After spending a week at the JP Morgan Healthcare Conference in San Francisco last week, I reflected on the themes that emerged this year. The two primary themes are 1) early stage biotech assets and companies are getting more attention, and 2) funding of early stage programs is increasing.
We have quite a bit of history with early stage companies and it has not all been good times for biotechs. PharmaDirections was formed in 2003 with the premise that early stage programs that relied on outsourcing were under served. We created teams and infrastructure to help companies navigate through the preclinical stages to their IND with access to a variety tools and resources that were only available to large R&D organizations. Great idea, except that these companies in need were not getting very much funding. At the time, the companies with clinical stage programs were attractive takeover targets or their clinical assets were getting the attention and money as they were being pursued by big pharmaceutical companies seeking to increase their own pipelines. There was little attention or funding given to discovery of pre-IND programs.
By 2008, many of the clinical stage companies and programs were getting acquired or the biotech company decided to become vertically integrated and take their products to market themselves. This left room for early stage assets to get some attention as large pharmaceutical companies begin scaling back their R&D groups and they looked to acquisitions as a research strategy. Unfortunately, market conditions were unfavorable for the next two years so many funding sources were depressed.
It appears from the various conversations around the JP Morgan and from recent funding events that it’s going to be a much better year for early stage companies and programs. Bruce Booth wrote in his recent Blog on Venture Backed Biotechs 2011 that investors reaped more reward from private M&A than the capital put into biotech in 2011. These results are a good portent for things to come this year for biotechs.
The new enthusiasm for early stage assets can also be measured by the number of venture funds that have been raised recently where their focus is pre-IND or pre-lead programs. Three funds recently created were Access BridgeGap Ventures, Broadview Ventures and Remeditex. Existing VCs have raised innovation funds such Bay City Capital, CMEA (Velocity) and Atlas Ventures where the intent is to acquire pre-IND candidate programs. Add to this the number of big pharmaceutical firms that are partner with small biotechs and you can see a lot of momentum building for drug programs or companies that are just getting off the ground.
Overall the biotech clients we talked to at JP Morgan were upbeat about meeting their funding needs and getting more of the programs through preclinical and into human trials. It seems like this is a good time to be in a biotech startup.
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