Medicxi has secured €200 million ($235 million) to support six companies. The unidentified biotechs are drawn from the portfolio of a €150 million life science-focused fund that Index Ventures set up before spinning off Medicxi.
While the creation of the portfolio predates the establishment of Medicxi, the Anglo-Swiss VC shop has continued to advise the Index Ventures Life VI that originally backed the biotechs. That has led to the establishment of a novel “exit and reinvest” transaction in which Medicxi has acquired interests in six preclinical and clinical-stage companies held by Life VI.
The change in ownership positions Medicxi, through its Medicxi Secondary 1 (MS1) fund, to provide the six companies with the cash they need to take programs deeper into the clinic. Medicxi envisages the exit and reinvest approach, which is used in the private equity industry, being applied to other funds to enable investors to pocket payouts and biotechs to receive fresh funding in the future.
“We believe this Exit and Reinvest type of transaction can be the blueprint for future investments by investors interested in obtaining exposure to biotechnology, but who are concerned by the long cycles of value creation in the asset class,” Medicxi co-founder and partner Francesco De Rubertis said in a statement.
De Rubertis foresees the approach being used to simultaneously monetize the value created during the early stages of drug development and give investors the option to continue supporting biotechs as they move deeper into the clinic. In practice, that meant giving investors in Life VI proceeds from the sale to MS1 and allowing them to reinvest in the new secondary fund.
Medicxi paid a premium to the net asset value of Life VI to acquire the assets for MS1. Pantheon, a leading secondary investor, and LGT Capital Partners supported the transaction by co-leading the investment in MS1.
It is unclear which companies are covered by the transaction. Index Ventures rarely publicly disclosed details of its life science investments. The VC shop backed XO1 shortly after setting up Life VI but that biotech was sold to Johnson & Johnson in 2015.