Stability at the Top: A Look at Top Biotech VC Deals from 2007-2010

By Jeremy Grushcow

FierceBiotech published the top 15 biotech VC deals of 2010 last week, measured by dollars invested. Since they noted an overall uptick in investments in 2010, it seemed like a worthwhile time to look back. Here’s what U.S. VC investment in biopharma and medical devices looked like from 2007 to 2010 (normalized to 2007 levels):

Not unexpectedly, a huge decline between 2007 and 2009, though not as big as the overall decline in VC investments. Here’s the really interesting part — the average amount invested (±1σ) among the top 15 deals each year:

Remarkably stable. Even during a period of steeply declining investment there will be standouts that generate real excitement, proving that as FierceBiotech said in 2008 ”[g]ood science will attract funding in any market.”

It’s not a surprise that good ideas always get some funding, but why do the top investees always attract the same amount?  The price of admission to the top 15 between 2007 and 2010 has ranged only between $39 and $42 million.

It must be that (once a concept reaches a certain stage) the amount of money needed to really propel a life sciences company to success is constant — apparently an average of $50 – $60 million — and recognizing that, VCs will fund their best prospects to that level even at the expense of other investments.  So the next time you’re contemplating a $10 million C round, keep in mind that you’re more than two standard deviations off the mean investment made when VCs really mean it. It’s an interesting idea the other way too: Pacific Biosciences, which IPO’d in the middle of its range at $16/share last October, was the top deal twice in four years (including the +2.4σ variant of $109m in 2010). It’s currently trading at $15.74, giving it  a market cap of $831.43 million, just over double the reported $370 million of VC that it raised prior to the IPO.

Check out FierceBiotech’s list of the top VC investments from 2010, 2009, 2008 and 2007 and apply your own 20:20 hindsight to your heart’s content. Also, keep your fingers crossed that a 3% increase stops feeling like such a victory when we see the 2011 data.

Re-posted from the Cross-Border Biotech Blog

Jeremy Grushcow is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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Top Three Reasons why Biotech Companies should use Social Media

By Jeremy Grushcow

Tech startups use social media avidly [rabidly?], but biotech companies? Not so much.  Biotech companies should be blogging, tweeting and linking in like mad, though.  Here’s why:

1. Your customers (pharma companies) do it. More and more pharma companies are active in social media. Take a look at this article in the December issue of Life Science Leader (h/t @FiercePharma) or read the Dose of Digital blog any day of the week and you’ll be directed to interesting information about how products are being developed, tested and marketed. These are things you need to keep in mind as you move through your own product development process. Also, lots of pharma folks are on LinkedIn, so if you are as well, you’ll maximize your ability to reach out through personal connections when you’re building a constituency for your partnering deals.  Here’s my Twitter list of BioPharma news and analysis.
2. Your investors do it. Check out this Twitter List of Canadian VCs, Angel investors and other funders.  Look at what they’re talking about, and you’ll see you don’t have to tell people what you ate for lunch (or disclose your latest lab results) to convey that you’re doing something interesting that other people are interested in.  Check out the CVCA’s blog, Capital Rants or the Maple Leaf Angels blog.  In Toronto? Stop in at the MaRS blog or the R.I.C. blog to see where investors will be and what they’re thinking about.
3. Your peers (other startups) do it. If you’re not participating in online conversations, you’re missing a world of good advice and perspectives.  Click over to Rick Segal’s blog or  StartupCFO, Mark MacLeod’s Blog. It doesn’t really matter that these guys aren’t involved in biotech. Lots of startups are facing similar issues to yours — funding, staffing, etc. and getting out of the biotech bubble from time to time can be a good thing.  Plus, being at a startup is isolating, particularly in biotech with its strong incentives to run a virtual company, so go online to find peers, mentors and other resources.

If this all sounds reasonable, but you’re still skeptical, or not interested, then find someone in your organization who’s excited about it, regardless of their actual job, and set him/her loose.  [Not totally loose, of course. Common sense is critical online because it’s hard to hit “undo” on the web, and appropriate confidentiality remains key to biotech ventures.  But all your people have common sense and discretion, right?]

We’ll be keeping an eye out for biotechs and other bioscience companies that are making good use of social media as part of our Biotech Trends series this coming year.  Other suggestions for 2010 biotech trends?  Let us know.

Re-posted from the Cross-Border Biotech Blog

Jeremy Grushcow is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

The RIC blog is designed as a showcase for entrepreneurs and innovation. Our guest bloggers pro vide a wealth of information based on their personal experiences. Visit RIC Centre for more information on how RIC can accelerate your ideas to market.

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Social Media for Biotechs: Building momentum toward critical mass

Re-posted from the Cross-Border Biotech Blog

By Jeremy Gruschow

In December, I wrote a post listing the top 3 reasons biotech companies should use social media and noted that we would be following adoption and use of social media by biotechs as one of our Trends in 2010.

The 2010 Dose of Digital Dosie Awards held voting for finalists this week, including for Best Facebook Page, Best YouTube Channel, Best Twitter Feed and Best Blog (in a number of categories).  The pharma and healthcare social media wiki that Dose of Digital maintains is a growing list, but still doesn’t include very many biotech companies.

So, why haven’t we seen more social media among biotechs?

Is it fear of FDA admonishment?  This blog post/video clip from Future of Pharma spends some time blaming the FDA’s evolving social media policy.  If the FDA were the problem, though, pharma companies wouldn’t be moving into social networking either.  But they are.

Is it fear of creating reporting obligations because of casual mentions of adverse events?  Looking at one community shows that a significant number of reportable adverse events could be unearthed; but Dose of Digital doesn’t view this as a risk or an excuse for avoiding social media, and explains why here.

The real answer is simpler: the value of a social network is the network. Until a critical mass of biotechs seed a social media presence, most other companies will not realize sufficient value in being online themselves.

The critical mass is starting to build: Michael Gilman, the Founder/CEO of Stromedix is on Twitter, as is Richard Pops, the CEO of Alkermes.  On Twitter, they interact with investors, journalists and patient communities; which points out that it’s not just a critical mass of other biotechs that creates social media value.

For example, the HIV Vaccine Trials Network (HVTN), at Fred Hutchinson Cancer Research Center in Seattle, is running a series of ads on Facebook to recruit patients to its trials; one of their sites is using Craigslist and individual patients are reporting about their experiences with the trials on blogs and on Facebook.  The Canadian Breast Cancer Foundation and the McGill University Health Centre are also using social media for outreach.

My bottom line: social media will be an increasingly common tool for biotech companies in business development, corporate communications, patient recruitment and for employee recruitment and development.  The sooner you start the more expertise you’ll have.

Jeremy Grushcow  is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

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Top three reasons why Biotech Companies should use Social Media

Re-posted from the Cross-Border Biotech Blog

By Jeremy Grushcow

Tech startups use social media avidly [rabidly?], but biotech companies? Not so much.  Biotech companies should be blogging, tweeting and linking in like mad, though.  Here’s why:

1. Your customers (pharma companies) do it. More and more pharma companies are active in social media. Take a look at this article in the December issue of Life Science Leader (h/t @FiercePharma) or read the Dose of Digital blog any day of the week and you’ll be directed to interesting information about how products are being developed, tested and marketed. These are things you need to keep in mind as you move through your own product development process. Also, lots of pharma folks are on LinkedIn, so if you are as well, you’ll maximize your ability to reach out through personal connections when you’re building a constituency for your partnering deals.  Here’s my Twitter list of BioPharma news and analysis.
2. Your investors do it. Check out this Twitter List of Canadian VCs, Angel investors and other funders.  Look at what they’re talking about, and you’ll see you don’t have to tell people what you ate for lunch (or disclose your latest lab results) to convey that you’re doing something interesting that other people are interested in.  Check out the CVCA’s blog, Capital Rants or the Maple Leaf Angels blog.  In Toronto? Stop in at the MaRS blog or the R.I.C. blog to see where investors will be and what they’re thinking about.
3. Your peers (other startups) do it. If you’re not participating in online conversations, you’re missing a world of good advice and perspectives.  Click over to Rick Segal’s blog or  StartupCFO, Mark MacLeod’s Blog. It doesn’t really matter that these guys aren’t involved in biotech. Lots of startups are facing similar issues to yours — funding, staffing, etc. and getting out of the biotech bubble from time to time can be a good thing.  Plus, being at a startup is isolating, particularly in biotech with its strong incentives to run a virtual company, so go online to find peers, mentors and other resources.

If this all sounds reasonable, but you’re still skeptical, or not interested, then find someone in your organization who’s excited about it, regardless of their actual job, and set him/her loose.  [Not totally loose, of course. Common sense is critical online because it’s hard to hit “undo” on the web, and appropriate confidentiality remains key to biotech ventures.  But all your people have common sense and discretion, right?]

We’ll be keeping an eye out for biotechs and other bioscience companies that are making good use of social media as part of our Biotech Trends series this coming year.  Other suggestions for 2010 biotech trends?  Let us know…

Jeremy Grushcow  is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

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Nobel and Gairdner winners discuss Biotech and Pharma’s pipeline problems

Re-posted from the Cross-Border Biotech Blog

By Jeremy Grushcow

As part of the  Gairdner Foundation’s 50th anniversary celebrations recently, there was a breakfast panel with a lot of brainpower (even for MaRS). Cal Stiller led a discussion by David Baltimore, Phillip Sharp and Corey Goodman who between them have three Gairdner awards and two Nobel prizes.

These top-notch scientists also have truly impressive corporate expertise: Board members of Amgen, Biogen and Limerick BioPharma. They turned their attention to “unclogging the pipeline.”

David Baltimore discussed reasons we’ve seen fewer approvals:

1. Higher regulatory safety barrier.
2. Low-hanging fruit is gone. A lot of targets are for diseases that are not fatal in the short term, which (see #1) creates a high safety barrier. Also, he says the molecular targets are harder.

Baltimore also identified potential areas of success: a subject area (immunotherapy) and a structural area (UCLA medical center’s translational research institute).

Phillip Sharp talked about the changing structure of early stage and translational funding.

• VC is re-thinking their model, but pharmas are reaching out earlier in the pipeline with incubators and academic outreach; and there is more public funding available to move products further along the pipeline.
• Trends he identifies: personalized medicine (patient-driven with $1000 genome); and a huge role for engineers and incremental improvements.

Corey Goodman starts with some stats:

• current success rate is closer to 1 in 25, not the 1 in 10 number still cited from the 1990’s
• cost of a new drug (R&D dollars divided by successful approvals) around $3 billion.

Nevertheless, Goodman sees upside due to huge unmet medical needs, deficient pipelines and vast academic output.

Panel discussion:

Will healthcare reform plans interfere with the United States’ (hidden) subsidization of global drug development through high prices?

• Baltimore points to $80 billion pharma deal that avoided price controls, but says prices are unsustainable.
• Sharp agrees that costs can’t be a bigger part of GDP, but it’s a big bucket even at current levels and there is room for efficiencies that don’t impact reimbursement.
• Goodman says importation can’t be prevented long-term based on a safety argument, so we’ll have to deal with pricing more globally [regardless of U.S. health reform efforts].

Aren’t early-stage acquisitions still (and permanently) the outliers?

• Baltimore thinks there will be a number of early-stage transformative technolgies that yield early successes, but VC and other early funders need to be more stringent and keep an eye on the long-term potential of even very early stage products.
• Sharp thinks that academia is not well-suited to disciplined discovery, and if the policy goal is to develop more products, we’ll need structural changes in academia.

The panel wrapped up on an optimistic note.  Not surprising — how can you not feel good in Gairdner season? Speaking of Gairdner season, don’t forget to check out this year’s winners.

Jeremy Grushcow  is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

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Rotman article explores Canadian biotech collaborations with developing countries

Re-posted from the Cross-Border Biotech Blog

By Jeremy Gruschow

A very interesting article in Nature Biotechnology from a group at the McLaughlin-Rotman Centre for Global Health provides some empirical support for a trend we’ve been following of increased innovative activity in developing countries.

According to the article, over 25% of Canadian biotechs collaborate with developing countries.  Of these, however, the vast majority of companies do so alongside collaborations with other developed country partners — only 4% collaborate exclusively with developing countries.  Also, gaining access to developing countries’ markets is the most frequent (66%) reason cited for collaboration.

Still, some of the data reflects the growing importance of developing country collaboration (China and India in particular):

• Canadian firms’ collaborations with India (17) and China (22) nearly equal the number of collaborations with Japan (18) and Germany (23); and
• Accessing knowledge from developing countries’ partners (24%) is approaching providing knowledge to developing countries’ partners (37%) as a reason for collaboration.

How do these collaborations look overall?

The figure from the paper on the left shows the geography of, and rationale for, the collaborations. Part “a” shows marketing and distribution collaborations, and part “b” shows those involving an R&D component.

What is the effect of all this activity?

Well, it’s hard to quantify, but the authors review revenue data from public company respondents and find that:

“average total revenues of firms that have North–South collaborations are nearly four times higher than firms that do not have such partnerships.”

My bottom line: causal or not, that’s a correlation that should cause all biotech companies to take note.

Jeremy Grushcow  is a Foreign Legal Consultant practising corporate law at Ogilvy Renault LLP. He has a Ph.D. in Molecular Genetics and Cell Biology. His practice focuses on life science and technology companies.

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