A Case for Preclinical Biopharma Companies

Despite the talk about how later-stage companies are being more favored, Jeff Himawan from Essex Woodlands Health Ventures made a very good case for preclinical stage biopharmaceutical investments at the recent LARTA Life Sciences Venture Forum. Concert Pharmaceuticals recently announced a partnership with GSK for three preclinical programs potentially worth over $1 billion in milestone and option payments. The lead compound, CTP-518, is a novel HIV protease inhibitor expected to enter Phase I trials the second half of 2009. Chroma Therapeutics also entered into a partnership with GSK for four discovery and development programs to identify small molecule therapeutics, including a macrophage-targeted HDAC inhibitor program for inflammatory disorders such as rheumatoid arthritis. The partnership is also potentially worth more than $1 billion. Last year, Daiichi Sankyo acquired U3 Pharma AG for $235 million. U3's lead program, which is partnered with Amgen, is a fully-human HER-3 monoclonal antibody that will start clinical trials by the end of the year. Obviously, investing in preclinical programs are risky, but with most investors focusing on later-stage opportunities, there might be some good bargains at the early-stage.

Strategic Investors Can Be White Knights

Despite the current financing crisis, strategic investors are still doing deals. Eli Lilly and Amylin recently entered into a licensing agreement for the rights to Altea Therapeutics' exenatide transdermal patch technology. The deal includes an upfront licensing payment, regulatory and sales milestones of up to $46 million, and royalties. Lilly and Amylin also made an equity investment in Altea. My friends in business development at biopharma and medical device companies have said that they are still looking to do deals, but they also know that valuations are lower and it's a buyers market. No point in rushing into a deal when they know that a startup doesn't have too many alternatives to financing.