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

Life Science Nation (LSN) is proud to release the RESI 2014 fall video, which captures the happenings and buzz from the third Redefining Early Stage Investments (RESI) Conference at Fenway Park. LSN is pleased that RESI provided scientist-entrepreneurs and investors with an opportunity to have a compelling dialogue that will lead to relationships and hopefully future capital allocations.

LSN would like to say thank you for coming to RESI, and we hope to see you at our next conference on January 13, 2015, in San Francisco.

By Michael Quigley, Director of Research, LSN

Developing therapeutics differs in many ways from developing medical devices. Therapeutics tend to have longer paths to commercialization and are more capital intensive, but they also usually deliver larger exit payouts. Interestingly, more investors are currently looking for opportunities in both of these sectors than in only one of them. An analysis of approximately 600 investment mandates gathered by our research team over the past year shows the percentage of investors interested in only medical devices, only therapeutics, or both. (See Figure 1.)

More than 50% of the investors we spoke with are looking to invest at some level in both therapeutics and medical devices. While portfolio blends may vary from investor to investor, with some looking more heavily into devices and vice versa, the bottom line is many investors are looking more opportunistically. They see great potential for ROI in these two spaces, so they leverage their networks and expertise to diversify their portfolios in hopes of capturing the upside in both. Many investors have partners or team members who are focused on therapeutics and medical devices, and other investors have vast networks of experts and industry executives to help them during the vetting process if they are unfamiliar with a particular technology.

As the therapeutics approval path is a much more capital- and risk-intensive process than that of medical devices it appears logical that more investors are looking only or additionally into the medical device space. It seems that those investors are looking to diversify their portfolios and cover their bets to generate a more positive outcome. We analyzed investment mandates by investor type for only therapeutics, only devices, or both. (See Figure 2.)

It is interesting to compare mandates from the various investor types; the differences could have a number of forces driving them. Private equity groups, for example, tend to look at later-stage opportunities, such as devices that are about to reach commercialization or that have been recently approved and have begun shipping. Therapeutics at this stage, however, tend to be partnered with large pharma or biotech companies to finalize approval and distribution, making those opportunities much rarer. Given their smaller investment size compared with other investors, angel groups look to invest in companies where they can get more significant equity positions, which makes early stage devices a more viable option, compared with therapeutics that are often seeking multimillion dollar seed rounds. The corporate venture capital groups that LSN tracks also tend to favor devices because of the numerous IT and tech-based companies that are now leveraging that expertise to expand into the healthcare sector.

The most important point that can be drawn from this data is that most investors in the space are looking at both therapeutics and medical devices for new investments, and their allocations will be a function of the deals that they are presented with. As a fundraising executive, you are doing a great disservice to your company by not getting in front of investors simply because you believe they don’t invest in medical devices. Although past investment data can tell you a lot about investors, in the rapidly changing life science space, the key is uncovering which areas investors are exploring going forward. Ultimately, investors are most interested in compelling and innovative opportunities with strong teams that solve a significant problem. If you have all three things, the sheer number of high-potential investors may surprise you.

 

 

 

By Tom Crosby, RESI Conference Manager, LSN

As LSN prepares to bring the next Redefining Early Stage Investments Conference to San Francisco, we are proud to announce that emerging biotech and medical device companies are now invited to apply to showcase their technologies at the event. Over the course of the next two months, thirty innovative companies will be selected from the pool of applications for a highly sought-after presentation space during the week of the 33rd annual JP Morgan Healthcare Conference.

For its last two Boston events, RESI has employed a re-envisioned presentation model, called the RESI Innovation Challenge; rather than have CEOs pitch during a randomly allocated 10-15 minute time slot, RESI gives presenting executives a space in the exhibition hall for the full day of the conference. Typically, selected companies will use this space to present their executive summary or recent trial data on large poster boards spread throughout the hall. LSN has found that this model increases the number and frequency of investor interactions for presenting companies throughout the course of the day.

To add some friendly competition to the atmosphere of the conference, the RESI Innovation Challenge also invites all attendees to participate in a virtual investment contest between the 30 companies. At the start of the day, each attendee receives RESI Cash to allocate to the entrepreneurs whose technologies they find most influential. When all is said and done, the company receiving the most investor dollars is named the winner. In March, it was the Newton, MA-based Empiriko; September’s event crowned Boston’s ORIG3N. Who will take the top prize at RESI San Francisco? Apply to present now — it could be you!

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

At the third Redefining Early Stage Investments (RESI) Conference, LSN brought together successful life science entrepreneurs who were at various stages of their fundraising campaigns and asked them to share their experiences. The panel discussed what the early stage fundraising process was like for them and how others can build an outbound marketing campaign to raise money.

The panelists shared their insights on fundraising through the 4s framework: sourcing, screening, segmenting, and selling. Click on the video link below to hear the views of scientist-entrepreneurs in the life science industry.

 

Moderator:

Rick Berenson, CEO, Thermalin Diabetes

Panelists:

Barbara Fox, CEO, Avaxia Biologics

Fred Colen, President & CEO, BeneChill

Richard Gauthier, Head of Business Development, Microbiotix

Gabor Bethlendy, CCO & Founder, Parabase Genomics

Michael Tippie, CEO, TomegaVax

 

By Shaoyu Chang, Research Analyst, LSN

Health information technology (HIT) refers to a broad spectrum of technologies, ranging from personal health-monitoring applications to big data analytics. The venture capital firm Rock Health recently reported that venture capital funding in the HIT field reached $3 billion for 2014, well surpassing the $1.9 billion invested in the sector during 2013.[1] The LSN research team tracks investors in early stage life sciences, and we have noticed a growing interest in HIT as well.

The reason for increased interest is twofold. First, large IT corporations are diversifying their product lines and gaining exposure to the growing healthcare sector. Wireless implantable medical devices that enable remote monitoring of patients’ vital signs, smart bracelets that track an individual’s physical activity level, and algorithms that interpret genomic data are just some of the new products that corporations are hoping will reinvent how we look at healthcare. Corporate venture capital firms, such as Google Ventures and Verizon Ventures, are leveraging their expertise in electronic hardware, software, and wireless communication in order to tap into the growing number of relevant healthcare opportunities in these areas.

Second, traditional life science investors are being attracted to the HIT sector because of the lower risk, shorter development period, and rapid growth potential when compared with the traditional medical-device and pharmaceutical sectors. These investors are leveraging their life science expertise to capitalize on these opportunities when they can identify and comprehend the unmet needs these opportunities are solving. Of the hundreds of investors we interviewed, 88% of medical-device investors are either investing or seeking to invest in HIT, and 60% of biopharmaceutical therapeutic investors are doing so as well. Exhibit 1 shows the total composition of life science investors interested in HIT, as interviewed by the LSN team.

Investors’ enthusiasm is also supported in part by a favorable regulatory environment. The Affordable Care Act provides financial incentives for healthcare providers to use electronic medical records and make meaningful use of HIT systems.[2] Furthermore, in the eyes of regulatory authorities, HIT products differ significantly from medical devices and therapeutics in terms of risk profile. In its 2013 final guidance, the U.S. Food and Drug Administration made clear that it will take a hands-off approach on low-risk HIT technologies, making this field much more attractive to risk-adverse investors.[3]

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[1] Rock Health, Q3 funding update: Digital health rakes in $3B, October 2014, accessible from http://rockhealth.com/2014/10/q3-funding-update-digital-health-rakes-3b/.

[2] U.S. Department of Health and Human Services, New Affordable Care Act tools and payment models deliver $372 million in savings, improve care, September 2014, accessible from http://www.hhs.gov/news/press/2014pres/09/20140916a.html.

[3] U.S. Food and Drug Administration, Mobile Medical Applications: Guidance for Industry and Food and Drug Administration Staff, September 2013, accessible from http://www.fda.gov/downloads/MedicalDevices/DeviceRegulationandGuidance/GuidanceDocuments/UCM263366.pdf.

 

By Michael Quigley, Director of Research, LSN

Last week, we discussed some of the tactics and tips used by the LSN research team to identify potential investors in the life science space. Identification is a multistep process, however. After you have a created list of potential investors from your personal network, the conferences you’ve attended, the databases and websites that report on financing rounds, and LinkedIn, for example, you need to go through the names one by one to determine who is worth contacting given your particular opportunity. There are several criteria that potential investors should meet to make it into your pipeline.

They Should Be an Investor

This may sound obvious, however, it is important to consider. Many companies with names like ABC Ventures or XYZ Capital may seem as though they are investors when in reality they are consultants, service providers, and investment banks—none of which allocate capital. Spending time contacting these companies for an investment is not worthwhile, as they will look to offer you their services, not capital.

They Should Be Actively Deploying Capital

Many investors in the space have elaborate websites and massive portfolios, however, they do not currently have capital to invest. To determine if investors are active, the first data point you should look for is when they closed their most recent fund. The term closed signifies the end of the fundraising period for a fund and the start of the investment period. Funds that have closed recently (within one to two years) are ideal, as they still have significant cash reserves and can hold new investments for a longer period. Generally, any fund that is six years old or older will be making investments only into existing portfolio companies or companies from which they can exit relatively quickly, which makes them less than ideal targets. If fund information is not available, then you should look to previous investments to see how recently they allocated. If they haven’t made a new investment in more than a year, then more than likely they will not be a good fit. It is important to note that not all investors make their investments known, so it may take some digging to uncover previous investments—if they are online at all.

They Should Be a Good Fit for Your Opportunity

Determining if an investor might have interest in your type of technology and its stage of development can take a significant amount of up-front time, but it will save you from wasting hours down the road. Even with referrals, it is important to understand if you fit the mandate of the investor, otherwise the meeting will likely yield nothing. There are a number of factors to consider, and the first place to look is the investor’s website. Some investors clearly spell out their investment parameters, including indications, stages, and regions of interests, as well as current and past portfolio companies. Other investors, often hedge funds and family offices, provide virtually none of this information on their websites. In cases where such information is not readily available on the website, it is best to check various news sources for reported financings rounds in which that investor was involved. You should compare your opportunity to the deals the investor has previously participated in. Look at the size of the round, the country, the type of technology, the stage of development, and the target indication.

These are all factors to consider when screening potential investors. If an investor isn’t a fit with your opportunity, it is not worth your time to reach out. If an investor has invested in your type of technology but at a later stage, it is worth presenting your opportunity and getting on the radar for when you are looking to raise further financing. However, if an investor fits all your criteria and is active, you have found a strong lead for your campaign.

 

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

At the third Redefining Early Stage Investments (RESI) Conference, LSN brought together experts from six major corporate venture funds that are involved in the early stage life science arena. The speakers shared examples of their recent investments and detailed their investment interests. The panelists also answered a variety of questions, including: What is your take on the resurgence of early stage pharmaceutical investment? How should I approach a corporate VC investor? Do corporate venture funds outperform VC firms, large pharmas, and other sources of investment? What is your advice for scientist-entrepreneurs?

Click on the video link below to hear the views of major players in the life science industry

Moderator: Vikas Goyal, Senior Associate, SR One

Panelists:

• Marian Nakada, Vice President, Venture Investments, Johnson & Johnson Development Corporation
• Jason Hafler, Director of Investments, Sanofi-Genzyme BioVentures
• Mette Agger, Managing Partner, Lundbeckfond Ventures
• Stephen R. Padgette,Vice President, R&D Research Strategy, Monsanto
• Tetsuro Iwata, Senior Manager, MP Healthcare Venture Management