Years as a VC: 10
Did you know? He knows everything about Harley-Davidson motorcycles, but the newly sworn-in American citizen still doesn’t understand baseball.