Here's a piece from yesterday's Xconomy, by Jens Eckstein a general parner from the TVM Capital venture firm. He provides his views from the recently concluded JP Morgan conference in San Francisco.
In summary, negative indicators from the conference participants include:
- Fundamental business model has not been revamped yet to ensure success in drug development - especially with innovators
- IPOs induce a great deal of skepticism by investors in the health care sector - unless near term revenues are evident
- Pharma and biotech need to collaborate to share risk on early stage projects due to high risk profile that is perceived now
- Most new deals will be done under some type of "option" structure based on attaining milestones - no more big upfront payments! No in and out for VC investors.
- Big pharma is beginning to seek innovative or disruptive approaches in early stage pipelines. They are looking for product platforms. This may be mismatched to biotech's who have been trying to establish better "clinical proof-of-concept" previously sought by Big Guys
Where does this leave VC investors? Stuck in many cases with legacy portfolios with products in clinical development with a lack of funding -- with no funding in sight. However, there is potentially breakthrough science aplenty. Companies and investors just need to work on funding models in concert with business model changes.
Posted by Bruce Lehr Jan 22nd 2011.