Warburg’s Ruoxi Chen talks Polyplus and ‘creative’ exit market

Chen said Warburg Pincus was still investing 'substantially' in Polyplus only few months before the exit.

Warburg Pincus agreed to sell Polyplus for €2.4 billion earlier than expected, with the company in high demand despite a challenging exit market – one that requires more “bespoke” approaches, managing director Ruoxi Chen told PE Hub Europe.

ArchiMed and Warburg Pincus will sell Polyplus, a provider of upstream technologies for cell and gene therapies, to French pharmaceutical and laboratory equipment provider Sartorius Stedim Biotech. Sources close to the deal expect Warburg to realise almost 5x on its initial investment over an approximately three-year hold.

ArchiMed first invested in Polyplus in 2016. In 2020, the Lyon-based firm sold approximately half of its majority stake to Warburg Pincus. ArchiMed made a roughly 300x return on the exit from its initial fund.

But the exit could have come later.

“We were prepared to own it for longer,” said Chen. “You could see that in some of the strategic decisions that we were making, even as recently as a couple of months ago.”

The New York-based firm was still investing “substantially” and was in the process of closing two acquisitions a few months back, according to Chen.

“Those are usually not indicative of a PE firm that’s looking to package the company for sale in near term,” he added.

While Warburg was not necessarily looking to end the ownership period at three years, Polyplus was gaining recognition as one of the leaders in transfection and other adjacencies, according to Chen. “Around that time, we were proactively approached by potential acquirers, including Sartorius.”

Strasbourg-based Polyplus may have enjoyed active suitors, but Warburg still had to navigate the demanding exit market. “This was probably one of the most challenging exit environments we’ve had in some time, given high interest rates and lot of macro uncertainty,” Chen explained.

Chen stressed that high-quality businesses will always have a market, but even within healthcare, firms cannot escape the macroeconomic turmoil. “Healthcare is resilient, but it’s not immune to what’s happening in the broader environment,” said Chen. “We’re living through this period where some of the slowdown that we’re seeing is caused by a buyer/seller mismatch. Buyers are looking forward at this uncertainty, while sellers tend to be more backward looking.”

It is not all doom and gloom. Within Warburg’s portfolio, activity is kicking up again. “The deals are going to be more creative, more bespoke,” Chen explained. “It’s going to be less like the 2020-era of exits where it was a lot of pre-emptive auctions and tonnes of PE.”

Three themes

Warburg identified cell and gene therapy about five years ago as one of the fastest growing areas within the life sciences industry, leading the firm to acquire Polyplus in 2020. “This was a business that directly came out of a proactive thesis that my team and I developed around trying to identify pockets of innovation within the biopharma industry,” Chen explained.

Value creation for Polyplus was centred around three key themes: innovation within the portfolio, investing to meet the needs of customers and developing end-to-end capabilities. At the time of the acquisition, Polyplus was considered a leader within transfection, according to Chen, which represents “one slice of the puzzle” when it comes to developing gene and cell therapy drugs. “But there are other key components as well, including DNA plasmids and cell media cultures, where we saw a real opportunity to create 1 + 1 = 3, where you can bundle and co-develop these together,” he added.

A recent add-on to Polyplus in an example of that maths. The company acquired Xpress Biologics in December 2022, a DNA plasmid manufacturer based in Herstal, Belgium.

Chen sees opportunities ahead within the sector too. “I personally remain very bullish on the future of cell gene therapy,” he said. “There’s real potential for this to change the treatment landscape.”