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their resources on easier bets with lower risks, by focusing on late-stage drug development, orphan drugs, and so called “me too” drugs that improve on existing compounds, or repurpose existing drugs for a different use than the FDA approved.
Kinsella says that during a recent dinner with a dozen biotech venture capital leaders, not one “was willing, from an investment thesis perspective, to build a bridge halfway across the chasm. “That other partner in the old days was pharma, and they’re just not there for you any more,” Kinsella says. “They want to beggar your investment thesis and grind you to the bone, or walk away from a deal. The default assumption today is that if you need a pharma company to step into your shoes at any point prior to Phase 3, it’s almost guaranteed that you’ll get a crappy deal. So why would any biotech investor or biotech executive want to beat their head against the wall?”
If you are a venture capitalist or you’re in biotech and you have a crappy deal on the table, you’ll have to ask yourself if it’s better than nothing—and “Yeah, probably, it is almost certainly better than nothing,” Kinsella says. “But if you’re a VC, is that a deal, or are a series of deals like that going to establish your reputation as a competent investor? Hell no.”
If you think of venture capital investing as a pure financial asset play, where VCs are just investing in biotech, or high tech, green tech, or social media, Kinsella says, “venture capitalists don’t need the biotech industry. They’re perfectly jolly making money however they can. But pharma needs products. Pharma needs the biotech industry.”