From The Editor | April 9, 2019

What Investors Want: 7 Key Components To Raising Capital

Erin

By Erin Harris, editor-in-chief

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ARM’s 2019 Cell & Gene Therapy Investor Day featured expert-led panels to help the audience wrap their minds around the investment outlook for the cell and gene therapy space. One such panel, aptly titled, “The Investment Outlook for the Cell and Gene Space,” was comprised of investors from DEFTA Partners, Roivant Sciences, Aisling Capital, and Aquilo Capital Management. Dr. Reni Benjamin, Managing Director, Biotechnology Equity Research at Raymond James & Associates moderated the panel.

The purpose of the panel was to offer the audience — a mix of both investors and corporate — a sense of how investors are thinking about the cell and gene therapy space in 2019.  In part one of this three-part series, Dr. Benjamin answers my questions about exactly what was covered during the panel discussion.

Harris: During the discussion, you asked the panelists to explain the must-have attributes they look for when considering making an investment. Tell us how they responded.

Benjamin: Yes, I asked the panelists to explain the non-negotiable attributes as well as attributes for which they are more flexible when considering investments. We had a lively and candid discussion.

Be aware of your competitive landscape. Some management feel as though they must always be “on;” CEOs feel they must be the quintessential salespeople by projecting the best possible image of their company and their product. Obviously, you need to believe in your technology, but you shouldn’t overhype your stance.

As such, be aware of your competitive landscape, and be aware of both the pros and cons of your technology. Present not only the unique aspects of the technology but also provide transparency about the challenges you face. Provide the plans for overcoming those challenges. Investors, especially those that have been in the business for a while, appreciate transparency.

Know how to adapt and pivot. Each of the investors prefer to partner with management teams that don’t “stick to the script.” Ascertaining clinical data, understanding the competitive landscape, and learning how to manage the process going forward are critical components to showing investors you’re able to adapt to what’s happening in the market place.

Platform companies matter. Some investors pay strong attention to platform companies. Companies that license one or two drugs from the university are obviously important. But, investors sometimes prefer to invest in platform companies that have a particular platform, manufacturing process, type of virus or construct, etc. Platform companies are differentiated from others in the space, and it’s due to their ability to create repeatable assets — in other words, companies that can churn more products into the pipeline.

Existing partnerships. One of the panelists explained that, if at all possible, they prefer when the company already has a partnership in place. If you have a pre-existing partnership, investors see that as added validation from somebody who has signed a confidentiality agreement by taking the deep dive and putting money behind their choice.

Raise money when you can, not when you have to. This is a major, key conclusion. In our business, markets change, sentiment changes, you run into clinical and/or regulatory road blocks — all of which impact valuation. The key takeaway here is that when you have investors who are either interested in your space or interested in you, you should seriously consider raising that capital.      

Clinical validation. In the gene therapy space especially, investors are willing to accommodate wiggle room. In gene therapy, typically, we’re focused on monogenic diseases — diseases where there’s a mutation in one gene and the concept of replacing that gene has really taken hold, and we’ve been able to see that robustly translated from pre-clinical to clinical. The blanket statement is that we would love to see clinical validation.

First-to-market. The investors noted that while they prefer to be first-to-market, there is room to breathe here. In my opinion, this is more specific to the gene therapy space because of the one-and-done approach that’s being developed. The thinking right now is it doesn’t make much sense to have multiple players in this type of indication. And, they are typically orphaned diseases, so they are much smaller indications unlike the tenth cardiovascular drug that’s available.  Also, unlike certain cell therapies, these are cures whereas other patients may relapse and come back to a different type of cell therapy or a to cell therapy from a different manufacturer.