Thursday, December 24, 2009
Monday, September 28, 2009
Branding Emerging Bioscience Companies to Attract Investors
Sasha Strauss, Managing Director at Innovation Protocol, gave a very interesting presentation at the SoCalBio Investor Conference in Santa Monica. He argues that even start-ups need to consider a branding strategy right from the start. Given the limited capital, does it make sense for a start-up to spend money on branding? Would VCs interested in investing even care about a company's brand?
To be honest, branding usually does not come to mind when evaluating an investment opportunity. Management, business model, technology, etc. are probably more important. While I don't argue that branding is important, especially as a technology gets closer to market, if there are issues with any of the other criteria, branding becomes irrelevant.
To be honest, branding usually does not come to mind when evaluating an investment opportunity. Management, business model, technology, etc. are probably more important. While I don't argue that branding is important, especially as a technology gets closer to market, if there are issues with any of the other criteria, branding becomes irrelevant.
Monday, September 21, 2009
Investing in People, Not Products
It's a cliche that "VCs invest in people first and foremost." VCs will argue that the an experienced management team knows what it takes to commercialize a technology. But does it make sense to invest in entrepreneurs with out a technology or product? Apparently, VCs think so.
Clovis Oncology raised $145 million earlier this year without a single product to commercialize. Clovis' management team consists of former executives from Pharmion, which was acquired by Celgene in 2008 for$2.9 billion . Clovis plans to acquire or license and develop oncology products. Investors include Domain Associates, New Enterprise Associates (NEA), Versant Ventures, Aberdare Ventures, Abingworth, Frazier Healthcare Ventures, and ProQuest Investments. ProjeX Therapeutics, which is backed by Sofinova, Ascalon, and Kineta are also pursuing similar acquisition/licensing models.
Given the risks and costs of developing drugs, investing in companies pursuing acquisition/licensing makes sense. Why invest in five separate companies with five seperate products and five management teams, when you can get a portfolio of products all managed by one, experienced management team. Investors still get a say in what products/technologies to license/acquire as long as they have board representation. It's simply much more efficient and cost-effective.
I think we'll start to see more and more companies like Clovis get funded in the future. It will be interesting to see how successful these companies become. Unfortunately, if this trend continues, the individual entrepreneur will have an even harder time raising capital.
Clovis Oncology raised $145 million earlier this year without a single product to commercialize. Clovis' management team consists of former executives from Pharmion, which was acquired by Celgene in 2008 for
Given the risks and costs of developing drugs, investing in companies pursuing acquisition/licensing makes sense. Why invest in five separate companies with five seperate products and five management teams, when you can get a portfolio of products all managed by one, experienced management team. Investors still get a say in what products/technologies to license/acquire as long as they have board representation. It's simply much more efficient and cost-effective.
I think we'll start to see more and more companies like Clovis get funded in the future. It will be interesting to see how successful these companies become. Unfortunately, if this trend continues, the individual entrepreneur will have an even harder time raising capital.
Wednesday, September 16, 2009
Next-Gen Genome Sequencing Attracting Investors
Despite the financial conditions, companies developing next-generation genome sequencing technology have been able to raise significant amounts of money. In August, Complete Genomics raised $45 million while Pacific Biosciences raised $68 million. Don't forget that Pacific Biosciences just raised $120 million in 2008. Both companies are pursuing the "holy grail" of genome sequencing, being able to sequence an entire human genome for less than $5,000. Keep in mind that the first human genome (Human Genome Project) took 13 years and $3 billion to sequence. See the recent article in Forbes for more on Pacific Biosciences.
While some people argue that sequencing the entire genome is not necessary, especially since 90% of the genome contains "junk" DNA, for less than $5,000, it doesn't really matter. The initial customers for genome sequencing technology will likely be drug companies for use in clinical trials, but as costs decrease, consumers will eventually become the customer. Look at the success of companies like 23andMe.
A number of next-next-generation companies, pursuing complete genome sequencing for less than $1,000, are chasing the tails of Complete Genomics and Pacific Bioscienses. They include Halcyon Molecular, Genovoxx, Lucigen, Sequenom, Oxford Nanopore Technologies, ZS Genetics, Anvantome, and VisiGen.
While some people argue that sequencing the entire genome is not necessary, especially since 90% of the genome contains "junk" DNA, for less than $5,000, it doesn't really matter. The initial customers for genome sequencing technology will likely be drug companies for use in clinical trials, but as costs decrease, consumers will eventually become the customer. Look at the success of companies like 23andMe.
A number of next-next-generation companies, pursuing complete genome sequencing for less than $1,000, are chasing the tails of Complete Genomics and Pacific Bioscienses. They include Halcyon Molecular, Genovoxx, Lucigen, Sequenom, Oxford Nanopore Technologies, ZS Genetics, Anvantome, and VisiGen.
Thursday, August 27, 2009
Highlights from California Bioscience Business Roundtable
A number of topics was discussed at the recent California Bioscience Business Roundtable including the venture financing environment, follow-on biologics (biosimilars), and health care reform.
Doug Kelly, MD from Alloy Ventures gave a pretty bleak outlook on venture financing; he even used the word "Armageddon" in describing the current environment. I was actually surprised to hear that he was not looking at any biopharmaceutical drug investments at the moment. Uncertainty surrounding biosimilars regulation and the FDA approval process were making it difficult to make any big bets. Adding to that is the financial crisis that is limiting the ability of VCs to make investments. Bill Gurley from Benchmark Capital has a great explanation of how the financial environment is impacting VC on his blog. I thought I was relatively pessimistic but Doug Kelly really depressed me!
Lori Reilly from PhRMA and Sam Youngman, White House correspondent from The Hill, discussed health care reform. The Democrats have not been doing a good job advocating health care reform apparently. Although, the recent passing of Senator Ted Kennedy might be a catalyst that galvanizes the Democrats. President Obama should start making an even bigger push for reform as a result. It's difficult to see whether any legislation will get passed by the end of the year given the amount of time Congress has left, but eventually, a compromised bill that doesn't make anyone happy will get signed. If the Democrats cannot get something signed soon though, the opportunity for health care reform will eventually die, similarly to what occurred during the Clinton administration.
Geoff Eich, Director of Regulatory Affairs at Amgen, highlighted the success of follow-on biologics regulation in the EU. For example, interferon biosimilars had different characteristics than branded interferon and caused relapses in patients. Ultimately, the EU rejected the interferon biosimilars. Human growth hormone (hGH) biosimilars suffered problems with side effects initially until it was discovered that there were problems with the purification process. Once the problem was solved, EU regulators approved hGH biosimilars. These examples clearly show that there will be a number of technical hurdles for biosimilar manufacturers to overcome. Just imagine how difficult it will be to manufacture antibodies if it's this difficult to do more simple proteins.
Doug Kelly, MD from Alloy Ventures gave a pretty bleak outlook on venture financing; he even used the word "Armageddon" in describing the current environment. I was actually surprised to hear that he was not looking at any biopharmaceutical drug investments at the moment. Uncertainty surrounding biosimilars regulation and the FDA approval process were making it difficult to make any big bets. Adding to that is the financial crisis that is limiting the ability of VCs to make investments. Bill Gurley from Benchmark Capital has a great explanation of how the financial environment is impacting VC on his blog. I thought I was relatively pessimistic but Doug Kelly really depressed me!
Lori Reilly from PhRMA and Sam Youngman, White House correspondent from The Hill, discussed health care reform. The Democrats have not been doing a good job advocating health care reform apparently. Although, the recent passing of Senator Ted Kennedy might be a catalyst that galvanizes the Democrats. President Obama should start making an even bigger push for reform as a result. It's difficult to see whether any legislation will get passed by the end of the year given the amount of time Congress has left, but eventually, a compromised bill that doesn't make anyone happy will get signed. If the Democrats cannot get something signed soon though, the opportunity for health care reform will eventually die, similarly to what occurred during the Clinton administration.
Geoff Eich, Director of Regulatory Affairs at Amgen, highlighted the success of follow-on biologics regulation in the EU. For example, interferon biosimilars had different characteristics than branded interferon and caused relapses in patients. Ultimately, the EU rejected the interferon biosimilars. Human growth hormone (hGH) biosimilars suffered problems with side effects initially until it was discovered that there were problems with the purification process. Once the problem was solved, EU regulators approved hGH biosimilars. These examples clearly show that there will be a number of technical hurdles for biosimilar manufacturers to overcome. Just imagine how difficult it will be to manufacture antibodies if it's this difficult to do more simple proteins.
Wednesday, August 19, 2009
AARP Got Follow-on Biologics Analysis Wrong
As the health care reform debate rages, I have been been looking at the potential impact of follow-on biologics (or biosimilars) on the drug industry. I came across an article from the AARP Rx Watchdog Report (May 2009) that made an argument in favor of follow-on biologics regulation. Granted, the AARP is not necessarily impartial, but the analysis from the AARP's Public Policy Institute is a bit misleading.
The AARP compares the treatment costs for small-molecule drugs and biologics and argues that biologics are too costly when used to treat the same condition, such as rheumatoid arthritis or multiple sclerosis. This argument can be misleading because the AARP does not compare the efficacy and safety of small-molecule drugs vs. biologics. It's like comparing an old Pinto to a brand new Mercedes Benz and saying that the Mercedes is too expensive. Of course, people are willing to pay more for the Mercedes because there is more value in such a car, as should insurers for better treatments.
The AARP also argues that sales of the top selling biologics more than cover the average cost of developing a biologic ($1.2 billion). First of all, the sales have to cover the development costs in addition to other costs. Otherwise, drug companies would not be in business for long. Secondly, it's unfair to cherry pick only the top selling drugs; it's not an apples-to-apples comparison.
I agree with the AARP that biologics have (to a certain extent) contributed to rising health care costs. I'm not a pricing expert, but some biologics (not all) do seem to be overpriced. It's obvious that rising health care costs are unsustainable. I also believe that follow-on biologics regulation is inevitable. Refer to the FTC findings on follow-on biologics competition for more analysis.
The AARP compares the treatment costs for small-molecule drugs and biologics and argues that biologics are too costly when used to treat the same condition, such as rheumatoid arthritis or multiple sclerosis. This argument can be misleading because the AARP does not compare the efficacy and safety of small-molecule drugs vs. biologics. It's like comparing an old Pinto to a brand new Mercedes Benz and saying that the Mercedes is too expensive. Of course, people are willing to pay more for the Mercedes because there is more value in such a car, as should insurers for better treatments.
The AARP also argues that sales of the top selling biologics more than cover the average cost of developing a biologic ($1.2 billion). First of all, the sales have to cover the development costs in addition to other costs. Otherwise, drug companies would not be in business for long. Secondly, it's unfair to cherry pick only the top selling drugs; it's not an apples-to-apples comparison.
I agree with the AARP that biologics have (to a certain extent) contributed to rising health care costs. I'm not a pricing expert, but some biologics (not all) do seem to be overpriced. It's obvious that rising health care costs are unsustainable. I also believe that follow-on biologics regulation is inevitable. Refer to the FTC findings on follow-on biologics competition for more analysis.
Wednesday, August 12, 2009
Top Life Science VCs
FierceBiotech just released a list of "top" life science VC firms. The article includes descriptions and different deals of each firm. It's a good resource to learn more about the life science VC firms listed, in particular what types of therapeutic areas and at what stage of development they are focused on. The definition of "top" here can be a bit misleading though. I believe that the term "top" used in the article really means most active. Nonetheless, all of the firms listed have a very good track record of making investments. There are many more VC firms that invest in life sciences, so entrepreneurs looking for financing shouldn't limit themselves to this list only.
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