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Fundador y managing partner de Innovative Bioconsulting, una consultora dirigida a empresas biotecnológicas. Profesor de Gestión Empresaria en el Máster de Biotecnología de la Escuela de Negocios Aliter, Madrid, España. Tutor de Emprendedores de IE Business School. Anteriormente ha desarrollado su carrera profesional en el sector biofarmacéutico, con experiencia multinacional y creación de dos empresas. Master en Biotecnología y MBA
Mostrando entradas con la etiqueta Biotechnology. Mostrar todas las entradas
Mostrando entradas con la etiqueta Biotechnology. Mostrar todas las entradas

sábado, 26 de enero de 2013

Biotechnology, Nanotechnology and pharmaceutical industry

Buckminsterfullerene C 60 has 60 carbon atoms ...
Buckminsterfullerene C 60 has 60 carbon atoms in each molecule, arranged in a truncated icosahedron. (Photo credit: Wikipedia)
Pharmaceutical industry is facing hard times. Surely you are not surprised by this statement. While we could see in my previous post that biotechnology is still an industry attractive for institutional investors, pharmaceutical industry is not perceived any longer as an interesting industry for personal investments. Traditionally, pharma industry has been considered an investment shelter when the stock markets where suffering distress. It seems that this situation is changing. According to a survey conducted in Q4 2012 among wealthy people, it turned out that two-in-five Millionaires are prescribing to invest in the pharmaceutical sector in 2013 – that’s down from nearly half in 2010. You can read about this survey in The Millionaires Corner.
The reasons behind are well known: less productivity in terms of approvals, we are at the end of the blockbuster drugs era, increased development costs and time, and increased regulatory hurdles.As a result, pharma industry is having problems in showing its double digit annual earnings. And pharma industry needs them because is a high risk investment. Development cost of a new drug are between 800 million [1] and more of 1 billion [2] (according to DiMassi in his interesting papers). DiMassi takes into account the failed programs that don't reach the market -1 out of 5 entering in clinical trials- and he capitalized costs. There are many discussions about the accuracy or this figures but after reading his papers I feel that he is right because he is reflecting the real costs that the pharma industry is paying. I even found another paper reviewing DiMassi's thesis that increased the costs...
Weather or not you agree with DiMassi's figures I'm sure that there is no doubt that the investment needed to move a molecule from bench to market is huge.
Biotechnology and nanotechnology role in drug development
Biotech and nanotech companies are part of the "ecosystem" of drug R&D for many years, specially biotech firms. They could help pharma companies to confront some of their problems, such as new molecules or new technologies for drug development.
Biotechnology brought a new class of drugs that didn't fit in what traditional pharma industry was betting. While biotech firms started developing biologic drugs, pharma was focused in small chemical compounds. I love small molecules because they are easy to synthesize, easy to formulate and they often allow oral delivery. However, their big counterparts are more specific and powerful, generally speaking. In any case, large molecules are a source of new drug candidates and have been able to tackle diseases with no alternative in the "traditional" small molecule drugs.
Life is not easy and while the new biotech leads where extremely powerful in vitro, they often have small or no activity in the alive organism. There are several reasons to explain the lack of activity, enzymatic degradation, impossibility to pass through biological barriers, immune response,... New delivery strategies were developed... some of them in the nanotech field.
Nanotechnology is not only impacting in drug delivery and formulation.Nanotech is the underpinning technology that is accelerating rapid advances in areas such as genomics, combinatorial chemistry, high-throughput robotic screening,drug discovery, high-throughput sequencing, and bioinformatics. The vision of nanobiotechnology is to build tiny, molecule-sized machines able to manipulate matter at the atomic level.
In the last few years,researchers have begun to construct primitive analogs of components that would be needed to build a functioning nanomachine. Examples include carbon structural frames, nano-scale grasping tools, molecule-sized motors, and logic gates that could serve as the basis for molecular-scale computers. Perhaps where nanotech has experience a bigger development is in pharmaceutical formulation field. There are three main ways in which innovative drug delivery systems improve pharmaceutical productivity:
  1. To combat patent loss for leading biotech drugs; innovative delivery systems may be employed by the leading players to manage product lifecycles by extending the patent protected period of a drug. Improved drug formulas, if launched prior to leading product patent expiration, will allow companies to capitalize on their existing patient population;
  2. The use of technology to enable pipeline drugs to be more effective; highly innovative products will, obviously, help set new market standards following their launch;
  3. To expand the number of drug candidates which may be brought into clinical R&D pipelines where pharmacokinetic profiles were not previously considered suitable, efficacious, or cost-effective.  
Obviously, nanotech and biotech companies are interesting tools for pharma, to increase its performance and fill the dried pipelines.

[1] DiMasi JA, Hansen RW, Grabowski HG, 2003, “The price of innovation: new estimates of drug development costs”. J Health Econ.; 22(2) pág. 151–185
[2] DiMassi, JA; Graboswki, HG, 2007, “The Cost of Biopharmaceutical R&D: is Biotech different” Manage. Decis. Econ. 28: 469-479 

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martes, 6 de septiembre de 2011

Financing biotech companies: the importance of MAB in Spain / Financiar las biotech: la importancia del MAB

FundsImage by HowardLake via Flickr
En castellano más abajo
[Note: MAB stands from Mercado Alternativo Bursátil – Stock Exchange Alternative Market- similar to Alternext. Monoclonal antibodies are quite important as well, but not for all biotechs ;-)]

We are living hard times in the biotech industry. Nowadays, it is becoming increasingly difficult to get money for almost every industry and, specially, for biotech companies. Credit crunch started two or three years ago and it is still present.

We can start this post reviewing the more popular financing ways for biotechs:

  1. Grants
  2. Private investors
  3. Angel investors
  4. Venture capitalists
  5. Bank loans
  6. Going public
Talking about grants, Governments in EU are facing public debt problems thus reducing expenses is capital for them. Spain and other countries have suffered a reduction in the amount of public funds available for grants, despite of the efforts of the Science Minister in this respect.
Capital is really conservative. When the economic forecast are, as we can see these days, uncertain investors prefer to put their money in safe places awaiting for a more clear vision on economy evolution. Private and angel investors are being very cautious before putting a dime in a new venture.
Venture capitalists are overwhelmed with towers of biotech business plan begging for money. In other words, competition is higher than never to get an investment in biotech which is taking down the companies’ valuation artificially. I read contradictory news about the VCs’ investment trend in last year and a half. Sometimes it’s been said that VCs are increasing their investments in biotech but, on my experience, that’s not true, at least in Europe. I don’t even think about going to the US to ask for investments in Europe…
Bank loans. I think that the readers of this blog don’t need any explanation. Simply, this is not an option nowadays for a biotech firm. It never was but now, that is more true than ever.
We just have one option available out of six: Going Public.
Really? Well, that appears to be the case. And this is not an easy option, especially for small emerging biotechs that are condemned to struggle in the competitive landscape of private investors and VCs…
Up to now, there are two Spanish biotech companies listed at MAB: Ab-Biotics and NeuronBiopharma. Good for them! Becoming a listed company is a strategic decision with many drawbacks as regulation is hard (but not as hard as it is for other "traditional" markets). Information should be provided to market regularly and the companies incur in extra expenses to accomplish all of the requirements inherent to being traded.
However, we cannot forget the added benefits: a traded company is required to be transparent for investors, what could attract new ones, and new funding strategies could be on place (PIPEs, selling newly-issued, discounted shares to existing shareholders, ATM strategy…).
As a conclusion, going public does not only permit the company to raise funds in the IPO, but also gives the company access to new fundraising tools unavailable to private companies. In my view, it is time for biotechs in Spain to start thinking on going public and being traded on the MAB as an alternative financing source.

Definitions:
PIPE (Private Investment in Public Equities): typically in a PIPE transaction, a small group of private investors led by a hedge fund and the firm's original venture capital (VC) backers purchase shares in a publicly held biotech that is often young and struggling to attract the attention of Wall Street analysts and large institutional investors like mutual funds and pension funds. I took the definition form Nice PIPEs at Nature Bioentrepreneur 

ATM (At The Market): ATMs involve selling shares into the market in small chunks, and while they can’t be used to raise a boatload of money, they can avoid the discounts and warrants that can make registered direct offerings and PIPEs unattractive. I found this definition here: BiotechFundraising Options for Those With No Options

Las empresas gestoras de capital riesgo están abrumadas con torres de planes de negocio biotecnológicos mendigando dinero. En otras palabras, la competencia para lograr fondos se ha vuelto más competida que nunca, lo que está llevando a la baja la valoración de las biotecnológicas artificialmente. Llevo año y medio leyendo noticias contradictorias sobre la inversión de capital riesgo. A veces se ha dicho que la inversión de capital riesgo en biotecnología se está incrementando pero, en mi experiencia, esto no es cierto, al menos en Europa. Ni se me pasa por la cabeza ir a EE.UU. para pedir dinero para inversiones en Europa…
Préstamos bancarios. Pienso que los lectores de este blog no necesitan ninguna explicación. Sencillamente, ésta no es una opción. Nunca lo ha sido, en realidad, pero ahora es más cierto que nunca.
En fin, que nos queda una sola opción de seis: salir a bolsa.
¿De verdad? Bueno, parece que esa es la situación, que no es fácil especialmente para biotecnológicas emergentes que están condenadas a luchar por inversores privados y capital riesgo…
Hasta el momento, hay dos empresas biotecnológicas españolas que cotizan el MAB: Ab-Biotics y Neuron Biopharma. Bien por ellas. Ser empresa cotizada es una decisión estratégica con muchos inconvenientes ya que la regulación es dura (aunque no tanto como para otros mercados “tradicionales”). Se debe informar regularmente al mercado y las empresas incurren en gastos adicionales para cumplir con todas las obligaciones inherentes a ser cotizadas. Sin embargo, no podemos olvidar los beneficios añadidos: una compañía cotizada es más transparente, lo que puede animar a nuevos inversores y, sobre todo, se pueden acceder a nuevas estrategias de financiación (PIPEs, venta de nuevas acciones descontadas a los actuales inversores, estrategia “at the market”,…)
Como conclusión, salir a bolsa no solo permite a la empresa levantar fondos en la oferta inicial de acciones, también permite acceder a nuevos instrumentos financieros no disponibles para empresas no cotizadas. Quizá es el momento de comenzar a plantearse la salida a bolsa para las biotecnológicas españolas… Y por eso es tan importante potenciar el MAB e incentivar a las empresas, ¡más que la financiación pública!
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