Financing the Future of Bioscience and Pharma

Current Investment Challenges:

• The time from scientific discovery to approved therapy averages 15 years, costing over $1 billion per drug.
• Only 1 in 10,000 scientific discoveries successfully navigates the pipeline to reach patients.
• Venture capitalists have retreated from early-stage translational research, seeking shorter-term returns in later-stage assets.
• Traditional investors generally only engage with assets in Phase III clinical trials where profitability appears imminent.
• Large pharmaceutical companies have moved "later stage" to acquire de-risked assets, creating a gap in early funding.

Funding Gaps and Solutions:

• Leukemia & Lymphoma Society (LLS):
  • Deployed $16 million in non-dilutive funding over 15 years for adoptive T-cell immunotherapy research where traditional sources provided less than $2 million.
  • The Therapy Acceleration Program partners with small biotech companies, having deployed $20 million last year.
  • LLS leveraged investments to generate $500 million in third-party deal flow (cash) and $1.7 billion in potential milestones, a 100x leverage ratio.
  • Nearly 30% of LLS-funded academic translational projects have moved from the lab to the clinic within 3–5 years.
• Government Initiatives (NIH):
  • Developing the "Centers for Accelerated Innovation" to bridge the "bench-to-bedside" gap with "bench-to-boardroom" strategies.
  • Programs provide funding for product definition studies, feasibility studies, and business plan development to de-risk assets for downstream investors.
  • Collaborations include the FDA, CMS (payors), and the USPTO to ensure early regulatory and market alignment.
• Crowdfunding and New Capital Models (Poliwag):
  • The JOBS Act allows startups to advertise offerings and accept investments from non-accredited investors, lowering the minimum bet size to as low as $10,000.
  • Poliwag targets the $2 million to $10 million "valley of death" stage, where companies fail due to lack of funding despite viable science.
  • Crowdfunding democratizes capital access, allowing investors to diversify across 100 companies for $100,000 rather than risking a single large bet.
• Public Markets (Fidelity & Value Funds):
  • Early-stage IPOs enabled by the JOBS Act can raise significantly more capital than VC alternatives; one example raised $90 million at a $78 million pre-money valuation versus a $30 million VC offer.
  • Public markets allow retail investors ("the crowd") to access preclinical companies via IPOs, creating a continuum of funding.
  • Biotech funds outperformed the S&P by 86% over five years, with Fidelity's biotech portfolios representing $3.7 billion in assets.

Scientific and Economic Trends:

• The cost of genome sequencing has dropped from $5 million a decade ago to $5,000 today, with projections to reach $500.
• The FDA increasingly approves oncology drugs based on Phase II data due to high efficacy in specific patient populations.
• Biotech applications extend beyond medicine to energy (algae biofuels) and agriculture (drought-resistant seeds), potentially representing a fraction of global GDP.
• 90% of global biotech research is conducted in the United States, supporting significant job growth.
• Despite a 50% five-year mortality rate for newly diagnosed blood cancer patients, new breakthrough therapies like Ibrutinib and Gleevec offer hope.

Panel Consensus on "Good Science":

• Good science does not always get funded due to high risk, small patient populations (orphan diseases), and a lack of patient-centric champions.
• History shows dramatic successes (e.g., Rituxan, Enbrel, Remodulin) often emerged from initial rejection or near-bankruptcy.
• Success often depends on "passion capital" and persistent champions rather than linear scientific validation alone.
• The industry is described as being in a "golden age" of science, comparable to Silicon Valley in 1984, with an expanding opportunity set.

Future Outlook and Call to Action:

• Continuum of Care: A successful model requires a seamless continuum from government basic research (NIH) to venture philanthropy (LLS), to crowdfunding (Poliwag), and finally to public markets.
• Regulatory Evolution: Patient advocacy groups are driving the FDA to adopt breakthrough designations to accelerate access for unmet medical needs.
• Investment Thesis: Investing in early-stage biotech is described as a "lousy idea" financially due to high failure rates, but a "great idea" socially and for "passion capital" given the alternative of stagnation.
• Structural Shifts: Large pharmaceutical companies are expected to fragment into smaller, focused entities to innovate more effectively, freeing up capital for smaller partners.
• Access Imperative: Financing is only the first step; ensuring patient access through payer and FDA education is critical to the final translation of therapies.