By Lucy Parkinson, Research Manager, LSN

Another quarter, another round of number-crunching in the venture capital space, and as Q1 2014 has come to an end the message is quite clear; VC deals continue to trend away from early stage opportunities.  According to Pitchbook, who tracks venture activity in all industries, 1348 companies raised $15.4 billion from VCs in Q1 2014; in Q1 2013, 1856 companies raised $11 billion from VCs.  That’s 500 fewer companies getting VC funding, while the median deal size has doubled from $2 million to $4 million.

This trend is magnified in the life science sector, which represents 14% of VC deals.  According to PWC, this trend became clear at the end of 2013, at which point life science venture investment decreased by 15% year over year, while deal volume declined by 2% over the same period. Compared with the previous quarter, investment declined by 26%. Developing a single therapeutic product might cost a company $1b before the product can bring in so much as a dime of revenue, and that is largely incongruent with the shorter exit timelines that VC’s are seeking.  At LSN, we often encounter very early-stage life science startups running on NIH grants and hoping to step out into the world as their grant funding dwindles and be instantly supported by a big-name VC firm.  The Q1 figures send a clear message that it is unlikely to happen. However, this is clearly a major opportunity for investors filling the VC void (virtual pharma, venture philanthropy, family offices and the like).

Are there any upsides in the data?  Potentially two:  Firstly, VC funding for healthcare IT companies is booming, with Q1 venture investments up 78% over 2013.  It’s a new field with a lot of risk lying between early investments and eventual success; most of the funding flooding into the sector is being allocated in seed and Series A rounds, and some experts are concerned that this bubble might burst due to companies failing to hit the targets required to secure Series B funding.  Secondly, this trend is making room for more early stage investors from other categories who now have the opportunity to invest in emerging assets.

So what does this mean for entrepreneurs in life sciences?  Simply put, the data shows that things are still in a period of major transition, and the state of investment.  It is critical for entrepreneurs to have insight into where the capital is flowing to successfully navigate the changing landscape. It’s never been more important to have your ear on the ground regarding funding, or to work with a fundraising partner who does.  There’s dozens of new funds out there that might be a fit for your company, and there’s also increasingly many funding possibilities outside of accepting a venture capital investment.  Here at LSN we’re keeping an eye on the space, and we’ll keep you abreast of new trends as they happen.

Source:

http://www.healthtechcapital.com/blog/anne_degheest/wsj_beware_of_health_it_bubble_not_enough_actual_business_plans/#.U0QUg1dEVE0

By Jack Fuller, Business Development, LSN

LSN  regularly hosts a fundraising bootcamp at the for life science entrepreneurs at incubators, universities conferences, and other venues globally. The purpose of this bootcamp series is to provide a tactical overview on how to manage an effective outbound fundraising campaign for early stage life sciences companies.

The main points of focus in the workshop are:

·         positioning, branding and marketing collateral

·         Creating a global target list

·         Launching a campaign

·         Creating a dialogue with potential investors

Below is an abbreviated version of the presentation which provides an overview of the essential components of fundraising in this challenging environment. This is a great reference guide for entrepreneurs seeking to embark on an outbound campaign and serves as a primer for the scientist-turned-executive.

Download: How to Organize Your Outbound Fundraising Infrastructure

By Lucy Parkinson, Research Manager, LSN

Why have rare diseases and orphan drug development attracted so much investor interest?  That’s one question we sought to answer at the Redefining Early Stage Investments Conference on Monday 24th March.

Our orphan and rare disease panelists – Michael Draper of Sanofi, Deb Geraghty of Cydan Development, Debra Miller of CureDuchenne Ventures, and Jean-Marc Quach of The Alpha-1 Project, with David Sendak of Accelerate Brain Cancer Cure moderating the panel – collectively represent the breadth of interests in the space.  For rare diseases, a diversity of parties can come together to achieve a result far greater than what any one group could achieve alone.  There’s the potential for small biotechs to make huge scientific advances, and for patient groups to maximise the impact of the funding they provide.  While these investors talked about the challenges of the space – such as limited markets, the difficulty of finding sufficient clinical trial participants, and concerns for the safety of child patients who may be dependent on medications for the rest of their lives – all expressed a lot of hope for patients suffering from rare diseases.

So what does the rare disease space offer to investors?

Highly engaged patients, said Deb Geraughty of orphan drug accelerator Cydan Development Inc.  In a rare disease field, a well-organized patient group can supply developers with a network of scientific expertise and patients who will do what they can to bring cures to market – such as donating funds and taking part in clinical trials.

Clear targets, said Jean-Marc Quach of the Alpha-1 Project.  A drug that homes in on the starting point of a biological process (such as inflammation) might find its most direct path to market in a rare disease space.  The eventual market for these technologies may be far bigger than the rare indication; Michael Draper of Sanofi pointed out that orphan drug designation can serve as a gateway to validate a technology which could later be repurposed for use in much larger markets.  This path shows promise for neuroprotective agents, for example, and provides a great opportunity for big pharma to engage with breakthrough discoveries.

For nonprofits, the equation is different but the result is the same.  Jean-Marc said, “We funded tons of basic research to uncover new knowledge, but the logical next step is to take matters in our own hands and push the cure.”

And as Debra Miller said, if a patient group is supporting a for-profit company, it only makes sense to take an equity stake and be sure of seeing some return on investment that can be used to continue funding new research.  “All nonprofits should take a look at this.”

So how do you get orphan drug status for your asset?  According to Deb, “Apply as early as possible, with the data to support it.”  And the investment dollars are out there. “[Investors] want to be educated in how to make money by investing in rare diseases,” she told us. The key as an entrepreneur is communicating clearly, directly, and making your opportunity obviously compelling.

 

By Dennis Ford, Founder & CEO, LSN

Life Science Nation was featured in the Nicole Fisher’s Forbes article  “Reinventing Investment: The Funding Landscape Of Life Science Shifts For Good” on Monday! This article offers some great insights on LSN’s mission in the early stage life science investment space, and how the Redefining Early Stage Investments Conference is filling the funding gap left by venture capital. I encourage you to take a look and welcome your feedback!

By Michael Quigley, Research Manager, LSN

As a research manager at LSN, I spend my time researching, calling and interviewing life science investors from around the globe to find out where the money is, and where investors are planning to direct their funding. It’s an ongoing learning experience, and it has given me the opportunity to identify some interesting patterns. Here are few things I’ve learned along the way:

New Investors Are Surfacing to Fill the Void Left by Venture Capital

Due to a shift in the investor landscape, new entities are emerging to fund science that has been left behind by the VCs. Having spoken with many of these new investors it becomes apparent that being new is one of their greatest hurdles. They do not have the draw of big pharma or top 10 VC names that every industry blog article seems to reiterate as if those few sources was all there was to the life science investment landscape. These investors are more under the radar and as a result are looking for targeted deal flow.  From service providers going direct to new virtual pharmas looking to in-license assets and nurse them through the clinic, to foundations and family funds, these investors want to hear about potential opportunities and tend to be much more responsive than their more institutional counterparts. Additionally these investors tend to be much more targeted in terms of types and stages of companies that they are looking to invest in, so is it important to determine who they are, and where their focus lies.

Investors Want Companies to Be Open to Pivoting

Having asked many investors what they look for in potential investments, one quality sought by many is flexibility or the ability to pivot. Many biotech entrepreneurs are overly headstrong in what their target indication is or what they envision for their company’s future. In many cases it may be advantageous to target an alternate indication with a less stringent regulatory pathway first, begin generating revenue, then look to repurpose the product to the original indication. This is applicable both for therapeutics and devices, and is a function of the industry as it currently stands. Investors of all types are interested in time to market and the difficulty of the regulatory pathway so if pivoting your product’s focus to begin generating revenue sooner is a possibility, investors are going to be more attracted to companies that realize this and take the lower hanging fruit before going big.  Across the globe, regulatory agencies define the life science marketplace and you are better off trying to work in alignment with them when possible rather than swimming against the tide.

The one commonality between all of these issues is change. Following old roadmaps for investing and fundraising in biotech can be a fatal mistake. The industry is maturing through natural selection and only those investors and companies that are able to adapt to the changing environment will be able to stay alive and prosper.

 

By Maximilian Klietmann, VP of Marketing, LSN

The Redefining Early Stage Investments (RESI) Conference is poised to launch on Monday. Getting this 400 person event together was no small feat: The RESI team relied heavily on a strict strategy on delivering quality content that was current, relevant, and compelling. The main tactic was to focus on early stage investment and really understand how that impacts emerging life science startups. When LSN embarked on the RESI Conference, there was a single mantra that drove the entire event organization process: Content is king. So many conferences recycle dry outdated content, and it’s the same old speakers with the same old content. This is precisely what LSN sought to change.

A brief glance at the RESI agenda shows that we succeeded: There are 16 panels covering topics such as family offices investing directly, non-profits adopting for-profit models, CROs investing into startups, the latest big pharma in-licensing activities, and other emerging trends in early stage life science investing. On top of that, there are workshops covering how to conduct a fundraising campaign, the legal landscape, and valuation.

So how exactly was LSN able to compile all of this content? Quite simply, it comes down to the fact that LSN’s primary business is working together with early stage companies raising capital, and profiling the investor landscape. LSN tracks over 5,000 active biotech and medtech investors around the world, and the LSN research team maintains an ongoing dialogue with them on a 90-day rolling basis. This gives LSN unequaled insight into the latest investor trends, but also fosters a relationship that allows for a higher ratio of active investors than any other major life science conference in the world.

The insights that LSN research compiles allow the RESI conference content to stay abreast of the industry. The RESI event’s content is designed to give perspectives on what’s happening now, who’s active, what’s hot, and what the future looks like on a tactical level. Moreover, because of LSN’s relationship with the senior staff at each of these investor entities, the content is delivered by the very people who are redefining early stage investments in the life science arena.

If you’re already a part of the RESI tribe, we look forward to seeing you all on March 24^th in Boston. If you’re not part of the tribe yet, it’s not too late, but time is running short. Come see what everyone’s talking about!

By Tom Crosby, RESI Conference Manager, LSN

Next Monday, March 24^th will mark the date for Life Science Nation’s second Redefining Early Stage Investments Conference in Boston’s State Room. Nearly 400 active early stage life science investors, biotech and medtech innovators, and senior executives from all segments of the industry will converge 33 floors above the city for a full day.

LSN’s motivation to create the RESI conference is based on a simple concept: while the world of early stage life science investments has fundamentally changed, many fundraising executives are still operating under the assumption that the old process for raising capital is still applicable. In light of this, LSN conceived the concept of a forum of entrepreneurs and active early stage investors not only to discuss the new marketplace, but also to initiate dialogues that would eventually lead to allocations. This is accomplished by a combination of top-tier investor panels, workshops, and a full-day partnering pavilion.

Ultimately, the key differentiator for RESI is that it is a targeted event seeking to connecting early stage technologies with investors – therapeutics, diagnostics, medtech, healthcare IT, and investors from 10 categories are all represented. It’s not indication specific, it’s not just for biotech, and it’s not just for medtech; it is the only conference that focuses on bridging the funding void that traditional investors have left.

So, what does RESI look like this time around? Let’s take a look at the numbers:

·         Total Attendees: 390 attendees from 377 organizations

·         Countries Represented:  12 different countries, and representation from across the US

Moreover, the ratio of investors to companies seeking capital is close to 1:1, which outperforms any other meeting on this scale of which LSN is aware. As a company – and as an conference – LSN and the RESI Conference continue to fill gaps in the market, create disruptive events, and ultimately, be an advocate for early stage companies seeking to move science forward.