7 Secrets VC Investors Want Biopharma Heads of R&D To Know
By Rob Wright, Chief Editor, Life Science Leader
Follow Me On Twitter @RfwrightLSL
Secret Number One — What Big Pharma Is Doing Right With Its Portfolio
Last summer, the biotechnology industry closed out the second quarter with a 32 percent increase in VC investments when compared to the previous quarter. But as good as 2015 started, quarters three and four seemed to signal the biotech bubble from which investors had been profiting might finally pop. The Nasdaq Biotechnology Index (INDEXNASDAQ: NBI), a leading indicator for the sector containing securities of Nasdaq-listed companies classified according to the Industry Classification Benchmark as either biotechnology or pharmaceuticals, showed July 17, 2015, as the actual peak. Since that high of 4,162.86, the index has declined throughout Q1 2016 (e.g., March 18, 2016, 2,630.32). However, at the time of this writing (April 2016), the NBI was starting to swing back up. During such fickle times, wouldn’t it pay to know what biopharma investors are thinking? Just imagine what insights could be gained from being able to stand, say unobtrusively around a water cooler while a group of biopharmaceutical VCs discussed what they look for when assessing a biopharmaceutical company asset. When managing the risk, reward, and the balance of their portfolios, do they go for platform or product, a specific disease or broader therapeutic category, early or late stage? What are their secrets? Well wonder no more. Having had the opportunity to attend an invitation-only event focused on biopharmaceutical R&D, what follows is a behind the scenes glimpse of what VCs look for when engaging with biopharmaceutical company heads of R&D as they weed, seed, and water those assets within their portfolios.
Secret Number One — What do you think Big Pharma is doing correctly in terms of its R&D management?
“One of the big things they’re doing is actually talking to us,” says one VC. “Ten years ago, heads of R&D didn’t want to talk to VCs. Now however, we are finding they are very open, as are their heads of business development (BD), and it is a much better dialogue. Knowing what pharma is looking for has helped us determine in what we want to invest.”
A second VC chimes in, “I’d like to reiterate on that point, because it is key and represents the landmark industry change. In the past it was impossible for VCs to have a meaningful dialogue with a head of R&D other than stealing 5 minutes in a hotel lobby during a conference. Today the situation is very different. The most advanced and strategic heads of R&D clearly look for building relationships with VC contacts. One thing that makes me optimistic is people on the biopharmaceutical side of the business aren’t just talking about open innovation, but facilitating much more open access, which is really key and a big driver.”
“I would add that our partnerships with Big Pharma have been very productive,” says another VC. “We’ve been fortunate to have companies in our portfolio be acquired by Big Pharma. In one particular case, the leadership of the portfolio company has gone on to play a very important part in a Big Pharma R&D effort in a particular therapeutic sector. The reason this is happening is because the acquirer recognized the value of maintaining the lean and mean entrepreneurial spirit that existed, and not only allowed it to continue, but married it with some resources that are quite challenging for venture-backed companies to provide (e.g., thoroughly optimized portfolios, additional patients and clinical studies). The Big Pharma was prudent while mitigating risk, and I viewed that scenario with a great degree of respect.”
In our second installment of this four part series we will divulge VC investor secrets two and three.