Posts Tagged IPOs

How to take a Biotech company from Idea to Exit


Mahendra Shah, Partner with Vivo Ventures & Ravi Mistry, President of EPPICGLOBAL (www.eppicglobal.org) talked about how to take a biotech company from idea to launch, at www.bio2devicegroup.org event.  Here is some of the comments made by Shah and Mistry.

Entrepreneurs starting a biotech company must start with a disease target, said Shah.  First and foremost there should have a good understanding of the disease and at which stage in the disease progression is the biotech seeking to interfere.  Second, one should have a good understanding of the market opportunity and about existing treatments.  Entrepreneurs need to ask the hard question regarding “clinical meaningfulness”; and whether or not the possible treatment developed by the biotech will lead to significant enhancement in patient care.  Payers will not pay for little improvements, said Shah.  Companies need to identify gaps in the treatment, and find a niche market.  Patients need to be identified for who the prescribed treatments do not work well and that could be a niche market for entrepreneurs, said Shah.  Shah said that during his career, he found such niche markets through repurposing, taking old drugs and finding new indications.  He also cautioned about the importance of ensuring secure Intellectual Property to protect the proposed solution.  With currently available internet tools and database resources, that is not hard to do.  Even speed browsing on Google can give you a quick idea of who owns the IP and if there are ways to get around it, said Shah.  Biotechs based on developing Orphan drugs are a great opportunity for a new startup, because once approved, you cannot have competition for up to 7 years in the US, and up to 10 years in Europe.

In terms of drug development, one needs to also get clarity on development pathway to determine whether it will require 10 thousand patients or few hundred, since that can make a huge difference in the amount of financial capital that will be required to bring the product to market.  Companies need to identify how quickly one can progress to phase 2 and bring it to a meaningful endpoint.  Also it is important to get an understanding if the endpoint is subjective or objective.  A subjective endpoint will have significant placebo effect and will require much higher number of patients, said Shah.  In order to do successful fund raising, companies need to have approximate idea of time and costs of bringing the product opportunity to a meaningful endpoint.  Companies also need to have clarity on the various product development milestones and inflection points.  Finally, an experienced Team is extremely important to bring the idea to fruition.  However in this, two members of the team are particularly important; the CEO and the Medical Director.  Other members of the management team can be hired as consultants but these two team members of the team need to be identified early and brought on board and should be people one can trust and those who feel passionate about the technology and who buy into it.

A biotechnology company requires significant money for its operations, so it is important to make sure that the first time investors have deep pockets, very sane advice from Shah.  He told the budding entrepreneurs to be careful and make sure they have synergy with the investors.  “Some of the investors’ money is not good, it will give you ulcers”, warned Shah, since money can have many strings attached to its return on investment.  Referring to reimbursement, Shah emphasized that the payer is very important and entrepreneurs should do a quick survey of physicians and Key Opinion and Thought Leaders and get a clear idea about existing and current modes of treatment and who will be paying for the new product opportunity.

Mistry shared some statistics on activity in the life science space.  2013 has been a banner year for life science IPOs.  Out of a total of 82 total IPOs in 2013, 46 were in the life science industry.  Life science industry also enjoyed a substantial investment of dollars.  The increase was certainly more significant in biotechnology, while medical device industry actually saw fewer dollars invested.  Mistry talked about how to prepare for an M&A exit and provided some advice to entrepreneurs to keep diligent documentation with respect to company’s IP.  He also commented that when it comes to negotiation, there is no “one size fits all” and best deals can be made if entrepreneurs remain can remain flexible throughout the process.

At the start of the talk Mistry put in a plug for EPPICGlobal and their upcoming annual conference, on March 29, 2014.  The conference has an exciting lineup of speakers and panels addressing neglected and rare diseases, point of care diagnostics, and innovations in clinical development of novel agents.  The talk ended with Shah sharing information on exciting speed pitch session, at the EPPIC conference, where entrepreneurs will have an opportunity to pitch their company to a panel of VCs and receive real-time feedback.

I would encourage my readers to attend the EPPICon 2014 conference, and avail of the opportunity to listen to various industry renowned speakers.  To register for the conference and/or register for the speed pitch, please go to www.eppicglobal.org.
            Bio2Device Group

 

 

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OneMedForum – San Francisco, 2014


The OneMed forum conference was launched in January of 2008, when economy was showing all signs of progressing to new heights, with an objective to showcase innovation in medtech.  The conference aimed to bring together the companies and investors, during the large influx of healthcare investors and executives, during the JP Morgan Healthcare Conference, in San Franciso.  Fast forward to 2014 and we are perhaps just emerging from one of the worst recessions; a downturn that hit the medtech sector more than any other industry segment.

This year, the location of OneMed Forum was changed and the venue was moved further away from the JP Morgan Conference.  Since the weather in SF was gorgeous, it was not a problem; but if the venue continues to be further away in future, and in the event of cold and rainy weather, it can have an impact and lower the attendance at future OneMed events.  This year also OneMed event seemed to be sparsely attended, although that appearance might also be enhanced because the meeting rooms were spread out on two different floors and there wasn’t a single spill out location for the participants to meet and network – another problem with the venue.

There was also a palpable difference between the JP Morgan conference and the OneMed Forum, this year, in terms of optimism.  While biotech and pharma sector is returning to pre-recession levels with a large number of IPOs and higher numbers of dollars raised, medical technology companies have yet to see significant investment dollars.  On talking with the participants, I heard a note of disappointment regarding low attendance from VCs and other investors, just like in the last few years.

However, despite slow pickup and staggering growth in the medtech sector, it is transforming and the companies are learning to operate more efficiently.  It is also recognized that healthcare is at a critical point and medical innovation will have to address some key challenges.  Various panels and speakers at the OneMed Forum, addressed the changing healthcare landscape and how the future of health and medicine will need to be shaped, in the coming years to address the key issues. 

Major Highlights

Personalized Medicine Panel discussed the promise offered by customized diagnosis and treatments, in lowering the cost and increasing effectiveness.  Panel sessions addressing the JOBS Act and the Affordable Care Act, explored the impact of the legislation on cost of care and access to care.  Companies and solutions that may be poised to offer effective healthcare solutions and may also present interesting investment opportunities were highlighted.  In somewhat grim medtech landscape, digital health is emerging as the hottest new trend, with much potential.  The Digital Health panel discussed the impact of Affordable Care Act in increasing information transparency and empowered consumers taking greater control of their health information.  The changing role of the patients/ consumers will require change in the healthcare delivery and transformation in the business model.

A panel addressing “reimbursement strategy after the affordable care act”, discussed impact of medicare payment rules on medtech and hospital markets.  The panel also discussed trends in coverage and payment for newly emerging molecular diagnostic tests.  One key advice from the panel was that thinking upfront about the reimbursement strategy will be increasingly more important for companies with new, innovative products.  A panelist also suggested that during clinical trials, companies can also think about reimbursement and instead of doing only what may be required by the FDA, if they can also collect reimbursement data then they would come out ahead.  During innovation, the companies should relentlessly focus on disease management, and that would lead to them to appropriate and effective reimbursement strategy, advised the panel.

Financing and IPO issues were addressed in various panels.  One interesting panel on Crowdfunding discussed a handful of portals that are beginning to raise some capital for emerging growth companies.  One investor who was attending the panel, later told me, that it is too early to give an opinion on what kind of success this strategy would yield, but he had some grave concerns.    AdvaMed CEO’s Unplugged Panel featured some of top leaders of the MedTech industry, who shared their insights on key challenges facing the industry.  Stuart Randle, CEO of GI Dynamics advised startups to focus on crucial healthcare issues including obesity.  He also advise companies to pursue capital intensive strategy, and at least initially sell products outside the US.  Scott Brooks, CEO of Regenesis Biomedical, advised startups to get good legal and regulatory counsel early on.  Patrick Daly, CEO of Cohera Medical was optimistic about the future of MedTech.  “IPOs are coming back, M&A is picking up, and dollars are rolling in, big companies have record levels of cash, and I feel positive”, he said.

One of the most prolific financiers, Bill Hambrecht gave a keynote address.  Hambrecht has over 500 IPO’s to his credit that include seed level funding in nascent industries.  Although I did not attend the keynote, I heard some highly positive comments from an attendee.  Steven Burrill, who has been at the helm of innovation in healthcare and shares and who regularly shares his insights through his annual reports, gave a second keynote.  Again, I missed the address but both keynotes were major highlights of the event.  Throughout the conference, over 800 emerging companies gave presentations.  Following the presentations, partnering and breakout sessions gave the opportunity for conference delegates to meet the CEO’s of these companies.

Although it may seem hard to believe, it appears that now the MedTech sector has nowhere to go but up.  The industry has learned some hard lessons, the companies are lean, operating with greater efficiency, spending cash wisely, and instead of hawking next new technology, they are focused on key problems facing the healthcare industry, and on providing effective solutions.  If the healthcare providers are not eager to incorporate some of the solutions, then it will happen out of necessity.  It will become incumbent upon the healthcare industry to implement solutions offering greater ROI in terms of improved health and lower cost.  Healthcare providers will be looking for solutions that provide digital and point of care diagnosis and health monitoring and treatment options and solutions from personalized medicine and genomic health.  Let us stay tuned for some cool innovations from the MedTech sector in 2014.  Senior Analyst at Wells Fargo, Larry Biegelsen has also observed that not only acceleration in healthcare spending is expected in 2014 but there are number of other tailwinds including, “emerging technologies and emerging markets contributing more to growth and a more industry-friendly FDA, which should lead to faster approval times for medical devices”.   

 

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JPM 2014 – Dr. Delos M. “Toby” Cosgrove, CEO & President, Cleveland Clinic: on Challenges, Opportunities & Affordable Care Act


During the luncheon keynote, Cosgrove began by quoting Lenin, “there are decades when nothing happens, and then there are weeks when decades happen”.  Clearly there is tremendous activity and major and disruptive overhaul happening in the healthcare sector.  To meet increasing demands proactively, Cleveland Clinic has made some significant changes in how they operate.  These include, one year contracts for employees, eliminating tenure tracks, implementing annual performance reviews, offering high deductible insurance policies, and greater transparency throughout the system, said Cosgrove.  Many other businesses are also moving towards some of these reforms.   In the new healthcare environment, retail clinics like Walmart and CVS will play a significant role.  Over 813 branded clinics and hospitals and other providers are partnering with these retail clinics, in anticipation of the shortage of physicians that will hit the system.  Cost pressures will also intensify as providers are increasingly pressured to move from the volume based system of providing care to value based system, linked with outcomes, said Cosgrove.  Cost pressures are coupled with pay cuts in education for physicians and other practitioners and there less money coming from VC funding sources.

Among the challenges, are hidden opportunities that can help overhaul the system to make healthcare better.  For instance VC funding for Health IT has gone up, M&A continues at rapid pace, and some of the focus on behavior changes is yielding good outcomes, said Cosgrove.  Genomics and behavior modification represents some of the largest unmet challenges and they account for 70% of premature deaths in the US.  At CC, with a relentless focus on behavior modification, employees collectively lost 430,000 pounds.  Similarly, genomics has opened up a huge opportunity in healthcare.  Approximately, 4300 single gene diseases have been so far been identified, and the cost of sequencing of full genome is dropping rapidly.  Other huge opportunities are with respect to patient health records and management of big data in healthcare.  CC has given 1.8 million patients access to their electronic health records.  Quoting “IBM’s Watson Computer”, Cosgrove observed that artificial intelligence is opening huge opportunities in healthcare.

All the disruptions in the healthcare should eventually enable society to “build a healthcare system that is humane, high quality, and sustainable”, said Cosgrove.  But this transformation will not be painless.  It will require a great shift in mindset for physicians and also in how people view healthcare, in society at large.  Roles of care providers are changing rapidly.  Only about 10 years ago, hospitals used to be epicenters of care.  Now increasingly care is delivered outside the hospitals and we need to develop systems that support and scale out of hospitals care delivery, said Cosgrove.  A few hospitals will need to be very high tech and to offset costs, they will need to share and partner with other care providers.  Cosgrove gave the example of CC’s high tech data center built at the cost of $170 million.  Cosgrove said, healthcare is the only industry that has not consolidated and it will need to consolidate in the coming years.

The only criticism Cosgrove offered with the implementation of affordable care was that it has not built in incentives for wellness.  Obesity is sharply rising in the US and it needs to be contained, in order to control costs, said Cosgrove.  Affordable care bill is not perfect and there will be unintended consequences, but they can be dealt with.  One of the shocking thing that Cosgrove opined upon was that US will one day have a single payer system, with basic healthcare provision for everyone, and optional choices in supplementary insurance on top of that.  This was an exciting keynote.  The whole bar in healthcare is being raised and Cleveland Clinic is clearly taking a leadership role in meeting the challenges head-on.

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JP Morgan Healthcare Conference 2014 – Environment of Optimism


For the healthcare sector, JPM conference is the largest and most important event of the year.  Technology innovators and life science professionals come together with the business analysts and investors and significantly more transpires outside the halls of the Westin hotel and presentations rooms, then what goes on inside.  Inside, the companies begin their short presentations with disclaimers that their presentations will include forward looking statements and reality can be different.  The companies give a quick overview of how they met the goals, objectives, and milestones they had envisioned or how and why they failed to meet them.  The companies go on to succinctly talk about their goals, objectives and milestones for the year ahead.  They share about new technologies, products, or drugs in the pipeline, the kind of return shareholders can expect, and make a case for why they present a great investment opportunity.

Outside the conference halls, market opportunities are discussed, new product or technologies are pitched, licensing contracts are signed, and deals are done as suited professionals fill up SF hotel lobbies, coffee houses, and diners.  The networking does not stop in the evenings.  Instead, it picks up.  Various receptions hosted by law houses, life science companies, and investment firms at hotel penthouses and art galleries, offer opportunities to mingle and get to know people, in a less formal and more personal way.  As alcohol freely flows and finger food and attractive dessert choices loosen everyone, professionals find more ways to make deals.  In my next few reports, I will share more details from JPM conference and One Med Forum events.  But overall mood this year was positive and companies had less to apologize for.  Large pharma companies and smaller biotech and device companies are mostly done dealing with most dire recession challenges that hit the life science industry most deeply; nearly dried out funding sources, stagnated hiring, patent cliffs and lackluster period of growth that significantly lowered earnings.

Biopharma sector has enjoyed an incredibly good year, with 76.25% increase in value for the year, according to Bio World Blue Chip Index.  Funding has also begun to flow.  According to Bioworld Snapshots, the amount of capital raised by global private biotech companies was $4 B in 2013, up 4% on the total raised in 2012.  Almost $1.5 B was raised in 4th quarter of 2013, a huge 55% more than $975 million raised in the third quarter of 2013.  Biotechs also closed many venture rounds in Q4, 2013.  And there was a flurry of activity in the IPO market, with a number of IPOs with 2X the offering price.  So the good news is not just the number of IPOs, but their price, which has gone up 119% and their market cap which is up 236%.

But it will take a while for money to trickle down and spread more widely.  And many other challenges remain.  For instance, at 45 percent of the global R&D spend, although US still tops investment in life sciences, the amount has dropped 51% since 2007.  Meanwhile the cost of developing drugs continues to rise.  As one of the most scientifically and technologically advanced industries, life science sector still faces major challenges including stringent and constantly changing regulatory standards, rising R&D costs, and shorter market cycles.  Additionally, there are increasing cost pressures, a need to streamline business operations, and increasingly higher expectations from patients, doctors, payers and so on.  The environment at JPM was one of optimism, even exuberance, but it was also mingled with caution.  In my following posts, I will include highlights from various keynotes and some company presentations.

English: Category:JPMorgan Chase

English: Category:JPMorgan Chase (Photo credit: Wikipedia)

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