Wondering what considerations need to be thought of when seeking venture capital for your company? Would moving into a partnership with another company be a good idea?
To address these questions, the Janssen Labs Movers and Funders in Life Sciences event was held on Thursday, September 19th at Janssen Research & Development’s La Jolla-based West Coast Research Center. The panel discussion was lively in a packed room.
The following is a paraphrase of the speakers, and should not be considered verbatim quotes.
Kirn (moderator): When you look to make an investment, what are the common themes you look for? What stage of development are you looking for in a company?
Alex: I look for a motivated team, who are experts in their field. I want votes of confidence: have you convince good people to join your board? For clinical diagnostics in costly disease areas you need to ask the question: which patients are more expensive than others? Very difficult to get insurance to pay for the test; does your test determine which patients need the costly treatment?
Follow up question: When you look at luminaries on board—how involved/valuable are they?
Alex: I look for luminaries who are selective about which boards they choose; I do not want to see them on competing company boards.
Kim: I like to find a diagnostic test looking for investment with a solid management team. Have they considered the following questions: how will this test impact patients? With diagnostic investments, companies need to consider where their test fits in the clinical flow. Is the test actionable? Will it change treatments? In areas of unmet need such as orphan drugs, will they get all the way through to venture dollars to Proof of Concept? On the device side, the US lags behind the rest of the world. Most device companies are already commercializing in some area of world.
Follow up: What do you look for in the management team that excites you?
Kim: I look for emotional IQ; someone who understands that a venture person is not trying to take over business; someone who understands their company strengths and weaknesses. An individual with real commitment, who is willing to go to all ends to make something work, who will listen to all people, who is fun to be with.
Alex: I look for entrepreneurs who are crazy. I want them so single-mindedly focus on getting their company to grow, that the CEO will run through walls to keep the company going.
Rekha: I look for people solving gaps in a pipeline at an early stage of development. I want someone who is looking at option deals. I like them to be capital efficient; ready to launch in 3 to 4 to 7 years, as patents expire in our portfolio.
Angele: Part of Genentech partnering focuses on early development. Genentech likes to look at things early. We are looking for good science, meaning good data. What is the “fit” within a therapeutic area? What is the modality? If we are collaborating with them, what are their capabilities, what is the intellectual property status? All these questions are very important for therapeutic development.
Angele: As a side bar, it is nice to have a companion diagnostics to go with therapeutics. However, you do not have to have companion diagnostic with therapeutics. If you do go the companion diagnostic route, be sure to have your rationale ready. Why are you proposing this? To get the right drug to the right people? Will there be reimbursement for this test?
Alex: GE does not invest in companion diagnostic companies; therapeutics are more lucrative. Pharma wants to partner with large companies like Qaigen to develop companion diagnostics.
Question: For the clinical proof of concept, what is the definition necessary for partnership or acquisition, specifically in the oncology field?
Angele: You at least have to have animal data.
Rekha: Its complicated, depends on mechanism and randomized control data in a Level 2 clinical trial. In a fast moving field this is not always clear before investment becomes necessary.
Kim: In startup oncology companies generating randomized phase 2 data may require $40 to $50 million. You are unlikely to get proof of concept before acquisition is necessary.
Question: What scares you away?
Alex: If a company claims there is no competition in the market space. Either what they are doing is not important, or they have not done their due diligence. I also do not want to hear how they plan on exiting the company. I want them focused on building the company, not exiting the company.
Rekha: Downplaying big risks, rather than being up front, can make a company look less credible.
Angele: Companies need to know the audience to whom they are pitching. Also, not showing data does not build your case.
Kim: Some management teams are too constrictive in reducing dilution. There is no real meeting of the minds. Illumina, for example, raised money and then added as much value as possible.
Question: What partnerships did not work out?
Alex: A competitor of Epic, was looking at circulating cells to find metastatic cancer cells. It was combined with another company that was also floundering. Unfortunately, the two technologies were not synergistic. Putting together two failing companies did not work.
Kim: One mistake is not understanding fundamental questions up front. For example, the drug novalar was designed to reverse dental anesthesia. Unfortunately there was no commercial traction; the company folded without a venture return. Investors should have figured this out beforehand. When do you stop throwing good money after bad?
Angele: When you do drug discovery deals you are working in speculative science. Sometimes you do not find targets. With transformative therapeutics, there will be some failures.
Question: What is driving the explosion on biotech funding? How long will it last?
Rekha: Historically these windows last 9 to 12 months; eventually it will shut down. Biotech companies have options, can go public, and do not have to deal with pharma companies.
Kim: This is a great climate providing wonderful optionality to take company public.
About the panelist and moderator
Alex de Winter, PhD works in information technology (IT) and is the director of GE Ventures, Healthcare. Previously he has worked at 454 Life Sciences, Pacific Biosciences, and Mohr Daivdow among other places.
Kim Kamdar previously worked for Novartis; she is now a partner at Domain Associates, a venture capital group. She now uses her experience with small molecule drug discovery to identify promising companies with cutting edge therapeutics and companion diagnostics.
Rekha Hemrejani comes at things from an investment banking angle. She has worked for Exelixis by raising funds through business development deals. Moving to Onyx, she was the Head of Licensing and Mergers and Acquisitions. Onyx was recently acquired by Amgen. Her efforts focus on licensing efforts and building a pipeline of new drug candidates.
Angele Maki moved from Genetech as a Senior Manager in Business Development to Bristol Meyer Squibb. Her areas of expertise includes antibody therapeutics as well as in- and out-licensing of technology platforms to engineer antibodies.
David Kirn moderated the discussion. Kirn is a J&J Innovator Awardee; a clinical scientist that knows both academia and business, he has started worked with both Onyx and Generex. He likes working on new companies and looking for business development deals.
DeeAnn Visk, Ph.D., is a freelance science writer, editor, and blogger. Her passions include cell culture, molecular biology, genetics, and microscopy. DeeAnn lives in the San Diego, California area with her husband, two kids, and two spoiled hens. You are welcome to contact her at firstname.lastname@example.org