Feb 16 2010

Show Me Where Else The Money Isv

Today we feature a post on funding for small biotech and pharma by Dr. Tariq Allana.  Tariq is a Clinical Strategy Scientist at Cato Research and the Associate Director of Business Development.

Developing a comprehensive and creative clinical and regulatory development strategy for getting one’s product from the bench to the bedside is challenging enough – adding in the pressures of funding the development, can prove fatal for smaller companies soon after they reach the ‘the valley of death’.  The recent economic environment, as well as the biotech and pharma industry’s embrace of information technology has resulted in increasing the chances of survival for smaller companies.


  1. Foundation funding – Venture philanthropy, for example, grants awarded by Michael J. Fox foundation and the Juvenile Diabetes Research Foundation’s Industry Discovery and Development Partnerships (IDDP) program.
  2. Government Funding
    1. State – in Maryland, there is the Maryland Technology Transfer and Commercialization Fund (MTTCF), and in North Carolina, North Carolina Biotechnology Center and Council for Entrepreneurial Development.
    2. Federal (National Institute of Health and Department of Defense funding programs among others).
  3. FDA funding, for example, the voucher program (applicable to tropical or neglected diseases), and grants for the development of orphan products.
  4. Angel funding – Some companies have used results from nonclinical proof‑of‑concept studies to generate traction in the local and national news media, including on social networking sites, which have generated interest from wealthy individuals interested in the technology.
  5. Venture Funding, including from large pharma (Novartis, MedImmune, Johnson & Johnson) – critical elements to receiving VC funding is networking extensively with the venture community, and having experienced management (that is, separating the scientific from the business expertise).

‘Funding’, the nontraditional way

With purse strings looser than they have been in the recent past, funding still remains elusive for several small companies, since traditional funding sources more and more tend to fund products rather than ideas – meaning clinical rather than nonclinical (proof‑of‑concept data) is needed to effectively raise money.

Other than infusion of cash, one creative model (offered by Cato BioVentures for example) that is gaining some interest from small and mid‑size companies offers promising life science companies immediate access to a broad range of essential CRO services on a noncash basis.  These services are often commenced in a “bridge mode” during the period between a company’s formation or initial angel financing and its first institutional financing.  The services can include preparation and attendance at a FDA pre-IND meeting, filing of the IND, or conduct of the Phase 1 trial, enabling companies to achieve key value‑added development and regulatory milestones with less reliance on venture capital and public equity markets.  Such a model, where strategic partnerships are developed between a CRO and a new company can also provide confidence to lead investors financing a new technology.

The long and short runway

In addition to finding alternative sources of funding, smaller companies, and some large ones too, are holding on to their dollars with creative solutions – whether it be using the strategic partnership of the type mentioned above, making their operations virtual, with a few experienced individuals running the show, or conducting trials in countries like South Africa, India and China, where investigator fees and the cost of goods may be cheaper overall.

The impending patent cliff that faces larger pharmaceutical companies has also provided an unexpected benefit for smaller companies – not only is there the option to exit through a sale, but smaller companies can seek appropriate partnerships for one or more of their compounds.

Where next

The culmination of several factors – an aging population, an impending patent cliff, an economic crisis not seen in years and the unexpected benefits of information technology and the internet – have brought smaller companies to an interesting fork in the road – with success and riches down one path and death of a company down the other.