Has venture capital always been a bad model for the life sciences?
Andrew Lo, director of the MIT Laboratory for Financial Engineering, dismissed the sector outright on stage Sunday at the Cleveland Clinic Medical Innovation Summit. His rationale:
- Projects take too long for traditional venture
- It takes more money to take a drug or device to finish
- The probability of success is too low
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
Venture capital “has the skill and motivation to push things forward,” Lo said. “The business structure is not suited.”
Those are some pretty standard barriers to most healthcare investments. But Lo made the case it’s now to the point traditional venture has become impossible to executive effectively.
He’s banking on new thinkers. He would like venture philanthropy to play a bigger role. He mentioned the Cystic Fibrosis Foundation’s $150 million investment in Kalydeco, which turned into a $3.3 billion win.
Lo also would like to see a version of impact investing, which are often long-term or below marketing investments attached with an expectation of social good, come to the life sciences.
Investors have to have patience and the stomach for the way drugs are developed, Lo said. “There are lots of those investors out there,” he said. “But they’re not traditional investors.”
