Next Phase Newsletter

By Lucy Parkinson, Senior Research Manager, LSN

Here at LSN, we’re getting ready to go home for Thanksgiving.  But first, we’d like to thank all our readers, supporters and friends across the global life science industry.  We wouldn’t be here without you.

In the spirit of the season, LSN Research welcomes you to the table to share the mandates we’ve gathered from our recent conversations with investors across the world.  This cornucopia of investors are from 6 different nations, and cover every niche of the life science sector – from agriculture to therapeutics to devices to healthcare IT.

Click on the mandates below to see what’s cooking in the rest of the world

1. Private Equity Firm Seeks AgBio and Sustainable Bio Opportunities
2. Early Stage VC Seeks Healthcare IT Opportunities
3. Global Firm With Patient-Centric Strategy Invests In Oncology, Cardiovascular, Anti-infectives, CNS/pain, and Women’s Health
4. Taiwan-based VC Investing In Innovative Early-Stage Medtech 
5. South American Corporate VC Interested in Orphan Drugs
6. UK-based Fund Group Seeks Medical Devices, Diagnostics, Lab Equipment, and Healthcare IT
7. Cross-Border VC Looking At Healthcare Technology for Emerging Markets 
8. Global Health Organization Funds Diagnostics, Vaccines and Women’s Health
9. European PE Invests in Drug Development, Diagnostics, and Medical Devices
10. Dutch Firm Investing In Medtech, Healthcare IT, and Biotech R&D Services

By Shaoyu Chang, Research Analyst, LSN

Coming from a scientific background, I thought I knew well enough about using slides and making presentations, whether in laboratory journal clubs or at hundred-attendee conferences. However, as I start to help fellow scientists on their fundraising campaigns, it has become apparent to me that academia and business speak very different languages.

Looking at the concept scheme (Figure 1), scientists are used to a standard structure that emphasizes on literature background, study design, and interpretation of data. However, building a successful investor pitch deck requires a different set of considerations, framework, and skills than an academic presentation. In addition to scientific merit, an investor pitch deck must showcase the superiority of the management team, market potential, business model, and competitive landscape, among other factors.

Figure 1

Unfortunately, many scientists who become life science CEOs often assume pitching investors is the same or similar to presenting at an academic conference, and they begin a fundraising campaign on the wrong foot. This article summarizes as 11 tips the recommendations for building a successful pitch deck from experienced industry veterans and investors who we interact with on a daily basis.

1. Keep it simple. Pitch decks serve as a vehicle to initiate a conversation. Try to draw a smooth and intriguing story line about where your invention came from and where you are planning to go. Ideally your pitch deck should be anywhere from 10-15 slides. Far too often do we come across entrepreneurs with pitch decks of 20 or more slides and while the data may be compelling, the reality of the matter is that investors do not have the time to review that amount of material on every opportunity they are presented with. Do not try to answer all possible questions in your pitch deck, simply aim to provide the investor with enough information to convince them that it is worthwhile to hold an in-person meeting.
2. Begin with the conclusion. Academic presentations describe a journey of scientific investigation that leads to a discovery or a conclusion. By contrast, a pitch deck should open with a high-level overview of the entire pitch. Time is of the essence. Investors want to know within the first two slides why they should care about this innovation, what is your solution, and what are the opportunities and risks.
3. Showcase your team. Standard academic presentations do not mention teammates until the last slide; however, when pitching investors, you and your team are as important as your science. Who are you? What is your contribution to the company? What credentials do your teammates have? Are they award-winning scientists or seasoned business professionals? Showcase the members of your team. Remember, investors fund the science and the team.
4. Describe the “pain” in the market. Explain where the current problem is, how it impacts people’s lives, what the commercial opportunities are, and how you got started. This section should be a shorter version of the background section in academic presentations. Many entrepreneurs waste their time preaching common knowledge, such as telling investors that breast cancer is one of the top killers in women or orphan drugs are a big business. Remember that your job is to get investors’ buy-in by defining a pain specifically and providing a compelling case for how your technology will alleviate it.
5. Explain your technology. Where did it come from? How does it work? How will it make an impact? What phase of development is it in? How is your technology different from others? What is your “secret sauce”? Tell a succinct story of the journey you have been through to get to where you are today. Sell your science by carefully laying out data and results from studies and prototype-testing that support your claims. A lot of data is not necessarily a good thing, as it may be difficult to explain and comprehend. (Remember, this is not a thesis defense.) However, some scientists cut back on key data and only speak about the big picture. This approach makes their claims look groundless and untrustworthy. Try to get feedback from industry experts or veteran investors before you make your pitch. It may take a few tries to strike the right balance for your specific financing round.
6. Describe product pipeline and address the risks. Early stage R&D is risky, especially in life sciences; every investor knows that. Still, investors appreciate pitches that acknowledge the risks associated with the ongoing project and lay out risk management and mitigation plans. Provide a roadmap to risk reduction that includes milestones, such as filing patents to protect intellectual property, establishing a safety profile, and demonstrating superiority over competitors. Risk mitigation does not need to be a stand-alone slide, but it should be addressed in a presentation or during a Q&A.
7. Propose a roadmap to future exits. What are the potential value-inflection points and how long will it take to get there? Are you aware of potential acquisitions and recent exit valuations in your sector? Many investors will obtain this information during due diligence. That being said, they appreciate entrepreneurs who know such information, as it demonstrates a level of preparedness.
8. Present the finances. How much capital have you raised to date? How much more are you raising now? What is the planned use of these funds? What are the milestones you want to achieve (such as chemistry, manufacturing, and controls (CMC); animal toxicology tests; and first-in-human trial)? Although life sciences are notorious for high uncertainty, it is still recommended to have a two- to five-year financial projection so that investors know you will adhere to your budget and can be trusted with their money.
9. Choose graphics and language that are suitable for your audience. A common mistake made by first-time life science entrepreneurs is to overwhelm the investor with too much data and unnecessary jargon. Use crisp and easy-to-understand visuals to display data and save the details for an appendix to provide to investors upon request. Try to explain abstract ideas in a language that a layperson can understand and use analogies when appropriate. For example, instead of saying “the chelating agent binds to heavy metal ions and therefore reduces their concentration in circulation,” try saying “the specially designed molecule acts like a magnet that attracts metal ions and takes them away from your body.”
10. Touch on intellectual property and the competitive landscape. While having IP protection and a competitive advantage are strongly emphasized in IT and other industries, these factors are seldom the make-or-break points when it comes to investing in early stage life science projects. Given LSN’s experience and the expert opinions we received, these points can be addressed in the flow of a presentation, but they should not occupy too much valuable time that could be used to explain the science or introduce the management team.
11. Ensure continuity in branding and messaging. As Dennis Ford discusses in The Life Science Executive’s Fundraising Manifesto, a company’s communication flow should be seamless. A company’s tagline should lead into its four- to six-sentence elevator pitch, which dovetails into its one- or two-page executive summary and its 15-slide pitch deck. When new information is added, it must be fully integrated into the flow to build a consistent and easy-to-understand message.

It is important to note that this article aims to provide a starting point of building a pitch deck instead of a one-size-fits-all template. Every life science company is different. The pitch deck for an early-stage biotech start-up seeking seed capital to develop small molecule cancer therapy should look very different from that for a medical device manufacturer seeking growth capital to scale up operations.

Good luck pitching!

By Lucy Parkinson, Senior Research Manager, LSN

In last week’s newsletter, we presented an overview of innovation and investment in the cardiovascular space. This week, we continue this series, analyzing LSN data on the neurology sector. Investors often tell us that neurology is a challenging space, particularly when it comes to evaluating early stage opportunities; some investors feel that it’s harder to assess animal data or prototype studies in this space than it is in many others. Here, we take a look at the competitive landscape for neurology and the investors.

LSN tracks therapeutic assets for two areas of neurology: diseases of the nervous system and mental and behavioral disorders. The former is a far more robust area of innovation at present, with 646 assets in clinical trials. We have been able to determine the specific disease areas that 437 assets are targeting. (See Figure 1.)

Figure 1

For many severe neurological disorders, there is tremendous competition among treatments at present; more than one hundred Alzheimer’s cures are presently in clinical trials, as are dozens of potential treatments for Parkinson’s disease, multiple sclerosis, and epilepsy. However, the pipeline is limited or dry for many rare neurological disorders. Leigh syndrome, a severe pediatric disorder, has only one asset in the clinical stage. For some other indications that we track, including Charcot-Marie-Tooth disease and Steinert disease, no drugs are currently in clinical trials. Potential treatments for these rare diseases could qualify for an orphan drug designation, so an early stage investment could yield not only a life-changing result for thousands of patients but also an opportunity for an investor to benefit from limited competition and a long period of exclusivity after the treatment has received approval.

Less innovation is taking place to address mental and behavioral disorders; only 164 therapeutic assets are in clinical trials. We have been able to determine the disorders that 144 assets are targeting. (See Figure 2.)

Figure 2

There are fewer medtech neurology products in the development stage because they have a shorter development cycle. We have identified and categorized 119 such products that are aiming to treat neurological, psychiatric, and spinal disorders, and in 100 cases we were able to identify the type of device being developed. (See Figure 3.)

Figure 3

Some areas of innovation are seeing markedly more new products than others; electromechanical devices (such as neurostimulation devices) form a crowded competitive field, as do various forms of implantable devices, many of which are targeting the spinal care market. There is also a wide variety of neurological diagnostic and imaging technologies in development. By contrast, few inventors are developing technical aids for patients suffering from neurological disabilities.

Neurology innovation is occurring worldwide. The U.S. has the largest number of neurology companies in both the biotech and medtech sectors, while in other respects the distribution of biotech companies is quite different from the distribution of medtech companies. (See Figures 4 and 5.)

Figure 4

Figure 5

The UK, Japan, and France are among the top five countries that have the highest number of biotech neurology companies, but these countries fall behind Germany, Spain, and Switzerland when counting the number of medtech neurology companies in each country. Canada is a leader in both sectors.

Now, let’s take a look at the investors interested in the neurology space. LSN has spoken with the investment staff at 290 organizations that are open to investing in therapeutics in the clinical stage. (See Figure 6.) We also spoke with 386 organizations that are interested in neurotech devices that are in the development or clinical stages.

Figure 6

It’s interesting to see that if we look at investors interested in neurology therapeutics in the preclinical stage, we find a different pattern. (See Figure 7.)

Figure 7

Venture capital is the largest category of investors in both cases. But at the preclinical stage, angel groups, corporate venture capital funds, and foundations—all of which may be more prepared to take on risky neurology assets in return for the possibility of developing a new cure in the future—play a more prominent role.

On the medtech side, private equity firms show more willingness to get involved in products that have yet to achieve approval. (See Figure 8.) In many cases, these firms are interested in providing funds to companies that are close to receiving approval for their products and need capital for commercialization.

Figure 8

Where are these investors willing to allocate their capital? While many neurology investors are focused on the U.S. and Western Europe, a large number are looking globally, particularly those interested in the biotech sector.

Figure 9

In addition to the multitude of global neurology investors, LSN researchers have spoken with investors who are interested in investing regionally around the world.

Both global and local capital provide possibilities for companies in the neurology space. No matter where your company is based, we’ve found investors who would like to see what you’re working on.

By Dennis Ford, Founder & CEO, LSN

At LSN, my five business development executives talk to about 35 CEOs each week, all of whom are in fundraising mode.  If we also consider the conferences and seminars we attend, LSN’s business development staff has spoken to close to a thousand fundraising executives since the company was founded.  Now, that is not a bad sample size.  At LSN, we always begin with three questions that will help us net out the status of the entrepreneurs we are starting a dialogue with.

The first question is, “Are you indeed fundraising?”  One would think this question is a binary matter…but it’s not.  The answers range from “Yes, we’re totally dedicated to raising money,” to “We are just sticking with our private network of investors,” to “We plan on starting a campaign soon.” What these answers reveal is how committed you are to raising capital, and that’s why it’s the most important question for us; LSN engages only with dedicated fundraisers.

The second question is, “Do you know how long it will take to raise a financing round, from start to finish?”  This is a bit of a trick question.  From inexperienced entrepreneurs and from executives who haven’t been fundraising as of late, we often hear answers ranging from 3-9 months, which have found is highly optimistic; in our experience, closing a round usually takes 9-18 months.

The third question is, “Do you know how much a 12-month fundraising campaign will cost?”  This question provides some interesting answers.  Many CEOs haven’t drawn up a yearly fundraising budget at all, and when they put pen to paper to quantify the issue, they realize that it will take a lot of money to go out and raise money.  Figure 1 provides the typical cost of the essential components of your campaign:

Figure 1

We use these three questions to gauge whether the CEO has done their homework on what it will take to raise a financing round and has a good grasp of the commitment required.  There is a lot more to raising capital than simply declaring that you’re raising capital and then staying within a limited region or a small network.

By Michael Quigley, Director of Research, LSN

Cardiovascular disease, the leading cause of death in the U.S., represents a massive market for life science products. LSN’s tracks both companies working on new technologies in the cardio space as well as investors looking to fund those technologies through our two data platforms. Looking at both companies and investors can provide a dynamic picture of the space as a whole.

Of the cardio technologies currently in development or in clinical trials worldwide, LSN has identified 561 that are therapeutic and diagnostic products and 238 that are medical devices. We then looked at cardio sub-indications to determine which ones have the most new-product development. (See Figure 1.)

Figure 1

For entrepreneurs working in these sub-indications, this figure should provide some insight into the competitive landscape. Products targeting hypertensive diseases, for example, have significantly more competition than products targeting chronic rheumatic heart disease. When seeking capital, it is crucial to understand the products you are competing with and what differentiates yours so that you can convince investors that your opportunity deserves their capital more than others.

The vast majority of therapeutics and diagnostics products and medical devices that are targeting cardio are from companies based in the U.S. However, several other countries are a source of innovation as well. (See Figures 2 and 3.)

Figure 2

Figure 3

It is interesting to note that while Israel isn’t among the top 11 countries for emerging cardio therapeutics and diagnostics, it is in second place in the medical device space. Asian countries make up three of the top five countries developing cardio therapeutics and diagnostics, while only Japan is in the top 11 for emerging cardio devices. Also worth noting is the significant innovation in both areas from Germany, the United Kingdom, Canada, and Switzerland.

Now let’s take a look at which countries and regions cardio investors are interested in based on their current exposure. (See Figure 4.)

Figure 4

Most investors are looking to invest in the U.S, which is in line with where the majority of innovation is taking place for this indication. Investors are also directing their attention globally and to Western Europe, Canada, and Eastern Europe respectively—areas where we also found innovation taking place. An area that appears to have a significant imbalance between innovation and investment interest is Asia, particularly in the therapeutics space. We have recently increased our efforts in this region; however, it still could remain true that the emerging Asian cardiovascular market is currently underserved when it comes to capital.

The types of investors interested life science products targeting cardio are fairly consistent with what we have seen in the life science space as a whole. (See Figure 5.)

Figure 5

All ten categories of investors have at least some level of interest in cardio, and as we have noticed for other indications, venture capital, private equity, and family office investors have the most. The interest across all ten categories highlights the importance of looking at all classes of investors when fundraising to help increase your odds for success. We look forward to providing this level of analysis in other indications areas in future issues, so be sure to keep an eye out for the indication relevant to you.

By Tom Crosby, RESI Conference Manager, LSN

Last week, LSN announced the RESI Conference’s new Commercializing Medtech Innovation panel, which will bring insights from investors who focus on devices that are nearing commercialization. This week, LSN is proud to announce another brand new panel in the Medtech Investor Panels track — this time, featuring investors who focus on earlier-stage opportunities. The In Development / Clinical Investors Medtech panel will offer viewpoints and advice from a diverse group of investors.

Moderated by Vicki Anastasi, Vice President & Global Head of Medical Device and Diagnostic Research at ICON, the audience will hear from:

Cary Adams, Founder, Almond Tree Capital

Jeff Sheldon, Managing Director, CitareTX

Ibraheem Badejo, Senior Director, New Ventures, Johnson & Johnson Innovation

Doug Fisher, Partner, InterWest Partners

Panelists will share their opinions on why medical device investments have been surging in 2014, and how entrepreneurs can capitalize on the trend. What is the path of least resistance from prototype to allocation? How do device entrepreneurs identify and qualify organizations that are actively investing early? What are the pros and cons of taking a venture capital investment, and what are the roles of other sources of funding? With a panel drawn from a wide variety of backgrounds, the session will offer an interesting perspective for any device company looking to take its technology to the next level.