Archive | April, 2014

The Importance of Single-Asset Focus

24 Apr

By Maximilian Klietmann, VP of Marketing, LSN

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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.

VC Strategies Diverge in the Valley of Death

24 Apr

By Lucy Parkinson, Research Manager, LSN

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We’ve talked about the fact that many venture capital firms have withdrawn from investing in early stage biotech startups, contributing to the so-called “Valley of Death.” However, there are still a number of life science VCs that remain active, so what are they doing with their dry powder now and why?

Talking to VCs recently, we found that the bulk of these funds are diverging in two directions. Some VCs are looking for nascent technological breakthroughs that are, generally, still a long way from becoming biotech startup companies. These VCs are building companies around these breakthroughs, gaining access to new scientific works either by maintaining a network of leading academics or by performing initial research entirely in-house.

There are some clear benefits to VCs taking this approach. Firstly, they can acquire assets for very low prices, before any of the classic value-inflection points. Secondly, the VCs can control a company’s direction from start to finish; they can select a management team and make strategic decisions, without a scientist entrepreneur getting in their way.

However, this strategy requires that VCs have a lot of connections and expertise. Scientists must be willing to hand their work over to the VCs, and the VCs must be capable of selecting and developing the most promising of these risky, very early stage assets. These VCs can cherry-pick the most compelling breakthrough ideas and build companies in-house, from the ground up, around these new assets. This then leaves real biotech startups—companies with pipelines and management teams—out in the cold (as far as VC investment goes). As a representative anecdote, an investment partner at a VC firm told us that in the past year, the firm reviewed 982 outside plans and invested in none of them. Another partner at the same firm later told us that it would consider investing in an external biotech startup but only in opportunities that were about three years pre-IND.

Other VCs have abandoned their appetite for technological risk and are instead focused on finding promising late-stage assets that they shepherd towards a rapid exit. These VCs typically look for investments that can be realized (often via a sale to big pharma) in a timeframe of 18 months to 3 years. Some have adopted a virtual pharma model and are focused solely on investing in assets rather than companies, either by in-licensing or simply acquiring late-stage product candidates and then managing the entire development of the asset until the exit point. Others do make equity investments in biotech companies, but some of these investors nevertheless see the company’s existing management as an optional add-on; one partner at a late-stage VC firm told us, “The development team is not necessarily the commercialization team.”

So what’s the takeaway? If you’re a late preclinical or early clinical-stage biotech company with a fully-formed team and a long development path ahead of you, this may actually be good news. More non-traditional investors will likely continue to move into this piece of the market to take advantage of the opportunity left by the VCs. The turbulence in the VC arena is far from over, however, and LSN will continue to monitor the latest trends in the investor space as the sands continue to shift.

FDA Proposes Expedited Access Program for Medical Devices

24 Apr

By Michael Quigley, Research Manager, LSN

mike-2Earlier this week, the FDA announced a new program that intended to provide earlier access to unapproved medical devices for certain patients. The EAP (Expedited Access Premarket Approval Application) program will allow companies to directly engage with the FDA sooner to collaboratively develop a plan for collecting scientific and clinical data in order to get patients safer and more effective devices sooner. The basic objective of the program is to diagnose and treat patients who are suffering from serious conditions and have medical needs that are unmet by current technology.

So, which companies are allowed to apply for the program? According to the FDA, a company is eligible for participation in the program as long as the medical device in question meets these standards:

• It is intended to treat or diagnose a life-threatening or irreversibly debilitating disease or condition.

• It is able to meet at least one of the following criteria:

1. The device targets an indication where no approved alternative treatment/diagnostic exists.

2. The device is technology that provides a “clinically meaningful” advantage over existing technology and/or approved alternatives.

3. Availability must be in the patient’s best interest (as determined by the FDA).

• The device has an acceptable data-development plan that has been approved by the FDA.

So what does the EAP program mean for the industry as a whole? One obvious foreseeable impact is the attraction of more direct investment into early stage devices.  This is great news, especially since early stage devices have had a tough time raising capital in recent times.  Moreover, early collaboration with the FDA means more guidance in setting clear clinical endpoints and having a better definition of what data is required to move forward. This increased regulatory transparency will hopefully increase the odds of approval (another checkbox for more risk-averse investors). At this point, the FDA has only released preliminary information on the program, but device companies and investors should keep an ear to the ground, as the details of the new program are released over the coming weeks.

Source: http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm394294.htm

Hot Life Science Investor Mandate 1: CVC of Tech Giant Looking to Invest in Healthcare IT and Connected Devices

24 Apr

The corporate venture capital arm of a large tech company is currently seeking to invest the in intersection of software and biology. The fund invests in companies at a variety of developmental stages and investments therefore vary widely, but typically range from $1-10m of equity. The firm is looking for opportunities globally.

Within the medical technology sector, the firm is interested in the intersection between communication and health, and particularly in technologies that improve delivery of patient care and make care more cost-effective.  Areas of focus include traditional healthcare IT (particularly data and communications in a hospital setting), personalized medicine, mobile health technology (including connected medical devices, consumer apps, and patient monitoring technologies that can be used both inside and outside hospitals), and genomic platforms that provide actionable information for patient care (technologies used purely for gene sequencing are not of interest).  While it is not an area of primary focus, connected lab equipment may also be of interest.

The firm invests only in privately-held companies. The firm backs innovative, creative entrepreneurs with expertise in their fields, and who are developing solutions that will have an impact on the health marketplace.

Hot Life Science Investor Mandate 2: Angel Group Seeking Women Led Biotech/Medtech

24 Apr

An angel group with offices throughout the United States is looking for companies with female founder or CEO, or with women in other C-level positions. The group prefers to invest in companies with a valuation under $5 million; the group’s first-round equity investments generally range from $ 0.25 million to $2 million. The group invests in companies based across the US and Canada.

The group is currently looking for new investment opportunities in the life science space.  Within the life science sector, the group is highly opportunistic and inclusive when considering opportunities. The group will consider any indication or technology, but as they prefer to invest in products that have an addressable market of over $1 billion, the group is more interested in large marketplaces such as the cardiovascular space than in rare diseases.

In terms of validation, the group prefers to invest in device companies with positive in vitro data and ideally in vivo data; diagnostic companies with strong retrospective and ideally prospective, data; and therapeutics companies with data showing efficacy in animal models.  As the group is interested in products with a shorter path to market, the group primarily invests in healthcare IT (including software-based diagnostic platforms) and medical devices.

The group only backs privately held companies in which women occupy key roles as managers, founders or equity owners, and prefers to back management teams with a strong scientific background.  The group is looking for life science companies with protectable IP, articulated pathways for regulatory and payer approval, clear milestones, and in which the amount of capital required to reach the marketplace can be clearly stated.

Hot Life Science Investor Mandate 3: European VC Looking Throughout US and Europe for Early Stage Investments

24 Apr

A European Venture Capital firm is looking to invest exclusively invests in early stage life science companies. The firm makes seed and early stage investments typically in the Series A round and can allocate €1-10M initially and an additional €10-15M in a follow-on investment per company. The firm typically co-invests with other institutional investors for larger investments. The firm is actively seeking opportunities throughout United States and Europe.

The firm is currently looking for biotech therapeutics, medical devices, and industrial biotech. For therapeutics, the firm invests in small molecule and biologics as well as cell and gene therapy. The firm is open to all indications as well as orphan indications. The firm will consider products as early as 24-month from IND through to Phase II. For medical devices, the firm seeks paradigm-shifting technologies that can reach a human proof-of-concept stage in a relatively short period of time.

The firm prefers to lead or co-lead an investment and generally require a board seat in its portfolio companies.

 

Top 5 Indications For Non-VC Early Stage Investors

17 Apr

By Maximilian Klietmann, VP of Marketing, LSN

Max Smile 2One of the LSN’s Research Team’s key points of focus is on investors filling the void left by Venture Capital in the life sciences space. Today, we’ll take a look at the non-VC early stage (discovery-ph. III) investors in biotech therapeutics. Let’s take a look below:#58 1

As far as indication interests go, CNS leads the way, with over 400 non-VC’s seeking opportunities in this indication area. This is followed closely by cardiovascular and infectious diseases. Endocrine and Immune disorders are also close behind. All disease areas in the top 5 have over 300 active early stage investors seeking opportunities.

So what is the takeaway? Well, for one thing, this is clear validation that non-VC investors are active in early stage biotech. Moreover, if you are raising money for an asset in one of these indication areas, but you aren’t looking at non-traditional investors, you are missing out on 300-400 potential investor fits. Keep following LSN for updates on where early stage investor interest is moving as the landscape continues to shift!