“The biotech industry has been around for a very long time, especially in Europe,” said Vesalius Biocapital’s managing partner Guy Geldhof. “Historically, the origin of our industry is in chemistry, and when you look at chemistry and medicine, it’s along the Rhine River,” covering many countries where you have seen lots of innovations and companies emerge.

But of course, there’s risk. Out of the thousands of molecules that are discovered, only one might hit the market.

What venture capitalists in this industry do, said Geldhof, is offer de-risked assets by supporting companies in their preclinical work, helping bring them to the clinical stage and making sure that what is brought to the market is safe and does what it’s supposed to do.

So what are Geldhof’s five reasons for investing in biotech?

It’s profitable

“First of all, it’s a profitable business,” argued Geldhof. “You see that the returns from early-stage biotech is good, and many years, it’s even much better than what our colleagues do in the traditional tech industry.”

A  published on 19 October, for instance, found that exit value during Q3 2023 was mostly generated in the biotech & pharma and software sectors. In the first nine months of 2023, 58.7% of European VC exit value was in the software sector (€5.3bn). The second place sector was biotech & pharma, with a 16.1% share (€1.5bn in exit value).

“I think our industry has proven over time that we can consistently bring good returns to investors over the long-term,” said Geldhof.

Proven business model

“The second reason why I think investing in biotechs is useful is that we have basically a proven business model,” said Geldhof. Innovation is everywhere: a new drug to target this disease, a new instrument, artificial intelligence that makes better diagnostics. “There’s constantly market for these types of things,” he said. “And it’s not stopping.”

Over the last several years, the industry has produced many innovations to cure diseases that couldn’t be cured before. In terms of cancer treatment, for example, immuno-oncology solutions that use the body’s own immune system to fight cancer have been used for cancers that were previously un-treatable.

Personalised medicine

Well, then a follow-up question might be: if solutions have already been found, why continue to invest in biotech?

“I think we’re seeing today the next type of companies that will emerge,” said Geldhof. “Cancer treatments--there’s plenty of them. But they’re horribly expensive. So we now need to find ways that are more personal. Personalised medicine [which uses a person’s specific genetic profile to help prevent, diagnose and treat disease, editor’s note] is the next type of companies that we’re going to see and that we, as an industry, support.”

Europe has a research advantage

Europe “absolutely” has an advantage, said Geldhof, and still has a role to play. America and China are also working hard in the sector, but “pharmaceutical development and biotech is still something where Europe has a lot of cutting edge institutions of research that have come up with new ideas, new approaches that are worthwhile.”

“Luxembourg also has a place,” he added. “It hasn’t been there naturally from the beginning,” but the government is working on building this up.

Improving quality of life

And, last but not least: real-life impact. “When you bring a new treatment, or a new diagnostic, to the market that helps find solutions for people… you improve the quality of lives,” said Geldhof.

“You’re doing the right thing, you’re doing a good thing, and as an investor, it also allows to create a return.”