RESI Boston Preclinical & Phase I Investors Panel

1 Oct

By Christine A. Wu, Research Analyst, LSN


At our RESI Boston two weeks ago, Preclinical/Phase I stage investors joined us on a panel discussing their approach in seeking new early-stage deals, what they look for, and their process and advice for entrepreneurs.

Moderated by Steven Gullans, Managing Director, Excel Venture Management, our panelists include:

The panel opened up saying that the industry is built on trust. Trust in partnering within their network, along with trust in developing relationships with their portfolio companies in terms of their management teams, their quality of science, and their clinical regulatory pathway potential.

Trust in Networking & Partnering—

Listing a target range of 2-6 deals per year for early-stage ventures, the panelists emphasized that a number of deals are done with each other with waves of requests in September after Labor Day, January after JP Morgan, and May.

There is a particular attractiveness to partnering with corporate venture capital firms, as the partnership would acquire benefits from their capabilities. When looking at big pharma, it is valuable to see what applies to them as they generally have large portfolios and companies can never be sure of how the project is prioritized. However, panelists highlight the existence of an asymmetry in partnership with pharmaceutical companies, in which they learn about assets in what the small company is doing in the space, but are reluctant to share what they’re doing and what they have learned.

Networking becomes incredibly essential when it comes to presenting a deal. The panelists emphasize how much more attractive the deal looks if it had come through someone they trust within their network.

Trust in Management Teams –

The panelists emphasize the positive asset in building the relationship between the investor and the company management team. Even after deciding in making the investment, it can take up to eight months to coach through and build a relationship to a point of comfort in the investment decision. This build of trust is particularly important with an early stage (series A) investment.

Trust in the Quality of Science –

Panelists emphasize clinical validation and the importance of presenting constructive data to show its ability to execute the process of development. The clinical asset sweet spot is a reliable and predictable animal model with the only exception being a completely novel breakthrough modality.

Another sweet spot is the company’s therapeutic strategy, which can be even earlier than the animal model. A company’s strategy, for example, may be identification of a new neuronal receptor as a pain target, and in order to test the hypothesis is to analyze medicinal chemistry.

In an area of science that has been around for a long time, the company should have a new twist in their modality. For a peptide molecule, for example, there must be a novel application in the operating space that is protectable and reliable. Companies should have the ability to rebrand technology with marginal potential.

In single-asset versus platform technologies, the panelists emphasize the value, and challenge, of understanding the “first” versus the “second” drug in the clinic. Generally 95% percent of a valuation rests on the lead asset, while the rest of the pipeline constitutes 5% of the value.

Trust in Clinical Regulatory Pathway –

Panelists stressed that they look for the company to have a clear path with a clear and thorough plan to prove that they know what lies ahead. Along with seeing a solid clinical process, the attractive preclinical time range is from 2 to 4 years in R&D. Panelists provided additional advice to have a pre-IND meeting to build a clinical path and plan for both the entrepreneur and capitalist to see the road ahead.

For preclinical to phase I companies, here is your overall advice –

  • Network! Come through with someone in the investors’ trusted network
  • Increase your credibility by reaching out to patient foundations for scientific advisory boards to support you. This will get investors to acknowledge that your product is important.
  • Build your relationships, and most importantly, build that trust.

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