Sofinnova and Medicxi talk M&A, patent cliffs, and ChinaSofinnova and Medicxi talk M&A, patent cliffs, and China

As BIO-Europe Spring (BES) approaches – this time in Milan, Italy– BioXconomy had the pleasure of virtually sitting down with Francesco De Rubertis, co-founder and partner at Medicxi, and Graziano Seghezzi, managing partner at Sofinnova Partners, to explore their latest insights on investments in the biotech space.

While both venture capitalist (VC) firms deploy different approaches to investments, De Rubertis and Seghezzi have mutual enthusiasm for the industry, its current state, and its future. The conversation ranges from China’s advancements in the space, M&A activity levels, all the way through to predictions of the key conversations that will be buzzing around the conference floors at BES in just four weeks’ time.

BioXconomy (BX): M&A trends are always a key topic at BIO-Europe events, so what have you witnessed and where do you think the current level of activity sits?

Graziano Seghezzi (GS): The venture-backed biopharma industry remains in a strong position due to its dual exit pathways, IPO and M&A, which many industries lack. With a looming $300 billion patent cliff, pharma companies are actively acquiring biotech firms to replenish their pipelines. Despite a slight slowdown in M&A activity in the second half of 2024, the trend is expected to continue, as pharmaceutical companies seek external innovation. In 2024, Johnson & Johnson acquired Shockwave Medical for $13.1 billion, and Asahi Kasei acquired Calliditas Therapeutics for $1.08 billion. While M&A remains a key driver for growth, the IPO market also plays a role in the industry’s innovation cycle. Though currently facing challenges, the IPO market is cyclical, as evidenced by the buoyant markets of a couple of years ago.

Francesco De Rubertis (FDR): The early months of 2025 have been nice. There have been two or three important M&A deals, but most importantly, from our vantage point, I can see a lot of activity in the making, whether these will materialize or not into M&As, we will need to wait and see. I do believe that 2025 will have a better IPO market, in line with a more catalyzed M&A market. Usually, there are better deals, and possibilities of IPOs, which potentially increases the urgency from Pharma companies to acquire assets instead of sitting on them. Overall, I think M&A is increasing.

BX: Talk to us about patent cliffs. How are they changing investors interaction with pharma? 

FDR: Patents are, of course, the reason for being in this industry as a provider of drugs to pharma. It is not changing because pharma has a clear goal in their mind and their planning. They know exactly when and if they have any patent cliffs, so they are prepared. Investors have been progressing assets that are important to pharma, therefore there is an openness and intensity to the conversation being had with pharma companies.

GS: The patent cliff is driving pharma companies to engage with biotech earlier and more frequently. With an increasing reliance on external innovation, pharma sees VCs and their portfolio companies as essential partners. This closer collaboration presents opportunities for investors to strategically position their assets for optimal exits, fostering symbiotic relationships where both parties benefit from shared innovation and resources.

BX: What challenges do you think this could create and how can investors overcome this?

FDR: This is an opportunity for investors. We are investing to be useful, relevant, and a business interest for big pharma. We invest in molecules, and design the next generation molecules, with a line of sight on when and why the molecules will become relevant to pharma companies. Of course, that's the bullish position and you need to acquire a lot of assets.

Some pharma companies have a strategic urgency on late-stage molecules because they're closer to markets, and some pharma companies have early-stage molecules as bigger urgency items because they do not have any, but want them in the pipeline, so they need to push to invest for the longer-term future. This dynamic is really what drives our investment thesis, especially the conversations with pharma. Whenever we have an asset that is ready for transaction, we identify which pharma has the most stringent strategic urgency. This is all a positive push for us.

GS: To stay competitive, we must focus on high-quality, differentiated products that can command premium valuations. Our primary focus is on Europe, where extraordinary medicines and superior returns are possible. However, Europe's investment landscape must evolve to remain competitive with the US and China. Building stronger ecosystems and ensuring strategic capital deployment will be key to securing the best opportunities and maintaining an edge.

BX:  You mention China, and the country is clearly a hot topic across the space. What engagement are you seeing from an investor perspective?

GS: China is rapidly evolving from a service provider to an innovation leader, producing both "me-too" and "me-better" products. In 2024 ~30% of assets licensed by pharma came from Chinese biotechs (vs. 0% in 2019, 12% in 2022). The total out-licensing deal value from China is up from $800 million in 2022 to $3.9 billion in 2024. Chinese companies have added more than 4,100 innovative new drugs to their pipelines since 2022.

FDR: Yes, China-based assets, molecules, and technologies have been really hot. So, going east is a trend that I have seen in the last six months. This trend has been demonstrated as Western companies have shifted some of their attention to China as a source of assets. The shift in attention has occurred as we now have proof of concept or success from the first wave of Chinese assets of the past three or four years. Many assets are sitting in China where, perhaps, development teams are still growing and access to capital is not fully shaped. Therefore, clinical companies from the West can provide an interesting value proposition to Chinese asset owners.

GS: This transformation is intensifying global competition, with big biotech companies starting to double down on their acquisitions from China. For example, BioNTech had licensed assets from Biotheus, and at the end of last year – acquired the whole company. These changes are prompting European investors to refine their strategies to maintain a competitive edge and differentiate homegrown innovations, ensuring their products stand out and do not fall into the 'me-better' category. 

GS: One of the most striking developments has been the speed at which China has transitioned from being a service provider to an innovation provider. While this shift was anticipated, the pace of change has been surprising. Europe, historically the second-largest innovation hub after the US, must now reassess its strategy to maintain a competitive edge. 

BX: Thinking about the conversation we have just had; what do you think you’re going to be seeing/hearing at BES this year? 

GS: A central theme at BES should be how Europe can maintain its competitive edge amid growing competition from China. The discussion should focus not just on venture capital but on the broader ecosystem – how regulatory frameworks, funding models, and innovation strategies can position Europe as a leader in biotech. These are the key discussions we need to debate in forums such as BIO-Europe.

FDR: I think there is a lot of investment activity because IPO and M&A activity is more interesting than before. And so early-stage investing or development stage capital will be part of the conversation. There is going to be a lot of looking around for series B, C, and D rounds or IPO rounds. That is what I think will be the trend.

Please join De Rubertis and Seghezzi for the Opening Plenary session “Italian roots, global reach: Biotech investment insights” at BIO-Europe Spring on Monday 17 March 10:30-11:15 AM.