Market Views

Q&A: Pierre Leocadio on why Oxford wants to be a 'first mover' in French life sciences

Oxford's SVP, Head of Office, Retail and Life Science, Europe discusses the opportunity for Oxford in France

November 2, 2022
645 Summer Street

As part of our high-conviction investment strategy to build a leading global life sciences business we entered into a partnership with Novaxia, a leading French urban investor and developer, to  develop much needed new supply of life sciences space across France. Targeting approximately €1 billion (C$1.3 billion) of investment over the next few years, the partnership marks our entry into French life sciences.

On the verge of announcing an initial set of investments, Pierre Leocadio, SVP, Head of Office, Retail and Life Science, Europe at Oxford discussed the opportunity in France, the Novaxia partnership and why Oxford wants to be a ‘first mover’ in the French market

Pierre Leocadio

Q: What attracted Oxford to invest in the French life sciences market?

Pierre Leocadio: We have high conviction in life sciences and we want to deploy capital in Europe, but there are several market-specific factors that we like about France. First, would be the market opportunities: France is Europe’s second largest biotech VC market, with VC funding into French life sciences companies seeing an annual growth of approximately 20% over the last ten years. This creates significant future growth and demand for lab space. This is coupled to strong existing fundamentals: France is an established global leader in R&D and within health, the country has claimed 13 Nobel Prizes in medicine, has a large pharma trade surplus and is ranked second in Europe for the number of biotechnology products being developed.

We also like the dynamics of the market: from a growth perspective, we believe we are just at the beginning for the life sciences market in France, so entering gives us a significant first-mover advantage over the next few years.

Lastly, we wanted to utilize the knowledge we’ve built in France and capitalize on that. We started to invest there in 2014 and since that time we’ve built a deep knowledge of the market: we know all the key players and have built a good reputation.

Q: What is unique about the life science market in France?

PL: For years we’ve seen R&D budgets decline in France and collaborations between academia, hospitals and the private sector have been limited. However, there’s been a huge push by government to invest in healthcare and biotech and this has been accelerated by COVID-19.

Private capital has mirrored this. There’s been exponential growth in VC funding, and that is a major catalyst for the formation of new companies and discoveries of new therapeutics. And we’re now seeing healthcare providers, like the Paris hospital system, working in collaboration with private capital and academia more than ever before.

France provides all the ABCD fundamentals (Academia, Business, Clinical and Demographics) to support growth in life sciences, but now they’re finally mixing together well and moving in the same direction.

Plus, France has always been a leader in oncology and infectious diseases, and it has some of the world’s largest research hospitals and institutes dedicated to that field (such as CNRS, Inserm or Institut Pasteur). We’ve seen a lot of startup activity emanate from those institutions.

Q: There’s a critical shortage of incubator space in Paris, what has caused this?

PL: Incubators in France have historically lived within hospitals or public research institutes, with very little private space available. The only real option for a startup was to work within a hospital or institute in what was, relatively speaking, lower-quality space. With the increase in VC funding, startup companies are much better capitalized and can be more discerning about the space they work in. There’s been a significant shift for these companies to favour state-of-the-art, ready-made R&D space with great amenities for employees.

We know there is very little of this modern, high-quality life science space being delivered in Paris over the next five years. So, by delivering this product, we are going to be able to connect with this growing life science ecosystem, help drive this growth and create significant value.

Q: Has Oxford’s global life sciences expertise been advantageous in entering France?

PL: It’s a big differentiator for us versus our competitors in all aspects: asset management, development management and investment. Collaborating with our North American life sciences teams provides us insightful data and trends when we underwrite new deals. Discussing with our OMERS venture capital and capital markets teams provides us significant inputs when reviewing our occupiers covenants and financials. Finally, having a global business enables us to have all solutions for our occupiers to support their growth internationally.

Q: What have been some of the biggest challenges?

PL: As the market is not as mature as the U.S., it lacks the same level of data points and you don’t have the same expertise in the market at an advisory level; we’ve had to work twice as hard to get conviction. Another is, being a first mover, we’ve had to open many doors ourselves, which Novaxia have been a great partner on. All these items are moving in the right direction, but they raise the barrier to entry, which ultimately is a benefit to Oxford and Novaxia as we have already done the hard work.

Q: Oxford’s stated focus has been on Paris, but what other markets will Oxford explore?

PL: Our initial focus is indeed Paris. Aside from its constrained supply, it benefits from possessing all the factors that lead to the cluster effect which we strongly believe in. France is very centralized. Paris has the largest hospitals, the best academic institutions and attracts 80% of all biotech VC funding—so the pieces are all there.

Outside of Paris, Lyon will be a natural second step for us. It’s a big and deep target for life sciences with history in the sector, government support and companies already choosing it as an alternative to Paris. We’re open to other secondary and tertiary markets and continue to perform due diligence, but Paris and Lyon are the emphasis.

Q: There’s been some turmoil in the capital markets, with growth companies taking hits to their valuations. Has this altered our strategy in life science?

PL: It’s been a painful moment for everyone, and the biotech sector is not immune to that. However, the long-term growth prospects are still there—aging populations driving increased demand for therapeutics, increased funding for the sector, the increased speed which firms can now get a product to the market. The potential is there, the long-term growth is there, and we want to be part of that. It’s also important to note that in the event of an economic slowdown, the occupiers demand should continue to outpace the available supply due to Paris constrained stock in the near term.

In the short term, we’ll be patient and selective around the opportunities we pursue. However, our ambition to deploy capital remains the same, and where we want to deploy that capital remains the same.

Q: Why did we choose to partner with Novaxia in particular?

PL: We recognized that establishing a life sciences business in France would be highly development-led, given there’s very little product in the market. So, it made a lot of sense to partner with a local developer in a market where we don’t have a development team on the ground.

As for Novaxia, they stood out as a partner. They were one of the only developers with a demonstrated strategy around life sciences in France—such as their impressive work to deliver one of the largest incubators in Europe at the Hotel-Dieu Paris. We also valued their agility, as we wanted a development manager that wasn’t too big, nor too small to work with local authorities on our various projects and Novaxia was the perfect fit.

Q: What has the reception been in market to Oxford’s entry and the announcement of the Novaxia partnership?

PL: Very positive. We’ve had great discussions with key stakeholder groups—academia, venture capital and the public sector—and it’s clear that everyone is pulling in the same direction and aligned in growing the sector. Potential occupiers have been excited by the prospect of a real professional and institutional landlord that will be able to support their growth entering the market, which has been great to see.

Read Oxford's French life sciences press release