Saturday, November 26, 2011

Not Dead Yet.... (Apologies to Monty Python)

As we continue on toward the last quarter of the year, we—as investors—continue to look at the life sciences sectors and long for a bright spot, or ten. Much has been written in the last year about the lack of private equity money for biotechnology companies. In fact, much has been said about the lack of money available in general. Well, I have news.  There is still hope. As proof,  two private early-stage companies closed significant early rounds last week. While both are involved in current industry “hot spots”—oncology and orphan diseases—both companies are signs of life in the funding sector.

The first, Agios, recently completed a $78 million C round, with participation from Arch Partners, Flagship Ventures and Third Rock Ventures, as well as Celgene (who has an alliance with Agios) and other private and public equity sources. This round, along with upfront monies received from Celgene on the signing of its deal, brings the cash available to Agios to north of $200 million. The company is focused on discovering and developing compounds that address issues with cancer metabolism, i.e., how cancers metabolize, thus allowing tumors to form. The company is also hoping to identify biomarkers during the early stages of the development process to enable the identification of target groups of patients most likely to benefit from treatment. This approach, in theory at least, would open the door to quick proof-of-concept trials.

The other, Biocartis, just closed a $100 million C round, with public and private equity groups in Europe. Using technology acquired from Philips, it is developing a new assay system that quantifies multiple DNA- or RNA-based biomarkers, and can be used in a wide range of patient sample types (e.g. blood, urine, tumor tissue). It has partnerships with bioMerieux and Janssen Pharmaceuticals, both signed this year. Biocartis’s goal is to enable physicians to match patients with the right treatment immediately.

These are but two examples of companies that are trying to move forward in life sciences and able to raise the money to do it. Both benefit from very early partnerships with established companies (Celgene and Johnson & Johnson, respectively), who also made equity investments in earlier rounds of funding. Agios and Biocartis are both exploring how to use new developments or accepted rules to move forward. Both are at least paying lip service to the idea that biomarkers can be used to help move compounds more swiftly through the clinic by pairing treatment with patients who would prove most genetically receptive—or by matching treatment and patient at the point of diagnosis.

There is no doubt that the present financing environment is making things challenging for both new ideas and existing companies alike. However, as we bemoan these tough times, we should also remind ourselves that there are signs of life. Promising companies are still being funded—and, given Agios and Biocartis as examples—not in a stingy way. Time will tell if this was money well spent, but isn’t this true of all our investments?