The FOBIP Alumni Network Executive Committee, New York State Center for Biotechnology, JPMorgan Chase & Co., and Connecticut Innovations Present:

Financing Biotech in 2021

Executive Summary

The goal of this event is to discuss some of the various sources of capital available to emerging pharma and biotech companies and the current trends affecting the market. We have established a panel of investors ranging from angels to investment bankers who will explain their role in financing companies in the healthcare sector. The panel discussion will touch on current technologies attracting investment, promising new sectors, selection mechanisms for targeting companies for investment, factors contributing to successful exits, and upcoming challenges facing the industry in the future. Click Here for Speaker’s Bios

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By Mathew A. Engel

Day 1 Summary: Venture Capital Financing, Intellectual Property Management, and Emerging Business Models

The 2009 Life Science Summit took place from September 23 to 24, 2009 at the Hyatt Regency Hotel in Happauge, NY. There were hundreds of attendees representing the biotech industry and academia from all over the state. The industry attendees showed a diverse segmentation with strong representation from university technology transfer offices, law firms, venture capital firms, medicine, privately held biotech companies, mid and large-cap pharmaceutical companies. As a graduate student and alumni of the Fundamentals of the Bioscience Industry Program, I spent most of my time talking with accomplished professionals from successful companies who had experience commercializing technology,  raising capital, or evaluating new ventures. Below I will summarize my findings from the most interesting sessions throughout the first day of the summit. Hopefully, in the near future I will publish a follow-up covering day 2.

What Does it Take to Build a Biotechnology Company in Today’s Environment

The opening plenary session was a great way to spark the crowd’s interest and attention. In the back of my mind, I am always thinking about starting a biotechnology company and therefore always eager to hear advice from seasoned industry veterans. These individuals, especially those who volunteer as panelists or speakers are often willing to share their knowledge and offer some deep insight to beginners. In this session the speakers focused on how to raise capital. Those who are evaluating your proposal will be thinking “where is the technology” and “where is the project”. It is suggested that you network and these connections will lead you to investors who can also guide you into small collaborations. Their role is to keep these smaller companies on track. Currently, most of the demand is for products in late stage clinical trials, in this space demand remains high. Pharma is limiting their investment to certain therapeutic areas. The days of massive deal for a new platform technology are behind us. The huge investment in genomics with no products to show for it was cited. Most deals come about because someone knew someone. It’s not just writing a business plan and patents (though that is still required!). Venture capital (VC) will only stay in for a very short time. Pharma will only jump in Phase II. VC largely invests in people they know. Mailing the best business plan in the world to VCs randomly will get you nothing. Your job is to meet and know people who may be interested in investing. For example, some of the people on the panels at the Summit are Angel investors. Remember to “pick your partners”. The entrepreneur better be prepared to invest. It is important to consider if there are there other options besides a start-up? Many of the panelists, knowing what they do now, would not have chosen to start their own company. You’ve “got to be ignorant to go do it” they claimed. Today, businesses are focusing on staying extremely lean – infrastructure is minimized, reducing the amount of money necessary to operate. However, a company can only “be so lean” and achieve its business goals. VC is not going to be the “sugar baby” that’s going to take the company all the way through. There are drug discovery and medical chemistry labs on campus for basic R&D work. A good university should have a funding pool designated for small companies coming out of academia. One of the panelists spent time describing the experience of his friend who was trying to raise capital. His friend took ‘no’ as just another opportunity to go back to the VC. However, it’s good to get someone with a lot of experience and put together a team of people. “Build a culture and your company”. Medical devices are a great area to get into now. Diagnostic tools are a “neat area to be going into”. Get management in – VC looks at the management team. Get help and advice from your VC. Donald L. Drakeman, Venture Partner at Advent Ventures previously ran a company and was now a VC. His motto is “management, management, management”. What makes great management someone asked? “Management that will step aside”.

Is the VC funding Model Broken?

Mary C. Tanner, Managing Director at Peter J. Solomon & Co. and Maggie Flanagan LeFlore, Managing Director at MedImmune Venture Inc. were two of the most outspoken panelists during this business workshop. The panel delivered an overview of the VC industry covering current trends and their investment strategies. VC’s are adaptable and clever. They are in the business of building private companies to be sold. Their goal is to reach a deal with your company, in which payments are made as milestones are met. LeFlore completed 18 deals in the last year (given as a benchmark). Private companies are easier to sell. Fewer and fewer big pharma are in the market for these types of investments. There has been a fundamentals shift in exit strategy. Survival has followed those most adaptable to change. There are many exit strategies available. How does one get the VCs interest, a participant asked? Early stage risk is notorious, your goal should be to find little pockets of money to move things forward. The faculty members on your team better be well known (i.e. published in Nature, Science, Cell..). One of the panelists, E. Jonathan Soderstrom, Managing Director of the Office of Cooperative Research at Yale University had brought a compound to the attention of Lily and they asked for a proof of concept in humans! He did not even have POC in animals. The message is that you cannot expect Lily or Genetech to fund your development costs when the product is highly experimental.