One advantage of a trip to BIO is that it stimulates me to review what I have seen and experienced at the meeting and how it reflects or differs from my personal view of the Biotech sector. Those of you that know me will not be surprised to hear that I will start from my conclusion! Over the last few years I have struggled to understand how the sector has changed since the economic recession. My thoughts are that the sector is still patchy and fragmented. Overall there is still a lack of investment especially in the UK. However there are several examples of companies achieving significant investment. My experience at BIO is that the USA investment environment is making a stronger recovery than Europe and the UK.
My first observation is that there is a clear interest in project based investment. Certainly whilst I was out representing Domainex I spoke to several organisations that would clearly invest in our lead programme and take it through to POC. These organisations varied from classical VC groups and Institutional investor groups to an emerging class of development companies who will use their expertise on risk share collaborations.
My second observation is that at last there are real signs that pharma are looking earlier in the drug discovery process for deals – and even more important is that they are being realistic about what an early project looks like. Again Domainex has attracted considerable interest in our pre-clinical program on TBK1 and IKK epsilon. What is critical to do early deals is that the target must be attractive and novel – you’re not going to get that early deal with another BRAF inhibitor!!
Finally, and one close to my heart, is that there is increasing interest in companies offering services and drug discovery. To be fair this model is not new. Companies such as Argenta successfully operated this model. Indeed most biotech companies do something to generate value out of their technologies or expertise. Sometimes it’s dressed up as technology access, sometimes a collaborative project or, as in the case of Domainex, services- sometimes in the form of risk share.
So what do these observations say about how the sector is changing and performing? As I said earlier in my conclusions I still believe it’s too early to say. My suspicion is that we are entering into a period, which could stretch over several years, of flexibility. Flexibility by pharma in doing early deals and biotech being realistic in deal structures around these deals, flexible funding with some biotechs following the more traditional model of investment of invest and spend, others looking at taking a variety of funding from smaller investor groups, drawing in income on their technologies, adding those all-important none-diluting Government grants and maybe using Special Purpose Vehicles to attract investment into single projects to take them to POC. Whatever happens we’re in for an ‘interesting time’- did I mention China? That’s for next time.
Written by Eddy Littler, CEO, Domainex Ltd, May 2013
The One Nucleus blog is written by individuals and is not necessarily a reflection of the views held by One Nucleus.