By Michael Quigley, Director of Research, LSN

For nearly 3 years the LSN research team has been identifying, profiling and interviewing early stage life science investors from around the globe. Throughout this time we have developed and honed a process for the identification and validation of investors in order to understand and qualify their investment interests. I recently held a “Researching Global Investors” workshop at our RESI 4 conference to shed light onto this process and share the tools and resources that we use, so that the entrepreneurs in the audience can take advantage of them as well. This article mirrors the workshop to further spread the message to our readership.

Tools for Identification:

Understanding where to look to find potential investors can seem like a daunting task given the vastness of the internet; however, by understanding the tools at your disposal, you can dramatically increase the effectiveness and efficiency of your research. Google search is often underutilized by those unaware of its capabilities. The chart below shows some basic “boolean” operators that can dramatically increase the precision of your searches.

These functions can be entered into the Google’s search bar to make your searches are more targeted and fruitful. For example, by entering  (intitle:biotech AND “Invest” AND “Early Stage” –public) into Google, you can search the web for sites and articles that have “biotech” in the title, include the terms “early stage” and “Invest”, and do not include the word “public”. Boolean functions should be utilized in whatever way makes the most sense for your campaign; this could include looking for terms surrounding your indication, stage of development, geographic exposure, or other factors that define your opportunity. By executing a number these searches and diving through a few pages of results you are sure to come up with a size-able number of potential investors.

Another often underutilized tool is LinkedIn. Similar to Google, LinkedIn search is also compatible with boolean operators, so using these in the search can again improve effectiveness. LinkedIn also offers an Advanced People Search feature that includes keywords, company name, industry and location among other details, as seen below. An additional benefit of using LinkedIn is that investors and others who are active LinkedIn users with complete profiles are often more open to being approached with opportunities. As LinkedIn is a professional networking site, these individuals tend to be more open to new contacts, and may even be actively looking to expanding their networks and uncover new opportunities.

Additional sources for new investor leads include life science investor conferences, and the websites of companies similar to your own. Investor conferences often list attending investors on their webpages, so even if you cannot attend an event, these can be great sources for identifying active investors. Much like investor leads found on LinkedIn, investors found on conference lists tend to be actively looking for new opportunities; this is generally their motivation for attending the conference. Now, visiting similar companies’ websites to find investors may seem like a stretch; however, many companies list their investors on their website, and if they are in a similar space and stage as your opportunity it is highly likely that those investors are a great fit. Also, many companies list their board of directors on their webpage as well; oftentimes members of the board are investors, as investors generally look to take a board seat following investment.

Validation:

Once you have identified a number of potential investors using the aforementioned methods, you must validate that these investors are a good fit for you opportunity. There are several variables you should consider, the first of which is determining if the investor is currently allocating. When attempting to determine if an investor is currently allocating you want to look for the most recent new investments that investor has made. These can be found either on the webpage of the investor or through using Google searches to find press releases or media articles relating to the investor’s recent deals. The more recently the investor has made a new investment, the more likely that they are still currently investing. Another means of identifying investor activity is to look at the most recent fund vintage. Funds generally have a 10 year lifecycle from closing until they need to return capital to their limited partners. As such, if your company requires 3-5 years to reach a potential exit, you will want to identify funds that have closed no more than 5 years ago. Funds generally reserve capital for follow-on investments, so it is highly likely that funds greater than 5 years old are no longer making new investments at all. They are instead reserving the fund’s remaining capital to support current portfolio companies.

Other variables that require validation include the investor’s preferred stage of development, industry sector, indication areas and geography. While many investors also list these criteria on their webpage, others are more reticent. For investors who do not list their criteria on their web page, the best place to look to find it would be in the firm’s previous investments. Have they invested in medical devices, or in therapeutics? Do they only invest locally, or will they look at opportunities globally? Do they invest in series A rounds, or are they only investing in later stage companies? Many of these questions can be answered by taking a look at previous investments the investor has made. Information on these previous investments is often available in press releases that can be found through searching the web.

The type of investor you are researching can also be a telling sign of the stage of investment they are looking for. The chart below provides a visual representation of the different stages of therapeutic development that different classes of investors are generally interested in.

Having a validated list of potential investors is extremely valuable, and this process is usable by virtually any fundraising entrepreneur in the life science industry. The fact that investor and company fit is an extremely important precursor variable into building a successful relationship that could lead to an an allocation. is the reason why this process is valuable, and is a fact that LSN’s Research and Business Development staff have seen the value of fit proven in the marketplace time and time again. Through this process outlined above, the research team at LSN has been able to identify thousands of life science investors and our number of investor profiles is still growing.

If you wish to see the presentation slides, click here.

By Michael Quigley, Director of Research, LSN

In tracking life science investors worldwide, LSN’s research team has noticed that there are a growing number of Asia-based investors seeking global opportunities as well as investments in the U.S. and Asia. (See Figure 1.)

Also worth noting is the number of Asian countries where these investors are based. (See Figure 2.) Although the majority of Asia-based investors are in China, more than half hail from other countries in the region.

Factors Affecting the Trend

Having spoken with more than 50 Asia-based investor groups, we’ve pinpointed a number of factors that are contributing to this trend.

A recurring theme is the lack of advanced infrastructure and practical expertise required to develop technologies in Asian countries. And while “many of the Chinese scientists who came out and studied in the U.S. have gone back to their home country and started their own businesses there,”¹ this doesn’t seem to be satisfying Asia-based investors’ appetite for innovation.

Other factors include the booming growth of private wealth that many Asian countries have experienced over the past few years.² This growth in wealth, coupled with the notoriously uncertain regulatory environment (particularly in China), has led many Asia-based investors to seek a more stable investment environment abroad. Diversification and the potentially high-yield returns this sector can generate also is attractive to these newly wealthy investors.

Arguably the most influential factor that we have heard in our discussions, however, is investor interest in early stage and commercial-stage technologies that are capable of addressing healthcare challenges across Asia as well as in specific local markets.  With growing populations and advancing life expectancy in these regions, the demand for medical devices and therapeutics is expected to increase dramatically—particularly in indications such as diabetes and cardiovascular disease. In fact, the vast majority of investors we have spoken with either require or strongly prefer companies that are planning to or capable of entering their local markets. Also, many of these investors have strong local ties to manufacturing and distribution channels, so they can add significant value to companies entering these markets.

Takeaways for Fundraising Executives

It is apparent that life science companies actively fundraising around the globe should take a serious look at Asian markets for capital. The wealth, population, and average age of individuals are all expected to continue rising in many of these countries. Therefore, the opportunity for life science companies to secure capital is likely to rise as well. Given the cultural differences and distance, starting conversations with these investors as early as possible is key, as the time to close a deal can be elongated by these and other hurdles.

If you are interested in learning more about the investor landscape in Asia and the investors we track, feel free to contact us at mandates@lifesciencenation.com.

1. “Philip Ma: from Scientist to Businessman,” China Daily, January 23, 2015.
2. “China Now Has the Second-Most Millionaires in the World,” Time, June 10, 2014.

By Lucy Parkinson, Senior Research Manager, LSN

Previous articles have provided overviews of innovation and investors in the cardiovascular, oncology, and neurology sectors. Infectious disease is also a major field of innovation; LSN researchers track 567 clinical-stage therapeutics globally that are targeting an infectious or parasitic disease.

Perhaps the most striking distinction of the infectious disease space, compared with sectors we’ve examined previously, is its breadth. The nature of the infectious disease field is one of constant change and local variation, with researchers focused on a multiplying array of threats throughout the world.

In fact, if we take a look at the specific diseases targeted by these innovations, the largest single category is “other.” This stands in contrast to fields where innovation is primarily focused on a few major unmet needs, such as Alzheimer’s in neurology. That said, some infectious diseases, such as HIV and hepatitis C, do have thriving pipelines. (See Figure 1.)

The assets covered by Figure 1 range from those that have only recently entered clinical trials to products close to achieving market approval. Of these assets, the greatest number are currently in Phase II. (See Figure 2.)

Infectious disease innovations are coming from a number of countries. The U.S. leads the world in infectious disease assets, however, the UK, France, and the Asia-Pacific region also have strength in this field. (See Figure 3.)

LSN researchers have interviewed more than 300 investors who are interested in this field, and many are interested in companies worldwide. (See Figure 4.)

Similarly, we see investors of every type that LSN classifies as active in the infectious disease field. (See Figure 5.)

As you can see, there’s no shortage of investors looking into the infectious disease field.  Venture capital and private equity funds are interested in the potential return on investment from infectious disease cures; recent blockbuster drugs in the hepatitis C field have demonstrated how much profit can be made from tackling infection.  Many government organizations fund infectious disease technologies due to an interest in bio-security and public health.  We also discovered last week that infectious disease is one of the top ten areas for venture philanthropy foundations that fund start-up companies; many major global health charities are interested in working with start-ups in this field.

Infectious disease research focuses on fighting urgent and widespread needs, and we find that many investors are willing to take on the challenges of this field.

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

This week, LSN published the RESI 4 Medical Device Strategics Panel video featuring five investment experts from top tier, global, medical device companies. The panel was designed to educate entrepreneurs on what kinds of innovative technologies these giants are looking for, and how to reach out to a strategic medtech investor about your innovative device technology. In this panel, several valuable questions were answered by the panelists, including: What distinctions are there between VC and strategic investing? How early in development process do you get involved with early stage companies? How do companies approach you, and can you provide examples of early-stage deals you’ve made recently? How should entrepreneurs find out what technologies you are interested in?

Check out the 45 minute video to learn more!

Moderator: Paul Grand, Managing Director, RCT Ventures

Panelists:

• Albert Lauritano, Director, Strategic Technology Partnerships, Becton Dickinson
• Conrad Wang, Senior Director, Corporate Development, Medtronic
• Evan Norton, Divisional Vice President, Venture Investments, Abbott Ventures
• Greg Fleming, Investment Director, Air Liquide-ALIAD

LSN 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.

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.

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.

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.

By Alejandro Zamorano, VP of Business Development, LSN

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.

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

At 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