Archive | May, 2013

Hot Life Science Investor Mandate 1: Family Office Seeks Service Providers for Allocation – May 30, 2013

29 May

A family office in the Central United States is currently seeking to invest in, acquire or recapitalize small- to middle-market businesses. The firm is a non-traditional private equity fund in that the managers of the fund provide all of its capital. Therefore, there are no hard fund investment periods, and they are free to hold and operate portfolio companies with a very long-term perspective if required. The firm operates on an opportunistic basis and makes allocations on a case-by-case basis. They will typically invest into the tens of millions in a potential issuer. Within the life sciences and healthcare space, the partnership seeks contract manufacturing and service provider firms; they are especially interested at this time in service providers such as CRO’s and CMO’s.

Hot Life Science Investor Mandate 2: Private Equity Investor Seeking Range of Life Science Opportunities – May 30, 2013

29 May

A private equity group that invests in the life sciences space based in the Eastern US with nearly $2 billion in AUM is currently looking for new firms for potential investments for their third fund, which targeted $650 million, and currently has $350 million in dry powder to deploy to new firms over the next year or so. The firm typically allocates $20-50 million per firm, and is currently looking for firms that are seeking growth capital. The firm is interested in medtech and biotech therapeutic and diagnostic companies. The firm is very opportunistic and will look at the full gamut of subsectors. In the biotech therapeutics and diagnostics space, the fund is most interested in firms focused on infectious diseases, cardiovascular disorders, and pediatrics. They are looking for firms that have products in phase I or II of clinical trials. The firm invests in companies based globally.

Hot Life Science Investor Mandate 3: Opportunistic Family Office Invests Generally in Life Sciences – May 30, 2013

29 May

A highly opportunistic, London-based private investor backed by a single family office LP in the life sciences space is interested in making 2-4 allocations over the coming six months. Within life sciences, the firm has no specific criteria for investment and will look at opportunities regardless of sector, indication, development phase or financing round. The firm has comfortably made allocations from seed stage financings to multi-million dollar, late-stage investments. The firm has a very long-term orientation and has the capital available to make several follow-on equity capitalizations for subsequent rounds.

In-Vitro Diagnostics – Device Companies Target Emerging Markets

29 May

By Max Klietmann, VP of Research, LSN

The life sciences arena has been aware of the substantial market opportunity that the developing world represents when it comes to delivering diagnosis and therapy. This segment of the population suffers largely from preventable and/or easily treated diseases that could represent massive opportunity for pharmaceutical and device companies to improve outcomes and increase revenue streams. However, the challenge has been – and continues to be – getting treatment to patients in remote, impoverished, and underdeveloped areas. However, recent developments in the diagnostic device space are beginning to address these logistical issues, and delivering product to patients in these markets is becoming a reality. This is being driven by rapidly decreasing costs of disgnostic technologies, investor demand for larger addressable patient populations, and lower regulatory thresholds for diagnostics.

One of the biggest problems facing emerging markets is an inability to effectively diagnose patients. Considering that most disease-related deaths in the third world stem from preventable and easily-treated conditions, diagnostics are one of the easiest ways to address public health issues. Governments in China and Russia, for example, have been actively supporting initiatives to bring affordable diagnostics and treatments to remote and/or underserved regions for exactly this reason.

Hand-held and portable low-cost diagnostic devices, genomic sequencing and proteomic profiling are all being developed by a number of companies for developing nations. These are designed to be simple, robust, and user-friendly. Historically, this technology was enormously expensive, and cost prohibitive, even in developed markets. However, as the cost of genomic sequencing and proteomics has declined, new opportunities have made themselves apparent. However, delivering this technology to, for example, remote villages in Africa, presents its own challenges (e.g. harsh climate, high temperatures, contamination risk). Thus, much of the technology being proliferated for this purpose is technology initially designed for battlefield use that can now be scaled for larger markets with similar requirements to field-deployed medical units. Combine this opportunity with the fact that regulatory requirements to enter many developing countries have a much lower threshold than developed markets, and you have a very attractive investment prospect.

Investors are increasingly becoming aware of this as well. As pressure from investors has pushed many companies to seek larger addressable populations, emerging markets present a compelling opportunity to find these patients. Medical technology companies developing in vitro diagnostic devices are in a unique position to easily target this opportunity (relative to therapeutic companies, who in most cases have higher regulatory thresholds and a significantly more costly R&D process).

In-vitro diagnostic device companies should consider the option of using this type of market approach when courting investors. The opportunity to rapidly proliferate product to a market with a serious need and low regulatory barriers is a compelling target for a strategic buyer down the road. “Grooming for exit” in a market that offers a buyer a turnkey market entry option is one way to stay ahead of the curve and take advantage of macro trends in the life sciences arena.

And in this Corner…

29 May

By Dennis Ford, CEO, LSN

I wanted to discuss the general vetting process for scientists, whether it be vetting scientists to present at a conference or selecting scientists that are developing early stage products to invest in. LSN’s staff attend a lot of life science conferences, and we are always interested in the types of companies asked to showcase their technologies at these events. This is always interesting to see, because sometimes spectacular technologies are presented by poor presenters, and in other cases, less interesting technology can be made to appear groundbreaking by the right speaker. Considering that LSN is organizing an Early Stage Life Science Investor Conference September 16th, I wanted to explore the concept of “vetting” presenting companies more deeply, as we select companies to present at our event.

The process of vetting potential investment opportunities is an interesting topic, especially in the case of early stage biotech firms because there is really no formulaic way to vet scientists other than the obvious data gained through trials – but the issue is for early stage biotech firms robust data simply isn’t there yet. I would like to point out that the VC community has had some very smart minds “formally vetting” science for a long time, but as we all know, the results have not been the greatest. The question is simply, why? If VCs can’t pick them, then who can?

Investing in life sciences almost reflects the nature of the field itself – trial by experimentation. An investor cannot simply evaluate a potential investment based on a firm reaching a few key performance milestones. There are also many science research publications that track the leading edge science and cover the latest and greatest strides forward in the space, but being highlighted in such publications rarely has a direct correlation to success in the market.

A lot of times, it really isn’t the fundamental science or underlying technology, but rather the person(s) driving the endeavor that determine success or failure. My take is that it all comes down to the inventor/entrepreneur and their own personal quest to move the science and technology forward. This is why so many investors end up investing in a management team rather than in the specific technology that the scientist is developing. This however leads to another challenge – if early stage life science venture success is a function of science (which can be objectively validated) and people (an aspect that is impossible to quantify on a start-up scale), then who can evaluate the true quality of an investment?

I will posit that if you had 100 leading scientist entrepreneurs, all with great science and inner drive, that only 20 of these scientists (applying the 80/20 rule) are capable of learning what they need to learn to do the rest of the work that would get their science to the market. The extra work I am referring to here is taking that giant step of learning rudimentary sales and marketing skills that enable an entrepreneur to go outbound and seek out the capital needed to move down the pipe, and realizing that you need to spend money to make money. I talk to gifted scientists on a weekly basis, and there is no doubt that their hearts and minds are in the right place. However, it is only a minority of these scientists that are so possessed that they will virtually learn anything and do whatever it takes to get their science to market.

Scientists that know what they need to do to succeed realize they need to get their messaging down so that it can be understood, and understand that they need to learn rudimentary marketing skills. In my mind, if they budget the funds, make the commitment to do the marketing, attempt to create the web presence and buy a database to enable them to go after investors and partners, then they are committed and aware, and thus vetted enough to deserve a chance to pitch to investors.

LSN is putting on an early stage investor conference in Boston September 16th, and LSN is soliciting presenters from a dozen or so of the top private and academic incubators in the U.S., as well as European and Asian scientists looking for early stage funding. We vet by word of mouth from our early stage science and business development partners, from our own in house science team reviewing responses from our newsletter’s request for innovation, our early stage investor network, and from our own LSN client base.

However, at the end of the day, it is the investor who needs to do the vetting, and ensure that the person on the other side of the term sheet has what it takes to succeed. We will have some great and interesting technology at the conference, and will also have some early stage investors that most entrepreneurs are not aware of. I understand that there is a vast difference between academic and private, and where the two intersect is where we are focusing the event.

Hot Life Science Investor Mandate 1: PE Group Interested in Analytical Services, CROs for Upcoming Investments – May 23, 2013

22 May

A private equity group based in the Eastern US has over $250 million in total assets under management, has raised three funds, and is currently looking for new investment opportunities in the life sciences space. While the firm has no set time frame to make an investment, they would allocate to a firm within the next 3-6 months if a compelling opportunity were identified. The group typically invests around $5-20 million per company.

Currently, they are looking for firms within the R&D services space. The firm is most interested in analytical services companies, as well as contract research organizations (CROs) that specialize in toxicology, however would consider other companies that fall within the umbrella of the biotech R&D services space as well.

This PE group executes recapitalization, growth equity, and buyout transactions. The firm is only interested in companies that are cash flow positive. With that being said, the firm is looking for firms whose EBITDA is in the $1-10 million range, and has annual revenue that does not exceed $75 million.

Hot Life Science Investor Mandate 2: Large Family Office Looking for Opportunities in Medtech Subsectors – May 23, 2013

22 May

A family office located in the Western US with around $100 million in assets is looking for a compelling opportunity for allocation within the next 6-9 months. The office invested in more than five deals in 2012, typically between $1-5 million per firm.

The foundation is most interested in medical devices, and will look at firms within the full gamut of medtech subsectors. Typically, the office allocates to firms that have at least one product on the market. They have no strict criteria in terms of a firm’s EBITDA or revenue, but require that any firm in which they invest has goals to lower the cost of healthcare.