Backed by J&J and Glaxo, veteran VC group splits from Index, unveils $227M fund

The biotech team at Index Ventures is splitting away to focus exclusively on what they do best: jump-starting new therapeutic programs in Europe. Following in the footsteps of Atlas and others, the veteran general partners at the firm have created Medicxi Ventures, which is rolling out a $227 million fund today with major support from GlaxoSmithKline ($GSK) and Johnson & Johnson ($JNJ) to keep its asset-centric investments in play with a new round of deals in the making.

Medicxi is managed by Francesco De Rubertis, David Grainger, Kevin Johnson and Michèle Ollier, the leaders behind IL-6, a €160 million fund which gambled on some 30 molecules. Now they plan on adding another 30 or so to the mix.

J&J and Glaxo--which bankrolled a big chunk of the last fund--also put up about half of the money for this new fund, Johnson tells me. The rest comes from a group of institutional investors who are growing increasingly confident in Medicxi's investment strategy, a factor that helped push Medicxi well past its initial goal for the fund.

There are several good reasons for a split at Index, adds Johnson. Like several other similar funds that split between tech and life sci, the tech half makes many more investments than life science operators, while looking for faster returns. Biotech investors have to be much more patient by the nature of the drug development business.

"In biotech," he says, "you're not going to know in two years if you've got a winner."

And inevitably the venture side of the business taps the reserves needed to sustain a biotech investment.

Medicxi Ventures 1 (MV1), like IL-6 before it, will continue to look to academic groups for most of its new assets. And it will continue to look to pharma as the natural buyers for these new products.

"We're very, very Europe-centric," says Johnson. And that makes sense. Even as the U.S. venture groups look to places like Harvard, MIT and Dana-Farber for new compounds and platforms to build new companies around, Medicxi can have more room in Europe to play, without a lot of competition from rival investors. With offices in London and Geneva, the best science is either in their backyards or right next door. And with J&J and Glaxo along for the ride to help advise them on their progress, they're part of a tightly knit ecosystem that can rely on relationships among some long-standing colleagues.

Don't expect Medicxi to be much more communicative about its portfolio than it has been in the past. Aside from a deal on XO1, for an antithrombin drug snapped up by its close partners at J&J, the venture group has typically stayed mum about the programs it takes on. But XO1 also helped prove that the strategy works, says Johnson, with about a 20% to 30% washout rate for the nonstarters in the bunch.

In European biotech circles, memories are long and relationships are vital. In that respect, the Medicxi partners--like colleagues at Sofinnova Partners (Paris) and Abingworth--are in the front ranks of interconnectedness. Case in point: Richard Mason was CEO of XO1 when it was sold to J&J, and he recently took over from Patrick Verheyen at the London innovation office for the pharma giant when Verheyen stepped up to become J&J's deals chief.

In biotech, who you know is every bit as important as what you know.

Read more on