EUVC #223 Juliette Audet, Partner at Forbion a €3 bn AUM leading BioTech firm in Europe.

0:00Hi, everybody, and welcome to the European BC Podcast. I am Andreas, and I'll be your sole host for today, because David is out flying high above us all on his way back from Tech Barbecue in Copenhagen. Today we have with us Juliet Audet, and she is a partner at Forbien, a multi-stage venture fund in Amsterdam and Munich, backing biotech companies in Europe and North America to impact the future of medicine. Forbien is investing out of two separate funds, Forbien Ventures Fund 6 and Forbien Growth Opportunities Fund 2 of 750 million euros and 600 million respectively, with a total of 3 billion AUM and an established portfolio of 44 companies with notable investments, including New Amsterdam Pharma, Gyroscope, and Inflasone.

0:48At Forbion, Juliet focuses on the venture strategy investing in biotech companies from preclinical stage to phase 1b and led the investments in New Amsterdam Ampharma, Mestak, and Dualix, amongst others. As you can all hear, this is going to be one of the technical episodes where we're going to dive into a space that I'm not usually most well-versed in, so I'm sure I'll do many more burbial fuck-ups than this. If you're listening in to the show, do drop us a review, follow the pod, and subscribe at eu.vc.

1:28and a liar. This is a union of values. United and determined, we can serve as a model for other regions of the world. The nature of a problem requires a European response. Europe is a story of new beginnings. Let's start acting. This show is not investment advice and the hosts of this episode may be invested in the funds and companies featured. Let's get this thing started with how you got into venture. Tell us your story. Great. Thank you for having me. I'm delighted to be here. So my journey into venture was not the straightest, but I think it's the case for many. So I'm a scientist by training, but I'm a physicist not a biologist, which actually does matter for the work that I do.

2:19I started my career in consulting i was at mckinsey and company i've actually very quickly uh oriented myself towards pharma and biotech that was mostly because this is where i could find a purpose in what i was doing and i cared about uh about that so worked in in consulting for a while and then i worked in at novartis in strategy and i have to say when i was in strategy i was missing engaging with science And so I was really interested in a career that would allow me to really combine the science and the business together. I have to say I was fortunate enough to have in strategy a boss that I had to change a boss.

3:02And then I had a little bit more flexibility for a couple of months. I went to see the Novartis Venture Fund, the head of the Novartis Venture Fund, Anja Koenig. And I said, here I am. I would love to learn more about venture capital. Can I work with you for a couple of months? and see how it goes. And I have to say, I was also very lucky because Anja Koenig has a very similar background to mine. She's a physicist. She's also went to McKinsey and then she was leading the, she is still the head of the Novartis Venture Fund that does only biotech investments. And so she gave me a chance. It has been an incredibly steep learning curve when I started, which was a little bit daunting at the beginning, but also incredibly exciting.

3:44And I think this is also what I love about this job. it's it's i learn every day and on the queue of learning i'd love to ask you to tell us a bit about a pivotal moment in your career this is not the most common part either but i grew up and i did a professional ballet training until i was 18 and i was doing that in parallel next to uh next to school so uh because my parents didn't allow me to uh to not do the normal school which i'm very grateful now for but obviously at the time as a you know angsty teenager i was uh i was not very happy about. But I think it taught me incredible discipline because obviously I had to manage both the normal school and then, you know, more than 30 hours of training per week.

4:25It also gave me, I think, the learn, I learned the power of training and trying and failing and starting over and learning from your mistake of what can I do differently to make it better. And then actually, when I was 18, I tore my Achilles tendon. So which meant that my belly barrier was over and that happened in the last year of high school and I had to turn things around very quickly and figure out okay what do I want to do like now that this is this part of like the path that I was on is done what do I do so like I had to you know while doing surgery and rehab and all those things I had to find a new path and you know find a university apply and then and then go go on my way so I think it taught me a lot of resilience but also the power of of seeing new paths when one falls through.

5:13And I think it's helpful in the startup and venture capital environment. Yeah, I imagine it's something you do on quite often when you're talking to founders about the fact that sometimes we have to fold. I think it's recognizing when it's the moment to fold. You know, sometimes in the scientific environment, I think this is also the chance that we have that But sometimes when the experiments don't work, you have to figure out, well, why don't they work? But then if they give you a very clear signal of like, this is non-progressible, you can get very, very clear signals from the data. Which I think that sometimes, you know, if you're thinking more about tech, the tech environment, or you have a product on the market, sometimes the feedback of the market is not as direct.

6:01So which is something that I think in the investments that we do, that I do, you can rely a little bit more on the science and what it tells you. We're most likely also going to talk about this, but I know it's a topic that matters a lot to you, which is training and building up newer VCs. And I'd be curious to ask you about this part specifically. It's an incredibly important skill for a VC. I think the best VCs out there are also the best coaches. And building that skill set in someone who was hired in to a firm is not necessarily the easiest. And that's, of course, also why it's a long path to partner and a long path to the board seats and leading investments where you have this responsibility of being able to work through this with empathy with founders.

6:50I'd love to ask you how you think about building this type of skill set into people that doesn't necessarily have that type of experience in their baggage. Yeah, I think it's an interesting question because especially in the field that I work in, you know, the profile of people we recruit is people that are very scientifically driven, usually PhDs. And they come here and I keep on telling them it's all about the people. This is a people's business, which obviously is something that they need to reconcile with. And obviously, you know, it's all about the science as well. And we need to have the science in place to make an investment and to really be convinced.

7:28And this is the base for being convinced about an investment. But then, you know, the science needs to be there. But then on top of that, we really need to understand how do we interact with the, not only with the funders, but also we usually syndicate our deals. So we have co-investors. And so what is the dynamic at play? And so I like to involve the junior team members early on into the decision making process and how it works and also make them understand very quickly that our role on the board is not someone where we can say, no, this is how we do it. I want X to be done. And because this is all about influencing and really understanding the different perspective and how do you get to move a board all together, because ultimately it's almost like an animal.

8:20It's a team on itself. You have to really shape it and really understand what is the dynamic as a whole. So the board role in particular is of course an important one, But it's also one that until you get there, it's not always that you have the opportunity to sit on the boards. Do you tend to allow your associates and principals coming up to join us as bystanders? Yeah, I think that's a really important thing. We try to always have an observer seat for our team members. And this is really for training purposes. I think, you know, very often, you know, the analysts and associates and principal are the one that have gone like the deepest into the science.

9:09Usually they also bring something to the table. It's not only about learning, but that is important. But I think the part that's also important in my relationship as a board member and my observer is also to help them understand what actually happens on the spot in the meeting versus what happens outside. And ultimately, this is something that I was quite amazed. You always think about the big board meetings and important people around the big table. And then you realize that actually everything happened outside of the board meeting. And then you get into the board meeting and that's where you formalize the decision.

9:49But unless you really want to create. And that's oftentimes the difference between a functional and dysfunctional board, right? Whether things are actually being done before versus after or during. Let's continue here a bit and I'm mindful that we're blowing every script here. But I do think that this board dynamic is incredibly important and something that might actually in a way be the difference between a VC startup and a non-VC startup in many ways. Because it's an incredibly valuable tool if it is used correctly. And if everyone knows how to do that, could you tell me a bit about your playbook, how you go about that and at what point you come in and say, OK, let's let's let's actually create that board.

10:36And this is how I think about it and so on. And do you usually take the board chair seat so that you are the person with with more, let's call it weight in terms of deciding how to run the board versus versus a normal board member? Yeah, I think I think that's a really important question. So for us, the board composition is something that is negotiated at Termsheet already. So this is something that we already think very carefully about. What is going to be the power dynamic? Obviously, you need to reflect somewhat the shareholder structure. But it's also what people can bring to the table, what is needed for the company, and then also how is the dynamic going to work out.

11:25So, you know, if you think about specific situation of you have a very large company with a lot of board members and then they raise only a small amount of money, you can't re-hold the whole board. But at the same time, as a new board member, you still need to make sure that your voice is being heard. So how do you ensure that this mechanics actually happens? And so we usually use thresholds of, you know, for example, investor director majority, where you say, well, we're for investor director majority. You need to have at least three of them that agree for any decision to be taken. And I think this is usually we never want and I think this is also not good for the company.

12:06It's like you don't want anyone to have a veto. And I think that's the dynamic that we're trying to create is you need to have enough consensus, but you also don't want the veto. And so how do you structure that? And how about fostering that dynamic around the board where the majority of the work happens before the board meeting? Because I've been in boards where it's definitely what happened between some board members and the founder, but not everyone. And that can be a tough thing to straddle. Well, I think there's two ways it happens. Either you're the initiator of a conversation and then you can decide who you want to talk to and who you don't want to talk to, which might be a strategy, right?

12:48And then there's the other option where it's like someone else took the decision. They want to pass something and they've decided either to include you or not include you. And so it's always a fine balance and like trying to get to know on which side of the table you are. I think just getting to know your cohort members is something that is really important. At the end of the day, you're a team. And so you need to operate as a team. And so all the good learning and good leadership advice about team management needs to be applied also to the board. It's not just a collection of individuals. And so I think the most effective way, honestly, is to pick up your phone and say, hey, have you read the board deck?

13:31And see what's on their mind. Could I push you to just give me like your three core messages around building an effective board? Could I quiz you on that? Yeah, I will try it. The first one is governance. So this is good governance. And so this is really thinking through legally how it's enshrined into your agreements. Because those things, when your board works well, you never go back to it. Never. When everything goes wrong, this is where you absolutely need those things to be airtight. And a note on that, right, because that's what we've just gone through a period where, honestly, VC turned quite light on that.

14:16And that was how you got into deals and you gave founders more rights and so on. Yeah. And we're seeing VCs being bit in the bag by this now, right? Absolutely. Absolutely. And so I think I always think this is the governance thing is actually it's always painful to negotiate because you need to be very strict. on what it means. And so people always think, oh, but like, what are you thinking about that it's going to go wrong? And it's like, no, I hope we never touch it. I hope we never see it ever again. But if we need to go back to it, it needs to be our ties. So governance is the first thing.

14:55Do you have on governance, do you have any red lines? So the way I think about it usually is with a cap table in front of me. And I look at the cap table and I just try to do any possible combination of investors to see when do they get to investors and shareholders and founders. When do they get to the majority? And I try any single possible. It's very easy to do, right? Like you're just on your Excel. It's like my sister's getting married. So it's like putting together the table arrangement and seeing how could this work out. Yeah, exactly. Exactly. And who's going to fight with whom and who cannot be sitting together?

15:43Like exactly that.

15:47So, yeah, I think I think that's the that's the governance part. Then the second part, I would say, get to know, get to know your board members. So I think I think, you know, at the full try to be there for board dinners and so on. And I know as VCs, you you you tend to sit on a lot of boards. And so having all those board dinners like that come in and they all come like it's board season at the moment and we all have like two or three board meetings a week and it's exhausting. But trying to be there and getting to know the people behind the board member is always helpful because then you can pick up your phone very easily and be like, hey, what happened?

16:25Or what is happening? Or what do you want? So I think it's really trying to create that relationship. What are your views on virtual board meetings? keeping that in mind? So I think that, yeah, I still want to do virtual board meetings. I think, you know, if this is one thing that the pandemic, the positive that the pandemic has brought is that we can do a lot of our business remotely. It's more effective in the sense of time spent. You get the full team around the table in an easier way. It's also better for the environment because we're not crazy flying. But the other part is that there is so much that you can get to know someone just over video.

17:11So I think usually the way that actually we write it in our investment documents that we want at least we usually ask for five board meetings, like, you know, roughly five board meetings a year. And we ask for two to be in person. So it's still majority virtual, but some companies, depending on where they are, where the investors are, sometimes it's easier. So we do it in person a little bit more often. And then we try to ask people that for those board meetings, everybody shows up. Yeah. Yeah. I mean, that makes a lot of sense. So first one was governance. Second is get to know your board members.

17:45Do you have a third one for me? I'm going to say it's a little bit obvious, but I'm going to say preparation. Read your board deck. And you'd be surprised sometimes with people who ask questions and you're like, that was in the board deck like two pages down. So yes, it has not been presented yet. but people get really angsty about something. It might be a little bit obvious, but I think preparation is everything. And it also means usually that you can get the founders and the team, the operating team, the management, very much on your side because you've done your homework. You're here to ultimately provide value.

18:26And so you've taken up your responsibility to do that. I respect that a lot. And having been an EA at a point in my life, that was a very bad feeling sitting there, knowing how much you battled over the deck before and getting everyone in the company involved in making sure that we had it or in the senior leadership to make sure that everything is as it should be. And then you can just see, fuck, this guy didn't read it. And now he's going to go on the rant that he usually does. So, all right, let's get into the next section, which is our Take Your Stands round. Take a start.

19:11All right, Juliet. Now I will ask you to comment on this quote from Sabina Vissander from Grandom, which reads... I think VCs add way less value than they think they do. They're less pivotal to the businesses they're advising. This quote makes me chuckle. I think it's the dirty little secret of VC. So I actually wouldn't say it's like way less, but I think it's different. I think VCs are an essential part of the innovation ecosystem and they provide very much needed risk capital that is not available otherwise. So I think that the strengths of the VCs on board and for entrepreneurs is twofold.

19:56is network. And because we see a lot of people, we see a lot of companies and so on. And the other part of it is also a byproduct of the number of companies that we see is what does the market look like? What is the visibility? We see a lot of companies. We have benchmarks. We see all the different elements of a company building process. And so we've seen a lot of things work. And so we do have the strategic perspective on things that, oh, we've seen this like five times has been used and three out of those five times it worked really well because the CEO did X, Y, Z. But then if you don't do Z, then it falls through.

20:38And so sharing those perspectives is something that is very, very helpful, like providing this external perspective. I think that's definitely helpful. I think that our role as VC is one of breadth and not necessarily ones of depth. What we bring to the table is rarely, and I say rarely because some people are absolute experts and some VCs are absolute experts into certain areas. But fundamentally, and I'm going to speak about the biotech VC environment, is like, you know, so I could have done a PhD on like a very specific part of oncology. And then I'm going to be doing investment in an epileptic company.

21:20I still need to learn about that. There's a lot of things that are transferable, but so I cannot be both an oncology and an epilepsy expert. So, you know, I think our strength is also to bring that epilepsy expert to the table and help, you know, develop the company. So, yeah, the court made me chuckle. I think we all laugh a little bit when we see that.

21:48All right, Juliet. Now I want to get into our deep dive section. And I am looking forward to be talking to you about exit strategies in biotech, because this is quite different from what we have in the rest of the VC market. And I am a complete newbie here. I've never been in this space. So tread lightly when I ask stupid questions, but take us into it. Tell us what's happening right now in the market and what are the dynamics that you should think about when you're doing something in this space? Absolutely. And no stupid question. We learn every day, right? That's what we like. So I think a biotech company inherently is an animal that is very different from what we know from the biotech VC in general.

22:36So the biotech company is a company that for a really long time is going to spend a lot of money, a lot. So several millions that are going to be spent. And usually the company will never see the day of profits. I mean, we've seen that, you know, Uber and Airbnb just turned a profit. So finally, it takes a long time for them as well. But it's doable. Indeed. But the way that it works is that usually a biotech, VCs will exit the biotech company before it turns any profit. And then the other part of it that is quite different, I think, from more tech or product-oriented portfolio companies is that we have very binary moments in the drug development.

23:26So it's, you do all your safety studies and if they're not clean, they're not clean. Your asset is dead and it's over. I mean, you don't want to bring it forward in any case, like ethically and all the things, but it's over. So you put a lot of capital to risk with a lot of moments that are very binary. And so the exit landscape that we have usually is big pharma saying, I like this asset. I think it's interesting for my pipeline. So I'm I'm going to go buy this company. That is usually what you want. And so, you know, there's a lot of talk in the biotech VC space where people are saying, oh, we've exited, we've gone public.

24:05And I'm like, well, but you haven't exited, actually. You're still in the company. And now, yes, you can exit slowly, but you can't dump all your shares onto the market at once because obviously you're going to, some people are going to be very angry on what you do with the share price. And so I think that, you know, part of our due diligence process is also trying to really understand what is happening in big pharma, trying to understand what are the therapeutic areas that they're interested in? Like, are they more interested in oncology or they're more interested in immunology or are they more interested in rare diseases?

24:37And then within each of those, like what are what is specifically something that they're looking for that they don't have internally that they're going to have to buy externally? And so that is really part of our process. We talk to a lot of pharma BD during our due diligence process. That is usually how it works. Something that has been happening recently is quite an interesting dynamic because pharma has several hundreds of billion of capital available for acquisition. So their work stresses are full. The other part of it is pharma. I think I was reading a statistic recently that 42 % of the revenues of last year for big pharma came from assets that will have a patent cliff within six years.

25:31So that means that, you know, their revenues are going to go down. And so that's coming. And so they have a lot of money and they need a lot of source of revenue for the next couple of years. But at the same time, they were... Could I ask you the dynamic behind that inflection point or whatever you call it in industry or sudden maturation of the patents? Because I guess that would speak to the fact that there's been a period in time where there was less innovation. And for that reason, there weren't any or many new blockbuster drugs coming out in that period. Yeah, so I think it's not that the innovation has continued throughout, but then, you know, a number of things fall.

26:20And so I think what has happened, to be honest, is that pharma has not invested enough in, you know, filling that pipeline. pipeline and maybe, you know, things were going great. They were selling a lot of their drugs. And so there was less pull to actually get something through the pipeline because it was all great. And so I think maybe now it's like getting to the point that they really need to do it because six years is through. Does that then mean, Juliet, that you're seeing because Warchest is full, we're seeing that they're going to have a problem down the line. Are they very attentive to that and trying to course correct and for that reason you would argue that we're really seeing a boom in in biotech so not yet i would like to see it you're waiting for it you're waiting for it that's what you're telling lps i'm saying i'm saying exactly i'm saying i'm saying that they have all the you know everything is aligned to actually execute on that they have the money and they need it what else do you want?

27:24No, but so there has been a slump in the M &A, you know, with the whole market going down. And so there has been a slump in the M &A activity, as well as in the broader environment. But in pharma biotech, there has been a slump. We're seeing a little bit of a pickup in 2023. We're seeing that it's starting to pick up. But I think it's becoming more and more of a conversation. And also, you know, when you hear analysts on the street talking about those big pharma, they're also talking about that. When are you going to buy it? What are you going to buy? What is your strategy for acquisition? And so on.

27:58So there's a push from the market. So I'm hoping it's going to translate, but it hasn't really fully translated yet. But the interesting part is that because the patent cliff and the fall of revenues is so close in time, the big pharma are looking for later stage assets. Yeah. So they're looking for stuff that will be ready to go out in six years. Exactly. And that is new. And so that means that, you know, big pharma in the past has been also more amenable to, oh, this is really interesting. This has not gone into human, but we like the target. The compound looks good. We're going to buy that.