Next Phase Newsletter

By Tom Crosby, RESI Conference Manager, LSN

A New Model for Foundations: Non-Profit to For-Profit Panel

In the past, non-profit organizations dedicated to research in specific disease areas were typically unable to take advantage of the upside of any significant discoveries that were funded through their organization. Recently, a new trend has emerged: non-profit organizations investing in early stage biotech/medtech companies in return for equity. This new way of investing provides the foundation the ability to reinvest their profits, providing additional capital to fund future research.

 Moderated by David Sandak, Vice President, Research at Accelerate Brain Cancer Cure, the audience will hear from:

• Howard Fillit, Executive Director and Chief Science Officer, Alzheimer’s Drug Discovery Fund
• Benjamin Seckler, Founder and President, Charley’s Fund
• Salvatore La Rosa, President & CSO, Children’s Tumor Foundation
• Keting Chu, VP, Research TAP, Leukemia & Lymphoma Society (LLS)

Panelists will speak to their experience with the new model. What’s different about vetting a company with returns in mind? How has for-profit investing changed their non-profit model? What are the best practices for a fundraising executive approaching a foundation with an investment opportunity? Panelists will discuss these topics and more as they shed light on the inner workings of receiving capital placements from foundations.

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Investing in Emerging Life Sciences: CRO Direct Investment Panel

This panel features CROs that are leveraging their internal expertise to make investments into emerging biotech and medical device companies, either in the form of cash or service-for-equity agreements.

Moderated by Peter Lee-Armandt of Sathguru Management Consultants, the audience will hear from:

• Michael Recny, CEO, Calvert Holdings, Inc.
• David Gee, Vice President, Business Development, Cato BioVentures
• Krishna Kodukula, Executive Director, Strategic Development, Biosciences Divison, SRI International
• Joe Vacca, Senior Vice President, Early Success Sharing Partnerships, WuXi AppTec

This new form of investor is becoming more common place in the life science as CROs continue to mature and play a growing role in the industry. In this session, hear from firms that are on the leading edge of innovation talk about how they structure service for equity agreements. What kind of risk they are willing to take? What phase of development do they like to participate in? How do they vet potential companies, and how do they work with existing investors? What do they see as the future of their hybrid investment arm?

By Michael Quigley, Director of Research, LSN

On Monday, August 18, LSN’s partnering system for our Redefining Early Stage Investments (RESI) Conference will go live. The purpose of the system is to help scientist-entrepreneurs and funding executives connect at the conference with potential investors.

Using the LSN’s partnering system is fairly straightforward. Registered scientists and executives enter information about their company’s research—including technology type, indication, and phase of development—and the system identifies registered investors who may be a fit. Then scientists and executives use the system to book meetings—as many as 16 per attendee—with those investors.

What are the interests of these investors? This conference is designed to attract investors looking to allocate to early stage companies. Exhibit 1 shows that that largest number of attending biotech investors are interested in technologies in the preclinical and phase I stages. Exhibit 2 shows that the largest number of attending medtech investors are interested in technologies that are in development and the clinical stage. Keep in mind these are just the confirmed investors are attending thus far, so expect these number to increase come September 17^th.

Exhibit 1

Exhibit 2

We are able to attract a large pool of early stage investors because we target ten categories of investors. Many of these investors are relatively new to the space; a lack of capital and a glut of compelling science have attracted newcomers in recent years.

By drilling down into the data set, we are able to determine the indications of interest for registered investors. Exhibit 3 shows the number of investors interested in a given indication.

Exhibit 3

Neoplasms/Cancer/Oncology leads the pack, garnering the most interest from investors. In what may be surprising to many, diseases of the nervous system comes in at number two. This level of interest in technologies for the central nervous system is in part the result of the many specialized foundations and venture philanthropy organizations that will attend. The interest in numerous indications is another reason why this conference is of tremendous value to fundraising entrepreneurs.

Connecting with investors is only half of the value that the RESI conference offers, though. Scientists and executives also have the opportunity to attend our panels and hear representatives from all ten investor categories have in-depth discussions on a variety of topics. We hope to see you there.

By Alejandro Zamorano, VP of Business Development, LSN

LSN Globally tracks technology platforms and has been able to yield some interesting data by classifying the different platform types and assessing the number of technologies within each classification. As you can see in Exhibit 1 LSN breaks down technology platforms into 26 categories as described below:

Exhibit 1

One of the most interesting findings was that number of large molecule discovery platforms is fairly abundant in the market place. This makes sense considering the explosion of biotech companies that have emerged over the last several years each claiming their unique mechanism to creating newest and hottest molecules. In addition, the bioinformatics also seem to be a strong platform which also is in line with the advances in computational power and the increasing sophistication of software data feeds that one is able to leverage. It would appear that these technology platforms in the space that have grown to be more abundant than others as a result of a higher level of investment in their respective class at an early stage.

The bottom of the chart is perhaps the most interesting where can see technology platforms that are relatively rare in the marketplace. Controlled release platforms for example appear to be relatively novel with only 14 companies reporting an in house platform. In addition in silicon modeling (of disease physiology or mechanism of action) is also a fairly unexplored field with vast opportunity. These areas could prove highly profitable for savvy investors able to identify leading technologies in a relatively unsaturated marketplace.

Knowing where you stand relative to the marketplace is a significant data point to understand both as entrepreneur positioning yourself or as an investor making a decision.

By Tom Crosby, RESI Conference Manager, LSN

In today’s fundraising environment, investors are inundated, sometimes seeing hundreds of executive summaries a month. Life science entrepreneurs, on the other hand, are all but obligated to run a calculated outbound sales and marketing campaign. But how do you set yourself apart from the crowd? This panel features successful life science entrepreneurs at various stages of their fundraising campaigns, telling their tales from the road.

Moderated by Rick Berenson, CEO of Thermalin Diabetes, the audience will hear from:

Fred Colen, President & CEO, BeneChill

Richard Gauthier, Head of Business Development, Microbiotix

Gabor Bethlendy, CCO & Founder, Parabase Genomics

Michael Tippie, CEO, TomegaVax

Panelists will share insights and best practices based on their experiences with raising capital in the new investor landscape. The goal of the discussion is to help emerging companies understand what it takes to fund a biotech or medical device company today. What are their best tips for interfacing with different types of investors? How did they structure their campaigns? What types of resources did they use along the way, and how have they found the correct investor in the past? Listen in as these executives share their best anecdotes from tackling the challenges of fundraising first-hand.

By Dennis Ford, Founder & CEO, LSN

LSN’s third Redefining Early Stage Investments (RESI) conference is fast approaching. Held twice a year, this event is the ideal place for scientist-entrepreneurs to meet early stage investors.

The idea for RESI came about while I was traveling and participating in a variety of domestic and international partnering and investor events. Considering the advertisements, I was surprised that so few qualified active investors attended many of the conferences. I was also shocked at the price given the limited investors turned out. The number of investors registered usually ranged from 20 for a medium-sized event to 40 or so for a large event. I knew that LSN could do much better because we had relationships already established with many of the early stage investors and strategic partners that scientist-entrepreneurs were seeking to meet. Thus, RESI was born, and this past March, 142 investors attended RESI.

The LSN investor-outreach process for the upcoming RESI conference has de-emphasized venture capital firms, which headline most life science partnering events. We welcome VCs, but we’ve been reaching out to many other investors with the goal of making both our panel content and our attendees as diverse as possible. By increasing the investor reach, we are broadening the variety of interests in the RESI partnering ecosystem. The investors who attend RESI include angels seeking high-risk, high-return early stage opportunities, foundations hoping to advance breakthroughs to improve patient care, family offices seeking long-term, high-impact investment opportunities, and the corporate development staff from pharma and large medical-device companies looking externally to fill gaps in their pipelines. Exhibit 1 shows the breakdown of early stage investor categories attending our upcoming fall event.

Exhibit 1

The next RESI conference will be held at the iconic Fenway Park on September 17. With six weeks left to register, we already have exceeded our forecasts. All told, active investors from ten categories will attend. LSN will be host to 30 RESI Innovation Challenge participants and dozens of emerging life science entrepreneurs who will use our meta-tagged partnering system to connect with investors who are a fit for various industry sectors and stages of development. Using the LSN partnering system, a company executive can arrange meetings with a dozen or more investors in a day.

The majority of companies attending the fall event are in the biotech, diagnostic, and medtech sectors. A wide variety of service providers will also visit RESI, including contract research organizations and those that provide financial and legal services. To further diversify the RESI ecosystem and welcome more early stage device developers to the partnering table, we are hosting a new panel discussion on medtech investment. To see the complete one-of-a-kind content agenda, click here. Going to the panels alone will be an education in the changing landscape of early stage investment. Hope to see you there.

By Tom Crosby, RESI Conference Manager, LSN

In the United States, the orphan disease space has gained significant interest from the investment community due to the expedited regulatory approval process, combined with the lack of current treatment options that address many of these uncommon conditions. A wide range of investor types are targeting these diseases for many different reasons. RESI brings together veterans in the orphan disease space to compare and contrast the strategies and motivations of different investors in the field.

Moderated by Peter Saltonstall, President & CEO at The National Organization for Rare Diseases (NORD), the audience will hear from:

Mark Day, Senior Director, Strategic Evaluation, Alexion

Jean-Marc Quach, Executive Director, The Alpha-1 Project

Chris Adams, CEO, Cydan

Mark Barrett, VP, Head Strategy & BD, Rare Diseases, Genzyme

Panelists will introduce and cover the areas of the orphan disease field they are most involved with and interested in. What stage and level of data are they looking for prior to making an allocation? What is the best way to present an orphan opportunity to a potential investor? The session will outline how orphan disease opportunities are evaluated and valued differently than non-orphan technologies. What is their outlook for investment and scientific advancement for these niche diseases going forward?

By Michael Quigley, Director of Research, LSN

As large pharmaceutical companies have cut internal R&D spending, they have established and financed venture capital branches, which have quickly become a critical source of capital for emerging life science companies. In a previous article, we discussed the two types of corporate VCs and why they can be a beneficial source of funding. This article sheds more light on corporate VCs by examining some data points from the last 50 mandates that we received from this group and by making comparisons with the rest of the investor community.

A Global Perspective

In general, more and more life science investors are pursuing opportunities worldwide; leading the pack are corporate VC players. Of the corporate VCs that LSN has spoken to, 78% have global mandates, compared with only 41% of investors from all other categories combined. (See Exhibit 1.)

Exhibit 1

The global investment focus of large pharma companies makes sense, as the majority operate worldwide. To uncover potential investments, these companies set up multiple offices around the world to act as external innovation engines or feeders for their parent companies.

An Early Focus

Another data point that can be extrapolated from LSN’s research is that corporate VC investors tend to be interested in companies and products at the earliest stages of development. This is true in the biotech and medtech sectors. For example, 82% of corporate VCs are interested in therapeutic and diagnostic companies that have technology or products in the preclinical stage, compared with 57% of other investors. (See Exhibit 2.)

Exhibit 2

Corporate VCs tend to have a good understanding of the scientific and regulatory hurdles that technologies face; therefore, these investors are more willing to evaluate and allocate to companies in the early stages of development. Additionally, corporate VCs are looking to fill their parent companies’ development pipelines. By identifying opportunities early, they are able to secure equity positions when the valuation of a technology or company is relatively low.

Large pharma companies aren’t the only corporate VCs in the life science space. LSN has also noticed that the venture divisions of a number of high-tech companies, such as Google and Samsung, have a growing interest in the healthcare sector. It is a positive development for the life science space that high-tech corporate VCs are joining large pharma to fill a crucial funding void that is being felt on a global scale.