Investors Say Times Are Changing in the BioPharma Market

It’s a brave new world in biopharma investing, according to Carol Winslow, cofounder of Channel Medical Partners, a late-stage venture capital firm. Winslow and early-stage investors were among panelists who spoke October 22 at Gleacher Center at an event co-hosted by the Finance Roundtable and GSB BioPharma, run by students in the Evening MBA and Weekend MBA Programs.

From the liability imposed by Sarbanes-Oxley legislation to the risks involved in early-stage investment, the venture capital market faces challenges at each point, said Kristina Burow, ’04, an associate with ARCH Venture Partners. She asks four key questions when considering a deal:

• Has the technology been thoroughly tested?
• Is the management team strong?
• Is the project focused?
• At what stage will the group partner with big pharma?

On the last point, Robert Okabe of the RPX Group said partnering with a big pharmaceutical firm is “absolutely a hot topic. There’s lots of activity around Pharma.” But, he said, “A lot of partners don’t want a noncommercial focus.”

That can be a problem for early stage ventures, said Burow, acknowledging that returns can sometimes be equivalent to investing in a bond. But, she said, “we’re looking at new ways to get to the market.”

Her goal is to couple “amazing science” with strong entrepreneurs and managers, but finding good managers can be tricky. “There’s a lack of seasoned CEOs,” Burow said.

Winslow too spends “a lot of time on people issues. It’s a people-oriented business in terms of networks and having a strong board and management team.”

In fact, according to panel moderator, John Banta, CEO and managing partner of Illinois VENTURES, “The vast number of failures in the early stages is due to people problems.”

On the up side, Burow said, “Our best deals are paradigm changing,” said Okabe. These are “the things that change the world.”

— Carmen Marti