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Lifesciences Opportunities In 2003

Anil Saigal

The TiE-Boston Life Sciences Forum met on Monday, February 10th at the MIT Faculty Club to discuss funding opportunities in this area. The panel consisted of Kevin Connors, General Partner, Spray Funds; Pat Fortune, General Partner, Boston Millenia Partners; and Dr. Anupam Dalal, Principal, Flagship Ventures. The event was moderated by Dr. Anil Khurana, Managing Partner, TCG-Life Sciences.

Dr. Anupam Dalal outlined the opportunities and challenges that exist in the lifesciences markets. “We are large in information and poor in knowledge” said Dr. Dalal. Siginificant technical advances need to be made in the areas of Systems Biology, Knowledge Assembly(Metabolics and Computational Tools and Solutions) and Chemistry to create products. Since the development of Genomics, there is a large database of targets. But currently conventional chemistry is being used and there is a big question as to whether traditional molecules will work on new proteins.

Pat Fortune focused on three topics - health care, life sciences, and information technology. In health care the challenge for the current health care system is that it has to deal with an aging population. Problem in the life science arena is that companies are spending more on research and development of drugs but still launching fewer drugs in the market. By 2007, $30B of drugs will be coming off patent. 8% of the top 100 drugs are now biotech products. “IT in pharmacutical industries continues to face many challenges. Pharmas are drowning in data, dying of thirst” said Pat Fortune. There are major bottlenecks moving downstream in chemistry and manufacturing. "As there is a strong need for Pharmas to fill up their pipelines, they are now more interested in products than discovery partnerships as spending on drugs is expected to continue to increase at double-digit rates" said Pat Fortune. There is still significant funding available for entrepreneurs dealing with novel screening methodologies, silico drug discovery and novel chemistries, protein manufacturing and late stage products. Pat made clear distinctions between the life sciences and health care areas. One should be aware that in the drugs area, the technical risks are high but the market risks are low whereas in the case of healthcare, the technical risks are low but the market risks are high. Pat Fortune outlined some of the opportunities in the IT area for health care services as well. According to the latest figures available, there were 5 B health care claims filed in the United States. Each claim involves about 10 individual information transaction and cost about $7 in labor and overhead. Therefore, online transactions and information services, and information technology support for electronic medical records and pharmaceutical and device development are in great demand.

Kevin focused on the ‘Deep pockets ---- short arms’ situation. His primary focus area was medical devices. The number of deals in the medical device industry has been stable at around 150 per year. However, the total dollar amount of the deals has tripled as individual deals have increased in size. The fraction of money invested in new deals has gone done from 50% to 25% in the past three years as more and more funds are invested in existing companies. According to Kevin, most of the medical device companies are acquired at some stage for about $30 – $500 M, where as the average median investment in them is around $27M. For majority of the entrepreneurs in this area, the exit strategy is acquisition. Except for the large corporations, every one is limited in growth due to their distribution networks. Large corporations are able to bundle products as part of their distribution networks. So before beginning a venture, one must think about potential buyers for your company. The only way to succeed in this business is to document that a device will reduce cost. Due to the technical risks involved, most of the financing in this field is Milestone Based Financing where additional funding is given subject to achieving a certain milestone. This requires one to minimize the burn rate in case it takes longer to achieve a particular milestone.

All the speakers were very focused and had specific dos and don’ts for the 75 or so budding entrepreneurs who were risking their lives on a very snowy evening to attend this event.

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Kevin Connors, Pat Fortune, Anupam Dalal and Anil Khurana

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