Tag Archives: biotechnology

Hot Life Science Investor Mandate 3: VC Creates Relationships with Universities for Spinoff Concepts – March 22, 2013

20 Mar

A venture capital fund that has relationships with nearly 50 university partnerships has around $100M in assets, and acts very opportunistically within the life science space. The firm also acquires participation rights for university spinout companies.

About 70% of the VC’s life sciences investments are in therapeutics, 30% of which are distributed between devices, diagnostics, and discovery platforms. Currently, the firm is most interested in therapeutics, and is avoiding med-tech opportunities due to an internal perspective of unpredictability of the FDA’s activities in the med-tech space.

Though they do not have a strict mandate in terms of subsector or indication, therapeutics for oncology, cardiovascular, anti-inflammatories, and ophthalmology drugs have historically done well, and are favored by, the investment team.

The VC does not have a specific timeline for allocation, and will make investments as opportunities arise. Typically, they will invest $500K – $1.5MM initially and reserve 1-3x initial invested capital for follow-on rounds, however the firm is comfortable investing broadly across stage, from seed to late stage, and will selectively invest $100K – $250K in angel rounds on an opportunistic basis. The firm prefers to be a co-investor alongside other firms or syndicates, and lays significant value on investing alongside notable “top-tier” firms.

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Personalized Medicine Trend Spurs Investments in Diagnostics

14 Mar

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

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Indication Diversification: Big Pharma’s New R&D Driver

14 Mar

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.

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Sourcing New Science

14 Mar

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.

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Establishing a Web Presence for your Life Science Firm

26 Feb

By Tom Crosby, Marketing Manager, LSN

In our increasingly connected world, the Internet has become not only the new marketplace of ideas, but in a very real sense, it is the new marketplace – where the majority of business is conducted every day, all over the globe.

This is not news to anyone with an Internet connection, but even the most successful and intelligent people in their respective industries can have trouble keeping up with the ever-changing environment, and often times fail to recognize how critically important it is for their own businesses. To the chagrin of traditionalists everywhere, web presence has become a vital piece of your company’s image or brand, and helps to deliver your message. In other words, it is too important to treat as an afterthought, especially when it comes to fundraising – if you don’t have web presence, you don’t exist. Worse yet, if you have a poor web presence, you are publicly out of touch, and sending the message that you do not “get it.” Investors are savvy, and it takes only a few seconds to see if you are brand-aware, and your message is on point.

Web presence takes careful planning and professional execution. For those attempting to raise funds in the life science arena, this often means using a specialized third party to execute this piece. The development (and subsequent marketing) of your products, creating dialogue with prospective investors & maintaining investor relationships, and your on-line branding all at once are too much for an executive to focus on, and will likely yield poor results. This is not to say that it can’t be done by the right individual with enough time, effort, and funding. However, the most cost-effective route long-term is the one that brings in capital the fastest and promotes a quicker path to market.

In order to raise funds efficiently today, a strong web presence is of pinnacle importance. This is something that is too often overlooked by industry leaders, whether they would like to admit it or not. Many life science firms will pay an uninformed third party – lacking any sort of industry-specific insight – what amounts to a nominal fee to establish their entire online identity, and leave it there. This is where having a dedicated team in place to establish your web operations can easily put you ahead of your competition for precious investor dollars. This can be done in-house, or by a team of industry-specific consultants, but either way, it is not an area in which you should underspend or cut corners.

Although your initial returns may be slower than outsourcing the work to the most affordable third party, having a dedicated, contextualized team presents your firm with many advantages that are worth the extra investment, not the least of which is a higher overall quality. First, your team will be in charge of shaping the performance of your brand, and therefore, will be personally invested in its success. Furthermore, by having constant, informed dialogue with your team, changes and updates to your web presence will take place quickly and fluidly. Finally, a team with specific understanding of the industry will be able to perform tasks surrounding your firm’s Internet identity that can’t necessarily be outsourced, or are better done by an individual in direct context with your goals.

One aspect that makes marketing a life science firm difficult is that there is often a disconnect between scientists and investors; the desire to do business is all there, but ideas are frequently lost in translation. This is even more so today, as life science VCs wane and new investors fill the void. Of course, any serious investor will quickly bring in a scientist to ultimately vet the technology. There are the cases of the scientist-turned-investor, or the business person who speaks biotech, but the message here is, plan for both, make sure your messaging is at least generally understandable, and save the deep-dive tech-talk for the scientists. Any vetting scientist will have to understand the value of your product, and from there, the businessperson will be able to value the market.

To effectively market any idea, simplicity is key. And it can be tempting for a drug developer in phase II to highlight the complexities of their work, touting novel pharmacological action and unique pathways. To the scientific community, this information is understandable, and even engaging. However, to an investor, this could very well be the obstacle standing between your firm and an allocation. Confidence is a huge factor in investing, and a coherent, easily understood message goes a long way towards creating investor confidence.

If you bring the messaging of your web presence in-house, or go through a consulting team that understands how to translate fluidly between the languages of science and business, you can effectively turn your product into an idea. Of course, your product is what lands your firm the allocation to push through to distribution, but unless it also exists as a single, digestible idea, getting your product to market becomes harder than it already is. An uninformed third-party can get your website up and running, but without some degree of outside understanding, you run the risk of being obscure and unattainable. The impact of a simplified, streamlined web presence cannot be underestimated, and, in a word, is a crucial factor in garnering investor confidence. Creating a brand and having your team all reciting the same message has a big impact when you are being evaluated as a firm who “gets it.”

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Why Investors are Speaking to Academic Scientists

26 Feb

By Max Klietmann, VP of Research, LSN

The academic scientist is playing a more critical role in the commercial life sciences space than ever before. This is due to the fact that large pharma is replacing early-stage drug development initiatives with M&A and in-licensing of technologies emerging from academic labs, strategic investors are aggregating early stage asset portfolios, and CROs are seeking to create relationships early to pre-emptively establish market position for the future.

It is obvious why early stage investors such as angels are interested in establishing dialogue with academic scientists, but even late-stage investors are in a continuous dialogue with academic scientists today. What makes this group of innovators so critical to the industry? Fundamentally, it is because they represent a crystal ball forecasting the long-term, groundbreaking industry trends that will affect the entire industry.

Academic innovation and commercialization are closer than ever, and this trend is accelerating. Academics were once all but irrelevant to investors because their work was often decades away from market potential, and most scientists didn’t care about or even consider commercializing their work. Academics 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 their peers – they were sources of deal flow/investment opportunities, market intelligence, and could point out disruptive technologies before they reached the “commercial realm.” The big pharmas, investors (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 oracle, and has the most future-oriented perspective on emerging trends in the space.

The line between academia and commercialization is blurring and the two, once-disparate realms are becoming tightly intertwined. As such, creating relationships with academic laboratories and innovators is a critical piece of market intelligence for all constituents in the space. Creating strong relationships with research institutions will be a vital to the adroit navigation of an increasingly complex space moving forward.

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How to Easily Select Investors that may be a Fit

26 Feb

By Alejandro Zamorano, VP of Business Development, LSN

Fundraising in the life science sector has changed significantly over the past five years, as old players fall by the wayside and new players come in to take their place. The overriding observation is that the sands are shifting and we are about to see the new landscape. What this means is that since the roster of life science is changing, everybody better update the rolodex.

Nothing wastes time more than using an out-of-date map to get somewhere new. From LSN’s conversations with executives who have successfully navigated the new fundraising environment, it is apparent that the investor landscape is much broader than most would have expected. LSN now classifies the life science investor space into eight defined categories:

  • Syndicated angel groups
  • Private equity, including venture capital
  • Private asset managers, including family offices and wealth advisors
  • Life science corporate funds, large/midsize pharma and biotech
  • Information technology corporate funds, computer manufacturers, large info providers and telecom
  • Alternative institutional investors, pensions, endowments, and foundations
  • Hedge funds, specifically pipes/event driven and special situations strategies
  • Government grants and contracts

These categories of investors have their own investment preferences and style. The first role of any life science executive tasked with the role of fundraising should be to create a Global Target List (GTL) of investors that you should reach out to and stay connected with throughout the life of your company’s development. As a result, the first step is obtaining a list of investors that operate in the life science space. This can be done by leveraging your internal network, or working with a third party research company that specializes in the collection of investor information (like LSN).

Once a general list has been obtained, the next step is to filter investor based on their investment preferences. This is critical in order to avoid reaching out to investors that are not a fit. LSN has identified six major criteria that investors use to filter though initial deal:

  • Financing type (equity, debt, royalty)
  • Ownership type (private, public)
  • Sector preferences (medtech, therapeutics, service providers, and diagnostics)
  • Development phase of the product
  • Allocation size
  • Indication categories (cardiovascular, diseases of the nervous system)

For example, take a broad-brush first pass, create a rough indicator that draws out the most common investors during each phase of clinical development that you would be able to put on your radar screen as a general fit. The task of determining investor preferences is the most difficult part any fundraising effort, as it requires in depth information about your investor prospects. The aggregation of this information is time consuming, and requires commitment and considerable resources.

As a result, one of the easiest ways to aggregate a list of potential investors is to identify comparable companies that are developing similar technology and assets. Once a list of comparable companies has been identified, the next step is to look at each of the comparable financing rounds to identify the names of the lead and co-investors. When identifying comparable companies, you should divide them into three tiers: exact fit, good fit, and rough fit. This will allow you to prioritize investors based on the fit of the comparable company. Reaching out to these investors should enable you to create a GTL of investors that are knowledgeable about your technology and space. Remember, many investor strategies have to do with aggregating assets under a particular silo or indication.

One of the common misconceptions in the industry is the belief that investors will not invest in competing technologies and assets. This could not be further from the truth. Remember, investors are interested in returns, and if a technology or asset competes with one those held by their portfolio companies, they are particularly interested in order to hedge their risk. Investors demand diversification and understand that investing is a number game.

The recommended route to identifying preferences of investors is to work with an established third party research group that specializes in the aggregation of investor data. These companies will help you navigate through the complex maze and enable you to find investors that are a fit for your companies’ profile and capital needs.

Having filtered your GTL to a list of investors to around 500, it is your turn to reach out to them and begin a conversation that will morph into a relationship, which will turn into an allocation. Remember, investors are people too, and at the end of the day, they are mostly investing in you.

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