#11: JPM - 2012

SJA and Toscana Ventures attended the 2012 JP Morgan Conference in San Francisco and met with over 40 emerging growth biotechnology companies, angels, high-net investors, and venture capitalists (VCs). Of interest was a meeting with a leading angel investment group, HealthTech Capital, highlighting the growing importance of angel investing in early-stage companies/therapeutics given the shift of venture capital into later-stage/de-risked assets.

HealthTech presented a slide from the Angel Capital Association (2009)  illustrating angels invested $17.6 billion (35% seed/startup; 47% early-stage) versus venture capital investments of $17.69 billion (9% seed/startup; 65% later-stage/growth equity) in businesses. The surprise was not the degree to which angels supported early-stage companies (traditional role), but the size and parity of their investment commitment in comparison to VCs.

VC's focus on later-stage assets and the reallocation of capital into medical device, IT, healthcare services, and social media was further validated during a meeting with a prominent VC in San Francisco. The VC highlighted the following reasons why they are hesitant to invest in the biotechnology sector in 2012:

Superior investment returns projected in the healthcare IT/services industries (~$10 trillion market; vs. Biotech's $1 trillion)

Recent biotech approvals providing only incremental benefits (>$100,000 per treatment oncology drugs with marginal overall survival benefits) versus breakthrough medicine

High development, regulatory, and commercialization risks associated with developing biologics (~FDA)

Patent life limiting investment returns

Payors (~governments) ability to pay for higher priced biologics under pressure given macroeconomic factors (~European Debt Crisis)