Category: Redefining Every Stage Investments (RESI)
The Redefining Every Stage Investments (RESI) Conference is an ongoing conference series that provides an international venue for life science companies across Biotech, Medtech, Diagnostics and Healthcare IT and to source investors from around the globe, create relationships, and eventually, secure funding.
When LSN began the Redefining Early Stage Investments conference series, one of our primary goals was to hear from new voices in the life science sector that were rarely heard at other events. Family Offices now represent an important source of capital in the life science field, and LSN has contacted numerous family offices that are seeking dealflow in the medical technology field. In January, RESI hosted a panel devoted to Medtech Family Offices for the first time; as this panel was hugely popular, RESI @ TMCx will once again feature a panel of speakers from the medtech family office world.
These investors will explain to the audience why they seek direct investments in medical technology, how their investment process works, and what they look for in an early-stage medtech opportunity. If you’re developing a medtech product and want to hear how family offices engage with your sector, join us at RESI @ TMCx.
By Shaoyu Chang, MD, MPH, Senior Research Analyst, LSN
Mimi Liu, Research Analyst, LSN
As the world’s second largest pharmaceutical market with an estimated annual growth rate of 10%–13% through 2018[1], China continues to attract growth-seeking life science companies and investors from across the globe. What are the opportunities and challenges in entering in this market? This article provides an in-depth view by dissecting information gleaned from LSN’s company platform and the interviews we have conducted with investors based in Greater China.
The growth of China’s pharmaceutical market is driven by a large and aging population, increased access to healthcare, and nationwide policy reform. Over the past five years, the generic drug market has been growing steadily, while branded drugs have gained greater protection, due to the improvement of regulations and laws by the China Food and Drug Administration. Market demand has shifted from antibiotics to specialized drugs, with many therapeutics companies starting to focus on oncology, cardiovascular conditions, blood diseases, and supplements.[2]
We examined a sample of 553 innovative companies located in Mainland China, Taiwan, and Hong Kong that are developing biopharmaceutical assets from the preclinical through phase 2 trial phases (see Figure 1). Neoplasm and “lifestyle diseases,” including metabolic and cardiovascular diseases, have attracted the most number of biopharmaceutical innovators. These therapeutic indications are of high demand domestically with the potential of expansion into overseas markets. A significant number of innovative companies are working on infectious diseases that are endemic to the region, such as hepatitis, tuberculosis, and HIV. However, there seem to be fewer innovations in diseases of the nervous, digestive, and respiratory systems, despite their high health burden.
Figure 1 | Source: LSN Company Platform, Data as of April 15, 2015
The development of China’s biotechnology sector is fueled by R&D centers set up by big pharmaceutical companies as well as the recruitment of Chinese expatriate talents, or “Haigui.” State-backed bioclusters are emerging in Beijing, Shanghai, Jiangsu, Shenzhen, Hong Kong, and Taiwan. Over half of the innovators in the region are developing therapeutics, including small molecules, antibodies, proteins, peptides, and nucleic acid drugs, as shown in Figure 2. There is also a significant interest in generics and biosimilars that addresses the strong demand for high-quality, low-cost products for the vast population.
Figure 2 | Source: LSN Company Platform, Data as of April 15, 2015
Medical device sales in China reached US$32 billion in 2013, making the country the second-largest market in the world[3]. Domestic manufacturers traditionally dominate the hospital equipment market, including medical carts, operation room and ICU equipment, and autoclave sterilizers. Devices for surgical, orthopedic, and dental use are also an arena saturated with locally based companies. According to BMI Espicom, China still has a high demand for imports, especially in the diagnostic imaging sector[4]. With the rise of cross-border partnership with international device manufacturers such as Johnson & Johnson, original equipment manufacturing (OEM) and original design manufacturing (ODM) have become important business units for medical technology companies in the region.
“Medical technology has been part of China’s national development strategy with increasing importance,” said Dr. Fan Yubo, president of the Chinese Society of Biomedical Engineering, at a recent medical device industry summit. “China’s upcoming 13th Five-Year Plan will focus on digitalized diagnostics, tissue repair and regenerative materials, molecular diagnostic tools and reagents, artificial organs and life support equipment, and health monitoring devices.”[5]
Let us take a look at the life science investment landscape in the region. To date, the LSN research team has spoken to over 50 life science investors who are based in Mainland China, Hong Kong, and Taiwan. While large pharmaceutical companies and venture capital funds are traditionally major players in this field, we have seen a growing trend of private equity funds, state-backed funds, and family offices showing an interest in life science investments, as shown in Figure 3.
Figure 3 | Source: LSN Investor Platform, Data as of April 15, 2015
We found that the investors who exclusively focus on China or Asia are typically interested in companies in clinical phase 2 or later of their development pipeline. On the other hand, about two-thirds of Greater China-based investors would like to look at new opportunities across the globe, with a specific focus on North America and Western Europe. These investors are generally stage agnostic, and many have a mandate to introduce cutting-edge technology back to the Chinese market.
During our conversations with those investors, the majority showed high interest in diabetes, cardiovascular, cancer, respiratory, digestive system, and nutrition fields, which are of great significance to the region. For example, China bears the highest burden of diabetics in the world, with an estimated 100 million people living with the disease[6]. One in five adults in China suffers from cardiovascular disease, which accounts for 40% of all deaths[7]. Moreover, the incidence of lung cancer in China has grown exponentially since the 1970s, due to smoking and air pollution. The disease is now the number-one cancer killer in the country, with over 487,000 new victims in 2010[8].
China represents immense opportunities for development of novel therapeutics and medical devices due to factors such as rapid market growth, the concentration of an educated workforce, and improving intellectual property protection and regulatory environment. In the medtech sector, state-led initiatives have identified high-end digitalized diagnostics, imaging devices, molecular diagnostic tools, and health monitoring devices as key strategic fields of development. Disease areas of the nervous, digestive, and respiratory systems present with high disease burden and relatively fewer innovations. Innovative biotech and medtech entrepreneurs should be able to find plenty of potential investors, as well as cross-border cooperation in R&D and manufacturing.
[5] Chinese Society of Biomedical Engineering. “Fan Yubo: Initial View on the Medical Device Strategies in the Thirteenth Five-Year Plan”. Chinese Society of Biomedical Engineering Website. 2015. Accessed from http://www.csbme.org/csbme/ch/showNewsDetail.asp?nsId=231
[6] Veronica Hackethal. “Diabetes Is a Major Public-Health Crisis in China”. Medscape. 2014.
Last week we used the LSN Company Database, which covers over 30,000 life science companies across the globe, to see what kinds of emerging therapeutics assets were being developed in European countries. This week we again utilized the database, this time to take a look at the emerging medical devices coming out of Europe, and we were able to identify over 400 products in development (see Figure 1). These devices all have yet to reach market approval and, as such, can likely indicate where the most innovation is currently taking place.
Figure 1 | Source: LSN Company Platform, Data as of April 15, 2015
In analyzing the data for the companies that we track, we found that reusable instruments, active implantable devices, and electromechanical medical devices are the most prevalent subsectors of in-development medical devices in Europe. By looking at the same cross section of medical devices in the U.S., we can observe how the innovation landscape compares across the pond (see Figure 2).
Figure 2 | Source: LSN Company Platform, Data as of April 15, 2015
In the U.S., active implantable devices are the definitive leader by number of products in development; however, the rest of the landscape looks fairly similar to that of Europe. This similarity might indicate a global trend in terms of where the most innovation is occurring in the medical device space. In the coming years, it will be very interesting to see how these charts correlate with the types of medical devices that reach market approval in both of these geographies.
It is also worth noting where in Europe these new devices are being developed (see Figure 3).
Figure 3 | Source: LSN Company Platform, Data as of April 15, 2015
Just as it led in our European-based therapeutics report last week, the United Kingdom is home to the largest number of in-development devices, although in the medical device space, it appears that there is a more even distribution of early stage technology across Europe than there is in the therapeutics sector. This is likely because the medical device sector is more nimble than therapeutics, which requires more capital, infrastructure, and existing expertise to support development of products. Medical device innovation is not limited to “innovation hubs” where all innovation follows the existing resources. While many local governments in Europe and around the world are pushing to develop themselves into one of these hubs, it takes a significant amount of time and resources to be able to attract and support innovation.
Finally, we can see the types of investors who are interested in early stage medical device development in this part of the world (see Figure 4).
Figure 4 | Source: LSN Investor Platform, Data as of April 15, 2015
Just as with our previous dissections of investor types, we notice a breadth of different investor classes with interest in this stage, sector, and geography. Venture capital again represents the most significant investor category; however, it is only just over one-third of the total capital pool. This is why it is vital to cast a wide net when fundraising. It not only will increase your odds of getting the capital you need, but also will allow you to hear valuable feedback from various viewpoints regarding your opportunity, ultimately helping you find the most strategically valuable investment partners.
By Natasha Eldridge, Marketing Manager, Life Science Nation
As cost concerns in healthcare rise and medical device technology advances, LSN has encountered a large number of investors who take an interest in the convergence of medical devices and software. Many investors are interested in the potential of this new wave of connected medical and diagnostic devices, which will collect and transmit biological data in order to monitor chronic conditions and warn of complications before they occur. The Internet of Medtech has the potential to change how healthcare is delivered, with data bridging the gap between providers and patients.
At RESI @ TMCx, LSN has introduced a new panel session devoted to investment in this rapidly developing field of innovation. Moderated by Michael Greeley, General Partner, Foundation Medical Partners, the audience will hear from:
The five investors will share their approach to the Internet of Medtech, discussing important fundraising issues such as: How can you demonstrate that your connected device has the potential to provide clinical benefits? What areas of healthcare are most in need of connected device innovation? How should an Internet of Medtech entrepreneur build a market for their new device?
BOSTON – April 9, 2015 – Johnson and Johnson Innovation, JLABS (JLABS) is collaborating with Life Science Nation’s RESI @ TMCx, June 8th, Houston conference. JLABS is a co-sponsor and will be hosting a Sunday evening cocktail reception on June 7th to kick off the RESI @ TMCx event on the 8th.
“The JLABS event will provide a great venue for scientist-entrepreneurs and investors to get some additional networking time,” said Dennis Ford, CEO, Life Science Nation.
Senior representatives from JLABS also will be participating in RESI’s panels and workshops as well as the RESI investor partnering forum.
“JLABS has a close relationship with the Texas Medical Center (TMC) and will be opening an incubator at the TMC Innovation Insitute, called JLABS @TMC, in early 2016. JLABS @TMC is dedicated to the early stage life science arena, so collaborating with Life Science Nation and TMCx for this event makes a lot of sense,” said Chelsea Hewitt, Director of Marketing for JLABS.
The Redefining Early Stage Investments conference also takes place in Boston in September and in San Francisco in January. Now with RESI @ TMCx on June 8th, fundraising CEOs have a venue to meet early stage investors that are a fit for their sector and stage every 4 months, providing a great ROI for cost conscious CEO’s.
About Johnson & Johnson Innovation, JLABS
JLABS, part of Johnson & Johnson Innovation LLC, provides the tools and resources needed to help life science startups thrive. Residents have access to turnkey, state-of-the-art infrastructure as well as year-round commercialization curriculum and networking events, onsite team for operations and business services, all with no-strings attached. JLABS links regional entrepreneurs with the full breadth of Johnson & Johnson Innovation, including opportunities to discuss funding, access third-party services, attend educational events and meet with R&D experts from our medical device technology, consumer healthcare product and Janssen pharmaceutical teams. The new JLABS @Texas Medical Center (JLABS @TMC) incubator will be located within Texas Medical Center’s new Innovation Institute at the TMCx facility, located at 2450 Holcombe Boulevard, Houston, TX. The 30,000-square foot JLABS facility will accommodate up to 50 life science startups. JLABS @TMC will also follow the same no-strings attached approach currently in operation at the California and Boston-based JLABS facilities.
In March, LSN Research spoke with the investment staff at 90 firms that directly invest in life science companies. As always, we reached out to a wide variety of investors; many were from the venture capital or private equity space, but we also gathered mandate information from investors of every type that LSN tracks. Figure 1 shows the range of investors we contacted in March.
Figure 1 | Source: LSN Investor Platform, Data as of March 31, 2015
These 90 conversations represent a truly global dialogue. In addition to speaking to investors in the U.S., Canada, and throughout Europe, LSN Research also spoke to investors from as far away as Korea and New Zealand. (See Figure 2).
Figure 2 | Source: LSN Investor Platform, Data as of March 31, 2015
As Figure 3 shows, we found that the largest sectors of focus for these investors were the diagnostics and medical technology sectors, with 65 investors interested in each of these fields. We also spoke to many investors looking for therapeutics opportunities, and also those with an interest in other life science opportunities, such as engineering and healthcare IT, biotechnology R&D services such as CROs, and other biotechnology fields, including industrial biotechnology and agricultural biotech.
Figure 3 | Source: LSN Investor Platform, Data as of March 31, 2015
LSN’s focus is on early stage opportunities, so we have concentrated on cultivating relationships with investors that have demonstrated interest in the preclinical and early clinical phases of development. However, many investors take an interest in companies at a range of stages. A large number of the therapeutics investors we spoke to in March were also looking at later stage opportunities, as Figure 4 shows.
Figure 4 | Source: LSN Investor Platform, Data as of March 31, 2015
We see a more even distribution in the medical technology and diagnostics fields, perhaps due to the shorter timelines involved in bringing a product to market. A slight preponderance of the investors we spoke with in March are interested in medtech and diagnostics products undergoing clinical trials, as Figure 5 demonstrates.
Figure 5 | Source: LSN Investor Platform, Data as of March 31, 2015
Over a third of the investors we contacted are interested in accessing life science opportunities all over the world. The rest have particular areas of focus, from a single city or region to one or more entire continents. The majority of these non-global investors have an interest in opportunities in the U.S., but we also spoke to investors who focus on Europe, Canada, Asia, the Middle East, and Oceania (see Figure 6).
Figure 6 | Source: LSN Investor Platform, Data as of March 31, 2015
LSN Research finds that there is continuing investor enthusiasm for direct life science opportunities, and also a great deal of nuance in the specific details regarding what investors are looking for. These reports show general trends among life science investors, but every investor is different and has their own unique approach to the field, whether it’s focusing on a certain inflection point or a specific area of medicine. No one opportunity could spark the interest of all 90 of these investors; therefore, it’s important to thoroughly vet each life science investor and assess whether they are a fit for your company before pitching your opportunity.
Over the past few months, we have examined the innovation landscape of early stage life science companies and investors across the Northeast, Southwest, and West Coast regions of the United States. This week we aim to shed light on life science investment and innovation in the European Therapeutic sector.
Using both the LSN Investor and Company Platforms, we have been able to identify over 350 investors and nearly 5000 therapeutic assets—from over 1000 companies—that have yet to reach commercialization. Figures 1 and 2 below show the number of European therapeutic assets LSN tracks by country of origin as well as the location of those European investors to whom LSN’s research team has spoken.
Figure 1 | Source: LSN Company Platform, Data as of April 7, 2015Figure 2 | Source: LSN Investor Platform, Data as of April 7, 2015
The United Kingdom is a clear leader in both the number of unique assets and investors who call the island home. This might be attributed to a combination of the significant large pharma presence in the country and the growing number of government initiatives and regional funding groups that operate there. Germany comes in as a close second for therapeutic assets, again fueled by a significant presence of large pharma. However, despite being number two on the list for investors based there as well, Germany along with the rest of the European countries fall significantly lower in terms of the number of investors based there than in the UK. While this may be partially due to the language barrier between the research team at LSN and non-English speaking countries, the difference appears too significant to be attributed to that alone.
Figures 3 and 4 respectively show the current phases of development of the European therapeutic assets, and the overall level of interest investors in this region have in each stage of the pipeline.
Figure 3 | Source: LSN Company Platform, Data as of April 7, 2015Figure 4 | Source: LSN Investor Platform, Data as of April 7, 2015
It is in the preclinical phase of development that most European therapeutic assets currently fall, however, much to the bane of fundraising entrepreneurs, it is the second least popular stage for investors. Fundraising at this point in the development cycle can be an uphill battle, though once a company begins to generate in-human data in phase I, supply and demand appears to tip more in favor of the entrepreneurs.
As the life science fundraising arena is a highly competitive space, particularly for early stage companies, it is vital that an entrepreneur identifies and then contacts all the different types of investors and capital providers that are a fit for the company’s investment profile. In Europe, just as in the U.S., there is a growing diversity of life science investors, and to focus your efforts on only one or a few of them does a great disservice to your campaign. Figure 5 below shows the diversity of European investors by class that LSN’s research team has uncovered and spoken with.
Figure 5 | Source: LSN Investor Platform, Data as of April 7, 2015
While venture capital and private equity lead the charge when it comes to investor types, the other categories also represent a significant percentage of total investors in the region and a very significant amount of capital. Since fundraising is a numbers game and the odds are often stacked again the entrepreneur, it is crucial to be able to identify and attract as many firms as possible that could be value-adding investors in your opportunity. Join us again next week for a comparative dive into the European medical device innovation and investment landscape.
When LSN began the Redefining Early Stage Investments conference series, one of our primary goals was to hear from new voices in the life science sector that were rarely heard at other events. Family Offices now represent an important source of capital in the life science field, and LSN has contacted numerous family offices that are seeking dealflow in the medical technology field. In January, RESI hosted a panel devoted to Medtech Family Offices for the first time; as this panel was hugely popular, RESI @ TMCx will once again feature a panel of speakers from the medtech family office world.
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