Investment team Q&A: Dr Jonathan Tobin and Dr Christian Schetter

28th April 2020

Jonathan Tobin, PhD - Managing Director
Christian Schetter, PhD - Managing Director

Why is biotech currently such an attractive proposition for venture capitalists?

Christian Schetter (CS): Biotech is at an inflection point. We’re seeing potential become reality at ever greater speed, as innovative scientific discoveries are rapidly being translated into medicines that have the potential to transform lives.

Jonathan Tobin (JT): Although the major pharma companies have the resources to develop new drugs, most of the record number of new drugs approved by the FDA in 2018 actually originated in smaller businesses. That’s because Big Pharma needs to meet the demand for new medicines by supplementing their own pipelines with ideas and products from smaller, innovative biotech companies. At Arix, we’re playing our part by investing in and building breakthrough companies like these – companies that are right on the leading edge of discovery. And that’s delivering huge potential opportunity for investors in terms of the financial returns they can anticipate.

"Big Pharma needs to meet the demand for new medicines by supplementing their own pipelines with ideas and products from smaller, innovative biotech companies.”

Jonathan Tobin, PhD, Managing Director

So what makes Arix different?

JT: Firstly, our transatlantic expertise and experience. While most of our peers are focused on either Europe or the US, our policy has always been to be geographically agnostic. For example, our investment team is spread across London, New York, Munich and Basel – which means we can simply seek out the best deals, wherever they may be. We also look to invest in companies at different stages of maturity. We’ll consider everything from creating a new business from scratch right through to investing in a company working in the later stages of clinical development.

CS: I’d add that the relatively small size of our team is another major advantage. It’s one thing to have the skills and knowledge to make the right decisions, but it can be something else entirely to have the agility to make them quickly. I’ve spent most of the last two decades on the other side of the fence, working within biotech businesses, and I know how well Arix is respected for its fast thinking and equally fast action.

How do you decide which companies to invest in?

CS: During a year, we either approach or are approached by hundreds of companies and identifying the real nuggets isn’t an exact science. We rule out 90% very early on for a variety of reasons. We have access to a powerful global network of personal contacts, including some of the top experts in many fields. We consult them to assess the science and, if we get positive feedback, we move into the due diligence stage.

JT: We look for an innovative scientific proposition with strong IP (intellectual property) – one that can support a differentiated competitive position and meet unmet need in a substantial market. It’s also important that there’s a strong team already in place or capable of being strengthened. The final piece of the jigsaw is a compelling route to approval and exit so that we can deliver value to our investors. It’s a very rigorous process and, in the end, we decide to invest in only about one in 86 companies that we see.

"We have access to a powerful global network of personal contacts, including some of the top experts in many fields.”

Christian Schetter, PhD, EiR

Over half the value of your portfolio is focused on oncology. Why is that?

JT: Just as we source opportunities regardless of geography or clinical stage, so we look right across the full range of therapeutic areas. Right now, there’s a lot of research focus in oncology – as the industry evolves and new science emerges, the portfolio is likely to reflect that.

CS: Yes, there’s a lot of exciting science in oncology but we’ve also invested heavily in immunology and genetic diseases, to name just two other areas. As long as the science is right, the business case is there and we have the opportunity to move it forward within a reasonable timeframe, we’re interested.

It’s clear what your portfolio companies offer Arix, but what do you give them in return?

JT: Of course, the first thing we provide is funds from our investors, but there’s a lot more to it than that. Again, our network is vital. We give companies access to the best and brightest minds across a range of disciplines: finance and service provision as well as IP and of course science. It’s a partnership. We help entrepreneurs build their businesses and take that difficult next step – turning a concept into a product that can change lives.

CS: We typically take a seat on the board. This enables us to influence strategy and key decisions such as when to explore M&A or partnership opportunities and how to hire the right people. It also means we can be assured of transparency and avoid any surprises!

You’re both involved at board level with one of Arix’s most recent investments, STipe Therapeutics. How is that working out?

CS: The STipe Therapeutics investment is a good example of how our strengths work in practice. I originally identified the opportunity for Arix to become involved with STipe, which uses a novel aspect of the interferon genes (STING) pathway to target cancer. This is a technology that I know well, as it is similar in many ways to that which underpinned Rigontec, a company I led as CEO before it was acquired by Merck. Arix co-led a €20 million investment in STipe in September 2019 and I’m now proud to be Executive Chairman.

JT: Christian headed up the deal from an operational perspective and I was glad to lead for the investment side, negotiating with other investors and the founders and managing legal issues. There is a huge amount of work that goes into successfully closing a deal and it is very much a collaborative approach, not only within the Arix team, but also with co-investors and the investee company’s management. The combination of the founders’ expertise, Christian’s experience in immunotherapy and our investment strategy gives us a great chance to accelerate new treatment options for cancer patients. STipe has a novel proposition in an area that’s attracting a great deal of interest from pharma companies – and although it’s early days, the signs are positive.

L-R: Christian Schetter, PhD and Jonathan Tobin, PhD