An Early Stage Investor’s JPM Reflections: Themes, Notes, and Quotes

Posted January 13th, 2012 in General Venture Capital, New business models

Flying home from JPM 2012 and thought I’d share a few reflections from our early stage venture perspective on what we heard (or didn’t) around the year’s kickoff biotech event.

While most of the attendees were focused on Inhibitex and other public biotech darlings, we spent all our time buried in satellite hotel meeting rooms talking about private companies.  In line with Bijan Salahizadeh’s “Simple Rules” for the meeting, we didn’t spend much time if any meeting new companies.  I only saw one.  And I only stepped foot in the Westin (a.k.a. Fort Knox) once, just long enough to get the wonderful beach bag.

The vast majority of our Atlas’ team time was spent meeting the “buyside” most relevant to early stage venture: not hedge fund managers, but R&D and BD teams from Pharma/Big Biotech.  The aim of these sessions was to discuss the progress of our portfolio, raise awareness around “hot” programs, here about their areas of interest, and share some of our venture creation initiatives.  We probably had over 20 of these sessions over the three days of the meeting.

Here are a few themes:

  • Innovative early stage assets are on the shopping list.  Pharma clearly wants differentiated new therapeutics, and much of the later stage clinical pipeline has either been picked over or isn’t innovative enough.  We heard repeatedly that even late Discovery and early Development Candidate stage programs were in the sweetspot for a number of Pharma BD scouting teams. And several earlier stage deals, like Forma’s pair with J&J and BI, highlight this willingness to go early for innovation.
  • Pharma wants to help kick-start more innovative companies.  When we discussed our venture formation activities, many Pharma groups raised their hand as wanting to help catalyze the early momentum of these startups.  Sanofi’s Warp Drive investment this week and Celgene’s 2011 Quanticell deal are both good examples.  Our Shire alliance also spurred lots of interest. These efforts go beyond the key role of corporate venture as valuable syndicate partners; they are really commitments from corporate R&D to helping shape the DNA of new startups.
  • Creative financial structures are moving into the mainstream.  Like in past few years, there was lots of discussion about R&D-sparing deal structures, spin-outs with buyback rights, put-call option deals, consolidation vs off-balance sheet relationships, etc…  But this year it seems these creative deals have real momentum and have moved from the periphery to mainstream.  Perhaps the accountants and lawyers are becoming more open-minded.
  • Research pipelines are not as dry as widely believed.  With the cuts to Pharma research budgets and reprioritization of disease area strategies, lots of interesting early stage assets are being put onto the shelf or spun-out.  This suggests that at least in Pharma discovery research it’s less a “dry pipeline” problem per se, but shifting strategy and resource efficiency challenge.
Those are four of the themes that came to mind, certainly reflecting my early stage bias and our focus on the tighter Pharma/Biotech/VC ecosystem.
Since we spent so much time in Pharma meetings, let me share a few constructive notes for improving the satellite meeting circuit.  Most of the meetings were great, but some weren’t.
  • Avoid really large groups of attendees unless they are all relevant and willing to participate: there were lots of meetings where I wondered why 80% of the room of 10+ people never said anything or were moving in and out of the session.  I was sort of hoping they’d be on their computers so at least I wouldn’t feel bad about wasting their time.
  • One-way downloads of information aren’t helpful.  The best discussions were those where substantive two-way dialogues ensued around our assets, the optimal preclinical and clinical development strategies, new insights in the field, etc… Sadly a few of our meetings felt like we were pulling teeth to get engagement and we wondered why we even bothered.
  • Big “VC events” by Pharma are very useful for networking, but keep the formal presentations to a minimum.  Nothing brings out a blackberry more effectively than 30 minutes of monologue from the front of the room. Provide leave-behind brochures or presentations, but don’t consume the meeting with them.

Lastly, outside of these Pharma meetings, there were a few quotes that I didn’t hear much:

  • [Biotech CEO]: “We’ve drafted our S-1 and are looking to file soon…”
  • [Public portfolio manager]: “Next generation sequencing is likely to be the next HCV story…”
  • [Private biotech BD exec]: “We’ve got multiple competing Series B up-round termsheets and need to pick one soon…”
  • [Healthcare VC]: “We closed our recent oversubscribed Fund via fax machine…”  (But congrats to Flagship and Canaan for closing their funds.)
All in all, the JPM 2012 meeting was one of cautious optimism for biotech. Looking forward to an exciting year.


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