Family offices and the biotech nexus – one big deal and others await

Photo by cgtoolbox/iStock / Getty Images
Photo by cgtoolbox/iStock / Getty Images

Family offices have for many years been a big source of funding for biotech. Of course, biotech isn’t without its risks, and most biotech startups end up nowhere, but the higher the risk, the greater the rewards if it all goes right. And it looks like one family office is about to make a sizeable return on their investment in the sector. Here is a taste of what’s going on from a family office perspective.

Wildcat Capital Management, the family office of David Bonderman, co-founder of the private equity group TPG, has made some serious money – at least on paper – by backing a biotech group called Kite Pharma. The California biotech group has just been acquired by Gilead Science for an impressive $11.9 billion, and Wildcat Capital Management owns a sizable chunk of the shares in Kite – according to NASDAQ, where Kite is listed, those shares are worth more than $400 million. Kite’s shares have quadrupled since the beginning of the year. Bonderman must be pretty happy with his investment.

Another prominent family office-backed biotech group is the German-based Biontech, which claims to be Europe’s biggest privately-held biotech group. Biontech’s biggest shareholder is the Strüngmann Family Office, which is owned by the brothers Thomas and Andreas Strüngmann. The brothers sold their pharma company Hexal for more than $7 billion in 2005.

But biotech investing isn’t for orphans and widows, and even some of the most experienced investors can get burnt

Biontech, founded in 2008, has been announcing a lot of positive things about its various cancer-based therapies in recent months. It could be on the verge of some big breakthroughs in cancer treatment. And, no doubt, presents a tasty takeover target from one of the bigger pharmaceutical groups. Could the Strüngmann brothers be in line for another huge payout?

Some other big biotech family office investors include Ernesto Bertarelli’s Waypoint. Bertarelli made his money from selling the family’s pharmaceutical business, Serono, and now has a diversified investment portfolio of companies managed by Waypoint and its subsidiaries. Waypoint’s biotech interests include Stallergenes Greer, which specializes in the diagnosis and treatment of allergies, and Macrolide Pharmaceuticals, which is involved in research and treatment of life-threatening bacterial infections caused by drug resistant pathogens.

But biotech investing isn’t for orphans and widows, and even some of the most experienced investors can get burnt from backing a business that promises so much, but can under-deliver spectacularly.

And an interesting case in point in this respect is the investors linked to Osiris Therapeutics, a biotech business based in Maryland. Thomas Schmidheiny, who owns a family office called Spectrum Value Management, invested in Osiris back in 2008. But the business, at least so far, hasn’t been as lucrative as investors might have hoped. The share price of Osiris, which is listed on NASDAQ, has tanked since its peak in July 2015 – it’s not clear if Schmidheiny still owns shares in Osiris. But the biotech group attracted some big investors as this story in Handelszeitung, a Swiss newspaper, indicates.