Friday 5 October 2012

The inside track: How can biotechs get investment?

This week Jamie and I swapped the grey streets of the City for the grey skies of Zurich, where we attended the Sachs Associates 12th Annual Biotech in Europe Investor Forum. Overall the tone was surprisingly upbeat – but perhaps inevitable, given the audience. It is some time since I have heard the biotech sector described as ‘thriving’. But, the discussions on investment, from the panellists in both VC and corporate venture funds, raised some interesting points.
Overall there is a trend towards M&A and collaborations in the sector; and while VC investments are on the decline, corporate investment is supporting financings in the sector to a degree. Additionally, the IPO market was described as ‘thawing’: over the past 12 months eight out of the 26 IPOs in the sector globally were on European markets.
One of the most promising projections was that by 2016, 70% of products on the market will have originated from biotech companies, so biotechs are clearly developing good products and Pharma can see the value.
While Pharma R&D budgets are slashed, biotech is finding its influence growing and is actually starting to drive the industry. But to drive the industry, there must be investment, and investors are understandably cautious.
So what should a biotech do to increase its chances of investment and, therefore, success?
To ensure commercial viability of a product, first and foremost: “There must be significant patient benefit, even if this increases the level of risk,” said Anja K├Ânig of Novartis Venture Funds, adding that “good management absolutely makes the difference between success and failure.”
This sentiment was echoed by her fellow panellists, along with the need for innovation and capital efficiency. Carole Nuechterlein of Roche Venture Fund and Debbie Harland of SR One both stressed the importance of the investor syndicate for several reasons. Investor interests must be aligned so it is preferable to get in together early and be able to take the Company through any further fundraisings to an exit. In addition to the mechanics of the deal, the personalities are extremely important and team work is essential.
“Companies and their investors will go through tough times and biotech is a small industry built on relationships and trust, in terms of both individuals and funds,” said Anja. This all plays into ensuring that everyone has the same objective – some of the panellists said at this point, that there were some funds with which they would not co-invest.
Finally, and perhaps most importantly for successful drug discovery companies, “do the killer study!” said Debbie. “Show if the product is a no-go, and stop it if it is not panning out.”

Simone Elviss

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