By Lucy Parkinson, Senior Research Manager, LSN

Two weeks ago, we took a dive into early stage life science assets in the Southwest region of the U.S. Today, we’ll take a look at what’s happening closer to our home, here in the global life science hub of the Northeast.

Using the LSN Company Platform, we are able to observe the wealth of innovation occurring in this region. We analyzed a sample of biotech and medtech innovators across nine Northeastern states: Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont. This sample drew from the pipelines of almost 400 life science companies, and included 1596 biotech assets in a range of developmental phases, from Preclinical through Phase III trials, as well as 154 medtech products in development. For 1435 of the biotech assets, we are able to track the primary indication area targeted by the product, as is shown in Figure 1. As in the Southwest, we saw significant pipelines in cancer, diseases of the nervous system, and infectious and parasitic diseases. With such a large sample, even less crowded indication fields such as blood and immune diseases and mental and behavioral disorders possess a significant number of pipeline assets.

We also found a great variety of medtech assets, as is shown in Figure 2. Diagnostic devices and delivery devices were the two most common technology types; this is in sharp contrast with the Southwest, where implantable devices and reusable instruments were the leading fields of medtech innovation.

Of the biotech assets, the greatest number are at the preclinical phase of development. However, Figure 3 shows that the drop-off before the IND is much less sharp than we saw in the Southwest.

There are fewer than 2 preclinical assets for every Phase I asset, and only 2.4 preclinical assets for every Phase III asset. This is likely because the local pharma strength leads to assets migrating to the region as they progress through the pipeline due to relocations, partnerships, or acquisitions.  One notable state within the sample is New Jersey (see Figure 4), where we find more Phase III assets than preclinical or Phase I assets.

As the Northeast is well-known for life science innovation, it’s unsurprising that we also find many local investors who are interested in early stage life science opportunities. Figure 5 shows the types of investors that LSN has identified in this region.

There are significant distinctions between life science investors in the Northeast and life science investors in the Southwest. Predictably, we see a greater corporate presence, with large pharma and medtech companies and their corporate venture funds together comprising 19% of active life science investors in the region. Only 23% of Northeast-based life science investors are venture capital firms, a clear sign that it’s important to look beyond this funding source if you’re seeking a Northeast-based investor.

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

If you are in the biotech arena looking for capital allocations from angel investors, this recap video is for you. The RESI 4 Biotech Angel Groups Panel features five investors from life science angel networks throughout the USA. In this panel, angels explained how they assess early-stage biotech opportunities and discussed the following topics:

• What attracts you to the biotech space as an angel investor?
• What are the headwinds that you see when you look at biotech companies?
• What’s the state of optimism regarding mergers and acquisition activity in the next 1-2 years?
• What do you look for in a biotech company that attracts you?
• How do you assess the potential that is locked in biotech companies before they generate revenue?

Watch the video to learn more.

By Michael Quigley, Director of Research, LSN

Scientist-entrepreneurs, often emerging from an insular academic environment, may not think about spending significant time and resources on their communications and marketing materials. Oftentimes these items are thought of only during the last moments of preparation for a fundraising campaign. “My technology speaks for itself, so it doesn’t need to be marketed” is the refrain we hear time and time again from entrepreneurs.

As science has protocols, so does fundraising, and adhering to the rules helps to move the process along. Understanding that it takes two to have a conversation and taking the time to find the best way to initiate that conversation is imperative. While all your data and publications are crucial to the success of your company, they are of no use to you if you cannot entice an investor to read and review them. Your brand and marketing materials are essential in capturing that initial interest. This newsletter has previously discussed the various marketing collateral required for fundraising, including your tagline, pitch deck, website, and introductory email; to effectively introduce yourself within the life science investment arena, it is essential that you keep your message and brand consistent across those mediums.

In its most refined state, your brand should be represented by a strong, simple logo accompanied by a cogent and lucid three- to six-word tagline by that is easily understood by people outside of your field. This logo and tagline should be present throughout all your marketing materials, including your business card, executive summary, pitch deck, website and anything else you are putting out into the marketplace. Stemming directly from your tagline should be an equally lucid three- to five-sentence elevator pitch that everyone at your company, from the bottom up, can clearly articulate. The elevator pitch provides a tactical and harmonious way for each person in your company to quickly communicate your core value proposition to whomever they may meet.

From the elevator pitch, you should develop a one- or two-page executive summary that elaborates your story and introduces your technology, the problem it is solving, and your management team. Your pitch deck should act as a visual representation of your executive summary, providing some additional metrics and graphics to further the understanding of your opportunity, and should consist of no more than 10 to 12 slides. Your website should effectively be a reorganization of your pitch deck in web format that also features links to additional supporting publications and relevant studies.

It is important to keep colors, visuals, and language clear and consistent throughout all of these materials in order to develop your brand. By maintaining consistency you keep the same message echoing through the industry, allowing anyone who would be interested in your space to get a fundamental understanding of your opportunity. These materials should be updated simultaneously as new significant data is gathered, partnerships are formed, or other significant changes in your business take place. You don’t want to waste an opportunity to highlight your most recent progress, or cause potential confusion among interested parties by circulating different materials.

A cogent, consistent core message becomes easily reproducible by anyone with whom you come into contact, which can drastically increase the number of relevant people who hear about and understand your opportunity. A developed and understandable brand can be vital in capturing the initial interest of an investor, and can help to eliminate the unnecessary conversations with incompatible parties that can suck up crucial time in a campaign. Being able to establish interest is critical in getting the investor to engage in due diligence, and will put you that much closer to achieving your fundraising goal.

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

For those who were not able to attend the fourth RESI Conference in January, LSN would like to bring the Healthcare IT Investors panel to you. In this panel, five investors explained their current investment mandates and shed light on the hot topics in the Healthcare IT field:

• What are the subsectors within healthcare IT that you are most interested in right now? Are there any you are “allergic” to?

• As you are looking at an investment in the space, what is unique to healthcare IT that you worry about and dig on the hardest as opposed to other investments in other sectors?

• As entrepreneurs are positioning their companies for investment, is there something like a particular a piece of information, data point or illustration that entrepreneurs can demonstrate that is particularly impressive, or able to distinguish themselves from the crowd?

• In general, where do you think the trend on valuations is going? Do you think about valuations in this space differently than in other spaces?

• Aside from Health IT pure plays are you seeing a trend where traditional biotech therapeutic, device or diagnostic companies are utilizing next generation IT or analytics to improve the efficacy or accuracy of their products. How do you view those opportunities as investors?

Watch the video to learn more.

By Michael Quigley, Director of Research, LSN

In honor of the 100th edition of the Next Phase newsletter, LSN would like to share five of the most popular articles to date. These articles provide a great snapshot of what this newsletter is all about: educating entrepreneurs and investors on the early stage life-science-investment landscape and providing tactical advice to entrepreneurs on how best to present their opportunity to the life science investment community. These articles all stem from our daily dialogues with both investors and entrepreneurs from around the world; this experience allows us to act as an information portal between these two groups.

Without further ado, here are the top five articles.

1. 11 Tips for Creating a Successful Pitch Deck

By Shaoyu Chang, Senior Research Analyst

“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.”

2. LSN Published in Nature Bioentrepreneur: “Beyond Venture Capital”

By Dennis Ford, CEO, LSN, and Barbara Nelsen, Founder, Nelsen Biomedical

“LSN is officially announcing the release of  ‘Beyond Venture Capital’ in the January 8, 2014, edition of Nature Bioentrepreneur! This piece, appearing in the current issue of Nature, is an in-depth analysis of the new life sciences fundraising environment, detailing what caused the paradigm shift in the investor landscape, who is active, and how fundraising executives should adapt. This is a must-read piece for anyone involved in the early stage life sciences arena, and an excellent primer for newcomers to the Redefining Early Stage Investments Conference.”

3. Formulating the Introductory Email to Potential Investors

By Michael Quigley, Director of Research

“Having personally scheduled and held several hundred interviews with life science investors over the past year, I have developed and refined a formula for getting ‘in the door’ with an introductory email. As anyone who has embarked on a fundraising campaign knows, initiating the dialogue is often the hardest part of the process. Few introductory emails ever get opened, and even fewer earn a reply at all. However, there are a few concepts and tactics that can increase your efficacy substantially when it comes to initiating a dialogue and locking in that first meeting. This article will share some insights from my personal experience that may be helpful in your email outreach.”

4. Pharma-Licensing Deal Trends in 2014

By Lucy Parkinson, Senior Research Manager

“LSN gathers data on early stage life science companies and investors worldwide, but we also track global licensing activity and trends through the LSN Deal Platform. We analyzed 20 pharma deals that were publicly announced from January through April and spotted three trends that offer a glimpse of what the industry may expect from pharma-licensing activity in 2014.”

5. 10 Steps to a Life Science Fundraising Campaign

By Dennis Ford, CEO

“Executing a successful fundraising campaign in the life sciences space requires organization, professionalism, determination, a great technology, and an outstanding team. LSN has worked with hundreds of companies in this capacity—companies that are at all stages of development, in regions around the world, and pursuing various types of technology. We’ve been watching as the latest process for fundraising has surfaced, and I wanted to share what we see as the ten steps.”

We hope you have enjoyed Next Phase so far and found useful information in this newsletter. We look forward to continuing to provide you with tactical advice and forward-looking information on the early stage life-science-investment landscape in the months to come.

By Lucy Parkinson, Senior Research Manager, LSN

LSN will be heading to Houston in June for our next RESI event, so we decided to take a closer look at a sample of life science companies based in seven Southwest states—the types of innovation taking place in these companies and the number of products emerging from the biotech pipelines.

We looked at companies based in Arizona, Colorado, Nevada, New Mexico, Oklahoma, Texas, and Utah. The sample was drawn from the LSN Company Platform, which partners with bioclusters around the world to gather information on early-stage life science companies.

Our sample consists of biotech companies with assets that are at least in the preclinical stage and not beyond Phase III, and medtech companies with products currently in development; neither life science service providers nor biotech companies at the discovery or lead-optimization stages were included. While most of these companies were located in Texas, the sample included companies from every one of the seven aforementioned states.

The collective pipeline of the biotech companies consists of 323 products, and we were able to track 301 by key indication area. (See Figure 1.) Cancer is by far the most common, accounting for more than one-third of the assets. Other leading areas of innovation include infectious diseases and neurology.

The medtech companies have 59 products that span a wide variety of fields. (See Figure 2.)

The LSN Company Platform also tracks the progress of the biotech products through the pipeline. (See Figure 3.)

As one would expect, the number of assets falls sharply following the preclinical stage, as both companies and their investors look for “go/no-go” signs in their animal data; a second steep drop happens following Phase II efficacy studies. What’s unusual about life science innovation in these states is the steepness of that second drop, as we can see by comparing these results to an analysis of companies across the U.S. (See Figure 4.)

The skew toward early stage assets is greater in these seven states than it is for the nation. There are 7 preclinical assets for every 1 asset that reaches Phase III, whereas for the U.S. as a whole, there are 3.3 preclinical assets for every 1 asset that reaches Phase III. The skew could be because strong companies leave for the East Coast or the West Coast or are acquired by entities based in other regions before the lead asset reaches Phase III. It could also be due to a more restricted funding environment, which may make companies more likely to close their doors after mixed results in Phase II.

In addition to biotech and medtech companies, these states are also home to a number of early stage life science investors who are open to investing in precommercial life science products. (See Figure 5.)

While examining investor exposure in these states, we found that a substantial number of investors are interested in opportunities not only in their own backyard but also globally. A core pillar of the RESI conference is providing entrepreneurs with a broad audience of investors—local, regional, national, and international—and we look forward to providing an opportunity for this audience to meet with life science entrepreneurs in these states and beyond.

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

This week, LSN would like to share the RESI 4 Diagnostic Investor Panel recap video with you. The panel features five investors from a highly diverse group of both for-profit and nonprofit investment organizations in the diagnostics field.