Sunday, March 31, 2013

Factors Influencing the Global Prospects & Investor Attractiveness of Indian Pharmaceutical Industry

Most ‘Indian Pharma Outlook’ reports from the likes of McKinsey & PwC  almost exclusively focus their policy & regulatory scenario call-outs on aspects that bear an impact on entry & exit strategies of global pharmaceutical companies - which is understandable given they form the healthcare client-base of these consulting organizations. Not much information is however available when it comes to information on the policy & regulatory landscape within India that has a bearing on the commercial prospects of Indian pharmaceutical companies globally & one that can influence the investor sentiment/ emotion driving it.

Inspired by CNN Money’s beautifully minimal ‘Fear & Greed Index’, I set about categorizing and analysing the three most debated India-specific pharmaceutical policy & trade issues in the past few months. Thus categorized as low, elevated & high risk, these three issues broadly mapped out the boundaries of factors influencing ‘Global Prospects & Investor Attractiveness of Indian Pharmaceutical Industry”.

Lack of candor in acknowledging a local & global menace of counterfeit drugs

FDA website says “Counterfeit medicine is fake medicine. It may be contaminated or contain the wrong or no active ingredient. They could have the right active ingredient but at the wrong dose. Counterfeit drugs are illegal and may be harmful to your health” – While US Pharmacopeia broadly uses the same definition, it extends the scope of fake to the drugs that are “deliberately mislabelled” and with “fake-packaging” - Now, while the definitions do not say so, it is an inferred & accepted norm within the regulatory, federal & industry circles within USA, EU most other developed economies that any drug approved for a certain geography/ country if found to be distributed, marketed in another geography where it hasn’t obtained any approval makes that drug a counterfeit too.

In what could be explained within ten lines of text as above & given this is a definite public health issue, it’s confounding how so much energy is spent by so many espousing interpretations of varied hues on what doesn’t amount to a counterfeit. A recent news item in TOI showcases how a whole country’s credibility could take a beating with misinformed defence of an ill-articulated official position. The gentleman in the referred article states "Counterfeit is essentially an intellectual property issue referring to falsely packaged products that violate trademarks, but it is not necessarily about the quality of the medicine" - almost affecting that a counterfeit with a real API a lesser crime" – If this is indeed the official position of Indian on counterfeits, it sure needs work.

Factors at play

From the consumer’s perspective it could be Cost differential of counterfeits vis-à-vis’ branded formulations & No-hassles (online) access of Prescription drugs. From the counterfeiter’s perspective, it’s all about monetizing the existence of a vast ill-informed & gullible market 

& then there is this legacy of distrust & malice……

While there is/ was a definite basis to suspect & investigate role of India connection to the counterfeits, for a larger part of the last decade FDA, PhRMA, SOCMA & EFCG and the various allied task-forces went on an extended witch hunt, not entirely without dishonourable motives (read: SOCMA, EFCG; NA/ EU manufacturers losing out to outsourcing to India), for Indian knockoff offenders & in the bargain tarnishing the image of many ethical Indian organizations that in some instances were completely unaware of their product getting trans-shipped through parallel/ secondary import channels (ref. the PhRMA report on counterfeit drug statistics quoting 2008 data)

*Image courtsey: from a Forbes article about Indian companies adaptng the mobile verification systems in a big way

Pros & Cons

ZILCH: There can absolutely be nothing positive about;
  • A fake drug with a spurious drug &/OR
  • A counterfeit with a real drug &/OR
  • A true generic in an unauthorized territory 

CREDIBILITY: Any knee-jerk reactions such as the above, based impractically on a painful legacy, may end up sounding like a tacit Indian support to counterfeit industry and will severely harm the genuine promise Indian generic industry holds and is pursuing

PUBLIC HEALTH: The above cynical approach to addressing global concerns on counterfeits can easily get rubbed off within the Indian context & the consequent confusion can be used by counterfeiters to take root & rot the whole public health system within India

NET IMPACT ON INDIAN PHARMA:  This is a no-brainer really, with zero positive & two negatives; this is a present & imminent danger to the credibility of Indian pharmaceutical Industry.

What could Indian Pharmaceutical industry & policy makers do to address the above aspects/ issues?

Ironically a lot of Indian response to any dialog on counterfeits still seems to be based on the sole concept that some of the "real-API counterfeits' are traceable to India & many a time, without the manufacturing company realizing so  - while this may still be a relevant grouse, it still cannot be the sole discussion point whenever someone mentions counterfeits.
From a global perspective, Counterfeits, even if they use “real API” should still be eliminated from supply chain owing to the following consequences* (adapted from a USP DQI presentation) of their existence;
  • Diminished trust in health care system
  • Waste of financial resources
  • People go untreated—leads to prolonged illness or, possibly, death
  • Sub-potent treatment can lead to resistance and treatment failure

India Pharma Industry, policy makers should shed the baggage of the hurtful past & acknowledge explicitly to the world community that the above concerns are applicable for control of counterfeits on the Indian soil too & hence both internally & externally India will deal with all dialog on counterfeit medicine FIRST as a public safety debate & THEN as a trade debate.

Looking ahead

The regulators & industry in developed countries such as USA & EU, UK should also look beyond the greed-driven commerce as the trigger for the existence of counterfeits & acknowledge that the  reasons can be equally economical, triggered by the need for affordable medicine for the outlier population that is neither covered by the state nor by the insurance companies. This aspect is bound to be helped by the current winds of genericization blowing through USA & Europe and this trend will hopefully and naturally topple the cheap counterfeit applecart – Having said that tackling counterfeits should be the primary corporate social responsibility of the pharmaceutical industry worldwide.

The not so surprising enthusiasm for the compulsory Licensing route to introduction of 'copy cats'

Back in March 2012, Natco Pharma opened the gates (or Pandora's box depending upon which side of fence one is..) with their successful bid for the Compulsory License of Sorafenib Tosylate (Nexavar) using the provisions set out in the TRIPS agreement. The recent endorsement of this decision by IPAB seems to have ushered-in the growth-phase of CLs with BDR Pharmaceuticals of Mumbai filing an application for Dasatinib and the grapevine says quite a few as this are lined up in the immediate future, in India & overseas.

While CLs are being looked into seriously by other developed countries too, what complicates it in the Indian context is the sheer price difference that makes the royalty on sales to the innovator a trifling formality and the sheer size of the lost opportunity for the innovator huge (size of Indian population).  The case-in-study being Nexavar again wherein Bayer’s price is 35 times the Natco’s price & the 7% royalty Bayer was granted, wouldn’t even pay for their lawyers fee at the initial sales volume.

Factors at play

Cost effective access to newer therapeutics in India, Compliance with global IPR norms (both prescribed & inferred) and last but not the least, A really big (read: 1.2 billion population) market opportunity, the surface of which has been hardly scratched.

Pros & Cons

SOCIA IMPACT:  The Indian population will have economical access to technologically superior later-date drugs

FINANCIAL IMPACT: Opening up of a new market in India for these newer therapies hitherto not adopted owing to a steep price barrier

CREDIBILITY: The Indian pharmaceutical industry's credibility will take a hit if the trend catches up in a big & uncontrolled fashion - The obvious impact will be a gradual deceleration of outsourcing to India & more specifically withdrawal of contract manufacturing of proprietary drugs in India by innovators affected by the CL (which could be all within a very short-span)

NET IMPACT ON INDIAN PHARMA: At the current stage, I’d believe Indian industry as a whole has more to lose w.r.t. loss of outsourcing pie than the money generated out of the CL drugs.

Also, despite a large price differential & given the drug use in India is still physician controlled & not state-sponsored or paid for by the insurers, the innovator companies are likely to resort to a sustained campaign through physicians to color the local copy-cat as a 'compromised medicine' & thus can significantly and negatively impact the Indian company's anticipated fortunes – Improbable as this may sound, this indeed happened a few years ago in the vaccine domain with the MNCs spoiling the retail-dreams of the local contenders using their sheer financial-muscle & reach to influence the physician** against the local vaccine.

**My daughter’s pediatrician forcefully opposed my suggestion to go-in for a Hep-B vaccine from a good Indian company & insisted that he wouldn't suggest we compromising on the quality of the vaccine and that we should instead opt for the pricier but reliable MNC  - Ironically, a decade later this Indian company was acquired by the very same MNC :-))

What could Indian Pharmaceutical industry & policy makers do to address the above aspects/ issues?

A transparent, public evaluation of the application & a greater scrutiny of the "need"/ "essentiality" of a certain new drug vis-a-vis further price rationalization drugs that have already fallen off the patent cliff.

Possession of validated process for the said drug by the applicant at the time of application to be deemed as an automatic disqualification - to mean, since this indicates that the applicant reaching out to the innovator for a licence has been done without an intent to get one & hence that refusal of a license by the innovator is not sufficient basis of the Indian generic company to go in for a CL route

In effect create a higher barrier to incoming applications & thus walling-out contestable awards that bring no incremental benefit neither to the industry nor to the consumer

Looking ahead

While at the face of it this may look like essentially an opportunity for Indian generic players, I tend to believe that pretty soon the global generic giants will join the game through strategic alliances, acquisitions et al & eventually even innovators would themselves monetize the trend by introducing authorized "cheap" generics - “Cheap” being the keyword, as it is eminently evident from the Nexavar price differential, a mere 20-30% reduction wouldn’t really sway the regulatory sentiment in favour of innovator.

Gearing up for better transparency, eventually

Even as articulation of a position is still a challenge for India in some key policy areas as above, Visibility, mostly aided by cyberization of governance is getting bigger & better in India each day. While digital governance may be an emerging global phenomenon, what makes it unique in the Indian context is that this amounts to a tentative first step towards transparency, a beast that India is struggling to tame for many years now.

Specific to healthcare, within the past four months the Indian patent authority (CGPDTM) has issued draft guidelines for processing patent applications pertaining to Biotechnology; Biological Material & Traditional Knowledge. What makes this interesting is the public review & dialog to aid the process of finalizing the guidelines.

Factors at play

The acknowledgement of a consensus approach to policy making; The concept an of enforcement designed & driven by the stakeholder universe; An attempt to encourage innovation within India by providing clarity on patentability aspects & finally, a rather brave attempt to forestall patent walling-in attempts by companies & to prevent encroachments on traditional knowledge
The pros & cons

ENABLING BUSINESS CLIMATE – As a country that conducts business transactions in English, India already has an inherent advantage with respect to visibility & transparency. The increased digital visibility will go a long way in helping India consolidate this advantage & give a much needed differentiator vis-à-vis the omnipresent Chinese competition

IMPROVED BUSINESS ETHIC – Each step in this direction will help India better its ranking on the transparency international’s corruption index – in part the visibility through digital governance itself is an outcome of higher awareness, wariness of the Indian citizen towards corruption in public & corporate life

DELAYED POLICY MAKING – Though my initial thought was to say nothing negative here, I realize that the Indian problem with ‘clear articulation of a policy’ can be further compounded by the diversity of information received through feedback, debates et al & thus potentially delay the legislation of the guidelines

NET IMPACT ON INDIAN PHARMA – Overall any favourable changes in governance will always translate as a better business/ investor sentiment, eventually

What could Indian Pharmaceutical industry & policy makers do to address the above aspects/ issues?

Indian pharma would do good to dive head-long into this process of deliberation on policies; guidelines etc. and partake in creating an enabling framework. On their part, the policy makers, government should proactively solicit participation of Industry and fine-tune the guidelines in light of practical business considerations.

Looking ahead

As stated earlier, enhanced visibility is the tentative first step towards transparency – it’d be ideal for all stakeholders to do whatever they could to sustain this forward momentum & help India shed the stereotypical image of a difficult third world country.

While I stopped at three, there are some other important factors that can impact the prospects of Indian pharma in some measure - a quick visual representation of these factors is as follows;

One recurring theme in the above discussions is a need for emergence of clearly articulated and transparently evaluated policies which then could be implemented in spirit.

Where no other motivation works the lure of commerce does, well in most cases. While this may sound dogmatic, it is a valid reason for an economy increasingly dependent on globalization & externalization. I wish & hope the Indian Pharmaceutical Industry will play a major role in setting the house in order & thus achieve and sustain their much deserved success world-over.

Thursday, March 21, 2013

You'd never guess what people could do under their loft beds!!


I love this piece not for the blog entry itself but for the sheer variety of comments it triggered and the mind-boggling scope opening up out there for garage innovation from DYI drones to DNA-Hacking and Synthetic life, no shit!!!....... wow.... I knew people have been silently cracking racial, ethnological, anthropomorphic puzzles online for some time now on sites like, but synthetic life?..... I say people.., WOW!!! 

Sunday, March 17, 2013

IT & ITeS Enterprise in India: an Outsider Perspective based on trends in Investment & Technological Evolution

Why should an outsider perspective matter?
I tend to believe that way too many people have taken Steve Jobs maxim, ‘customers cannot tell you what they need’ at its face-value and in the process probably haven’t realized fully that the very user-experience guidelines Apple Inc., so vigorously pursued, propagated to the developer community made the tech-consumer an integral part of the technological evolution & hence an “insider” for all practical purposes – After all within six months of launching iPhone, Jobs recalled his earlier decree of ‘No third-party apps on iPhone’ :-) - I rest my case here.
Life, tech & the metaphysics of a cyber-quest
The exabytes of sheer information thrown up by an internet-query and the consequent collateral learning at times gives a radically different perspective of the principal quest &/or changes the very course of the search/ research.
That’s precisely what happened when I set-out with an innocuous query ‘Life+Tech’ to check-on how the marriage of life sciences & technology is working out as indicated by the quality of innovation and the investor sentiment towards this emerging IT subset globally and, if India is in-sync with these trends – I strayed off-course quite a bit soaking up some non-serious gyan on gamification, cross-application potential of game mechanics to health & wellness, dallying a while with the first ever ‘drug discovery’ game, Syrum & eventually decided that I’d do good to first understand how the IT & ITeS enterprise is poised in India & then go about speculating on where it could go from here, towards life-tech or some other direction altogether.
The quantitative & the qualitative sojourn

As I looked into the openly available, mostly undifferentiated data** & the trends, I used the following assumptions in order to get as close to reality as possible;
  • Wherever the VC activity has been clubbed under PE, I considered all early-stage & some growth-stage deals as essentially venture deals
  • Where I depended on individual alerts of certain deals, I considered funding up to series-C as venture funding & series-D too if that involved at least one VC 
  • No acquisitions, Mezzanine funding rounds have been considered as Venture capital (which of course wasn’t much)
  • Since I was looking into IT sub-category trends & the only categorization ‘Industry Codes (VEIC)’ by NVCA is surprisingly devoid of some well-understood terms such as “Cloud”, “Apps” etc., I decided to use my own simplistic terminology that’s hopefully self-descriptive
**My primary source for the data was which derives its own info from Venture Intelligence alerts & reports. In addition to this I have also used, primarily for cross-verification of primary category figures, the MoneyTree reports by PWC & NVCA from data provided by Thomson Reuters ……. phew
True to my enlightened detour, the not-so-cursory analysis of the available information on IT & ITeS related investments in India in 2012 drew an interesting picture;

  • Commerce sub-category (B2C e-commerce) hogged the largest share of 45%
  • Services sub-categories (B2B BPO, Cloud, Edutech, IT Services, Telephony) cornered second highest 22%
  • Analytics sub-categories (B2B Internet & Mobile Advertising; web-analytics) that are focused on the increasingly crucial data mining, analysis and consumer demographic profiling gathered 20%
  • Product sub-categories (B2B Mobile apps; PaaS; Software; Health-IT & Gaming) managed only 13% share of investments, helped in a large measure by the Mobile Apps category

From the above observations it can be inferred that the investor sentiment in India is very strong towards Commerce, strong towards Services & Analytics and weak towards Products. This also could mean that the investment in IT & ITeS in India is driven more by the local than the global potential–while this statement may sound altruistic, the statistics seem to support it;
It’s an irony that my initial interest ‘Health-IT’ is very insignificant at 1% of funding – a cursory review of the ‘mobile apps’ companies also doesn't indicate any healthcare component being pursued – so much for my principal quest!
Takeaways for the investing universe, primarily for the VCs
There’s only as much space to jostle around on the e-com super express
  • The e-commerce opportunity while looks tempting is surely reaching the tipping point wherein differentiation & achieving of critical mass is going to be a huge challenge
  • Compounding this is the fact that the global biggies like Amazon, eBay et al that could’ve offered a superior exit option by way of an acquisition have started to get-in on their own (, – banking on the relative ease of establishing a virtual enterprise
  • It’s also apparent that the likes of Amazon are now gearing up to ‘Walmartify’ their online shopping and go physical to enhance user experience! – If not anything, this points out to the cyclical nature of consumer preference of a buying experience & hence the caution one has to execute in putting too many eggs in one basket.

The Quants will rule and later they won’t & then again they would
  • The monetization of analytics opportunity will surely out-pace e-commerce & services given the eventuality of any business is to understand consumer & maximize the consumers buying impulses.
  • Quite interestingly the innovation quality of Indian companies in this domain seems to be pretty high – probably since analytics combines Math & Jugaad, skills Indians inherently seem to possess.
  • I’d also think it makes business sense for the quant in consumer analytics context to be essentially an ‘insider’ &  hence Indian analytics enterprise could always showcase an edge, a value-add
  •  Eventually, while the ‘insider advantage could work in favour of Indian analytics enterprise in the shorter term, the Math + Jugaad + Semantics combination could open the world to India in a big way, touch wood.

Hop onto the Gravy (app) train early on & dish out by the dime
  • Mobile apps development is essentially a platform (OS specific SDKs et al) based innovation that enables small & Individual pools of expertise to emerge quickly & thus very amenable to garage innovation
  • While building of apps is innovation per se’, it is more ‘applied innovation’  (owing to the afore mentioned platform technologies) & hence India won’t necessarily face a quality-of-innovation prejudice
  • Added to this is the global trend of healthcare going mobile progressively, there’s an open opportunity of cellular network providers tying up with local app developers, for the service & transactional ease they’d bring in.
  • Apps are evolutionary products with a limited shelf-life (before being reinvented in a different version) & hence inherently man-power intensive. Given this context & given the explosion of engineering education making available qualified young (& economical) tech work-force that can think in English, India has the potential to become the ‘China’ of mobile apps – if only the rough edges of campus-to-corporate transition can be smoothened out sooner.
  • Using this & some of the 'local' advantages i mentioned under Analytics, I'd think there's no reason why Indian enterprise shouldn't give an India flavor to its Gaming?, after all, all nationalities like to play by their own rules :-) - this would also expose the average indian youngster to the game mechanics that from whatever I read, is poised to dominate every tangible domain in the years to come.
  • And finally, a domain where VCs can play evangelists, stoke the fires of enterprise & seed the self-sustaining revolution of mobile apps – all with minimal risk & funding :-)

And hey, is Mobile Hardware IT too? – thought NVCA said so…
  • Is it me or wasn't there really any investment into the super accelerating mobile handset Indian enterprise in 2012? Unless this is already reaching saturation which I seriously doubt, there’s still a good open investment opportunity. But of course given the capital intensive nature of these start-ups, the scope for venture funding may be low and only at very early stages, but if successful this could turn into a multi-X return by series-B funding itself.

After Thought:

What’s with financial analysts & their compulsive fetish for quarterly reporting? – I’d agree quarterly trends do matter in consumer markets, but I’m utterly confused about their utility in a long-decision-cycle B2B environment like investing – enlighten me folks, I’m all ears!

Sunday, March 10, 2013

Modi's WIEF woes & Why I'm pissed!

Not sure who’s pissing me off more…

The holier-than-the-pope trio of desi professors that merrily went about occupying Philly then & now gleefully pulled down the chief guest from his pedestal at a forum that’s neither about social work nor about English literature

The legions of Modi fans overtly smarting from this snubbing of their visionary leader and outlandishly branding Wharton as Islamist and the perpetrators leftist

The WIEF itself, which doesn't seem to have a strategy of identifying and sticking with the chief guest for its annual jamboree, but nonetheless goes ahead professing to stimulate an energetic dialogue between India's current and future industry leaders and policymakers.

I myself, with my frustrating indecision on where my sympathies largely lie!

Wednesday, March 6, 2013

Will Mylan's acquisition of Agila benefit Accel Partners?

Okay, the story goes like this....

Way back in 2007, Accel partners committed to invest & invested over the next three years 1.5mio USD in a Bangalore based start-up called Inbiopro. This investment turned into ~10% shareholding (guestimate) when Strides Arcolab acquired 70% stake in Inbiopro in 2010. It’ll be useful to slip-in here that somewhere in 2011/12 Strides separated out Inbiopro from Agila as a separate business entity called Agila Biotech.

Now, post the Mylan deal, Strides Arcolab committed to invest USD100mio into Agila Biotech, Given this impetus if Agila Biotech vigorously pursues the commercialization of its pipeline of 8 biosimilars, its valuation could go up to anywhere between USD200-500mio** in the next five years, depending upon how many registrations are successful. At which time if Strides again succeeds in finding a buyer for Agila Biotech (Mylan again, given its Biosimilar ambitions?), it is likely this will turn out into a USD20-50 million exit for Accel Partners, i.e from a decent 13x to a good 33x ROI.

My take away from this is, scout around for start-ups that have chosen 'quicker to market innovations' as their research focus, invest in them early on & work closely on the selection of a local partner & monetize during the multinational acquisition - Not a bad mantra for a decent-value exit in a market like India :-)

**The valuation guestimates are based on the expected worth of approvals (EU/ NA) which are primary assets in this context. 

Tuesday, March 5, 2013

What could VCs learn from the recent pharma deals involving biotechs with very early-assets?

My response on the blog post "Preclinical Biotech Structured Deals: Reflections on 2013′s Solid Start" by Bruce Booth - posted on 01/Mar/2013

The news of structured-deals/ buy-outs of ‘tight/ single-EARLY-asset’ biotechs both pleases & scares me… pleases, as I feel this will trigger a healthy change in the way start-ups choose their programs & scary because I (CRO/ CMO) will now start losing clients/ programs much before the conventional PIIA - read-on…..

While I totally agree with the points you’ve raised & the surmises made, I’d like to add the following;

  • This in some fashion is an endorsement of the importance of early venture seeding by the very same stakeholders that typically enable the high value exits for VCs, viz., the mid-sized/ big pharma companies.
  • As you say, there seems to be a promise of reward for innovative organizations that know their science – however I’m not sure if there’s any message about preference for a single asset/ tight set of assets, It is rather a niche focus/ platform & this aspect I’d think always mattered to the investors.
  • Do I also see some de-risking in the form of going in for companies who’s lead/ pipeline candidates are inherently safer (recombinant proteins; antimicrobials et al) & hence highly likely to breeze through Phase-I
  • Interestingly, though the indications are rare/ orphan, the therapies themselves seem to be more maintenance than curative & hence more attractive to the investing company
  • This lure of an early alliance/ deal may now encourage the new enterprises to come up with more compelling technologies rather than me-toos… & thus help put drug discovery enterprise model on a correction course
  • Is this the emerging new avatar of the CVC? - CVC 2.0? (Perdona, Baron.... :-))

Now, having seen a lot of my clients getting lapped up by mid/ big pharma & their programs either killed, shelved in favour of the larger companies competing pipeline, I would be a little cynical till I see the next instalment is released/ option executed.

Finally I would like to ask if there is a message in here for the VCs? – towards an opportunity, a need to structure the initial funding deals differently so that they could still keep an option to enhance their share whenever such early alliances crop-up eliminating  avenue of series-B funding?

Post Thought:

Quite a coincidence that I was just reading an article in HBR (Mar 2013) titled “How Competition Strengthens Start-ups” by Andrew Burke and Stephanie Hussels of Cranfield University.  The authors postulate that exposure to competition in the early stages of a firm’s life increases its long-term survival prospects – competition in this context including competing against a lean-funding scenario & hence learning to stay creative, efficient & productive – Since for all four companies here the early pressure is almost eliminated of by the reasonable/ comfortable funds received (upfront instalment OR buy-out), I was wondering if that makes these companies less long-term in light of the above study.

Of course I do understand that it’d be foolhardy to apply an academic study arbitrarily to any context, particularly in life sciences, where the author’s themselves have made a provision indirectly through their statement “Of course, early competition has a downside: Some new businesses fail before they have time to build up the immunity we describe” which sure sounds like the business of designing drugs.

Saturday, March 2, 2013

What when the boundaries blur between VC & PE?

My response on the highly thought provoking blog post "Venture Capital 2.0" by Drug Baron (David Grainger) - posted on 01/Mar/2013


Once again a really thorough proposition by Drug Baron that leaves frustratingly little scope to contradict. For the sake of a debate I would still like to raise a few questions; make a few statements & generally try not to sound like mouthing a rejoinder in support of Venture Capital 1.0 - which it definitely is not! J

It is absolutely true that the VC model should periodically re-invent itself & evolve like the innovations of other kind it chases routinely – this, I believe is not just true of VCs focused on life sciences but for all others too. Also, after a quick read, I realized that one could misread the term “asset centric investing” if they do not go through what exactly Index ventures pursues through its IDDs – David, you may consider hyperlinking your statement “Asset-centric investing is only the first step on a road to improved returns for life science investors” to

Now, since the primary intent of the asset-centric-investing model appears to be de-risking venture funding to the LPs (and thus raise funds with less difficulty), the inferred premise(s) of this model appear to be as follows;
  • That the early discovery prior to lead-validation should-not-be/ need-not-be venture funded

  • That owing to the large investment & the inherent risk of failure, innovation (in particular drug discovery) is something better left to academic/ federal institutions & large pharmaceutical organizations that can afford the risk (did someone say, ‘risk is neither created nor destroyed, only transferred and hedged differently!’ :-))

  • And finally that any VC backed biotech with a “pipe-line” hasn’t probably thoroughly screened the clinical & commercial viability of candidates including, probably in a few cases other than, the lead-program candidate for which it managed to tease out some funding?

No doubt this model makes absolute sense to the fund of funds or LPs on its focus on sheer reduction of risk to IRRs but not sure if this model helps generate & nurture novel enterprises & why should it? - now I do realize that the ACI model also believes that creation of an innovative enterprise is NOT the VCs responsibility (probably since they are using ‘others money’ for this noble cause? J) & more a responsibility of the struggling entrepreneurs themselves?

Without sounding too knowledgeable about it, I would like to believe that across the past few years, VC seemed to have played a role in keeping afloat the spirit of enterprise at the most critical & vulnerable early stages and thus helped, however minimally, in letting a lot of budding innovators take root & grow their enterprises into cash-cow organizations that’d offer a lot more de-risked alternative asset investment options to the LPs.

So while I generally & unequivocally support the need for yet another paradigm shift in drug discovery methodology & innovation models, I am not sure if a VC model de-risked to this extent almost morphing into a PE would help this innovation paradigm nor help create the much needed pipeline of early innovative enterprises that later mature into investable asset-centric organizations.

Post thought:

In the current context of drastically reduced spend on basic discovery by big-pharma, I see that most most biotechs, drug discovery organizations have started to reinvent themselves into “drug development organizations” and have quite voluntarily started de-risking by building a pipeline/ portfolio of in-licensed/ spun-off ~pre-validated drug candidates . So I guess without so much as a nudge, the enterprise out there is all ready for Venture Capital 2.0 – Now again that doesn’t say much about the survival chances of real innovation that not necessarily stems from the largest of organizations/ institutions….. after all, garage innovation in life sciences appears to be a distinct possibility in in these winds of open source drug discovery.