A private equity fund located in the Central US with roughly $1 billion under management intends to make allocations in the tens of millions on a case-by-case basis in 2013. The firm is generalist and invests across sectors, but has a specific interest in life sciences & medical technologies. Within this space, the firm is opportunistic in almost every aspect, but does require that an issuer be EBITDA-positive. This means that a firm must have at least one product on the market generating revenue to be of interest. Though the firm has looked at and invested in therapeutics and medtech companies historically, a primary interest currently is service providers such as CROs and CMOs.
Tag Archives: life
Hot Life Science Investor Mandate 1: NPO Looking for Biotechs Developing Brain Disorder Therapeutics
11 JulA non-profit based in the Western US with nearly $50 million in assets is interested in biotech firms developing therapeutics that target brain disorders. The firm typically allocates from the hundreds of thousands into the millions per firm, and is looking to allocate to one more firm in the life science’s space for their second fund. They are especially interested in technologies that are able to deliver therapeutics across the blood brain barrier, as well as the personalized medicine space. The firm prefers funds that are in between phase I and phase II of the clinical development process, but will consider products in preclinical, phase I, and phase II development.
Hot Life Science Investor Mandate 2: Non-Profit Targets Cancer Research, Treatment
11 JulA New England-based nonprofit is targeting a philanthropic fund that specifically supports scientific discoveries targeting oncology that show significant clinical potential, but which remain stuck due to insufficient funding. The organization’s primary mandate is to increase the number of cancer treatment discoveries that undergo early stage product development so that more successful treatments will make it through the pipeline.
The organization intends to write grants to emerging biotechs developing preclinical technologies. Average allocations are expected to be in the hundreds of thousands, and will be made on an opportunistic basis. Though the organization will look at opportunities across the scope of oncology therapeutics and diagnostics, companies developing molecular technologies are of particular interest.
Electronic Patient Records and their Impact on Clinical Testing
11 JulBy Michael Quigley, Research Analyst, LSN
It is no secret that more and more hospitals in the US and across the globe are beginning to store their patient records electronically: One of the biggest drivers of this trend in the US is the HITECH Act of 2009, which allocated nearly $30 billion to increase the use of electronic health record systems (EHR), primarily though incentive programs. Currently, under this act, hospitals that have not implemented the most basic form of EHR by July 1st, 2014, will face monetary fines that will increase over time. Furthermore, some institutions – such as the Patient-Centered Outcomes Research Institute (PCORI) – are working to develop a national, patient-centered network for clinical research that will work on improving both the quantity and quality of patient provided data.
This increase of electronic patient data is great news for companies in the health industry for a variety of reasons, but especially when applied to clinical trials: Currently, screening for clinical trials (as well as the trials themselves) often omit numerous significant factors of a participant’s health profile. With this data becoming readily available and standardized, companies will be able to dilate their inclusion criteria for candidates in their trials based on a myriad of different variables, including age, weight, race, gender, lifestyle, and perhaps most importantly, genomic data. By understanding these variables, research organizations will be able to more effectively understand how their products effects different patient types, while avoiding screening patients for trials that they do not want.
Take cancer, for example, most patients are over the age of 65 and have some sort of chronic health condition. However, in clinical testing conditions, most candidates around the age of 50 are pre-selected to only have cancer. What ends up happening is that you develop a product that will be used on a market that it has not been sufficiently tested on. Having more easily available patient data could greatly reduce this dilemma and enhance the potential benefit of personalized medicine. Also once clinical trials are completed, as it currently stands, the connection between the research organization and the patient comes to an end. But with the continued uploading of patient data, whenever they visit a doctor, more long-term effects could be evaluated as well. (1)
As more data is continually made available, the resulting increase in the efficiency of clinical trials is great news for established and emerging companies, as it may chop away at the daunting $1b number that is often associated with getting a drug on the market. This data doesn’t just have the potential to lower the cost of trials; it also gives companies greater visibility as to potential reasons for why their product did or didn’t work, and what they could alter to make it more effective, thus increasing the effectiveness of drug production process on an even larger scale. So what does it mean for the industry at large? CRO’s in the trial space should adapt and find an edge in this arena to compete for the myriad of trials due to come from emerging biotech firms. Investors should re-evalute their investment timelines due to potential shortening of time to market, and emerging biotechs should focus on more niche opportunities for treating specific subpopulations within indications.
1. Mearian, Lucas. “How Big Data Will save Your Life.” Computerworld. Computerworld, 25 Apr. 2013. Web. 11 July 2013.
Investments Follow Scientific Breakthroughs… but what else?
10 JulBy Jack Fuller, Business Development, LSN
LSN has written extensively about the repurposing of drugs, virtual pharmaceutical companies, and the benefits of developing products that have a well-defined pharmacological profile. This trend continues with basic research at established companies often gets squeezed out by small, short-term projects, which promise an incremental improvement or a patent extension. Conversely, it is the goal of every emerging biotech and medtech company to develop the next great technological innovation and secure the capital financing to bring the product to commercialization. This sentiment was recently summed up by a panelist on emerging trends in neurological diseases: “the investment follows the scientific breakthrough,” he said. This got me thinking about the ways in which investors qualify potential opportunities for investment; while the quality of science is a major factor, many fundraisers neglect or downplay other factors that can easily make or break a deal.
LSN often engages both investors and capital seekers, and has seen several trends and common mistakes when talking to investors. This is by no means a complete list or a guide to fundraising, but rather some key observations and comments. Each type of investor and each individual presents a different challenge and requires a high level of finesse, tact, and persistence.
The life science investor landscape has fragmented in the last five years, but often times even experienced fund raisers are stuck trying to raise capital the same way they did before 2008. If you are reading this, you might recognize that updating your fundraising strategy and understanding the current investor landscape is one of the most important and certainly the first step in raising capital today. It does not matter how experienced a fundraiser you are, everyone needs to understand the current investment landscape and how it is changing.
If you are fundraising for a company, you are actively engaged in an outbound marketing campaign. Congratulations! Every PhD, MD, MBA, and individual in your company must know the message you are sending to investors. This should be reflected the information you release to the public, as well as in what you tell investors. When was the last time you updated your website? An investor will look at a company’s website and will make an instant, if sometimes unconscious, decision as the legitimacy of the company and management. The message of a company must be clear, concise, and uniform among all public and private forms of communication with an investor.
Investors can go from interested to apathetic over the course of a single sentence. This can take several forms; the most common we have seen is the tendency to stray from the primary asset under discussion, trying to oversell an asset, or anything that would put into question the dedication of the management team. Many times, people will be working on multiple projects, assets, or even companies. Similarly, a product may have several possible applications beyond the focused indication currently in development. Bringing attention to either of these can immediately sour an investor, as they want the undivided attention and focus of all aspects of the management team. Investors need to know the technology is breakthrough, and the team behind the product is utterly and completely dedicated to its success.
The points highlighted above are only a small cross section of the total package required to run a successful fundraising campaign. Most people in the fundraising process are acutely aware that an investment will never happen if the science is not well-presented. Unfortunately, many people neglect some of the basic marketing and presentation aspects that can just as quickly sink a prospective deal. However, these pitfalls are easily avoidable with a little bit of foresight in the form of a legitimate, calculated marketing effort.
Enhanced Search Granularity: Sub-Indications Search Implemented
10 JulBy Max Klietmann, VP of Research, LSN
LSN is a major proponent of the importance of finding exact fits. In an industry that is becoming more complex, granular, and specialized, finding exact matches is key to success – whether it is a matter of finding prospective clients, investment targets, strategic partners, or investors. LSN discussed this recently in the context of niche specification among CROs, and how it is more critical than ever to be able to source highly qualified leads.
In light of this, LSN is delighted to announce a new feature in the LSN Companies database: Search by therapeutic sub-sectors has been implemented, allowing users to search for specific indications. For example, searching for specific cancer indications such as gastric cancer, leukemia, pancreatic cancer, and 45 other sub-indications of cancer is now possible. This search feature has been implemented for all indications for “Companies” and “Products.”
What makes this so powerful is that it allows users to enhance their search granularity even more, shortening the time required to qualify leads, and to make outbound campaigns even more effective. LSN continues to watch industry trends and incorporate client suggestions into its platforms. In doing so, LSN products are a direct reflection of what the industry needs today and will require going forward to effectively meet and exceed its goals. Stay tuned for more announcements coming soon!
Alternative Exit Models: Strategic Acquisitions by Earnout
27 JunBy Max Klietmann, VP of Research, LSN
We are all aware that the IPO market has been less than stellar in recent history. This lack of exit opportunities has been particularly troubling for companies in the life sciences space due to the long time to market and considerable regulatory risk associated with drug development. Logically, M&A exits via strategic buyers has become the predominant exit route for many emerging biotech and medtech companies. M&A is of course not a new phenomeneon, however there is a significant trend in how these deals are being structured. Increasingly, M&A activity in the industry has been characterized by “acquisition via earn-out.”
Earn-outs are essentially pre-defined payments based on specific milestones. As an example, a strategic buyer would buy out an early-stage company (or asset) at phase IIa for a relatively small amount. Then, as the asset hits specific milestones (typically regulatory milestones), payments are triggered. One can think of it almost as a risk-adjusted buyout over time.
The advantage to this deal structure of course is that strategic buyers can afford to engage in more buyouts without putting too much capital at risk in the event of a failed trial. This is good for entrepreneurs and corporate buyers alike, who can diversify their bets on a myriad of assets.
This has overwhelmingly become the model for buyouts in recent time, and will likely become the standard. Moreover, the proportion of money in the upfront payment-versus-milestone payments is shifting as well. This means that entrepreneurs in the space seeking to exit via a strategic partner are likely to see an uptick in exit opportunities via this type of deal model. In turn, patients will see more drugs make it to market, and investors will see a significantly less volatile industry. All-in-all, this is a trend that is bound to solidify its position as an industry standard.
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