Next Phase Newsletter

By Max Klietmann, VP of Research, LSN

What do an emerging diagnostic company from Norway, a small Israeli single family office, a therapeutic company from Boston, and a small CRO from Switzerland have in common? They are all organizations that one would expect to be locally-oriented, and yet they have a world-wide focus in terms of sourcing capital, uncovering deal opportunities, and sourcing new business. LSN encountered these constituents at every conference our staff has attended in the past year in the US and Europe – Boston, Philadelphia, Hamburg, San Francisco, New York, Barcelona… These are not multi-national pharmaceutical companies or multi-billion dollar PE funds, but they are thinking as though they were, and they’re not the only ones.

The life sciences industry is no longer constrained geographically, and a local orientation can be massively disadvantageous – it can mean missed opportunities, a myopic perspective that results in missing disruptive innovation, and can make a star performing company a laggard in short order. Collaborative IT, cheap global communication and logistics solutions, and big data have opened the floodgates for local players to tackle the global marketplace with a tactical precision that was previously reserved only for massive companies.

So what does it all mean? Most importantly – increased competition for business, capital, and deal opportunities. In short, if you aren’t thinking globally already, you’re dead in the water. If you are seeking a service provider, look for higher quality/less expensive options outside of your local sphere. If you are selling services, hit those areas that are locally underserved, even if you are on the other side of the planet. If you are looking to invest in companies, make sure that at a minimum, your competitive analysis and due diligence is in a global context. If you are raising capital any further down the line than a pre-seed angel round, you need a global target list of potential investors, not a handful of business cards from a local networking event. Fundraising is a numbers game.  The more investors you have on your list to engage with the more chances you have to make a connection and receive an allocation.  By all means exhaust your regional ties first, as the cost savings and ease of marketing make sense. But don’t stop there – The age of regional focus is disintegrating, and those who can adapt the fastest will be the early success stories of the era – go global young entrepreneur!

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Dennis Ford, CEO, LSN

Investors have a new sense of urgency when it comes to engaging with early-stage academic scientists and biotech executives. Early stage investors have always sourced deals from these groups, but now even mid-stage and later stage investors are devoting significant time talking to these constituents of the life science arena.
 
I have initiated a dialogue to find out exactly how investors see these two groups relative to one another, and what value each has to offer. I decided to conduct an informal survey among some of LSN’s contacts within the industry to better understand the dynamic.
 
Though the question may be simple, the answer is complex and multi-faceted. Here is some feedback I received from my question: “Why do investors have a new sense of urgency to engage with academic scientists and emerging biotech executives?”

Interview #1

Consultant / Pharmaceutical Executive

The Lesson:

Buy low, sell high!

This executive was previously involved with several big Pharma players – The new direction is a variation on the theme inherent in most drug discovery scenarios within Pharma.  Find and select interesting and compelling candidates and then help guide and shepherd them through the clinical development process.

The new twist is creating a life science entity funded by an investor group consisting of a combination of pharma, family office, corporate venture (not VC), and other new life science investors. The theme is creating a portfolio of assets made up of next generation small molecules around a particular indication. The overall business model here is to select and buy a large group at a low price, and then, sell the few that make it through the development process for a very high multiple. The distribution channels can be a traditional distribution or a “rent-a-sales force-model” to move product through. This new entity can be a very lean and hugely profitable virtually outsourcing almost every facet from discovery to distribution. As an experienced entrepreneur, this executive has seen firsthand how the industry is changing, and he can explain that very well to investors.

Interview #2

Private equity firm with an academic focus

Around $100 million in AUM (Assets Under Management).

The Lesson:

The value of the first pass. 

This conversation was with a mid-tier PE that’s interested in life science investments post-phase II, and supply capital for phase III. They concentrate on assets with a research university pedigree. They don’t put capital in early stage investments, but they do invest time in building relationships for the future, because it is a big win when something is available to be commercialized, in which case they turn first to the ones they know. The strategy? Spend time with early stage academic scientists as they grow in the industry, and if by chance they do want to commercialize some technology, they will surface to do a “first pass” with people they already have a relationship with.

Interview #3

Scientist / Entrepreneur

Life Science Industry Association

The Lesson:

The Past: Publish or Perish;

The Future: Publish to Commercialize

Academic innovation and commercialization are closer than ever, and this trend is only accelerating. Academics used to be irrelevant to investors in the 80’s and 90’s because their work was often decades away from market potential, and most scientists didn’t care about or even consider commercializing their work. Instead, they wanted to be respected by other academics, and lived by the mantra “publish or perish.”

All of this began to change in the late 90’s, when a massive surge in academic publication occurred that led to a huge rise in patent registration around various technologies. This made investors suddenly aware that academic scientists were not just professors in labs trying to impress other professors in labs – they were sources of deal flow, investment opportunities & market intelligence, and could point out disruptive technologies before they reached the “commercial realm.”

The big pharmaceutical companies, investors (both early and late-stage), and even secondary constituents like insurance firms all maintain dialogue with academia precisely for these reasons. Academia is the industry’s “crystal ball,” so to speak, and has the most future-oriented perspective on emerging trends in the space.

Interview #4

CEO

Emerging Biotech

The Lesson:

Find a brilliant Scientist and build a management team around the commercialization of his technology.

The overriding issue in academic scientists versus private emerging biotechs is that the academic side usually has no business sense. Academics know science, but the management team is the critical foundation. The best formula is a strong business player, a brilliant scientist, a practical scientist (one who performs trials and benchmarks), and finance & legal support. Without a team assembled to back you up, you have big problems. Investors do not have to be life science gurus to help organize and assemble a management team; providing management guidance and mentoring does not require a PhD in some esoteric science.

Interview #5

CEO / Scientist

Emerging Orphan Drug Biotech

The Lesson:

“R&D vs. r&d” – Understanding the dynamics

In the area of therapeutics, it is important to understand how to break down research and categorize the various segments and opportunities. For instance “little r,” which are targets, as opposed to “Big R,” which are actual drug candidates. Also, “little d” early phase management VS “Big D” phase II and phase III management.  Each category area is different and investors exist for each phase but for different reasons and bring different values.  Each segment has a different but distinct exit orientation, and as such it is important for investors to understand this interplay from all of the various constituents’ perspectives.

Interview #6

Entrepreneur & Life Science Investor

The Lesson:

Creating an academic network for validating investments, in order to determine if the science makes sense.

This particular investor’s main reason for speaking to scientists is as a self-education exercise – investors want to educate themselves on science and theories that are outside of their particular area of expertise. By reaching out to scientists to get knowledge of a particular topic for due diligence purposes, a lot of basic science due diligence goes on, even for later stage investing in the life sciences space. In doing so, this investor is able to later draw on his relationships in the academic science space to validate his investments.

As is plain to see, there are varying opinions, innumerable reasons for the dialogue between investors and early stage/academic scientists, but fundamentally it is a desire to be at the cutting edge before anyone else. The primary purpose of this article is to bring some conversations that LSN is having and creating in the market to the surface. Feel free to email me with any comments or input at dford@lifesciencenation.com

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Tom Crosby, Marketing Manager, LSN

To have a successful fundraising campaign, it is important to create effective marketing mate­rials from the very beginning. Not only does this process require a lot of time, but you must also make a financial commitment up front if you want to see the best results.

What conclusion can investors make when they see unprofessional marketing materials coming their way from a life science firm looking to secure capital? First and foremost is that the firm in question doesn’t take their outward image seriously. This can be a telling sign of internal operations, and is often all that is needed to turn a serious investor away.

It can seem like a good idea to put you marketing materials together in-house. After all, who knows more about your company than your staff? However, there is much to consider before trying to brand your firm by yourself. Most importantly is that unless you have gone out and specifically hired a marketing professional with design experience, your team will be taking valuable time away from performing the job functions that they are trained in, and therefore, are the best at. Design is a practiced skill with developed theory and technique behind it. Many people take its nuances for granted, and this is the genesis for poor design of marketing materials.

If, on the other hand, you make an initial investment in your marketing materials by hiring a professional firm with design expertise, the message you are sending to prospec­tive investors is that their time is important to you, and that you value their ability to discern professionalism from amateurism. This lets them know that you are making your best attempt to cover all your bases in terms of making your firm’s message clear and concise.

While it is an option to place your investment in hiring an in-house marketing professional, the more realistic move is to outsource the work to a professional marketing firm. Although the overhead will be higher initially, the results will be worth it. It is easy to tell when professional firms have created marketing materials. Not only do they stand out as more visually appealing, but they read differently, and evoke a different feeling in the audience. Furthermore, they make an investor’s job easier, because they are created with their interest in mind.

So what does it cost to have a marketing company create high-quality materials with content that matters – content that reflects your firm in the most positive way possible, and gives you the best chance at securing valuable capital?

Prices will vary based on the type of your company, its complexity, your strategies and audience, and other factors. Your branding requirements will also affect the cost. However, a quality firm can pro­vide a quote for each individual item. Typically, firms quot­ing at the low end use templates, and create very little original content, leaving that part up to you. Estimates on the higher end usually include custom content, and thereby, custom graphic design.

Through his years of this type of market research, Life Science Nation CEO Dennis Ford has estimated that the cost of branding, messaging, & website creation for a regional outbound marketing campaign should cost somewhere between $40 – $60,000. For a global campaign, this range increases to $80-$100,000. Unfortunately, this type of financial commitment makes everything more difficult for those entrepreneurs who are just scraping by, but the fact remains that their competitors are figuring out that to make money, you have to spend money.

A life science firm should expect to have this type of capital ready to deploy in order to run a successful campaign. Of course, these figures are ball park estimates and you can do it for less by trying to finesse the collateral. But at the end of the day, it has to get done, and is simply the cost of doing business.

If you get your branding, messaging and marketing presence sorted out, and make it a priority, you will have quick turnaround with a high-quality product. Prioritize what is important – which is getting in front of investors and pitching your ideas, technology, and products.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Danielle Silva, Director of Research, LSN

There has been a great deal of buzz surrounding the topic of personalized medicine in the life science sector recently. Personalized medicine attempts to forecast a patient’s likelihood of being afflicted with certain diseases through genetic testing, and offers cures that are tailored to their specific needs. Thus, diagnostics and therapeutics are moving towards personalization based on an individual’s phenotypic and genetic makeup.

As a result of the Human Genome Project (HGP), which was completed in 2003, DNA sequencing has become much more accurate, and the cost of sequencing a single genome is dramatically lower than it was in the past due to advances made in the area of sequencing instrumentation (it’s estimated that the price is getting down to around $1,000 per genome)[1]. One of the uses for this lower-cost DNA sequencing technology is the development of individualized biomarkers. The development of these biomarkers, however, is just the beginning of the story; to truly develop a well-rounded therapy involves the use of a diagnostic as well, which is why investors have been drawn to investing in firms developing diagnostics as of late.

Overexpressed proteins (or genetic markers) are unique traits that are often associated with a specific disease. These are known as biomarkers. Creating a therapeutic that targets an individual biomarker can create a favorable result in terms of patient outcome. The biomarker, however, needs to first be located in order for the therapeutic to truly fall under the umbrella of a personalized medicine. The agent that locates the specific biomarker is therefore known as a companion diagnostic. The advantage of using such an agent is that it is easy to identify whether or not a given patient can benefit from the use of a certain therapeutic.

Because of the importance of companion diagnostics in the personalized medicine space, interest from investors in firms developing diagnostics has surged accordingly. From 2011 to 2012, the number of reported financing rounds in the Life Science Nation Financing Rounds database increased from 11 to 31. This represents an increase of nearly 182%. In January of this year, Cambridge, Massachusetts-based Foundation Medicine received $13.5 million in Series B expansion equity, adding to the $42.5 million they had received just four months prior in their initial Series B round. The firm focuses specifically on conducting cancer genomic analysis to match patients with a targeted therapy and clinical trial. In the area of cancer, the development of companion diagnostics is arguably the most advanced. This is a large reason why cancer diagnostics have been a particularly attractive area for life science investors.

In a recent conversation with a large corporate venture capital fund that typically invests in 5-10 firms per year, the firm expressed a particular interest in therapeutics with companion diagnostics. Advances in genome sequencing are predicted to continue, and if the cost of sequencing a single genome falls below $1,000 it is possible that insurance companies may even begin to start to cover some of the costs of this service. Consequently, LSN predicts that investor interest in the area of personalized medicine and diagnostics will continue to gain steam.

[1] http://articles.philly.com/2013-03-06/news/37503360_1_genetic-tests-caplan-expectant-parents

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Max Klietmann, VP of Research, LSN
 
I’ve written previously about how big pharma is changing in terms of targeting emerging biotech companies for acquisition, rather than investing in in-house R&D, but there are also profound changes taking place in terms of what indications are most attractive, and how to strategically approach the replacement of blockbusters that are about to fall off the patent cliff.
 
Big pharmaceutical and biotech companies were historically synonymous with blockbuster drugs: therapeutics targeting an indication afflicting a large patient population, such as cardiovascular disease or diabetes, drawing billions of dollars into the company while enjoying the price premiums afforded by robust patent protection. However, the impending patent cliff, which is the rapidly approaching inflection point at which many blockbusters will lose patent protection, means that these revenue streams will soon vanish and be replaced by cheaper generics. This translates to billions in sales lost to generic competitors. Worse yet, pharmaceutical companies are scrambling to find replacements for these revenue streams, and despite great effort and expenditure, there are few candidates with the potential to fill the gaps. Moreover, competition is highly aggressive for blockbuster indications, making it very easy to lose significant sums in R&D. However, strategically oriented pharmas understand this conundrum, and when it comes to blockbuster indications, the big pharma business model is evolving too.

Rather than sinking astronomical sums into major indications, the focus is beginning to shift towards a diversified portfolio of niche therapeutics targeting less common indications. This doesn’t necessarily mean orphan drugs (which have always had a clear advantage on the regulatory front), but simply those disease areas that were previously less attractive, e.g. pancreatic cancer or kidney cancer. This way, there is diminished completion for market position upon commercialization.

One large pharmaceutical plans to take this strategy one step further by focusing on therapeutics that target biological disease pathways, rather than specific indications, so that a drug can be re-purposed for a variety of indications further down the road. Multi-purpose drugs are by no means new to the space; plenty of scientists have argued that their pre-clinical compound is a panacea (many of these folks never get much further than this stage, as this “scattered” approach is often unattractive to investors who value a targeted and focused drive to market.) But multi-purpose drugs historically were repurposed due to favorable side-effects discovered by accident. What is happening today is very different; for the first time, pharmaceutical companies are strategically targeting drug candidates with the potential to treat several indications simultaneously. Specifically targeting these drugs creates the opportunity to develop a novel type of blockbuster via a multi-indication revenue stream approach whereby a single drug can become a multi-billion dollar product across a variety of smaller disease markets. However, it is important to remember the regulatory issues associated with multiple FDA trials for various indications.
           
These trends will be important for both early stage investors and life science CEOs moving forward on a track to partner with large pharmaceutical companies down the road. The most attractive indications of the future are not necessarily the largest single markets, and keeping a watchful eye on secondary disease areas will help to create a strategic approach to drug commercialization.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital

By Dennis Ford, CEO, LSN

The two groups that everyone wants information on are academic scientists, and the private emerging biotechs & medtecs – scientists who have gone commercial. These two constituents make up the source where all the new science and technology is stemming from, but for several reasons, they remain difficult to consistently identify and map. However, the innovation currently occurring in the university labs and the fledgling private startups is where the next generation of life-saving drugs, devices, treatments and cures are coming from. More to the point, the rate of this innovation is accelerating as the knowledge that enables new discovery becomes increasingly available.

This is where the interest in innovators in academia and the emerging private sector comes from. The problem, however, is that no entity has effectively and efficiently linked it all together. Furthermore, there is a plethora of academic assets that are waiting to be discovered and brought to the light of day. Many entrepreneurial players in the industry – both large and small – would like to know what information is available, but the data assets of life science academia have not yet been aggregated in one central place. These assets are the scientists who are working on the research, and the technology that has been discovered and is in different forms of development, waiting to be licensed out of academic institutions.

There are two major opportunities that need to be addressed in the life science market. The first is the aggregation of both academic and private research & development under one user-friendly, affordable application. The reason is obvious in that as the life science business world starts to head towards the source, they need an easy way to find who they are looking for. The answer is a platform that solves the “finding” issue in such a way that encompasses both academic and private emerging biotech. The chart below represents the three life science source silos that represent the core data that the life science industry is searching for.

The second opportunity revolves around how academic scientists typically surface at and utilize forums and publications to connect-the-dots. While emerging biotech’s go to general themed conferences and utilize the side bar partnering sessions that are a big part of a life science B2B DNA. A great deal of the market place has been programmed to do partnering through conference attendance and partner showcases which typically is an adjunct side event. When it has been done as a pure partnering play it turns out to be so broad in the B2B concept that it is a virtual industry free for all. The truth is that there really isn’t a dedicated emerging biotech/investor partnering conference that has blown it out of the water yet, and therefore, a great opportunity exists to be that vendor.

Tags: biotech, biotechnology, CMO, consulting, CRO, family offices, Fundraising, investor, Investors, issue, letter, life, Life Science, life science nation, medicine, nation, news, newsletter, pharma, Pharmaceutical, private equity, research & development, science, startup, venture capital