Growth Strategies for Bioscience Companies II

"Developing Your Pipeline While Minimizing Risk and Managing a Great Exit"

Jane Hollingsworth, CEO, NuPathe Inc., moderated the session in a question and answer format.
Panelists were:
Michael Bozik, M.D., President and CEO, Knopp Neurosciences, Inc.
Frank LaSaracina, Founder, South Point Associates LLC
Mel Sorensen, M.D., President and CEO, Ascenta Therapeutics, Inc.
Paul Thomas, Former Chairman, President & CEO, LifeCell Corporation

One of the perennial questions for early stage companies developing their business model is, "Is it better to develop one product, or a portfolio of products?"
Sorensen: There is no one answer. It is all relative to your timeline, and whether you are looking at the short-term or long-term. It's much easier to see a single product result in an acquisition. When you have a single product, you have more flexibility managing your cash, and the high cost of pharmaceutical trials means you have less costs to worry about. In a portfolio approach, you have to be much more cautious about your cash flow and keeping your business going.

LaSaracina: A lot of it depends on who you are - management versus investors versus the board. If you are the management or the entrepreneur, if you have nurtured your product, you can want to stay focused. If not, you want to be careful where you're focusing your energies.
As the investors or the board, you might want to take a risk-management approach - as in, do you want all of your eggs in one basket? My perspective is that it's always better to manage your risk the best you can, and focus your activity on what will create the most value for your shareholders, while having an under layer of activities that will help cushion your risk.

Thomas: I don't think there's one answer. If you're a technology company, pursuing other technologies makes sense. You reach a point in a company's evolution where you have to take a risk. Ideally, that's a point where we'd all like to reach: you feel it, you smell it, you taste it and you really think it's going to work. It's a higher risk, but if you're successful, it really plays dividends. If you place your chips on single products, you can pursue multiple applications and hedge your bets a bit.

Bozik: Focus is very important. At the end of the day, you have to be willing to take the leap. The experience that we've had is very similar; we've placed our bet on our lead compound. But you shouldn't exclude an investment in the underlying technology because it creates credibility and a story, and when your product goes, that platform becomes a very rich source of 2nd generation activity. Stay focused, it is about product, but you have to build a foundation underneath.

LaSaracina: The finance situation right now is as bad as I've ever seen it, but Big Pharma has never been more desperate for products. They are looking at a patent cliff that's unprecedented.
Hollingsworth: Do you think the buyers in larger biotech pharma companies are more interested in buying diagnostics than they used to be?

Bozik: I've heard that's the case - there is still interest in diagnostics. Everyone's looking for what's the early test that you can determine whether a product's active or not.

Sorensen: The payors should be interested too, not just big pharma. Big Pharma doesn't always make the best decisions, or pay attention to compounds that don't have huge market sizes.

LaSaracina: As we go in the direction towards personalized medicine, there will be a resurgence of the diagnostic market that will gain importance as we start trying to treat smaller groups of patients that will respond better to therapies. If you can develop a product to monetize before selling your business, that's excellent. In this environment you have to demonstrate that you can move forward.

Bozik: There's an enormous amount of money available from the government. In PA, there's a big effort to shift policy to make small business more competitive for these Phase I Phase II SBIRs. We've had a number of discussions with NIH and NCI. the NIH recognizes they need to make a shift to be more like business - NCI is demonstrating this already. It's easier for them to fund platform technology because it's not as expensive, and shouldn't be disregarded as a source of income.

Thomas: The only drawback is that the money takes a long time.

By Danielle Kozich
on behalf of Pennsylvania Bio
kozich@thebravogroup.com

I apologize if there are any errors in this post; I am a layperson and many of these terms are out of my field of expertise.