By Lucy Parkinson, Research Manager, LSN

There are many investment models used in the therapeutics sector, including the partnership model used by the innovative, hands-on, asset-centric Virtual Pharma groups. These investors, otherwise known as pharmaceutical management companies or pharmaceutical development companies, partner with small biotechs with the goal of building a portfolio of therapeutic assets and efficiently developing them for an exit opportunity. But how do virtual pharmas operate, and why might it make sense to partner with one?

The research team at LSN keeps in contact with virtual pharma groups because, quite simply, they are investors in early stage biotech. Rather than investing directly in companies, virtual pharmas invest in assets (in most cases, by in-licensing and then funding the asset’s development; in a few cases, by acquiring assets completely, often with the original rights owner maintaining a royalty share). Some virtual pharmas have been spun out by an investment firm, such as CMEA‘s Velocity Pharmaceutical Development or NEA‘s Tesaro Bio; others raise their funds independently. In many cases, the virtual pharma firm spins off each asset into a separate company. With their focus on a single asset, these new companies are more streamlined for the purpose of attracting other investors or making later-stage strategic deals.

There are some obvious tactical benefits to considering a virtual pharma partner.

Expertise. For scientist-entrepreneurs with deep research experience but who are new to the world of commercial drug development, it makes sense to partner with a company that specializes in getting drugs to market. Some of the virtual pharmas we’ve contacted specialize in a particular field, such as oncology or dermatology, and they are experts at the regulatory and market issues in that field. Others specialize in a particular part of the development process, such as Phase III trials, and are experts in managing those stages.

Strategic assistance. Virtual pharmas tend to have a very strong awareness of their space, and as one virtual pharma executive told me recently, “We don’t invest in assets that aren’t going to get later-stage funding.” In addition to knowing how to market the asset to investors, virtual pharmas also often have good relationships with CROs and big pharma corporations that can be harnessed to bring the asset through to an exit.

Focus. A virtual pharma director told me that his group generally works with biotech companies that have multiple promising assets. The virtual pharma takes over management of one asset and spins off that asset into a new company with staff focused solely on its development. This allows the biotech company to focus on developing the rest of its pipeline.

Monetization. Although the structure of these partnerships varies (much as big pharma partnerships do), many will involve up-front payments that can be used to finance the development of other programs.

Although the strategies of virtual pharmas are highly varied, there’s one consistent value they all share: it’s all about the asset. Make-or-break factors for other investors, such as where your company is located or whether it’s a privately held or publicly traded company, generally don’t apply. If you’re making a pitch to a virtual pharma investor, you should bear this in mind and keep the focus entirely on what’s unique about your asset, how the research data demonstrates its value, and how a partnership on this asset will make sense for both sides.

By Tom Crosby, RESI Conference Manager, LSN

One of the newer investor types to the life science arena are virtual pharmaceutical development companies. These firms are aggregating multiple assets and leveraging their internal clinical expertise to shepherd them through the development process. By doing so, these investors can invest in multiple companies, add distinct value, and get rewarded by the companies that succeed.

Moderated by Gene Williams, COO at Immune Pharmaceuticals, the audience will hear from:

Jarrod Longcor, CBO, Avillion LLP

Dennis Goldberg, President, Benu Biopharma

Baiju Shah, CEO, BioMotiv

Andrew Perlman, Managing Director / CMO, Velocity Pharmaceutical Development

Panelists will discuss their day-to-day operations, as well as their individual groups’ investment preferences. How are they funding their projects? What are their mandates for geographical location, management team and total investment size? Do they prefer to take a passive role, or does their firm’s model involve replacing the original management? Panelists will also shed light on their preferred investment sectors, sub-sectors, indications & phases of development – and how they typically structure the ownership of the assets they in-license.

 

By Danielle Silva, VP of Business Development, LSN & Mimi Liu, Research Analyst, LSN 

Life Science Nation is always looking for ways to improve in the ability to create a compelling dialogue with investors and life science executive alike.  We recently had the opportunity to attend a series of seminars teaching Dale Carnegie’s principles of communication, which are outlined in his book How to Win Friends and Influence People. When we shared the lessons learned about successful communication techniques with the other LSN staff, we all realized these principles and techniques can be applied to building a better rapport with investors. Here are our picks for the top four lessons and how to apply them to fundraising in the life sciences.

Be a good listener. Encourage others to talk about themselves.

A good way to help investors open up is by asking them why they are interested in a particular area and what trends they see in the space. Ask them about their background and how it relates to the areas they are involved in now. Then when it’s time to talk about your technology, you’ll be able to highlight the attributes that fit the investors’ interests. Show genuine interest in investors and you will build strong relationships.

Talk in terms of the other person’s interests.

When speaking with potential investors, discuss how an investment in your company will not only help you (for example, by advancing from the preclinical to the clinical stage) but also how it will benefit them—how it will complement their portfolio. For example, perhaps your project would help diversify the investors’ portfolio or be an attractive add-on acquisition to one of their current investments.

Build a positive personal relationship

At the end of the day, no matter how compelling your technology is, if you can’t get along with investors, they won’t invest. Therefore, it is important to try and avoid sounding overly compassionate, strong headed, or not willing to listen. After all, investors are investing in you and your team as much your technology. Learn how to disagree in an agreeable manner and show respect for others’ opinions.

Make your idea stand out by telling a story

Investors read tons of business plans, watch hundreds of presentations, and speak with thousands of companies every year. When speaking with investors, your ideas need to be not only clear and concise but also well expressed. By creating a compelling narrative it will bring your ideas to life, engage your listeners, and allow the investor to connect on a personal level. This will also allow you to separate yourself from the crowd and ensure that you are grabbing your investors’ attention.

Although there are other Dale Carnegie principles that can be useful when communicating with investors, these four strategies are the most helpful when you’re trying to influence investors’ thoughts and decisions. We encourage you to try them out.

By Dennis Ford, Founder & CEO, LSN

After decades of government, nonprofit, and private funding of translational scientific research, there is a glut of early stage life science companies with great deal of promising data ready to go on to the next stage of preclinical and clinical development. However, many of these life science start-ups lack the capital to take the next steps toward commercialization for three main reasons.

Developing Relationships with New Categories of Life Science Investors Is a Challenge

The migration of VC dollars to later-stage investments has disoriented early stage fundraising executives, even though a new group of investors has surfaced to fill the early stage life science investment void. How to identify and market to these new investors remains a conundrum for fundraising executives. There is no easy solution to match up the thousands of early stage life science companies looking for capital with the thousands of early stage life science investors who have capital to invest.

A Regional Approach to Fundraising Limits the Chance of Success

Fundraising executives typically are using an outdated playbook. Thus, they are focusing on obsolete investor categories and paying little or no attention to the new categories, which in most cases are better fits. Early stage life science firms are typically confined to a strategy of regional fundraising instead of employing a global investor strategy. Raising capital is a game of finding investors who are a fit for your stage and sector, and like all marketing and sales, it’s essentially a numbers game. By limiting the eligible investors to a region or a country, you are limiting your audience and therefore your probability of success. Canvassing the world substantially increases your chances of finding an investor fit for your stage and sector and obtaining financing.

Poor Branding and Messaging Materials Deter Potential Investors

Compounding the problem is that early stage life science executives typically do not take the time to adequately develop their branding and messaging. Investors are inundated with requests for meetings and have little time to peruse and decipher marketing collateral or a website. It is paramount and the ante into the game to concoct a crisp, cogent brand and message that clearly conveys your team’s and technology’s value proposition. Taking the time to get your messaging right means investors can quickly determine if there is a fit for a particular investment mandate when they do get a chance to look at the materials.  If investors are interested, then they will take a deep dive and go through all your material and your website, so you have to cover all your marketing bases.

Life science executives must address this fundraising dilemma if they hope to commercialize their research.

By Tom Crosby, RESI Conference Manager, LSN

At LSN’s next RESI Conference, the Venture Philanthropy Panel will bring together five leaders at top venture philanthropy organizations from around the U.S. to discuss their experience with impact investing—currently one of the most talked about funding models for early stage life science investments. Typically funding on a multiyear basis, these heavily donor-funded organizations are forging a path for significant results on a quick timeline.

Moderated by Brian Horsburgh, Trustee at the NeuroNetworks Fund, the audience will hear from:

• Charlotte Hubbert, Venture Investor, Bill & Melinda Gates Foundation
• Tim Armour, President & CEO, Cure Alzheimer’s Fund
• Albert Roy, CEO, Lupus Therapeutics
• Daniel Auclair, VP of Translational Research, Multiple Myeloma Research Fund

Panelists will discuss key points in investing for impact. What do venture philanthropy investors look for in initial correspondence? What goes into the process of investment selection and due diligence? What value can VPs provide your company in addition to capital? The session will go over what metrics are most important in evaluating progress, and how grantees & donors are involved in analyzing these results. If venture philanthropy investment is part of the plan to get your company funded, this panel is a great opportunity to update your roadmap for navigating these organizations.

If venture philanthropy investment is part of the plan to get your company funded, this panel is a great opportunity to update your road map for navigating these organizations.

By Lucy Parkinson, Research Manager, LSN

Scientists pursue many different approaches when doing lab research. However, when it comes to fundraising, they often repeat the same actions and expect different outcomes—which has been said to be the definition of insanity.

If your process for connecting with investors isn’t working, don’t continue to do what you’ve been doing. Try something different. At LSN, we use an approach we call “shaking the tree.” We find that by continuing to approach investors using various tactics, some fruit usually falls.

Some investors are easy to connect with; perhaps we happen to catch them at the right time, or the first thing we say happens to catch their interest. But success on a first attempt is more a matter of luck; gathering LSN’s comprehensive intelligence on life science investors requires a systematic approach.

Like most people, each investor has a preferred contact method. You probably know someone who never picks up the phone but always responds to your emails. Does the investor you’re trying to contact check their voicemail regularly? You can’t know until you leave them a message. Many professionals don’t make their email address or phone number available but have a public profile on LinkedIn. Use the service to send them a short introductory message; for some people, social media platforms are a better means of engagement than email. Some investment firms have a web form on their website; this seemingly impersonal means of contact may be the first source of incoming deal flow that the investor looks at every day. People communicate differently; you must determine the best way to connect if you want to reach them.

When you’re trying to get someone’s attention, you’re more likely to get it if you make the process as easy as possible for the other person. We’ve previously discussed how to craft a highly relevant, eye-catching pitch email(keep it brief and clear; don’t include irrelevant information) and a few methods for following up on your email target list (make it easy for the investor to respond). If an initial message that describes your opportunity in a few paragraphs doesn’t elicit a response, send something short and direct to follow up. Ask simple questions: Are you investing in life science right now? Is this opportunity of interest? Can we talk for 10 minutes? Don’t make connecting with you a chore. Be specific enough to make a response the easiest option; say what you want to discuss and suggest a time frame for the meeting. ( Similarly, your marketing materials should be streamlined. A PowerPoint deck that is more than 12 slides suggests an unfocused presentation and deters investors from reviewing it.)

Above all, be sure to make your relevance immediately obvious. Don’t be afraid to seem pushy; high-quality deal flow is the lifeblood of private investment firms. But you need to be clear about how much of the investor’s time you want and why you want it. Perhaps you relate to the investor’s mandate in a specific way, such as being located in a particular region or having a new approach to a field of medicine that the investor previously funded. If there’s a gatekeeper such as an executive assistant who filters all incoming phone calls and emails and controls the investor’s calendar, proving your relevance is doubly important but also easier; you can explain why you are trying to contact the investor, learn when he or she is most likely to take a call, and ask to schedule a meeting.

Although you may have to try many approaches, every shake of the tree will make more fruit fall; creativity and perseverance can get you in front of many investors, and that’s what it’s going to take to close your next round of funding.