By Maximilian Klietmann, VP of Marketing, LSN
LSN regularly speaks with numerous early stage entrepreneurs on the subject of asset focus. All too frequently, scientist entrepreneurs are reluctant to choose a single asset for the focus of their company unwilling to believe that it is in their best interest. Despite the feedback LSN gets from ongoing conversations with life science investors, many emerging biotech entrepreneurs still see this as a debatable point.
The typical arguments that emerging life science CEOs make against a single-asset focus may appear to make sense at first: Investors should prefer multiple shots on the goal or a portfolio of products is worth more than the sum of its parts. However, the key point that is often missed is that multiple assets frequently spell increased risk from an investor’s perspective. Why is this? It can be boiled down to three basic factors.
Capital Efficiency: The process of moving a therapeutic from discovery through the clinical trial process is extremely expensive, and it’s not getting cheaper anytime soon. Many investors tell us that given the inherent risks already present in the development process, they want their capital to be going towards the development of a single product that the whole company is focused on. This is preferable to spreading funds across a number of projects (increased overhead) that will get a portion of everyone’s focus (decreased attention).
Time to Market: The value inflection created by FDA approval is huge. A single asset on the market is almost always more valuable than a handful awaiting approval to move to the next trial phase. Relating to the capital efficiency point above, most investors we speak with would rather see one asset receive all the capital to move it across the finish line faster, regardless of the promise any other drug candidates may have.
Management Focus: This is the big one. Picking a single asset and having a laser-like focus on how to move it through the pipeline and to market shows that the management is dedicated, has clarity of vision, and is aligned with the investor. It exudes a “shortest line to cash” attitude and lets the investor be confident that the entrepreneur is able to lead the company.