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.
- Clinical performance (safety and efficacy)
- Consistent with compound evaluations, commercialization, pricing and competitive environment
- Familiarity with a therapeutic area
- 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.