By Tom Crosby, Marketing Manager, LSN

LSN’s partners at Venture Valuation recently released a “cluster report” in conjunction with KPMG. This report is targeted chiefly at North American and Asian life sciences companies looking to establish a presence in Europe. The analysis takes a deep look at the state of the European marketplace by examining the strength of bio-clusters in each of the six major EU countries for life sciences. This document is designed to serve as a guide for site selection, and details the particular strengths of each regional cluster – Here are a few highlights:

France:

• Focused on nutraceuticals and cosmetics.
• 60% of French life science companies undertake in-house R&D (highest % in EU).

Germany:

• Highest number of life science companies of any European country (focus on Medical Devices).
• Largest life science workforce in absolute numbers.

Ireland:

• Second largest LS workforce relative to the active population.

Netherlands:

• Attractive to regional HQs of non-domestic LS companies for their R&D activities.

Switzerland:

• Strong LS clusters with large number of global HQs of domestic companies.
• Largest number of regional HQs of non-domestic LS companies within the six countries covered.

United Kingdom:

• Europe’s largest cluster in Biotechnology Therapeutics and Pharmaceuticals.
• Strong in R&D and a large life science workforce.

To read the full 46 page report that details the evaluation of these regions, please click here

By Lucy Parkinson, Research Analyst, LSN

LSN’s articles on fundraising are largely based on the idea of finding investors that are a strong fit for a life science company’s offering. However, once a conversation with an investor is started, it becomes a complex process. There are a plethora of criteria that many fundraising executives may not be aware of that do have a significant impact on investment decisions. Moreover, an investment represents a long-term relationship that needs to be maintained. In short – Fit isn’t just about pairing cash with an asset.

I interview investors on a daily basis. Yes, we do talk about the assets – such as whether an investor is more interested in biotech or medtech, what stage of asset development an investor is interested in buying into, or which indication areas show the most promise. We also talk about typical allocation sizes and the frequency of allocations. However, one of the most important elements we discuss is the investor’s approach to portfolio building, and what qualities they want to see in a management team before they sign a deal.

In LSN’s experience, it typically boils down to control of the company, which can manifest itself in a number of ways. Let’s face it – nobody likes unnecessary exposure to risk, and investors want to do what they can to reasonably reduce their risk relative to their return. This often manifests itself in a positive way. For example, a corporate VC that offers a portfolio company free expert advisory, access to corporate resources, and easy access to a potential exit into the mother company. However, a dispute over control can lead to serious problems as well, and an entrepreneur should be mindful of how to parse the marketplace depending on different investors’ missions.

Here’s an example – You have a small molecule for oncology and a venture philanthropy in the cancer space chooses to invest. What happens when you find out that even though your asset is promising for cancer, you have a much faster path to market with a totally different disease area. You may now be restricted in your ability to pivot due to your investor’s indication-specific orientation. Similarly difficult situations can arise when it comes to management decisions, and a proactive VC may desire to replace elements of a portfolio company’s core team or to make a significant change in strategy. Vinod Khosla recently questioned the wisdom of these VC-led leadership decisions.

The point is, as an entrepreneur, you need to think both tactically and strategically, and that will help guide your decisions in choosing an investor group to target. So when you initiate your outbound campaign and term sheets begin to surface, think about getting your company to the next level, but be mindful of the levels after that as well.

By Alejandro Zamorano, VP of Business Development, LSN

LSN is focused on tracking all classes of emerging players in the life science realm. One of the most interesting new developments is the phenomenon of patient groups starting their own biotech companies. These are known as patient-driven biotech (PDB) companies, and they are essentially the alignment of a philanthropic mission and commercial action.

The structure is typically a patient group nonprofit that provides capital to a for-profit subsidiary company via an evergreen structure. This capital base can then be augmented by additional investors who want to invest in the firm. PDBs can either develop their own assets internally or, more commonly, aggregate assets under a specific indication to shepherd through the development process. Once a portfolio of assets is established, a PDB company will then develop the products internally in order to maintain operational control. PDBs are unique because they leverage three unique attributes which have previously been mutually exclusive to either traditional non-profit foundations or for profit companies: access to capital, access to patients and development resources, and operational flexibility.

Access to capital: PDBs have the benefit of accessing capital markets in a way a nonprofit organization cannot. By enabling the company to issue shares to investors they can open the door to a bigger investor pool. Consequently, by allowing institutional investors to participate PDBs can raise bigger rounds of capital, providing the ability to guide the development of the assets as they mature. In addition, PDBs are also set up to receive philanthropic donation via their nonprofit affiliate that further adds to their capital base.

Access to patients & developmental resources: Due to their ability to harness the expertise and resources of their not-for-profit counterparts, PDBs are uniquely positioned to gain access to key resources and expertise that increase capital efficiency, serving as an attractive model to investors. This can come in the form of patient recruiting, access to tissue samples and indication expertise. As a result of the close association between the two entities PDBs an also leverage an extensive intelligence network of experts that are often first to learn about disease and drug candidate developments. This could lead to discoveries such as the identification of sub populations for the company’s various drug programs.

Operational flexibility: Since the main goal of any PDB is to develop and bring to market a treatment or cure for the target disease, profit is secondary. This provides PDBs with flexibility in terms of valuation and deal structure when negotiating with investors and licensors. By uniquely positioning as a neutral and flexible partner it allows to open doors to institutions that would otherwise consider the company a competitor.

PDB’s are a creative structure which will continue to gain momentum as the industry finds new models to make the drug development process more efficient and effective. Stay tuned as LSN follows this emerging trend.