All the experts who have converged upon San Francisco in what is the busiest week in biotech agree that 2018 will be a year of deals.
So if you are approaching investors, these tips below should be of help:
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Give extra attention to corporate investors
Yes, biotech venture capitalists abound, but corporate investors are playing a big role in early-stage investing. Hear what Marianne De Backer, vice president of venture investments with Johnson & Johnson’s venture arm, said at a panel hosted by Bloomberg Intelligence and Women In Bio on Wednesday:
“If you look at all the [Series] A rounds, … one-third of all investments came from the corporates, the strategic investors,” she pointed out. “So that’s a real change in trends and if you are an entrepreneur looking for financing, it is really a good time to speak with corporate investors because there is a lot of interest in early-stage investing.
Your options for money could be expanding
The likes of Pfizer will be repatriating large amounts of overseas cash to the U.S. given the gift contained in the tax reform package by way of a tax rate cut. They will be hunting around for good deals once they have returned some money to shareholders and done some buybacks.
But guess who else is also sitting on cash on their balance sheets? Chinese and Japanese pharmaceutical companies, said Christiana Bardon, founder and managing member of Burrage Capital.
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“There is a little bit of a change in the competitive landscape ex-US…,” Bardon said.
If you are not in oncology or rare diseases, tough luck
Backer from J&J pointed out that the lion’s share of venture capital going into biopharma is in oncology. It’s like ducks to water.
“[Last year] 60 percent of Series A rounds were focusing on oncology,” she said. “If you add rare diseases it was 87 percent. So this is a huge skewing of investment, especially in early-stage, towards those few areas.”
Investors are paying more for sure shots
Shehnaaz Suliman, senior vice president or corporate development and strategy at San Fransico-based Theravance, who is a former Roche executive, explained that when it comes to M&A, there is a strong bias for companies to “pay more for certainty particularly in highly competitive therapeutic segments.”
As an example, she pointed to the deal announced late Sunday where New Jersey-based Celgene agreed to pay up to $7 billion to buy Impact Biosciences. The San Diego company makes a kinase inhibitor to treat myelofibrosis and polycythemia vera. The kinase inhibitor showed “clinical improvement in a phase III trial with treatment-naïve myelofibrosis patients and in a phase II trial with myelofibrosis patients resistant or intolerant to ruxolitinib,” per a news release.
“Up to $7 billion for an asset at that stage of a validated target is proof that paying more for certainty will still be a dominant trend especially in competitive therapeutic areas,” Suliman said.
Photo: bayhayalet, Getty Images
Correction: An earlier version of this story had the wrong day for when the Celgene deal was announced. It was announced on Sunday. Also Shehnaz Suliman was a former executive at Roche and not Pfizer.
