When VCs hand out mega-rounds to Vir and Gos­samer, are they bet­ting on the jock­ey or the horse?

Fol­low­ing a pe­ri­od of un­prece­dent­ed re­turns for bio­phar­ma in­vestors, flush VCs are sink­ing big­ger and big­ger rounds of cash in­to com­pa­nies whose pipelines are still in their in­fan­cy. Tak­ing this trend to a new lev­el is an in­creas­ing­ly pop­u­lar move to back biotech ex­ec­u­tives who are known to be star per­form­ers with mega-rounds ris­ing north of $100 mil­lion – even if their pipelines lack a star pro­gram.

There was a time when a few mil­lion bucks would back a promis­ing as­set, and then — if the pro­gram proved worth­while — in­vestors would re­cruit a star team. But back­ing man­age­ment be­fore sci­ence is a trend that’s pick­ing up steam, ac­cord­ing to sev­er­al in­vestors I met at JP Mor­gan this year.

Ni­na Kjell­son, Canaan

Some con­sid­er these bets ex­ceed­ing­ly risky, as VCs are es­sen­tial­ly hand­ing the C-suite cash and hop­ing they dig up some­thing use­ful in re­turn. Oth­ers ar­gue the move means in­vestors are play­ing it safe with this strat­e­gy. Af­ter all, a res­olute CEO root­ing around for sev­er­al op­tions to pro­vide a re­turn may be more de­pend­able than the some­times-finicky sci­ence of a one-star pro­gram.

“It’s a clas­sic de­bate in the VC world,” said Canaan’s gen­er­al part­ner Ni­na Kjell­son. “Do we in­vest in the jock­ey or the horse?”

Com­pa­nies like ARCH Ven­ture Part­ners and Flag­ship Pi­o­neer­ing of­ten bet on the jock­eys.

The trend means one thing for cer­tain: in­vestors’ wal­lets are filled to the brim, and their strate­gies are chang­ing as a re­sult.

The plan, of course, is to get trust­ed lead­ers in po­si­tions where they can de­liv­er one (or hope­ful­ly many) re­turn. This has evolved in­to a busi­ness mod­el in which an um­brel­la com­pa­ny finds promis­ing as­sets to ad­vance, and then spins them out in­to sep­a­rate en­ti­ties to see if the sci­ence sinks or swims. That way, one fail­ure doesn’t tank the whole en­ter­prise and the vet­er­an ex­ec­u­tives can dri­ve on.

When your re­sume war­rants mega-rounds

George Scan­gos

We saw this re­cent­ly with the eye-pop­ping fi­nan­cial back­ing of Vir Biotech­nol­o­gy, which went from launch to rais­ing over a half-bil­lion in seed mon­ey in its first year. In­vestors are bank­ing on a vet­er­an ex­ec­u­tive team that in­cludes CEO George Scan­gos, the for­mer boss at Bio­gen and Ex­elix­is.

Then there was the re­cent deal with Gos­samer Bio, a start­up led by two for­mer Re­cep­tos ex­ec­u­tives that emerged ear­li­er this month with $100 mil­lion in seed mon­ey. The com­pa­ny is be­ing tight-lipped about what as­sets they al­ready have, but we do know the plan is to snatch up ear­ly- and late-stage as­sets and de­vel­op them un­der spin­out en­ti­ties.

To some de­gree, De­nali fits in this pic­ture, too. The com­pa­ny’s pipeline is chalk-full of pre­clin­i­cal as­sets, and yet the com­pa­ny raised mega-rounds to get start­ed and then scored a $287 mil­lion IPO.

In­vestors shore up risk by bet­ting on re­peat teams

Jay Lichter, Aval­on

Jay Lichter, man­ag­ing part­ner at Aval­on Ven­tures, said he sees this as a risk re­duc­tion strat­e­gy on the part of the in­vestor.

“It re­duces risk a lot when you’re back­ing a group who’s proven to ex­e­cute on pro­grams,” Lichter said. “Give them a bunch of mon­ey, toss them a few pro­grams, and the chance that all will fail is close to ze­ro. One will turn in­to a ven­ture re­turn.”

Both Lichter and seed stage in­vestor Wal­ter Moos of Shang­Phar­ma agreed that the trend is an in­di­ca­tion of in­vestors with heavy pock­ets.

Wal­ter Moos, Shang­Phar­ma

“This is prob­a­bly one of the most di­verse fi­nan­cial ecosys­tems I’ve seen in my 35 years in the in­dus­try,” Moos said. “[VCs] need to in­vest more mon­ey per as­set be­cause they have so much more cap­i­tal to de­ploy. There’s a lim­it on how many com­pa­nies the part­ners can han­dle, so the deal size gets big­ger.”

It’s al­so pos­si­ble that VC firms are di­ver­si­fy­ing, Lichter said. In­vestors might con­sid­er vet­er­an-led teams as more ma­ture ven­tures that de­serve pri­vate eq­ui­ty-sized deals in­stead of VC-sized deals.

Big bets or pub­lic­i­ty play?

Are mega-rounds for nascent pipelines smart? Kjell­son said she’s not a big fan of huge seed rounds, even if the team is ex­pe­ri­enced.

“I’m a lit­tle bit more sober these days to make a bet on a team with a $100 mil­lion check ver­sus a $10 mil­lion to $15 mil­lion check,” Kjell­son said.

Of course, many of these deals are mile­stone gat­ed, she says, and as Moos points out, “like biobucks, lots of that mon­ey nev­er shows up.” Moos thinks these mega-sized rounds can some­times be a play for pub­lic­i­ty.

“It can draw more top man­age­ment, co-in­vestors, or even grab the at­ten­tion of Big Phar­ma,” Moos said.

Lichter tends to agree with Kjell­son. He says too much mon­ey in the bank makes biotechs slug­gish as they be­gin to op­er­ate like a “small big phar­ma, with all the bu­reau­cra­cy and po­lit­i­cal struc­ture.”

“I’ve nev­er been a fan of big fi­nanc­ing,” Lichter said. “I think it draws you away from what’s great about biotech, which is be­ing nim­ble. Be­ing close to death. It’s shock­ing how hard peo­ple will work when they have six months of cash and they have to get to work to stay alive.”


Il­lus­tra­tion: Shut­ter­stock

Janet Woodcock (AP Images)

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Janet Woodcock is set to be the most powerful person at the FDA in less than a week.

The veteran regulator and longtime director of the Center for Drug Evaluation and Research has been tapped as acting commissioner of the FDA, according to reports by BioCentury’s Steve Usdin and Pink Sheet’s Sarah Karlin-Smith.

The appointment was requested by the incoming Biden team, Karlin-Smith added, as they sort out the nomination of a permanent successor to Stephen Hahn — whose one-year tenure has been defined by Covid-19.

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Janet Woodcock (AP Images)

Janet Wood­cock is in the run­ning for FDA com­mis­sion­er — what does that mean for the agen­cy's fu­ture?

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The decision, as the initial wave of reactions suggest, could have dramatic implications for where the agency is headed in the next four years — if not beyond.

Woodcock, the longtime CDER director, is being vetted alongside former FDA principal deputy commissioner Joshua Sharfstein, Bloomberg reported. Already tapped as acting head of the agency, she’s set to take over from Stephen Hahn right after Biden’s inauguration next week.

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Steve Harr (L) and Hans Bishop

Paint­ing by the num­bers, Sana founders carve up a gi­ant uni­corn-sized IPO — for a biotech that has­n't quite made it to the clin­ic

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The raise they penciled in — $150 million — isn’t likely what they actually have in mind, and it doesn’t do justice to the size of their ambitions.

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Eli Lil­ly re-ups di­ver­si­ty pledge, pitch­ing in $30M to ven­ture fund for mi­nor­i­ty-owned health­care firms

The fight against racial injustice spurred by a series of high-profile shootings of Black men by police earlier this year put Big Pharma and healthcare — industries targeted for their lack of diversity — in the hot seat. Eli Lilly made an early pledge to change its ways and put more back into the community, and now it’s continuing to make good on that commitment.

Lilly will infuse $30 million into the Unseen Capital Health Fund, a venture fund looking to invest in early-stage minority-owned healthcare companies that have been historically “unseen” by the investment community, the pharma said Friday.

Laurie Glimcher, Dana-Farber president and CEO (Getty Images)

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The pace of innovation at the Dana-Farber Cancer Institute in recent years has seen a wave of startups launch with IP or leadership sourced from the nonprofit’s ranks. Now, looking for its own returns on that success, Dana-Farber has launched a new venture fund to invest in those fledgling businesses.

On Thursday, Dana-Farber unveiled Binney Street Capital — its first-ever venture fund. Roche and Verily veteran Luba Greenwood has been tapped to lead the fund, which was named after the location of the institute’s Boston site.

CEO Brett Monia (Ionis)

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Monia, one of the handful of young scientists who in 1989 followed Stanley Crooke across the country from SmithKline (now GSK) in Philadelphia to found Ionis in Northern California, replaced Crooke as CEO last January. By then, they had proven antisense, an RNA-based method for manipulating gene expression, could work dramatically well in at least some instances, transforming spinal muscular atrophy with the Biogen-partnered blockbuster Spinraza.

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David Kessler in April 2009 (Eric Risberg/AP Images)

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Friday the European agency put out the 5th in a series of statements about the hackers who broke into their system, noting that some of the information on vaccines that was gleaned in the attack is showing up online — altered to raise questions about the Covid-19 vaccines now in use.

This included internal/confidential email correspondence dating from November, relating to evaluation processes for COVID-19 vaccines. Some of the correspondence has been manipulated by the perpetrators prior to publication in a way which could undermine trust in vaccines.

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Nadim Ahmed (Bristol Myers Squibb)

Bris­tol My­er­s' top hema­tol­ogy ex­ec is on his way out — right on the heels of a $6B CVR im­plo­sion

Fourteen days after the $6.3 billion CVR tied to the approval of liso-cel went up in smoke, one of the top execs in charge of the work at Bristol Myers Squibb is preparing to step out of his job.

Mizuho analyst Salim Syed, who’s been following every twist and turn in the CVR saga, told investors on Thursday morning that Nadim Ahmed is on his way out. Syed’s note:

Recall, Ahmed is EVP and President of Hematology at BMY (i.e. JCAR017 and bb2121 are both hematological drugs). He’s still listed on the BMY management page. This is true — he’s still technically there. However, I have confirmed w/ BMY that his last day is tomorrow, Friday 1/15. To my best knowledge, Ahmed does not have another job lined up post his departure tomorrow.

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UP­DAT­ED: Am­gen tops cost watch­dog's price gougers list based on 'un­sup­port­ed' in­creas­es for En­brel with­out mean­ing­ful da­ta

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