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March
12, 2007--Panelists
at this year’s Sachs Investing and Partnering in Biotech
Forum were in firm agreement that early-stage
biotechnology products are still not getting sufficient
funding in the US, but they tried to offer a variety of
solutions to that problem.
The Forum was held in Boston on Monday, March 12.
Changes
in the capital markets have made it less likely that
venture funds will ever again back early-stage companies
at anything approaching the level seen in the 1990s.
While the problem is very much a local one, “The
US is a crucial world leader and unless we figure it out
in this country, the innovation will go elsewhere,” said
Jeremy Levin, global head of strategic alliances at the
Novartis Institutes for Biomedical Research.
Novartis
has taken action, creating a new funding vehicle called an
Option Fund. The
Fund, which is already in place, is designed to give
start-up companies venture backing.
“Where we find great science, we will lead a
funding round and get top-tier venture funds involved,”
said Levin. Novartis
will take an option on one of the start-up’s clinical
programs, he explained.
No
firms have been funded through the Option Fund yet, but
“deals are imminent,” Levin said.
Novartis will seek venture partners who were
founded with the express intention of funding early-stage
companies. “Those
who have raised funds for this purpose and want to
continue in this business,” he said.
“Hopefully, more pharmaceutical companies will
follow our lead.”
Can
such innovations help?
“When we are funding companies that venture
capitalists won’t support, are we just founding
businesses that won’t survive?” asked Maggie Flanagan
LeFlore, head of AstraZeneca’s R&D Ventures.
Venture
capitalist Bill Mills applauded Novartis’ approach,
saying “Just because venture capitalists don’t invest
in something doesn’t mean it’s not worth investing
in.” He
pointed out that while venture capitalists are not helping
to found many early-stage companies, they are interested
in new ways of structuring deals.
Many funds are simply too large now to invest in
early-stage companies, and most investors want a much
quicker return on their money than they used to expect.
Comerica
Bank’s Janice Bourque suggested that venture
capitalists, pharmaceutical companies, and academia might
have to come together to create new funding platforms for
start-ups. “Academia
needs to put more endowment money behind these
companies,” she said. Such a plan would require
competitors to cooperate, “And we would need to change
some expectations,” she said.
LeFlore
pointed to the spate of recent “$400 million plus”
deals and asked “Do these prove the drought is over and
the cycle is coming around?”
Panelists agreed, however, that most of these deals
were limited to technologies that represent major steps
forward, such as siRNA or novel antibody engineering
approaches. Another winning tact is to target medical
arenas where there is still tremendous unmet need, such as
hepatitis C.
“Companies
make these big deals for a variety of reasons,”
explained Levin. He
suggested that the next rally is less likely to be led by
big pharmaceutical companies.
“I’d be watching the mid-cap biotechnology
companies,” he said.
“Many of them have reached their maximum
potential with the pipelines they have.”
One
thing is for certain: “If no one invests in early-stage
companies, there are no late-stage products later on,”
pointed out Christopher Mirabelli, a venture capitalist
who spoke during a second panel at the Forum.
“But today’s start-ups need to be much more
capital efficient and put the money they get into
advancing the science.”
Copyright
2007, Cambridge Healthtech Institute. All Rights Reserved. |
