Next Phase Newsletter

By Max Klietmann, VP of Research, LSN

LSN research spends a lot of time speaking with investors in the life sciences space. As such, I wanted to share some insights gleaned from medical device investors over the past several weeks; specifically, I’d like to highlight two major investor interest trends in the device space that follow a common theme: cost reduction. As medical costs have risen over the past few years, hospitals and care providers are under increased pressure to reduce costs while improving outcomes. This has created a high demand for devices that can not only make an improvement in a patient’s condition, but also make a business case for a hospital’s bottom line. Here are the areas of the highest interest:

Infection Control

Hospital acquired infections (HAI) such as MRSA constitute a major issue for care providers, as these (usually preventable) conditions can massively protract hospital stays and drive up costs, due to complications and the need to treat a secondary indication. Tools and systems that can aid in early detection or prevention of these infections are in high demand, and are a compelling investment opportunity for investors in the space.

Home Care/Remote

Getting patients out of the hospital as quickly as possible is a primary way of reducing hospital cost. One way to safely accomplish this is via remote monitoring and other ways to allow a patient to continue receiving medical care from home earlier than usual. Furthermore, the less time spent in a hospital, the lower the risk of secondary complications such as HAI, further reducing the risk of incremental cost. Finally, remote monitoring often pairs existing technologies (heart monitors and wifi, for example), and can have a relatively inexpensive R&D process – all good things for an investor seeking fast time to market and proven demand.

Though these concepts may be intuitive at first glance, most entrepreneurs in the device space are too heavily focused on an improvement in patient outcomes at any cost. However, at the end of the day the improvement needs to make sense from the standpoint of a hospital’s investment and the likelihood of insurance reimbursement. Device entrepreneurs should consider how strong their business case is to the end-user, and in doing so, can be better aligned with investors’ critical need for return.

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

I spend a lot of time observing and analyzing early stage investment trends in the life science industry. The product of this research has led me to identify the biggest trend in recent years: that new categories of investors are surfacing to fill in the void left by the lack of VC funding.

Part and parcel to the new investor group’s trend is a bevy of new entities that are spending time and money vetting and grooming biotech and medtech start-ups.  They range from world renowned hospitals, research clinics, academic tech transfer offices, patient groups, foundations, both private and public sector initiatives all morphing into different forms of life science incubators pushing scientists and their innovative technologies to commercialization.  The essential idea is that there is enough general domain knowledge to pick the likely candidates for success based on their own sector or indication expertise. This is a great concept and is still getting off the ground. However, what most of these initiatives fail to grok is that “the last three feet” of the fundraising/commercialization is the actual going out into the market and finding the channel partner or investor and getting a deal done!

I have met and interviewed countless graduates and winners from these entrepreneurial programs. They graduate with eager smiles and hearts full of enthusiasm, take a deep breath, and then say…now what?

It was Edward R. Murrow who said, “It has always seemed to me the real art is not so much moving information or guidance or policy 5 or 10,000 miles. The real art is to move it the last three feet in face to face conversation.” Although he was speaking about international exchange, I think the quote is wholly applicable to the life sciences.

This last three feet is exactly where LSN staff spends most of their time. At the end of the day, where the real failure lies for many of these initiatives is in that scientist-entrepreneurs remain unprepared for the reality of how difficult the process is for connecting with a partner in the market place. Everybody understands their marching orders, but hardly anybody has been given the training and tools to carry out the mission.

What I am talking about specifically is the basic, tactical sales and marketing 101 skillset (the training) to go out and fundamentally execute a partnering campaign. This has to do with using databases to gather and vet lists of targets to go after, and identifying the low-cost, cloud infrastructure applications (the tools) that will enable and support the endeavor. For example, once you have gathered together the targets that are a good fit for your partnering initiative, you have a list – and the associated tasks – that you will have to manage. Most scientists will go right after the color-coded Excel spreadsheet to do this, which may as well be the kiss of death.

Cloud applications like SalesForce.com can provide you with a fabulous automated list, as well as task-management capability for a small monthly fee. Email applications such as iContact are a necessary tool for your outbound partnering campaigns, and you get a lot of compelling reporting for a low-cost monthly fee that will provide insight into who is clicking and interacting with your emails and outbound marketing. Newsletters, blogging and whitepapers are another excellent way to reach out to targets to either start a dialogue (or continue a dialogue) with multiple clients. These Cloud apps have created an affordable, easy-to-use campaign management infrastructure that just wasn’t here a few years ago. These applications are the picks and shovels for the gold the entrepreneur is trying to mine.

My point here is that there is not a lot going on tactically in teaching the last three feet – how to find and start a dialogue with investors, how to arrange a meeting, schedule a roadshow, run a meeting, and nurture & cultivate an ongoing relationship with your prospective partners. All the aforementioned criteria are critical in finishing what has been started with the scientist-entrepreneurs. After all the pie-in-the-sky strategy and perfect pitch role-playing is done, you still have to go that last three feet, stick out your hand and introduce yourself.

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 Jack Fuller, Business Development, LSN

The growing role of Corporate Venture Capital (CVC) in driving early stage enterprises in the life science sector has been well documented and dissected. The majority of corporate investments are structured in four forms: direct investments from the parent company, wholly owned subsidiaries, independent organizations with dedicated funds, and as limited partners in other funds. Understanding the type of corporate investment makes an enormous difference in the type of investment they are looking to make.

CVCs come in two flavors: internally focused on bolstering future technology prospects for the parent company, or externally focused on generating a solid return on the investment, with much less emphasis on the mission of the parent company. The primary strategy has shifted in recent years to favoring an externally focused approach.  This is primarily due to the CVCs appreciating the fact that an initial investment in a company does not provide any significant advantage when it comes to acquiring or in-licensing the technology and the need to hold a diversified portfolio. It is particularly important to understand the CVCs as a viable source of capital, considering the changing landscape of entrepreneurial fundraising.

CVC funding is particularly beneficial for new ventures in the life sciences that operate in uncertain environments because they provide specialized assets and knowledge. Over 1/3 of active CVCs are healthcare focused, with Novartis Venture Funds, J&J Development Corp, SR One, Kaiser Permanente Ventures, Novo Venture, Merck Global Health Innovation Group, Lilly Ventures, MedImmune Ventures, Pfizer Venture Capital, Siemens Venture Capital, Roche Venture Fund and Google Ventures all being in the top 25 most active CVCs by number of deals in the last year. Additionally, studies have shown that financing rounds with a CVC involved tend to be significantly higher than non-CVC funded rounds. The innovation output of CVC-funded companies is also higher, as determined by the number of publications and patents.

Even more recently, CVCs have actually started co-investing in rounds with each other.  Initially, this makes little sense as the parent companies are directly competing for the same technologies. However, as the CVC firms become more familiar with each other, they have begun to understand how each structures their deals, and are more comfortable sharing the table with another big name player. The shift toward independently-operating venture funds is big pharma’s response to keep the innovation pipeline flowing, with the decline of truly early stage VC funding. This is good news for early stage ventures, and should be carefully considered when planning a fundraising strategy.

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

Innovative collaborative models are a defining part of the life science industry. We’re all familiar with alliances between big pharma and venture capital, the academic/commercial collaborations of the tech transfer space, and most recently, the development of early stage technologies by research hospitals. Currently, another emerging trend is poised to make a significant impact on the industry on a global scale: Global collaboration between research centers, incubators, and bioclusters in the form of organized therapy development alliances.

So what does it look like? The model, which has already been adopted by a group of six research institutions in the US and Europe, aims to integrate the entire value chain of the drug development pipeline – from discovery through distribution – by having all of the relevant stakeholders involved. Essentially, it is a collaborative strategy that puts research groups, universities, tech transfer offices, CROs, industry organizations, service providers, investors, and big pharma under a project umbrella that allows compounds to be quickly vetted, shepherded through the development and trial processes, and brought to market.

But what does this mean? Since these alliances are formalized groups aimed at advancing drug discovery and development on a global basis, it increases the chances of getting all the pieces in place to bring a drug to market several fold. It creates communication, standardized processes, and facilitates the sharing of best practices and resources. All of this is being made possible by enhanced information sharing and physical logistics, as well as data management capabilities. It translates to a new model for translational science commercialization, and could be a key answer to bridging the valley of death by bringing capital, service providers, and big pharma capabilities to emerging assets globally. This trend is likely to accelerate in the remainder of this year and into 2014, so prepare for a paradigm shift.

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