Avaxia Biologies secured $6.4 billion from an angel syndicate in a series B financing in December 2012 to fund a firstin-human trial of its oral antiTNF antibody, AVX-470, to treat ulcerative colitis for which it had just received FDA clearance. The drug is designed to act in the gastrointestinal tract to suppress inflammation and treat inflammatory bowel disease, which includes ulcerative colitis and Crohn's disease. Current anti-TNF antibodies work well but they are injected and suppress the entire immune system, which can lead to serious side effects. Avaxia's funding round was led by existing investor Cherrystone Angels and new investor Golden Seeds, with participation by nine other angel groups, many of whom are new investors attracted by the potential of its platform and its ability to localize treatment.
Angel investors in the US have organizations such as the Angel Capital Association that support their activities. Now, the idea has caught hold in the United Kingdom. Angels for Life Sciences launched in October 2012 as the first national angel network focused on helping raise money for early-stage life-sciences companies.
THE GEOGRAPHY OF VALUE
Another way that companies are accessing capital is by turning to opportunities to secure funding in countries that are trying to build their life-sciences sectors. Life-sciences companies, such as CompanDX, are finding that the value of their technology can vary by geography, and what may have marginal value in a developed market where healthcare providers have many competing choices, may have much greater value in emerging markets with unmet needs that are hungry for new technologies.
In July 2012, CompanDX, a UK diagnostics startup, raised $6.1 million (39.6 million RMB) from the Chinese government and private investors to develop and commercialize its products in China. The investment is nondilutive. Instead of taking an equity stake in the startup, investors will be eligible for a percentage of any revenue from commercialized products sold in China. CompanDX applies proprietary bioinformatics technology to advance personalized medicine. The company said that the Chinese investment would speed up its product development because of the regulatory climate in China and the willingness of major regional science parks there to provide funding for accelerated development for products relevant to the Chinese marketplace.
ON A SOLID FOUNDATION
Funding from disease-focused foundations has become another important source of capital for advancing new therapies for rare diseases and other areas of unmet need as traditional venture capital funds migrate to later-stage investments. This funding is often nondilutive and can help derisk research early in the development process. Notable successes, such as the Cystic Fibrosis Foundation's role in backing development of the cystic fibrosis therapy Kalydeco, approved by FDA in January 2012, have shown the impact such organizations can play in bringing new medicines to market. Although already spending millions of dollars each year to fund work on developing new medicines for neurological conditions and rare diseases, foundations are taking steps to amplify their efforts.
THE WISDOM OF CROWDS
The JOBS Act enables private companies to have as many as 2000 investors and still remain private, opening another avenue for startups to access capital: Crowdfunding. Already popular in tech circles, crowdfunding-using social media to source small amounts of capital from a large pool of investors-has begun to create buzz in the biotech world. Several web portals such as Poliwogg, MedStartr, and ScitechStarter, have already sprung up in the US to enable crowd investments in anticipation of final regulatory rules, and companies have already begun soliciting investments through them. Although companies can only raise up to $1 million a year through crowdsourcing, it is still enough as a source of pre-angel funding.
In an early example of what could be done, startup biotech uBiome launched the world's first crowdsourced effort to map the human microbiome, the trillions of microbes that live in and on the human body, with crowdsourced funding in November 2012. The company, coming out of the University of California's QB3, seeks to put the latest high-throughput metagenomic sequencing technology directly in the hands of people who invest in the company through the crowdsourcing portal Indiegogo. By pledging $79 in support of uBiome on Indiegogo, anyone can have his or her personal microbiome sequenced. Within the first two months, it raised $120,000 from more than 1000 participants, surpassing its initial goal of $100,000 and 1000 users.
Crowdsourcing has already been used by life-sciences companies in France with some success. Almost 20% of the preIPO investment in the French biotech Nanobiotix was raised through the fonds commun de placement dans l'innovation, the French version of crowdsourcing. Nanobiotix raised $18.5 million in an IPO in September 2012. The UK Biolndustry Association is basing its proposal for a Citizens' Innovation Fund on the French model.
CREATIVITY IS ESSENTIAL
There is no single path to financing a company today. Instead, companies need to take a multidimensional approach to thinking about potential funding sources. This pool of funding includes not only government grants, but also tapping into nonprofits, patient advocacy, disease-focused, and philanthropic groups.
Though venture capitalists are moving away from earlystage financing, the reality is that rather than having fewer financing options, entrepreneurial companies have a range of funding alternatives that they can pursue. Regional differences exist in both the availability and cost of capital. The only requisite to fund a company today is creativity. In a world in which we finance one in 100 companies we see, tenacity is a big asset too.
These other entities are filling the void left by venture capitalists that have moved away from earlystage financings.
Another way that companies are accessing capital is by turning to opportunities to secure funding in countries that are trying to build their life-sciences sectors.
Crowdfunding-using social media to source small amounts of capital from a large pool of investors-has begun to create buzz in the biotech world.
G. Steven Burrill is chief executive officerat Burrill & Company, San Francisco, CA.
Most Popular Stories
- 5 Potential Snags to the Bipartisan Budget Deal
- Adam Levine Wins Big as 'The Voice' Crowns Champ
- U.S. Home Construction Hammers Out 5-Year High
- Mega Millions Winning Tickets Sold in Atlanta, San Jose
- Delta: No Voice Calls on our Planes
- Phil Pustejovsky's Relief Real Estate Offers Seminars in Daytona Beach
- Housing Starts Soared in November
- From Fiscal Cliff to Female Head of GM: 2013 in Review
- Legal Dope in Uruguay Breaks International Law, Says Buzzkill U.N.
- China Provokes Bitcoin Crash