Two recent healthcare events supported by
the One Nucleus biotech network, has nicely highlighted some of the challenges
facing healthcare companies and investors that are looking to bring innovative
solutions to these markets that have had limited historically success and subsequently
attracted limited investment. One of
these industry events was focused on the recent developments in Dementia (http://www.onenucleus.com/onenucleus-events?id=968)
, hosted by Eli Lilly in their UK offices. The other event was focused on the
use of crowdfunding to facilitate investment in the life sciences sector. Though
vastly different topics, both meetings included presentations on new approaches
to help kick start research in markets.
The Dementia market has been a challenging
one for big pharma. From 2000 – 2012, 244 compounds were tested in 413 clinical
trials with only one ultimately approved for use. With failure rates of over
99%, (compared to the 80% seen in Oncology) it’s understandably made companies
shy away from large scale investment. From a scientific perspective, the jury
is still out on the root cause of these conditions and whether the current
hypothesis around the involvement of Amyloid and Tau proteins in different
stages of this disease can be confirmed.
To help address a lack of investment in
novel dementia science a new £100M Dementia Discovery Fund (http://theddfund.com/ ) was launched towards
the end of last year. This charitable fund represents collaboration between the
Department of Health, Alzheimer’s Research UK (http://www.alzheimersresearchuk.org/)
and a number of Big Pharma companies. Managed by SV Life Sciences the fund is
focused primarily on Phase I and II research and aims to help share the risks
associated with early drug discovery whilst reducing duplication of efforts.
From a Phase III perspective, advances in
real world trial design are being applied to help investigate improvement
initiatives from early stages. The European Prevention of Dementia Consortium (
http://ep-ad.org/) has collated a register of
24,000 patients deemed at risk, from these 6000 patients identified as being of
high risk will undergo standardised testing and follow up in over 30 centers.
Ultimately they intend to enrol around 1500 patients in ongoing early stage
adaptive clinical trials where new patients are added as old ones drop out.
Such methodologies hope to both reduce the costs of traditional randomized
controlled trials (RCTs) whilst allowing for far longer follow up of
participants and allowing for patients within the trial to be moved from one
compound to another more easily.
Another modern approach that is hoping to
foster new development is Crowdfunding, which aims to open up early stage
investment opportunities to the general public via the internet. It is much
more common in consumer product development, where prototypes can be visualised
and it’s applicability to Life Science Markets has been questioned as it is
difficult to evaluate markets without specialist scientific skills.
To date around 30 Life Science companies
have secured funding, with 80% of those doing so via Syndicate Room (https://www.syndicateroom.com/
), a financially regulated organisation that applies a lead investor business
model. Here, the primary investor, typically a smaller VC, Business Angel or
Family Fund fronts around 25% with the rest coming from individual
“sophisticated" investors who are able to purchase shares at the same
price and on the same terms via a nominee who manages a group of investments.
The minimum investment allowed is £1000 and Syndicate Room charges companies 4%
of the capital raised.
It’s early days for this approach but there
does appear to be some advantages. From
the Entrepreneurs perspective, Crowdfunding can allow them to digitise their
pitch, disseminate it to anybody with an internet connection whilst saving on
search costs associated with traditional methods of sourcing investment. A new
CEO I spoke with hoped this would allow him to spend more time focused on
growing their business, whilst still benefitting from commercial expertise of
their primary investor. With average investments of around £0.5M, Crowdfunding
seems to have found an early niche in the Valley
of Death, helping top up investment opportunities that are too large for
Business Angels but too small for traditional Venture Capitalists.
It remains to be seen how more fundamental
risks in Crowdfunding markets will be successfully mitigated however. The
Syndicate Room hopes some risks of due diligence are also reduced with an
investor lead share scheme. Though primary investors will be understandably
reluctant to share their research for a number of reasons, including their wish
to avoid such moves being seen as promotional, it is hoped that the very fact
they have decided to invest will signal to the market some degree of legitimacy
in the venture. Also, by being financially regulated and offering shares on the
same terms to all investors they aim to limit the risks of predatory behaviour
by larger investors, such as negotiating better deals through priority share
schemes, whilst guarding against the potential of pyramid schemes to be created
within their own funds. I was personally encouraged by the open forum virtual
chat rooms on their site where answers to questions posed by potential
investors could be viewed by all.
Here at Black Swan we’re watching all these
new approaches with much interest and hope to see some innovative companies
grow as a result. To support companies who find themselves on this growth
trajectory, we have developed our new EpiomicTM
Insights Series reports. (https://www.epiomic.com/subscription/epiomic-insights
). These are single page reports for a specific disease available at a low
cost-effective price that is aimed at Entrepreneurs and Biotechs who require
snapshots of the eligible patient populations for all the key global markets.
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If a more detailed breakdown of the patient
numbers is required, we have the information available in a more extensive
report that includes other conditions related to the specific disease or
syndrome. However when the challenge is to look at a combination of new or
existing opportunities at the same time, we also have a portfolio analysis tool
that uses scorecard techniques to rank both commercial and technical
attractiveness.
Do get in contact with us if any of these
Black Swan Analysis (www.blackswan-analysis.co.uk ) offerings
would be of interest. We would welcome the
opportunity to support your commercial decision-making in such forgotten
markets.