Part 1: 2009 and Biotech Financing: How To Stay Afloat in Turbulent Economic Waters




Episode Loading...




PharmaTelevision requires Javascript enabled and Adobe Flash Player to watch our programmes. If you do not have Flash installed, you can download it for free from the Adobe Flash homepage.

Improve your Internet experience and start watching exciting new video content.

Video title: Part 1: 2009 and Biotech Financing: How To Stay Afloat in Turbulent Economic Waters
Released on: July 28, 2009. © PharmaVentures Ltd
Share/save this page:
Email
Bookmark
Facebook
Twitter
LinkedIn
Follow us:
RSS
Twitter
  • Summary
  • Transcript
  • Participants
  • Company
2009 is a tough year in the business world and for many biotech companies finding essential funding is proving to be harder than ever. In this comprehensive discussion Paul Hastings, CEO, OncoMed Pharmaceuticals and Steve Parkinson, CEO, Lakewood Amedex tell of the innovative ways that companies can use to secure the cash they need to operate and of the pros and cons of new financing sources.
2009 and financing of biotech companies.
Fintan Walton:
Hello and welcome to PharmaVentures business review here at Bio in Atlanta. On this show I have Steve Parkinson, who is President CEO of Lakewood Amedex. He's also had a lot of experience in the pharmaceutical and biotech industry including working at TranXenoGen, CereMedix, also working for Advanced Cell Technology, Johnson & Johnson, PPL a lot of experience there Steve Parkinson. I've also got on this show Paul Hastings. Paul J. Hastings is again a very experienced Senior Executive in the pharmaceutical and biotech sector. He is currently CEO of OncoMed Pharmaceuticals. And has worked as CEO at companies like QLT, Axys Pharmaceuticals, which was acquired by Celera [PharmaDeals ID = 8164] also working at Chiron biopharmaceuticals, Genzyme Corporation, Synergen and Hoffmann-La Roche. Welcome.
Steve Parkinson:
Thank you.
Paul J. Hastings:
Thank you.
Fintan Walton:
We are here today to talk about the biotech industry and How To Stay Afloat in Turbulent Waters? A subject matter that is very clearly debated is through the year of 2009. And I'd like to tap into both of your experiences with regards to the financing of biotech companies? So Steve Parkinson I like to start with you in general when you look at 2009 and you see what's happening within the biotech sector and you look back from your own experience you working as a CEO in a biotech company trying to raise finance. Is this the low point?
Steve Parkinson:
Well it's certainly seems like that if you are out looking for financing at the moment. I think companies -- there is gonna be a lot of rationalizations on companies, obviously in good times there is a lot of companies get started with the small piece of technology or a small or one product I think we never gonna see a lot of roll ups as they used to call them and we've see this before in the biotech industry were the venture capital companies maybe called 5 or 6 companies in the portfolio and then you rationalize that down to 2 or 3. We are also seeing a lot of activity in the pharmaceutical industry. A lot of pharma companies are rationalizing and cutting back on their internal R&D and so we are seeing some acquisitions going out there or licensing of products and I think that's really the big hope right now for a biotech companies.
Change in traditional biotech business model and role of venture capitalists.
Fintan Walton:
Okay. And for you Paul J. Hastings, having worked in the number of biotech companies. We traditionally look at biotech as a biotech business model one where financing occurs from seed capital into venture capital then eventually companies IPO. Are we now moving away from that traditional business model into a new era where things were gonna have to change?
Paul J. Hastings:
Well so, perhaps we are perhaps we're just in another cycle and we are at the bottom of that cycle. So if once been running this industry for 20 or 30-years once probably seen this before. It may not been has low as it right now. And when we rebound from this may not be as high as it's been before but there are science that are pretty recognizable here. And I've seen this over and over again in my career where folks who did raise money in good times manage their companies like they raise money in good times. And I think that the best possible way to look at this is whether you raise a lot of money or a little money in whatever time you're raising, who should always manage it as if the times were turbulent. Anticipating that things could change in a minute, the only constant that we've seen over the last 25-years has changed. So if one recognizes that it's probably doesn't make it easier but it might help in your decision making process if you're going about thinking about taking the risk of hiring 20 additional people to do a new project, or building a manufacturing facility, or even you know in some instances for companies here in the next year or so running out of cash. And so thinking about the company long-term, in other way to look at this is you've mentioned venture capitalist. I think the way that VC's are looking at funding companies today is to make sure when they put in the financing that is gonna covered that company to another fundable advantage. Now they've always been looking for this, but I think now is more of a punctuation on that so that the company can get through the turbulent times on to the other side.
Fintan Walton:
Right, but often they've like to fund the company to the next inflexation point not to the next side part from that economic cycle?
Paul J. Hastings:
Your are right.
Fintan Walton:
So they so they have to change the way they manage the funding?
Paul J. Hastings:
Well that's the fundable movement, right? So I mean it's dangerous if you are when I saw a fundable movement I mean in an inflexion point for which you can then attempt to finance, so someone who has to finance the share still has to go out and try to finance, right?
Fintan Walton:
Sure.
Paul J. Hastings:
And hopefully when they run out of the cash that they have today, when they get to their point where they need to finance there are the point with their product portfolio where there is a fundable movement. So they might have just completed a proof of concept whether it be a Preclinical Proof-of-Concept or Clinical Proof-of-Concept without data there will be no and go you raise money. So data is quite important and what I was stressing was at the VC's need to and I think they do this quite well now, funds the company when they are initially funded are in the series that they funded till the point where they know the company is gonna have data, that they can use when they are out there raising money and use that data to by convinced others to financing whether they gonna finance it at the you know at a higher price or whether there will be down, that's another story.
The waves of investment cycles
Fintan Walton:
Sure, okay. But in the end Steve Parkinson, if it goes back to you again the pharmaceutical biotech game is taking products through clinical development obviously inherent in that is the risk that basically any molecule entering clinical trials is mostly likely to fail, so when we look at the way biotech companies are funded are there sufficient funds going in to cover the level of risk that a company is gonna have to face?
Steve Parkinson:
Well that's a very good question. I mean that is that is a big part of the problem is that you know companies like biotech companies are under pressure obviously to get products into the clinic quickly because the minute you get a product into the clinic you go into different category, you no longer a pre clinical company, you are a clinical company. And you see an upswing in your evaluation. Now that's in the interest of the company and also the investors to PVC's. I think what we may see now is a change in that model where we see a lot more care and attention taken to making sure that the products are good before they go into the clinic, because clinical cost are not going down they are going up. And I don't think we can afford in this economic climate to see some many products going to the clinic and failing. So I think that may be a change in the model that we see in terms of that the drug development cycle may be longer. I also think we may see some change in the model in terms of companies becoming virtual and semi- virtual as it post to integrated companies as we saw in the past. I mean that's the one good thing, the one different thing about the cycle that we see now the last really negative cycles a while ago we didn't have the same service industries that we have today. So there are a lot more people in the middle portion who can manage the clinical process that the you know the regulatory process in a kind a similar better way.
Fintan Walton:
So you saying that our industry is actually getting stronger because it's because it has to adopt through each of these waves and cycles that new businesses are emerged from the from the records of the previous down cycle that actually then reinforces and strengthens our industry, is that possible?
Steve Parkinson:
Well I can't say it's getting, but actually stronger it's I think it's learning. I think we are learning better ways to develop drugs. I mean normal the classic text book stories of I forgot what they called the company in Boulder, Colorado who had their product go into Phase III and built the manufacturing plant.
Fintan Walton:
Right.
Steve Parkinson:
While was the product still in Phase III and they left the manufacturing plant, you know so I don't think that
Paul J. Hastings:
That was Synergen by the way.
Steve Parkinson:
Synergen that's that's the company.
Paul J. Hastings:
My company.
Steve Parkinson:
Sorry about that one.
Paul J. Hastings:
No problem.
Steve Parkinson:
So you know that, I don't think we see that kind of thing any more you know asset thing.
Fintan Walton:
Yeah.
Steve Parkinson:
Yeah I just have to agree with Paul is a lot better management of money now. And I also think you know since we are talking about alternative financing you know people are getting more innovative in terms of looking at alternative financing. For example, I've seen in previous cycles people didn't turn to government grants for example quite so much, now there is a great huge activity go after government grants and we are actually learning there as well is getting tougher to get government grants. And you know we haven't to be much more focus in terms of for people after, I think
Fintan Walton:
There's also, they are nice because they are also non-diluted?
Steve Parkinson:
Yes, that's also pretty nice. And I think you know that is, I let that Paul explain this. But I do think there is a sort of virgilling angel market coming back, a lot of angels who are previously putting money into VC's are sort of spotting opportunities now and saying maybe I can invest directly in this company or that company. I think there is a still a real fact that there is a very, very few investments you can make that give the potential return to the biotech investment we give. So that is starting to attract the money that's out there and hope it is --- it's been helped by tightly it is time to flow a little bit more I think.
Role of Venture capitalists.
Fintan Walton:
Right, well may be may be just on that thing because the, that the target often for attached by people in the biotech industry or the VC's other sources of funds. But are they they just fit themselves of of a misperception or understanding more our industry is all about, Paul J. Hastings?
Paul J. Hastings:
So when you say there is target for attack by
Fintan Walton:
By individuals, I just to attack venture capitalist because they they are pretty you know top on price. They're sometimes reluctance but more like companies and so forth?
Paul J. Hastings:
Now I see that's okay. Well I think if we are in this industry we probably need to understand that venture capitalist are essential to what we do. And yes of course they're gonna, just we were gonna invest in our piece of property, if we get that property for a 100,000 versus getting it in a million we certainly take it at 100,000. So people gonna take advantage of that. Someone who is responsible for financial engineering they gonna financially engineer, that's what venture capitalist do. They also you know fund innovation and they do it in the way where they need to get a return on that investments. So I think again to me that's the another part of the cycle.
Fintan Walton:
But is it but I also said there are also victims as well?
Paul J. Hastings:
Sure.
Fintan Walton:
Because in a way their perception or the sources of their funds having yet clicked into what the expectation should be for a turn bio VC into a biotech company?
Paul J. Hastings:
Well, I think there was a when the markets crash here few months ago. The funds who fund venture capitalist many of them had ratios that they needed to expectations of ratios if they needed to fund to, a certain percentage of public investments, a certain percentage of private investment. When their public investment evaluations came way down the percentage of investments in private venture proportion went up and so they had to equalize that. So I think the venture community got caught in that where these funds of funds wouldn't invest in new venture funds or in some cases even in you know new, new funds within existing venture funds.
Fintan Walton:
Exactly.
Paul J. Hastings:
Because they have to balance their public, private ratio. So yes in the way they've been a victim of it but on the other hand if somebody remember now that we are in a cycle, so lot of venture capitalist raised money very much like OncoMed did before the cycle hit. And so there is money out there but they've been careful about the way they're spending it. But those who had not raised the money they had to go out and raised it after the crash there at hard time and they will continue to have hard time.
Fintan Walton:
Do you think some of the VC's will disappear?
Paul J. Hastings:
Well, I think is a little bit like our industry, right? He mentioned Synergen. Synergen, we entered the market as part of Amgen. So Amgen bought that manufacturing facility and Amgen bought that portfolio products and it's, you know it's in green now in Amgen or part of Amgen. So that's what I think happens when things you know venture firms mainly in the future consolidate who knows, they may go way all together or they may rebound they way we may rebound. So it's part of this prepared self or whatever might happened and and you know to the best of kind a manage to until you get to that point.
Importance of change in business model for surviving in the industry.
Fintan Walton:
Right, so in your in your experience Steve Parkinson when you running a biotech company, how important is it for the for that biotech company to move to move from one business model to another or actually expect that some of the products and some of it's it's assets are not really up to it and they've got to move on to another asset. How important is that in relation to the surviving in our industry?
Steve Parkinson:
Alright, I think it's absolutely critical. I think, you know what we will see now is companies who have the opportunity to achieve revenue through services or you know whatever they have will be up, they're trying to do that. I mean that's clearly the way to go make your money stretch further really, your investment money. I think companies will certainly yeah drop a lot of products that maybe were marginal and you know had to promise that in good times we get funded and go to the clinic. I think we'll them focus very, very much on one good product put all the resources behind that, because in the end that's what it's about, it's about making these milestones, it's about getting them to the clinical.
Fintan Walton:
Right.
Steve Parkinson:
So they've getting value add to your company by getting through those.
Fintan Walton:
But when you focus your, your you're no longer spreading your bets. So you are more likely to
Paul J. Hastings
President and CEO
Steve Parkinson, President and CEO at Lakewood Amedex, has over 25 years experience in the biopharmaceutical industry, including four CEO roles over the last eleven years, one of them as founder and CEO of TranXenoGen, a company he took public on London AIM. As President and CEO of CereMedix, a drug discovery and development company, he advanced their first product to clinical trials. Previously he was with Advanced Cell Technology, Johnson & Johnson, PPL Therapeutics (Dolly the Sheep) and Genzyme Transgenics. Born and raised in Scotland he has lived and worked in the US for the past 20 years. Mr. Paul J. Hastings brings more than 20 years of experience as a biotechnology and pharmaceutical industry executive. He has served as President and CEO of OncoMed Pharmaceuticals since January 2006. Prior to joining OncoMed Pharmaceuticals, Mr. Paul J. Hastings was President and Chief Executive Officer of QLT, Inc. Previous to that, Mr. Paul J. Hastings served as President and Chief Executive Officer of Axys Pharmaceuticals, which was acquired by Celera Corporation in 2001. From 1999 to 2001, Mr. Paul J. Hastings served as the President of Chiron BioPharmaceuticals, a division of Chiron BioPharmaceuticals. Prior to that, he was President and Chief Executive Officer of LXR Biotechnology. Mr. Paul J. Hastings also held a series of management positions of increasing responsibility at Genzyme Corporation, including serving as President of Genzyme Therapeutics Europe as well as President of Worldwide Therapeutics. Mr. Paul J. Hastings also served as Vice President, Marketing and Sales and General Manager, Europe for Synergen, Inc., and previously held a series of marketing and sales management positions with Hoffmann-La Roche. Mr. Paul J. Hastings currently serves as Chairman of the Board of Directors of Proteolix, and also serves on the board of directors of Cerimon Pharmaceuticals. He received a Bachelor of Science degree in pharmacy from the University of Rhode Island.
Lakewood Amedex
Lakewood Amedex, a private development stage biopharmaceutical company, headquartered in Sarasota, Florida, has a diverse portfolio of targeted therapeutics, broad spectrum anti-bacterials, and anti-viral technologies. The lead product, LPI007, is a fully human toxin-neutralizing monoclonal antibody shown to be effective in the treatment of hemolytic uremic syndrome (HUS) caused by pathogenic EcoliO157:H7 and will be entering Phase I clinical trials in late 2008. Nubiotics are a broad spectrum first in class group of anti-bacterial compounds that represent a first line defense against the increasing number of antibiotic resistant bacteria. A proprietary nanoRNA technology developed for the treatment of viral diseases, such as avian influenza and hepatitis. OncoMed Pharmaceuticals OncoMed Pharmaceuticals was founded in August 2004, by Drs. Michael F. Clarke and Max Wicha who led the discovery of cancerstem cells, in solid tumors. The ability to isolate and monitor tumor initiating cells using specific surface markers and flow cytometry has allowed OncoMed to carefully evaluate the importance of specific targets associated with key biologic pathways implicated in both stem cell biology and cancer. Antibodies against these targets have been developed and tested within xenograft models derived from freshly resected human cancers. Using these approaches, OncoMed has a portfolio of active antibodies that target biologic pathways critical for survival of tumor initiating cells. OncoMed's first antibody targeting the pathways critical to cancerstem cells has now entered clinical trials. Details of the initial Phase I study, which is now recruiting patients, may be found at ClinicalTrials.gov. Multiple additional promising therapeutic candidates that target other critical pathways are also being developed. OncoMed Pharmaceuticals has attracted significant funding from a prominent group of investors, that include, US Venture Partners, Latterell Venture Partners, The Vertical Group, Morgenthaler Ventures, Nomura Phase4 Ventures, Delphi Ventures, Adams Street Partners, De Novo Ventures and Bay Partners.