By Shaoyu Chang, MD, MPH, Senior Research Analyst, LSN
When LSN first began a dialogue with life science investors three years ago, we encountered the common perception that diagnostics is a challenging area due to regulatory, reimbursement, and adoption issues. However, as LSN has tracked the diagnostic investment landscape over the last year, the mood change among investors has been significant. A large portion of their optimism is attributable to the promises of precision medicine.
Precision medicine, as defined by the National Institutes of Health, is an emerging approach for disease prevention and treatment that takes into account people’s individual variations in genes, environment, and lifestyle. This year precision medicine has emerged as a vital sector of the industry, as evidence by a few healthy signs. A US-based private genomic company successfully closed another round with new investments from a Chinese internet giant. A molecular diagnostic company had a high-profile IPO. And a large multinational pharmaceutical announced plan to pay up to $425 million to acquire an antibiotics diagnostic company.
What are the factors fueling investors’ optimism? What are the emerging opportunities for entrepreneurs in this field? Here are the trends that LSN has observed:
- Large scale initiatives and collaborations advancing science (government and academia)
The US National Institutes of Health has recently laid out a plan to launch a $130 million national, large-scale precision medicine research cohort. The project would enroll 1 million participants in 2-4 years. In the cancer research community, seven major medical centers in North America and Europe have led the initiative to pool patients’ data with the hope to push forward the field of cancer research. As large scale collaborations are creating unprecedented large data sets, based on our interviews, several VC funds of healthcare providers and payers have expressed high interest in accessing new analytic technologies that can help them turn data into actionable information.
- Liquid biopsy changing the cancer diagnostics game (VC)
The development of biomarkers and sequencing technology has given rise to liquid biopsy- non-invasive blood tests that detect circulating tumor cells (CTCs) and fragments of tumor DNA from the primary tumor and from metastatic sites. This technology allows early detection of cancer in high-risk individuals, monitoring of cancer recurrence in previously treated patients, and identification of patient sub-populations that would respond to a specific treatment. This field has attracted much attention in recent years with new startups and major companies as well commercializing liquid biopsy products and services. Investors are taking notice of this growing trend. For example, in a recent interview a California-based VC fund with AUM of $2.8 billion told us that traditionally they look for therapeutic assets, but the fund now starts to emphasize on personalized medicine and molecular diagnostics.
- Companion diagnostics and adaptive trials (pharma)
An increasing number of targeted therapies are approved every year, and more are in pharma’s pipeline. As these drugs are designed to treat subsets of patients, in many cases based on molecular biomarkers, companion diagnostics are often required as a condition of FDA approval. In addition, the acceptance and implementation of adaptive trials is on the rise. Adaptive trials utilize companion diagnostics to stratify patients and adjust trial design based on patients’ reaction to the investigational product. Budget-sensitive pharmaceuticals are eagerly exploring this novel trial design to make drug development more efficient. One interviewee from a multinational pharmaceutical told us they are interested in precision medicine tools that can work with their therapeutic products in neuroscience, respiratory, autoimmune, and infectious diseases.
- Genomics and population health (tech and healthcare companies)
As genomics helps researchers understand genetic background of disease, the rise of mHealth and monitoring devices creates large potential for phenotyping human health and disease. The intersection between genomics and population health holds the promise of identifying environmental and lifestyle risk factors and developing new approaches to disease prevention and treatment. This field of precision medicine has therefore attracted interest from traditional technology companies. For example, a leading US computer corporation has recently joined forces with a genomic analytic company and an e-commerce giant from China to develop a precision medicine platform.
We have spoken to a number of corporate VC funds set up by healthcare payers, pharmaceuticals, and tech companies. In one conversation, the fund manager stated a clear interest in precision medicine tools that can enhance clinical awareness & decision support, quality of care & performance improvement, and provider & patient engagement.
While precision medicine continue to shape the healthcare industry, entrepreneurs working in this field are encouraged to follow the trend and identify their niche in the global marketplace. The LSN team will bring you the latest updates as we keep monitoring the investment landscape.
