Day one of MedCity INVEST, an annual healthcare investment conference held in Chicago, highlighted different facets of today’s biopharma industry — from startups to VCs to Big Pharma partnerships.
It began with a panel discussion on hot investment trends…
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Creative drug pricing and reimbursement
In early April, Amgen made a bold and possibly trend-setting promise concerning its new LDL cholesterol-lowering drug Repatha. If patients taking the PCSK9 inhibitor (for at least six months) experience a heart attack, Amgen will honor a money-back guarantee.
The application is a little more complex, but the concept has been floated for some time as a way to truly commit to value-based care.
The panelists believe there’s more of that to come. So regardless of the technology and its sophistication, startups need to package their products and services in real human health terms, “to make sure that what the system is paying for is good outcomes,” advised Ilan Zipkin, a senior investment director at Takeda Ventures.
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Ed Mathers, a partner at NEA, agreed. “I think what you’re going to find is a lot of innovative ways to try and approach pricing,” he said; be it supply chain partnerships or loaded contracts that include criteria for therapeutic performance.
So be warned: basic market research and a cliche focus group may no longer cut it for pricing.
Private company valuations
Moderator Paul Yook of LifeSci Advisors also asked the panel for their thoughts on the industry slowdown in initial public offerings and company exits. Both fell dramatically in 2016 and haven’t yet regained the same momentum, he pointed out.
How is that impacting private biopharma valuations?
“Private valuations tend to lag the public valuations,” Mathers told the audience, noting a consistent flow on effect.
Private companies know that pharma isn’t buying things right now and they hear that valuations are overpriced in the public markets. “People are realistic,” he said.
Without good M&A and IPO options, Mathers believes the industry is taking a pragmatic approach to VC financing. Today’s valuations aren’t built around hype; startups are asking for modest sums of money to create real value. The question then, is “how much do we need to get to the next value inflection point?”
That being said, true innovation will always be rewarded. Yook asked Mathers for his thoughts on what could fuel an upswing in deals.
“I think it’s really the asset,” he replied. “If people are showing something really unique, then people are going to step in.”
Talk to the Department of Defense
Later in the day, 10 early stage biopharma companies went head-to-head in one track of MedCity Invest’s Pitch Perfect startup competition.
Despite the diversity of companies and presenters, several themes emerged. Among them was a shared and somewhat surprising source of funding: the Department of Defense (DoD).
While the DoD has long invested in relevant science and healthcare initiatives, the breadth of its recipients was notable.
Third Coast Therapeutics, a Chicago, Illinois-based oncology company, has scooped up $2.2 million in DoD funding for its preclinical work. SpineThera received just over $2 million as part of a U.S. Army award, supporting the development of its long-acting injectable corticosteroid for back pain. NuvOX Pharma has worked with the U.S. Army and Navy for preclinical studies on hemorrhagic shock and traumatic brain injury, respectively.
As of May 17, the DoD’s Congressionally Directed Medical Research Programs (CDMRP) website listed new funding opportunities in ALS, ovarian cancer, bone marrow failure and more.
The depth and variety of grants is particularly relevant in today’s political climate. While it’s far from written in stone, President Trump’s 2018 budget blueprint called for $5.8 billion in cuts to the National Institutes of Health (NIH) — that’s a 22.4 percent reduction. On the other hand, defense spending stands to gain an extra $54 billion.
Later on, during a networking reception, the CEO of a preclinical pharma company targeting obesity acknowledged that he too has applied for DoD grants and continues to scan the website looking for a possible fit.
Who doesn’t want non-dilutive funding?
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