Es­sen­tial cri­te­ria bio­phar­ma­ceu­ti­cal in­vestors seek when eval­u­at­ing com­pounds and com­pa­nies

Cur­rent­ly, 81 per­cent of the bio­phar­ma­ceu­ti­cal projects in the glob­al de­vel­op­ment pipeline are owned by small-to mid-sized com­pa­nies*. These emerg­ing com­pa­nies have many chal­lenges in fur­ther­ing their de­vel­op­ment of new and ex­cit­ing projects. Whether a com­pa­ny seeks to out-li­cense, com­mer­cial­ize a com­pound, or po­si­tion it­self for ac­qui­si­tion, suc­cess of­ten de­pends on in­vest­ments. These in­vest­ments can come from ful­ly in­te­grat­ed phar­ma­ceu­ti­cal com­pa­nies and/or ven­ture cap­i­tal­ists. And, ul­ti­mate­ly, the com­pa­ny’s suc­cess in se­cur­ing in­vest­ment can mean the de­vel­op­ment of new treat­ments for the pa­tients who need them most.

Com­pound in­vest­ment: at­trib­ut­es in­vestors val­ue the most

While clin­i­cal per­for­mance (safe­ty and ef­fi­ca­cy) is by far the most im­por­tant in­vest­ment at­tribute for both large bio­phar­ma­ceu­ti­cal com­pa­nies and ven­ture cap­i­tal­ists, there are dif­fer­ences in how they con­sid­er oth­er com­pound at­trib­ut­es.

Large bio­phar­ma­ceu­ti­cal com­pa­nies are more like­ly than ven­ture cap­i­tal­ists to in­di­cate fa­mil­iar­i­ty with ther­a­peu­tic area as a top in­vest­ment at­tribute. How­ev­er, ven­ture cap­i­tal­ists usu­al­ly in­di­cate clin­i­cal tri­al ex­e­cu­tion as be­ing more im­por­tant com­pared with large bio­phar­ma­ceu­ti­cal com­pa­nies.

If a com­pa­ny has signed a deal that in­cludes pay­ments up­on the com­ple­tion of key de­vel­op­ment mile­stones and is able to meet those mile­stones, the com­pa­ny is demon­strat­ing to the mar­ket that its prod­uct is valu­able and man­age­ment is ca­pa­ble of meet­ing goals. This has the po­ten­tial to in­crease the over­all val­ue of the com­pound when the com­pa­ny seeks fur­ther fund­ing or en­ters in­to li­cens­ing agree­ments. Non-clin­i­cal con­sid­er­a­tions such as man­u­fac­tur­ing and route of ad­min­is­tra­tion al­so are im­por­tant for both in­vestor types.

Here are the top four most im­por­tant cri­te­ria in­vestors look for when eval­u­at­ing the in­vest­ment po­ten­tial of a com­pa­ny.

1. Clin­i­cal per­for­mance (safe­ty and ef­fi­ca­cy)
2. Con­sis­tent with com­pound eval­u­a­tions, com­mer­cial­iza­tion, pric­ing and com­pet­i­tive en­vi­ron­ment
3. Fa­mil­iar­i­ty with a ther­a­peu­tic area
4. Fa­mil­iar­i­ty with non-clin­i­cal con­sid­er­a­tions such as man­u­fac­tur­ing and route of ad­min­is­tra­tion

Com­pa­ny in­vest­ment: at­trib­ut­es in­vestors val­ue the most

While clin­i­cal per­for­mance (safe­ty and ef­fi­ca­cy) is by far the most im­por­tant in­vest­ment at­tribute for both in­vestor types, there are dif­fer­ences in how they con­sid­er oth­er com­pa­nies for in­vest­ment.

For ex­am­ple, both types of in­vestors in­di­cate that fi­nan­cial per­for­mance and cost man­age­ment are very im­por­tant, how­ev­er for ven­ture cap­i­tal­ists, this would be one of their top-three in­vest­ment cri­te­ria.
Since ven­ture cap­i­tal­ists typ­i­cal­ly in­vest in a num­ber of com­pa­nies, it is crit­i­cal that the team in which they are in­vest­ing has ex­pe­ri­ence and is cred­i­ble, the mar­ket size is sub­stan­tial, and the prod­uct has the po­ten­tial to of­fer sub­stan­tial re­turns.

As with their in­vest­ments in com­pounds, large bio­phar­ma­ceu­ti­cal com­pa­nies are more like­ly than
ven­ture cap­i­tal­ists to in­di­cate fa­mil­iar­i­ty with the ther­a­peu­tic area. This is be­cause the in­vest­ment must fit their over­all prod­uct strat­e­gy.

Clin­i­cal tri­al ex­e­cu­tion and reg­u­la­to­ry plan­ning are al­so more im­por­tant for ven­ture cap­i­tal­ists than
bio­phar­ma­ceu­ti­cal com­pa­nies. Since the cost of clin­i­cal tri­als re­quires a sig­nif­i­cant in­vest­ment, un­der­stand­ing the clin­i­cal de­vel­op­ment and reg­u­la­to­ry path are of in­creased im­por­tance for ven­ture cap­i­tal­ists.