Jennewein’s progress as a biotech company fermenting synthesised human breast-milk sugars illustrates the success of venture debt in financing European innovation

When a baby is born, it needs the sugars found in breast milk to fuel its miraculous development. The sugars must be just the right ones and in the right balance to promote the growth of the baby’s organs. The same is true of companies, which need exactly the right kind of financing to get beyond their early stages.

This metaphor comes together precisely in Germany’s Jennewein Biotechnologie. It’s an innovative and relatively new company that has devised a process for synthesising the sugars in human breast milk, so that babies whose mothers either can’t or don’t want to breast feed can get as close as possible to the advantages of human lactation.

Jennewein is one of the first companies to have benefitted from the European Investment Bank’s venture debt financial instruments, loans designed to support growing companies without putting pressure on their cash flows. Venture debt, which is also called quasi-equity, allowed the EU bank to take on the risk of financing Jennewein’s developing technology with loans in 2015 and 2018. The instrument has proved how successful it can be, as Jennewein moves to the next stage of its industrial development with its takeover by a larger Danish company.

“In Europe, we have a very strong research culture, developing the kinds of amazing technology of which Jennewein is a fine example,” says Werner Hoyer, president of the European Investment Bank. “But transferring that technology from academia to industry is not Europe’s strength. That’s where the European Investment Bank plays a major role, as we’re proud to have done with Jennewein.”

Ahead of the multinationals

Human milk is important to babies because it contains complex sugars called human milk oligosaccharides. This natural sugar source reduces the risk of infectious diseases in children by up to 50% and promotes the growth of organs, including the brain. Human breast milk is unique in its high level of oligosaccharides.

Several multinationals have tried to manufacture oligosaccharides at a price low enough to make mass production feasible—without success. Jennewein figured out how to do it by a tailored biotechnological fermentation process “at a high quality and low price,” says Auvo Kaikkonen, the senior life science specialist at the European Investment Bank who helped appraise Jennewein’s loans.

“There are instances when a mother’s milk needs to be supplemented,” says Kaikkonen, “because of medication the mother may be taking, or insufficient lactation.” There are also social factors at play, he notes. In some Far Eastern countries, breast-feeding is currently seen as something only lower-class women do.

Next stage for synthesised human breast milk sugar

That’s also an impulse for this next stage in Jennewein’s progress. The company is partnering with Chr. Hansen, a larger company with industrial-level operations, so that it can produce sufficient quantities of breast milk to attract contracts to supply the big Far Eastern market. Hansen, a bioscience company based on Hoersholm, Denmark, acquired all shares in Jennewein. It plans to invest €200 million by 2025 in new production facilities. The Danish company says its aim is “to lead the global market for human milk oligosaccharides.”

Founded in in 2005 in Rheinbreitbach, south of Bonn, Jennewein signed with the European Investment Bank in 2015 for a loan of €10 million from the InnovFin Growth Finance Initiative to launch the company’s first plant. That helped Jennewein obtain the fastest-ever novel food registration from the US Food and Drug Administration and, then, the European Food Safety Authority. Jennewein was then able to work with global infant nutrition companies all over the world. 

In 2018, Jennewein took a second European Investment Bank loan under the European Fund for Strategic Investments, which combined financing from the EU bank with an EU budget guarantee. Commercial banks were unlikely to invest in the company at that time, because of the early development stage of the company. This European Investment Bank financing was in the form of venture debt with equity-like remuneration features. Thus, it does not load down a young company with high debt service. But because it’s not an actual equity investment, it allows the founders and early investors to retain their stake in the company, instead of diluting it.

“This deal is one of the best examples of our support for innovation and the impact it can have on a company’s progress,” says Ovidiu Morariu, who manages the Jennewein loans at the European Investment Bank. “This is one of the most dynamic and innovative companies we’ve seen.”

Faster growth with venture debt

Kaikkonen agrees on the impact of the European Investment Bank’s financing. “It allowed the company to reach this stage three years faster,” he says, than it would have done with traditional financing available for companies in similar stage of maturity.

Jennewein is one of many European companies supported by quasi-equity from the European Investment Bank with the guarantee of European Fund for Strategic Investments during the last five years.

“This is an excellent example of the type of firm we can advance in Europe, and the key is providing the right financing ecosystem,” says the Bank’s President Hoyer. “European Investment Bank financing helps ensure that firms like Jennewein can grow in Europe, rather than taking their innovations to the United States for support and development.”