Archive | January, 2015

The Life Science Venture Philanthropy Landscape

29 Jan

By Michael Quigley, Director of Research, LSN

mike-2LSN researchers recently decided to take a deep dive into interviews we have held with venture philanthropy groups from around the world to see what the future likely has in store. After analyzing data gathered over the past three years from more than 150 investors, we uncovered a few notable trends.

Diseases of the nervous system is the indication area with the greatest amount of interest from venture philanthropy investors. (See Figure 1.) This is likely a result of the notoriously high risk in this sector, stemming from a lack of accurate animal models that can serve as a viable gauge for human efficacy and safety. This heightened uncertainty drives many venture capital and other financially motivated investors away from the sector entirely, leaving a gap that venture philanthropy organizations hope to fill. Additionally, there are a massive number of unmet needs in the space, particularly with respect to diseases such as Alzheimer’s, the prevalence of which is increasing as the overall age of the population increases.

Figure 1

Figure 1 | Source: LSN Investor Platform, Data as of January 27, 2015

Oncology comes in second in terms of interest from venture philanthropy investors. Their interest is driven in part by the massive and growing need for improved treatment options in this indication area, particularly in orphan forms of cancer, some of which have foundations with venture arms that invest specifically in that field.

In third place, we have endocrine, nutritional, and metabolic disorders, driven by the number of diabetes-focused venture-philanthropy groups. And in fourth place, we have congenital deformities and chromosomal defects, also largely driven by foundations looking to fund companies targeting orphan diseases such as Duchenne muscular dystrophy, whose underlying cause can be tracked to genetic mutations.

Early Investments

The largest percentage of venture philanthropy groups are looking to invest at the earliest phases of product development. (See Figures 2 and 3.) Other investors, and investors as a group, usually look for companies in Phase I of development for therapeutics and in the clinical stage for devices. However, because the primary motive of venture philanthropy investors is to improving patient care, they focus their efforts on the stages where capital is most lacking and innovation most prevalent.

FIGURE 2

Figure 2 | Source: LSN Investor Platform, Data as of January 27, 2015

Figure 3

Figure 3 | Source: LSN Investor Platform, Data as of January 27, 2015

Oftentimes, venture philanthropy investors view their allocations as a catalyst: an investment to help companies get the level of data required to become attractive to other institutional investors. Very few of these firms have the capital available to fund product development completely through commercialization; however, the capital they can provide in conjunction with their expertise and connections (to both providers and patients within the target area) makes these investors an invaluable resource to early stage companies.

Significant Allocations and Equity Positions

Another interesting metric to consider in the venture philanthropy landscape is the size and types of funding from these groups. (See Figure 4.) With nearly 50% of all venture philanthropy investors LSN has spoken with looking to make allocations of $1 million or more, it becomes clear that these groups are providing significant funding. Historically, these types of organizations have focused on financing academic and industry research through smaller grants and other forms of nondilutive funding. However, after years and years of their previously funded technologies not making it to the bedsides of patients, many have taken the challenge of funding research to a larger scale to deliver a more significant impact on patient care.

Figure 4 | Source: LSN Investor Platform, Data as of January 27, 2015

The foundations that have begun to dive into this realm of venture philanthropy do not look to provide purely nondilutive funding, however. More than 75% of the venture philanthropy investors we have interviewed that are providing $1 million or more are looking to take an equity position in the companies they allocate to. Granted, they are likely going to offer more favorable terms than a financially motivated investor; however, they are looking for equity. The model we have seen most frequently is one of an evergreen fund structure, where the firm invests in companies, takes an equity position, and any return that comes from those investments is then recycled back into the fund, allowing the group to further advance the standard of care in their indication.

Venture philanthropy is definitely of growing significance in the early stage of the life science investment ecosystem. As these groups evolve and new models for advancing care become utilized, it is highly valuable as a fundraising entrepreneur to be aware of all the players relevant to your technology.  Given that they are capable of providing expertise, patients, invaluable connections, and, more recently, significant amounts of capital, companies that form strategic relationships with relevant philanthropic groups can undoubtedly be served well in most aspects of development.

NextPhase has published numerous articles on venture philanthropy funding. You can find them on our website here and here.

 

 

CRO Trends in 2015

29 Jan

By Alejandro Zamorano, VP of Business Development, LSN

Alejandro 10*10

LSN maintains regular dialogue with a broad spectrum of contract research organizations (CROs) – from top-tier full service organizations, to small niche-specialized research companies; some are customers of the LSN Company Platform, and others are friends.  Every year we talk to hundreds of business executives in the field. Based on our market insight, here are the top trends we see in 2015.

The Monetization of Data

CROs are beginning to realize the power of their clinical data after years of ignoring this information. Some established CROs are even monetizing their data set by anonymizing the data, providing incredible insight to researchers.  This should also help companies on deciding when a trial should be killed, and whether a drug is a worth pursuing when a sub-population seems to respond the treatment. In an ideal world all clinical data should be standardized for analysis, but this is a great first step.

The Death of the Undifferentiated CRO

The CRO industry has exploded over the past 5 years, and competition is fierce. By searching the LSN Company Platform, one can find profiles of 859 clinical trial providers globally. Standing out amongst the vast herd is becoming harder, and most are competing on location, speed and increasingly price. In order to stay competitive sales teams have started to target biotech companies as early as the discovery stage, in order to form a relationship before others come knocking on the door.

To differentiate themselves CROs are developing and in-licensing unique technology platforms such as unique analytics, manufacturing capabilities, animal models, and biologic expression technologies. In 2015, don’t be surprised if CROs start competing with big pharma for access to these unique technology platforms.

The Search for Patients

Finding patients is often the hardest part in putting together a clinical trial, especially if the trial is in a rare disease field. Today CROs are looking to partner with diagnostic companies to identify specific patient populations for future studies. This close collaboration between diagnostic companies and CROs will change the manner in which the industry conducts its business, and will reap huge benefit to patients looking for access new therapeutics.

Exclusive Agreements with Big Pharma

The majority of R&D expenditure is consumed by big pharma and some CROs are tired of competing with others for a slice of the pie. Thus, larger CROs that have the necessary capacity have started to offer their biggest customers massive benefits to form exclusive partnerships. These include reduced pricing, full time core employees, standardized reporting and analytics, increased transparency, and reserved excess capacity in order to provide services on short notice.  The industry is getting more competitive and exclusive structures is just one of the many ways CRO’s are adapting to this environment.

2015 will be an interesting year for CROs, as the increasing competitive nature of the industry will allow only the strongest, most adaptable companies to enjoy market growth. LSN will continue to track the key market dynamics affecting service providers going forward.

[Video] 5 Major Investors Discuss Clinical Phase I & Phase II Investing

29 Jan

By Nono Hu, Senior Manager, Branding & Messaging, LSN

Nono 2At the fourth Redefining Early Stage Investments (RESI) Conference, LSN put together 16 biotech and medtech investor panels, in which we are featuring five major investors actively investing in and working with therapeutic companies in phase I and phase II of clinical trials. If you have entered into clinical trials (or are preparing to), the panel can help you to understand the keys to positioning your opportunity at this stage and how best to approach investors in the initial outreach. The panelists answered a variety of questions, including: What types of things do you look for in an investment opportunity? Do you prefer companies with a platform approach or those focused on single assets? What do you think of build-to-buy partnerships with big pharma? What company profile is appropriate for venture funding? How do you manage an investment for success? What is the best way to approach you?

Moderator:

Neil Littman, Business Development Officer of the California Institute for Regenerative Medicine

Panelists:

Daniel O’Mahony, Partner, Seroba Kernel Life Sciences

Lisa Rhoads, Managing Director, Easton Capital

Mike Dybbs, Principal, New Leaf Venture Partners

Sam Hall, Principal, Apple Tree Partners

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