What Happens When a Herd of VCs Runs Away From Biotech? Highlights From Yesterday’s Tweetchat

11/23/11Follow @xconomy

[Corrected: 8:41 am ET] Turns out you can say a whole lot about the biotech venture capital crisis in 140 characters or less.

Yesterday, Xconomy hosted a lively back-and-forth on the state of life sciences investing and innovation with guest Daphne Zohar (@daphnezohar), the founder and managing partner of Boston-based PureTech Ventures. I tried to keep this chat limited to 30 minutes (we’re all busy, right?) but that was actually pretty naïve. There were at least 26 Twitterers who jumped into this fast-moving Q&A fray, with people sending a total of 172 Tweets in the form of questions, comments, or re-tweets, which you can find on the searchable hash tag #bioVC.

Everybody got a word in edgewise. At the beginning, I asked Zohar: “With a few VC firms getting out of life sciences, others merging, what effect is this having on innovation?” But before she even had a chance to answer, Jens Eckstein, the head of GlaxoSmithKline’s SR One venture capital arm, jumped in. “It’s unfortunately not only a few getting out of LS, it’s a herd! Very concerned about breakthrough innovation in LS!” wrote Eckstein (@akikoacom). He followed that up with a Tweet that said, “In a recent exercise tried to count bona fide active early-stage investors globally – barely fills both hands.”

A few seconds later, Zohar offered her take: “biotech ecosystem is in disarray. Few innovative companies getting launched. Really exciting academic science tho.” And then she retweeted Eckstein’s message, to her followers, about the shortage of active early-stage investors.

And so it went.

There were questions from entrepreneurs about PureTech’s investing strategy, about how to stir more life sciences innovation in Middle America, and about whether scientific entrepreneurs need more training before they can attract money. There was even a jab about the Red Sox (even in November. Come on guys, time to let it go).

The whole chat wasn’t complete doom and gloom, though. As Zohar put it: “Positives: pharma hungry for innovation. M&A deals for non-approved drugs had Avg value of $480M w/ Avg upfront of $219M.” [Correction: An earlier version of this post said Gautam Kollu made this comment; it was actually Zohar responding to Kollu.] And people are still processing Gilead Sciences’ breathtaking $11 billion takeover of hepatitis C drug developer Pharmasset (NASDAQ: VRUS) on Monday. As many commentators have noted, this is a pretty large chunk of change for a company that has shown impressive clinical results, but doesn’t yet have its own drug on the market.

For a full rundown of the Tweet-by-Tweet, check this compilation on Storify by my Xconomy colleague Lilly O’Flaherty.

Thanks to everyone who joined this great, freewheeling chat online. This Tweetchat (and a previous one with Alnylam Pharmaceuticals CEO John Maraganore) were so popular that I’m convinced there’s enough interest for us to keep doing them on at least a semi-regular basis. If you have any suggestions for people and themes that you think would be good for us to convene, just send me a note at ltimmerman@xconomy.com. Or if you’re a really hard-core Twitterati, send me a DM @ldtimmerman.

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  • Mark Minie

    “biotech ecosystem is in disarray. Few innovative companies getting launched. Really exciting academic science tho.”

    -Daphne Zohar
    founder and managing partner of Boston-based PureTech Ventures

    This sums-up everything that is wrong with the biotech/pharma picture today…calling science “academic” is a standard put down, and as long as the science is not valued, the system will continue to be in disarray and lack innovation. With incredible things happening in such areas as microRNAs, large data, biomedical IT & AI and smartphones as biomedical devices, it is astonishing that investors are rushing away just as the field and the industry are at the early stages of a whole new era that will dwarf anything seen before in the bioindustry…how is it that they can’t see the criticality one importance of science in a science driven industry?

  • R. Jones

    Speaking truth to power is not easy. The power is in the hands of the people whom Xconomy caters to, VCs, C level execs and other non-scientific types. These people are the best at talking and advancing their own careers. They move from one failed company to the next. At the lowest level are the people who work in the labs. We have to take the square pegs handed to us by the powerful and hammer them through the round holes. That RNAi drug that doesn’t work is our daily struggle. That anti-amyloid beta antibody that is just as effective as the last 50 tried is our daily nightmare. When these projects fail, the lab staff goes away first.

    There is no correlation between VC money and innovation. The science is handed off to scared young non-PhD technicians who are given one molecule and told to go into the lab and provide the power players with the right evidence they need for their next VC presentation. By the time the VCs hear about the science it has been massaged into a beautiful story. A beautiful story that people have stopped believing.

  • http://www.vmindex.com Burak Alpar

    Our own research has shown a very sharp slow-down in early stage healthcare investment. In North America we have tracked 149 early stage investors active as lead, co-lead or follower in YTD 2011, a 45% reduction from 2010. Similar analysis for Europe shows only 77 active early-stage healthcare investors over the same period, 38% down from 2010.

    However, not all of those investors will have left the VC markets entirely, some may have shifted focus to later stage (for the time being at least), and others will just be sitting on their hands waiting for 2011 to be over.