Heyday For Biotech Founders And Investors

By Amanda Hayward, Managing Director, Venture Capital Investments, Connecticut Innovations

Amanda Hayward, Managing Director, Venture Capital Investments, Connecticut Innovations

Biotech is in a great place right now—not only for the promise it offers in scientific breakthroughs to cure illness and improve lives, but also for the tremendous investment opportunity it presents. The industry is expanding at an unprecedented rate compared with what we’ve seen traditionally due to a few key trends.

KEY BIOTECH TRENDS

New Technology Platforms

Enabling technology platforms such as CRISPR-C as gene editing, sequencing technology, big data and artificial intelligence are changing the face of biotech. With these advances, scientists are able to combine biological knowledge with specific patient data to draw vital connections between pathology and disease. These tools that were once only dreamed of have reached the point where they are yielding new science to create unforeseen approaches to treatment.

Broader Acceptance of Change

There has been an increase in the comfort level of investors, clinicians and companies in newer modalities of therapeutic treatment. In some cases, older-generation drugs such as chemotherapy are beginning to lose ground, making way for the development of successful antibodies and protein-based drugs, as well as nucleotide-based approaches.

Advances in Treatment

We’re seeing a major resurgence in gene therapy and cell therapy due to a growing track record of successful outcomes. Immuno-oncology and CAR T-cell therapy for cancer are prime examples of this. These are cancer treatments that are making a meaningful difference in patient survival rates. New technologies are being used to cure previously untreatable cancers. This has really contributed to the biotech explosion right now.

Evolving Role of Pharma Giants

Another reason biotech is such a strong investment opportunity is that big pharmaceutical companies that previously relied largely on their own internal R&D have become increasingly interested in building an externally sourced pipeline and more aggressively bringing in technologies developed by much smaller biotech companies. This presents a great exit opportunity for biotech startups and significant financial returns for their investors—a boon for the industry.

"Enabling technology platforms such as CRISPR-C as gene editing, sequencing technology, big data and artificial intelligence are changing the face of biotech"

BIOTECH INVESTOR PERSPECTIVE

How Do You Differentiate Among the Biotech Opportunities You See?

First and foremost, at Connecticut Innovations we look for companies that will bring jobs to the state and whose purpose dovetails with our mission to foster the development of technology and the emergence of young companies in Connecticut. Within those parameters, we still see way more opportunities than we are able to invest in.

Generally speaking, I’m always looking for companies that have identified a real problem to solve. A company may have developed a truly amazing technology. But if the company is left having to retrofit the technology to meet what they perceive as a market need, that’s not always successful. The companies that really stand out for me are the ones that have created a unique approach to solving a clear and present challenge. Also, as a scientist by training, I like to see groundbreaking science with really good external validation—for instance, a proven solution with a really solid animal model. Another important differentiator is having a compelling mechanism of action that is not only distinct from what others have attempted, but also one that decidedly moves the state of the science forward in order to benefit patients.

What Are the Key Attributes You Look at When Evaluating a Deal?

When we’re doing diligence on our investments, we always look for strong intellectual property protection—this is vital to an investible company. Also, a really good team with knowledge, experience, and demonstrable business and market savvy. The founder can often do a great job at articulating the science, but the team must have a viable strategic plan to get the science to the patient. That means specific details of the milestones to be achieved at each stage to move the technology forward and increase the valuation enough to help ensure the next round of funding. A company also must have a very clear understanding of the competitive landscape—what the current standard of care is and why clinicians and insurance providers would be willing to pay for the technology.

How Do You Work with Clients Post Investment?

At CI, we’re very hands-on investors. We serve as a value-added resource in helping guide and support the companies we invest in—we bring a lot more than just a check. We provide mentorship, guidance, access to contacts and connections, and usually sit on the board of directors.

On the biotech side, we pursue mostly early-stage investments—seed rounds and series A rounds. Often these are technologies fresh out of the university. So, there might be a great scientific founder, a CEO and maybe one or two other team members, but otherwise they’re more virtual teams without extensive capabilities in house. As such, they look to their investors and boards to be more active. And we certainly don’t shy away from that. Our portfolio companies feel comfortable reaching out for advice, for introductions, or for help driving strategy or planning.

How Have Your Current Portfolio Companies Benefited Most from Your Guidance?

What I’ve been able to bring to the table is my extensive experience sitting on the other side. Many investors have never been on the operations and startup side. I think if you have that perspective, it’s a big advantage for your portfolio companies because you’ve faced similar challenges. I also have an extensive network in the pharmaceutical industry, venture community and local biotech ecosystem in Connecticut. I’m able to open my Rolodex and make that network available to the companies I work with.

A Final Caveat

My final words would be not to let hubris run amok. It’s high times for biotech companies in terms of investment money available. But not every idea is investment-worthy. In the tide of times, the best opportunities often rise to the top, but not always. Investors should be careful in the diligence process and apply the right filters to choose the companies most likely to succeed.

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