Tag Archives: Boston Biotech Watch

How I stopped worrying and learned to love Twitter: Top Hundred Life Sciences Twitterers to Follow

By Steve Dickman, CEO, CBT Advisors

Amsterdam, Monday, March 19, 2012

Twitter last month hit a half-billion users and no wonder. What a valuable business tool! Adoption is accelerating in the biotech world. Initially I was skeptical – “What, me ‘tweet?’ You’ve got to be kidding!” But now I’m a believer.

Twitter has helped me find clients; introduced me to new and interesting people, increased the speed and accuracy of my responses to industry news; and given me ideas for blog posts. I’m even starting to say the dreaded word “tweet.”

For all the hype about Twitter’s role as a real-time wellspring of trivialities, and for all the righteous blather about its disputed role in fomenting revolution, the fact is that Twitter greatly enhances both my network and my appreciation for the news.

Now it’s time to give back, both live and online. Today (Mon. March 19, 2012), two Twitter veterans, Michael Gilman (@Michael_Gilman) of Stromedix (now Biogen Idec) and Simon Meier (@Venture_Invest) of Roche Venture Fund, and I will share some of Twitter’s benefits with the audience at a panel discussion at the BioEurope Spring conference (hashtag #BES12) in Amsterdam. This post will give my Boston Biotech Watch readers a quick way to increase the value they can derive from Twitter.

Below, my associate Ovid Amadi and I have created ten “Top Ten” lists of whom to follow on Twitter. Once you have opened a free account on Twitter, go to my feed and simply subscribe to whichever one of these lists you like. Or pick and choose among these top Twitterers as you build your own custom feed.

For those who cannot attend the session, you can still get an in-depth and hands-on intro to Twitter from this video, kindly posted by EBD Group after the “social media and biotech” panel that I moderated at the BioPharm America conference in Boston last September. On it, you will see how biotech execs and communications pros are using Twitter and other social networks to improve their access to industry intelligence, find jobs and project a strong professional image.

According to the invaluable summary graciously provided by blogger and tweeter Maude Tessier (@Maude_Tessier), “the savvy panelists made a compelling case for Twitter as:

An ideal source for real time data/news to inform business strategies

  • A helpful forum to poll the community on a subject
  • A platform to comment on the state of the life science industry
  • A way to better understand how people think
  • A tool to make new connections with companies and patient groups
  • A medium to build credibility for you and your organization.”

Another ringing endorsement for Twitter in life sciences came from Xconomy’s indefatigable Luke Timmerman (@ldtimmerman): http://www.xconomy.com/national/2011/09/12/what-most-biotechies-are-missing-by-avoiding-twitter-a-huge-networking-opportunity/

I can enthusiastically vouch for all that. Twitter: it’s the bomb.

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Ten “Top Tens” for Twitter in Life Sciences

Compiled and annotated by Ovid Amadi and Steve Dickman (@cbtadvisors), CBT Advisors

Each tweeter’s name and handle is accompanied by a brief description as well as a classification as “PERSP” – providing primarily perspective, commentary, and opinions on topics; “INFO” – providing timely factual information and news stories; or both.

I. Genomics
II. Health IT
III. Investing/Finance
IV. General News
V. Biotech News
VI. Science
VII. Healthcare/Medicine
VIII. VC/Entrepreneurship
IX. Service Providers
X. Benchmark Biotech/Life Sciences Twitter Users

I. Genomics

1. INFO, @genome_gov – National Human Genome Research Institute
– Provides useful information and headlines in concise uncluttered format.
– Does not draw upon a single resource.
– Includes technical, policy, and commercial headlines
– Moderate tweet frequency

2. INFO, @GenomeBiology – Genome Biology
– In addition to scientific news features multiple links to blogs and opinion articles
– High tweet frequency

3. INFO, @genomeresearch – Genome Research
– Covers broad range of genomics topics
– Presents some opinions and personality in posts
– Multiple retweets from a variety of sources
– Moderate tweet frequency

4. INFO/PERSP, @23andME – 23andME
– Offers perspective articles with less focus on news
– Includes social perspective on implications of human genomics advancement
– Limited self promotional content and maintains relevance of such posts
– Exhibits noticeable personality and tone.
– Moderate tweet frequency

5. PERSP, @dgmacarthur – Daniel MacArthur
– Postdoc in genetics whose interests extend well into societal and commercial realm.
– A member of the genomes unzipped project aiming to disseminate information on and analysis of the field of genetic testing.
– Participates actively in conversations, retweeting, and original links
– Maintained an active blog.
– Informal tone.
– High tweet frequency

6. PERSP, @genomicslawyer – Dan Vorhaus
– Editor of Genomics Law Report
– Offers unique perspective of legal advisor specializing in genomics and personalized medicine.
– Much of linked content includes personal/professional opinions with nuanced and detailed discussions.
– Clear conventional and twitter specific syntactical organization
– Moderate tweet frequency

7. PERSP, @MishaAngrist – Misha Angrist
– Explores ethical, social, and health implications of personalized medicine
– Recently published a unique text and maintains populated blog
– Generally maintains focus on relevant issues while expressing commentary
– Moderately high tweet frequency

8. INFO, @NatureRevGenet – NatureRevGenetics
– Provides “Ahead of Publication” notifications of pertinent scientific reviews (more tractable than primary article)
– Moderate Frequency, useful for those interested in details of scientific advance

9. PERSP, @DivaBiotech – Ruby Gadelrab
– Affymetrix employee with primarily genomics focus
– Presents appropriate balance of retweet and original content and extraneous information is minimally distracting
– Abundant dialogue and interaction
– High frequency

10. INFO, @Knome – Knome, Inc
– Life sciences company interpreting human genomes
– Very little self-promotion
– Very few retweeting and content is noticeably interesting/unique (less mundane compared to similar providers)
– Low frequency

II. Health IT

1. PERSP/INFO @jhalamka – John Halamka
-Tweets are introductions to his very active blog (contains personal elements) and numerous insights into healthcare IT as a field and career.
– No retweets
– Moderate frequency

2. PERSP/INFO @ahier – Brian Ahier
– Maintains a well populated blog on healthcare IT
– Provides a large sum of content with brief commentary/recommendation
– Broad range of health IT topics punctuated with unrelated, but interesting information
– High frequency

3. PERSP/INFO @IyaKhalil – Iya Khalil
– Co-founder of GNS Healthcare
– Comments on a range of topics including data analytics, genomics, and the biotech innovation
– Personalized tone connotes author’s perspective
– High frequency

4. PERSP/INFO @john_chilmark – John Moore
– Maintains a thorough blog with frequent in-depth discussion
– Frequently expresses opinions in tweets with good balance of perspective in information
– High frequency

5. INFO @iHealthBeat.org – iHealthBeat.org
– Content rich and well focused on Health IT field
– Includes links to news, analysis, and editorials
– High frequency

6. INFO @HITNewsTweet – Healthcare IT News
– Content rich, relevant posts primarily to parent site
– High frequency

7. INFO/PERSP @JohnSharp – John Sharp
– Primarily focuses on patient/clinical component of Health IT
– Provides daily summary of news pertaining to electronic medical records
– Perspectives often found within links not twitter posts
– Moderate frequency

8. PERSP @Anthony_Guerra – Anthony Guerra
– Links to parent site (healthcaresystemCIO.com) that features interviews with health care CIO’s with deep commentary and analysis
– Moderate frequency

9. PERSP/INFO @DonFluckinger – Don Fluckinger
– Generally features recommendations for and analysis of health IT components
– Maintains analytical/critical approach despite large number of posts
– Views are sometimes shared in twitter conversations
– High frequency

10. PERSP/INFO @boltyboy – Matthew Holt
– Eclectic mix of health IT topics and the author’s opinions
– User personality is apparent
– High frequency

III. Investing/Finance

1. INFO @businessinsider – Business Insider
– Mix of business and financial news with topics for a general audience
– Links primarily to Business Insider website
– Posts are designed to attract attention with tint of sensationalism
– High frequency

2. PERSP/INFO @zerohedge – Zero Hedge
– Offers a particular mix of opinion and information with links to parent blog
– Zero Hedge blog authors maintains anonymity to protect site integrity
– Exhibits a clear and unique activist/sarcastic tone
– Primarily original posts
– High frequency

3. INFO @StockTwits – Stock Twits
– Provides a less pedestrian description of financial news for a more seasoned investor
– High frequency

4. PERSP @PIMCO – Pimco
– Consists entirely of comments by Pimco’s co-chief investment officers
– Bill Gross posts express opinions and news without links
– El-Erian comments via links to newly published articles
– Moderate frequency

5. PERSP @jimcramer – Jim Cramer
– Former hedge fund manager, Mad Money host, and TheStreet founder
– Offers commentary and dialogue with regular references to Mad Money program
– Style is tailored to educated but not expert audience with casual tone
– High frequency

6. PERSP @herbgreenberg – Herb Greenberg
– CNBC senior stocks commentatory
– Engages in dialogue with users
– High frequency

7. PERSP @DougKass – Douglas Kass
– Journalist and investment manager
– Opinions, dialogue for the more informed investor
– News is dispensed primarily via short descriptions rather than links
– High frequency

8. INFO @MarketWatch – MarketWatch
– Comprehensive news headlines from MarketWatch website
– High frequency

9. PERSP/INFO @BioRunUp – BioRunUP
– Specializes in biotech trading
– High frequency

10. PERSP @BiotechtraderHB – Tony Pelz
– Active dialogue discussing investment strategies and events in the biotech industry
– High frequency

IV. General News

1. INFO @WSJ – Wall Street Journal
– Wall Street Journal headlines
– High frequency

2. INFO @nytimes – The New York Times
– The New York Times headlines
– High frequency

3. INFO @nprnews – NPR News
– NPR News headlines
– High frequency

4. INFO @TheEconomist – The Economist
– The Economist headlines
– High frequency

5. INFO @washingtonpost – The Washington Post
– The Washington Post headlines
– High frequency

6. INFO @TheOnion – The Onion
– The Onion headlines
– High frequency

7. INFO @cnnbrk – CNN Breaking News
– CNN headlines
– High frequency

8. INFO @bloombergnow – BloombergNow
– Bloomberg headlines and editorials
– High frequency

9. INFO @digg – Digg
– Digg headlines
– High frequency

10. INFO @AJEnglish – Al Jazeera English
– Unique perspective on international events
– High frequency

V. Biotech News

1. PERSP/INFO @gautamkollu – Gautam Kollu
– VP Marketing at Exelixis
– Range of topics include development drug, capital markets, and cancer
– Succinct posts with commentary and relevant retweets
– Engages in dialogue regularly
– High frequency

2. PERSP/INFO @pharmalot – pharmalot
– Most original tweets link to a very active blog written by Ed Silverman
– Each morning provides collection of headlines from various sources
– Blog content highlights interesting events with author’s commentary
– Tweets offer provocative/intriguing introductions
– Moderate tweet frequency

3. PERSP/INFO @rleuty_biotech – Ron Leuty
– San Francisco Business Times Biotech reporter
– Links to blog compiling San Francisco Bay Area biotech stories running in the San Francisco Business Times and Silicon Valley/San Jose Business Journal
– Retweets from a diverse group of users
– High frequency

4. INFO @FierceBiotech – FierceBiotech
– Links to broad range of biotech science and industry news
– Concise tweets
– High frequency

5. PERSP/INFO @eyeonfda – eyeonfda
– Author, consultant/attorney Mark Senak, specializes in regulatory issues
– Perspective on impact and implications of regulatory events
– Includes many links to general biotech/pharma news
– Moderate tweet frequency

6. INFO @Genbio – GEN
– Links to Genetic Engineering & Biotechnology News website
– Features biobusiness, drug discovery, omics, bioprocessing, and translational medicine
– Frequent use of twitter hash tag syntax
– High frequency

7. INFO @FiercePharma – FiercePharma
– Broad range of pharmaceutical industry news with occasional retweets
– High frequency

8. INFO @BioMedReports – BioMedReports
– Healthcare stock and investing headlines and related news
– Retweeting is rare
– High frequency

9. INFO @BioPharmaToday – Josh Berlin
– Elsevier Business Intelligence – publishers of The Pink Sheet, IN VIVO and PharmAsia News
– Focused on business development strategy, drug development, and regulation
– High Frequency

10. PERSP/INFO @reutersBenHir – Ben Hirschler
– Pharma, health and science correspondent for Reuters in London
– European news and perspective related to pharmaceutical industry
– Includes general worldwide financial/economic commentary
– High frequency

VI. Science

1. PERSP/INFO @NatureNews – Nature News & Comment
– News and opinion (not research articles) from Nature Magazine
– Engages in dialogue
– High frequency

2. PERSP/INFO @wiredscience – Wired Science
– Wired Science blog from Wired magazine
– Themed for general public and science enthusiasts
– Moderate frequency

3. INFO @sciam – Scientific American
– Scientific American article and blog posts
– Content from additional sources provided via retweets
– High frequency

4. PERSP/INFO @newscientist – New Scientist
– New Scientist Magazine covering space, tech, environment, health, life, physics/math, and science in society
– Includes original articles, blogs, and opinions
– Content from additional sources provided via retweets
– High frequency

5. PERSP/INFO @nytimesscience – New York Times Science
– Science, environment and space news from the New York Times
– Features articles, blogs, letters and opinions
– Few retweets
– High frequency

6. PERSP/INFO @carlzimmer – Carl Zimmer
– Prolific science writer, maintains blog “Loom” at Discover Magazine
– Covers broad range of science topics and news
– Frequent retweets and dialogue with users
– High frequency

7. PERSP/INFO @guardiansciblog – Guardian Science Blogs
– Science blogs from The Guardian covering general science, physics, and nature, and science in the general news
– Moderate frequency

8. INFO @DiscoverMag – Discover Magazine
– Discover Magazine content with additional sources
– Includes content about science and scientists
– High frequency

9. PERSP/INFO @NatureBiotech – Nature Biotechnology
– Journal covering the science and business of biotechnology
– Diverse content: research articles, science news, business news, and blogs
– Contains relevant retweets
– Moderate frequency

10. PERSP/INFO @mattwridley – Matt Wridley
– Author of books on evolution, genetics, and society
– Maintains and links to a blog: “The Rational Optimist”
– Provides content at the interface of science and its social implications
– Moderate tweet frequency

VII. Healthcare/Medicine

1. INFO @nytimeshealth – NYTimes Health
– Health news from the New York Times
– High frequency

2. PERSP/INFO @HarvardHealth – Harvard Health
– Links to Harvard Health Publications, news and information about treatments and disorders
– Includes “Ask Doctor K” section
– Moderate frequency

3. INFO @AmerMedicalAssn – AMA
– American Medical Association provides news and information relating to the health professions
– High frequency

4. PERSP/INFO @WSJHealthBlog – WSJ Health Blog
– Links to blog entries providing both information and commentary on health and health business topics
– Moderate frequency

5. PERSP/INFO @MayoClinic – Mayo Clinic
– Articles from the Mayo Clinic concerning health issues and treatments and advice
– Moderate frequency

6. PERSP/INFO @Health_Affairs – Health_Affairs
– News and opinions regarding health, healthcare, and public health/policy
– Moderate frequency

7. INFO @NPRHealth – NPR Health News
– NPR Health news articles ranging from research advances to social issues
– Moderate frequency

8. INFO @NEJM – New England Journal of Medicine
– Variety of content from the New England Journal of Medicine
– Moderate frequency

9. INFO @Lancet – Lancet
– Content from the Lancet Journal
– Moderate frequency

10. PERSP @PaulFLevy – Paul Levy
– Former CEO of Beth Israel Deaconess Medical Center in Boston, MA
– Authors prolific healthcare blog which is frequently the subject of tweets
– Moderate tweet frequency

VIII. VC/Entrepreneurs

1. PERSP/INFO @venturehacks – Venture Hacks
– Advice for startups
– News, employment, funding opportunities
– Much content provided via retweets
– Moderate frequency

2. PERSP @RealEndptsEllen – Ellen Licking
– Editor and writer for Value and Innovation Blog
– Each original post features author’s opinion or commentary
– Frequent retweets with new author comments
– Moderate frequency

3. PERSP/INFO @DavidASteinberg – David Steinberg
– Partner at PureTech Ventures, co-founder of 6 startups
– Early stage investment in novel therapeutics, medical devices, diagnostics, and research technologies.
– Topics include general science, regulation, and biotech innovation/investing
– Primarily dialogue and commentary reflecting author’s view with occasional links
– High frequency

4. PERSP/INFO @bijans – Bijan Salehizadeh
– Managing Director at NaviMed Capital
– Late stage investors in medical technology, healthcare services and health IT
– Dialogue, retweets, and abundant commentary
– Moderate frequency

5. PERSP/INFO @GoogleVentures – Google Ventures
– Google’s venture capital arm
– IT/technology specific content in addition to general discussion on entrepreneurship and career resources
– Moderate frequency

6. PERSP/INFO @ScottKirsner – Scott Kirsner
– Boston Globe columnist
– Focused on start-ups, venture capital and innovation in New England
– Dialogue, retweets, and abundant commentary
– High frequency

7. INFO @BioStartUp – Ed Y Lu PhD
– Industrial researcher
– Links to news articles relating to medical innovation in research and business
– Concise tweets
– Moderate frequency

8. INFO @Sequoia_Capital – Sequoia Capital
– Venture firm in energy, finance, healthcare, energy, mobile, internet and technology sectors
– Provides promotional content and resources for entrepreneurs
– Moderate frequency

9. PERSP @msuster – Mark Suster
– Entrepreneur turned VC – blog Both Sides of the Table
– Primarily dialogue with recommended links to blog or via retweets
– Moderate frequency

10. INFO @peHUB – peHUB
– Venture capital and private equity headlines with links
– Concise tweets
– High frequency

IX. Service Providers

1. INFO @BostonBioTech – BBCR
– Boston Biotech Clinical Research – Clinical strategy and trial design specialists
– Links to content focusing on rare disease, orphan indication and clinical trials
– Moderate frequency

2. PERSP/INFO @PearlF – Pearl Freier
– Founder of Cambridge BioPartners, Inc
– Innovative networking, recruiting and strategic business development
– Primarily dialogue
– Moderate frequency

3. PERSP/INFO @Comprendia – Comprendia
– Biotechnology and life science marketing, social media and business development
– Engages in dialogue and occasionally posts links
– Moderate frequency

4. PERSP/INFO @ideapharma – IDEA Pharma
– Pharmaceutical design consulting company
– Commentary and links concerning innovation in biotech industry
– Technical and strategic approaches
– Moderate frequency

5. PERSP/INFO @biotechPatent – Brian R. Dorn, PhD
– Patent attorney working on biotech, biosimilars, nanobiotech, and phamaceuticals
– Moderate frequency

6. PERSP/INFO @ipwatchdog – Gene Quinn
– Patent attorney
– Provides news and commentary while engaging in significant dialogue
– Moderate frequency

7. PERSP/INFO @McKQuarterly – McKinsey Quarterly
– Business journal of McKinsey & Company
– Articles on aspects of managerial strategy
– Moderate frequency

8. PERSP/INFO @StevenRothberg – Steven Rothberg
– President of CollegeRecruiter.com
– Advice and commentary and employment searches and recruiting
– Moderate frequency

9. INFO @WJNPharma_Jobs – Wiley Pharma Jobs
– Pharmaceutical and biotech recruitment service
– High frequency

10. INFO/PERSP @achrismanEBD – Anna Chrisman
– EBD Group Senior Manager, Conferences and Program – facilitating strategic partnerships in the biotechnology/pharmaceutical industries
– Provides information on conferences, events, and partnerships
– Tweets are focused, concise, and clearly express opinions
– Relatively lower frequency of link tweeting; the tweet itself is often the extent of the commentary
– Low frequency

X. Benchmark Biotech Twitter Users

These are individuals in the biotech industry actively engaged in social and professional Twitter activity. While focused on the industry, they are engaged across a broad spectrum of topics and discussions.

1. Steven Dickman @cbtadvisors – Founder/CEO of CBT Advisors
2. Bruce Booth @LifeSciVC – Biotech VC
3. Cynthia Clayton @Alnylam – RNAi Biopharmaceutical Company
4. Adam Feuerstein @adamfeuerstein – Sr. Columnist TheStreet
5. John Fierce @JohnCFierce – editor FierceBiotech
6. Michael Gilman @Michael_Gilman – Founder/CEO Stromedix
7. Carlos Velez @LacertaBio – Pharma/Bio Business
Development, Licensing, & Consulting.
8. Daphne Zohar @daphnezohar – Founder & Managing Partner,
PureTech Ventures
9. John LaMattina @John_LaMattina – Sr. Partner PureTech
10. Carol Gallagher @carol_gallagher – Past CEO of Calistoga Pharma
11. Richard Pops @popsalks – CEO Alkermes
12. Richard Heale @ThinkingPharma – CEO ThinkingPharma
13. Tim Walbert @HorizonPharmaCEO – CEO Horizon Pharma
14. David Williams @HealthBizBlog – Co-founder MedPharma
15. Bill George @Bill_George – former CEO Medtronic
16. Chris Hogg @cwhogg – CEO 100plus
17. James Tayloer @JTBiotech – CEO Precision Nanosystems
18. Tim Ravenscroft CEO @Lentigen – CEO Lentigen
19. John Halamka @jhalamka – CIO of BIDMC
20. Omar Ishrak @MedtronicCEO – CEO Medtronic

Appendix: Approach

These “Top 10” Twitter lists represent groups of Twitter users who in sum create a thorough and diverse ensemble of twitter users in a specific subject area. The lists were compiled for an audience of life science professionals and are partially based on the preferences of our “Benchmark Biotech Twitter Users” as well as the authors’ own preferences. Each tweeter’s name and handle is accompanied by a brief description as well as a classification as “PERSP” – providing primarily perspective, commentary, and opinions on topics; “INFO” – providing timely factual information and news stories; or both.

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“Quant” VC Correlation Ventures: VC’s New “Dream Date”

Those venture capitalists lucky enough to remain in the drastically smaller pack are constantly cruising for the perfect co-investor. Like the perfect spouse, it’s hard to imagine finding it all in one person:

  • Quick decision. Even if it is a no, I want to hear it quickly.
  • Ready money. If it is yes, please be ready to close very soon.
  • No diligence. If a lead investor has already “kicked the tires” on the deal, don’t you do it too. Trust their diligence. Don’t bother our key customers or partners.
  • No backtalk. We already have plenty of board members and lots of opinions. Be a board observer. Or, better yet, trust us. Don’t come to the board meetings at all.
       When Managing Partner David Coats and his colleagues founded San Diego-based Correlation Ventures, they had sat on the other side of the table – lead investors looking for co-investors. When they went looking for a fund concept, applicable in both life sciences and high-tech VC, that would both be new and would match the needs of the market, they decided to explore how such a “perfect” co-investor could also make money. They deployed heavy-duty predictive analytics on what they claim is one of the most complete databases of venture capital financings and outcomes, including the fifty thousand deals in their database – ninety per cent of VC deals closed since 1987. This information was scrounged the hard way, according to this recent post on the Nature blog site: Correlation forged relationships with Dow Jones and multiple VC firms to access historical non-public data. That way, they were able to find a mathematical model, described below, that should lead to a strong return while still offering all the advantages listed above.

        Fund-raising went surprisingly well, given the current constrained environment. Correlation Ventures blew past its $150 million target and raised $165 million. This amount will be invested over three to four years in up to fifty companies in chunks as small as $250,000 or as large as $4 million over the lifetime of a company. The list of limited partners (LPs), whose identities were not disclosed, reads like a who’s who: endowments, pension funds, family offices and individuals. I chatted with Coats at Convergence Forum in Chatham, MA, in May, 2011 and again at the JP Morgan conference last week. He said that the fund-raising was so successful in part because of the early and enthusiastic support of thirty top-tier venture fund partners who themselves wrote checks. That sort of endorsement opened doors with limited partners.

Correlation had a first closing in 2010 and started investing then. Two of its first thirteen investments are in the healthcare space, one in medical devices and one in therapeutics.

Lies, damn lies and…

So what’s the secret sauce? Statistical analysis. Correlation feeds in data on all the variables, including co-investors, the level of management experience, and, especially outcomes such as internal rate of return and multiple. Correlation then runs multiple regression analyses and identifies those variables that account for the most variance.

Cartoon on regression analysis       Surprisingly, success in individual deals does not correlate all that well with the “top-tier” nature of the VCs involved. “When you look who the winners are in VC,” Coats explained, “the industry is not nearly as concentrated [at the top tier] as some assume.” Coats is defining winners as investors whose deals generate large cash on cash multiples. In actual fact, he said, “The winners are widely dispersed and the distribution is not random. When you actually look at the data, every year there are hundreds of financings generating large multiples. Most, however, are small deals that are not even led by the top sixty VCs.” And in many of these deals, the lead investor winds up looking for a co-investor to fill out a round. That’s where Correlation comes in.

       It expects to push aside funds that might have contended for the open slot but would not make as quick a decision and that would not in any case have been as cost-effective for LPs. This implies that Correlation takes less carried interest and lower fund fees than “active” funds, but the fund understandably chooses not discuss its fees publicly.

The surprising distribution of success poses a dilemma for limited partners, who tend to invest again and again with those funds that have made them money. This is generally a rational hypothesis, Coats agrees, and a disproportionate number of Correlation’s investments are with top-tier firms. In that regard, Coats admits, Correlation is acting like a limited partner, maximizing relationships. However, Coats and his partners decided to broaden their fund diversity and go after the long tail of investors and deals that are not necessarily in the spotlight.

“The big ‘aha,’” he explained, was realizing that “many big [returns] come from financings that are undersubscribed or take a long time to close.” This is due to a pair of what Coats calls “natural inefficiencies.” One inefficiency arises when funds without long track records find good deals and have trouble finding appropriate co-investors. Another occurs in deal selection by funds that may not be seeing the best opportunities. In a conservative time like the past five years, these inefficiencies would seem to have increased as funds become more conservative about who they follow into deals and as there are fewer and fewer “blue-chip” co-investors to choose from.

The beauty of the Correlation model, according to Coats, is that “the top fifty VC firms could shut down and we believe we would still generate strong returns.” There would be enough deal flow and plenty of winners. It certainly is an alternative approach to an otherwise confounding market in which much of the VC muscle now seems to be concentrated at the top.

Piggybacking to success

Won’t this model, if successful, spawn competitors? And will the inevitable rise of additional “quant” VC funds piggybacking on the success of others distort the market in ways that limit or even destroy the yield? Look at what the Moneyball approach did to major league baseball: the team that applied the statistical analysis of player performance, the Oakland Athletics, had an initial advantage despite having less to invest in superstar players. This worked fine until their approach was cloned by virtually every other major league team, returning the Athletics to mediocrity and the league to its previous imbalance of power.

Perfect date image

But will he give me deal flow in the morning?

There will be imitators. In VC, every new fund concept that makes money attracts them. Just look at the proliferation – some would call it an explosion – in royalty-based funds (for example, the new billion-dollar fund raised by Cowen earlier this month). What about the overall impact if copycats generate “clean-room” (reverse-engineered) co-investing models and what if every syndicate starts to have a quant fund as a co-investor? Predictably, Coats had a statistical answer for this. “We have already modeled what we think will happen to the VC industry with our success. Obviously there is greater unpredictability” if and when that happens.

It is too early to say for sure whether the Correlation model – or that of another new fund, Ulu Ventures in Palo Alto, which uses Bayesian analysis to predict the success of internet-enabled consumer and business service companies – will prove successful. After all, plenty of confounding factors not predictable by any model contribute to make investing risky. The risks are especially pronounced when the exit takes several years and the capital needs are as high as they are in life sciences. Holding times for VC-backed healthcare companies are up over five years now, according to this analysis by Silicon Valley Bank.

Some VCs I know see Correlation as a threat, at least to their egos. Others raise the specter of quant-based models such as the notorious Long-Term Capital Management, whose derivatives investing nearly brought down the world financial system in 1998. Please comment, publicly or privately – if there are enough comments, I will post a summary.

To me, their concern seems overblown. The model will work, or it won’t. Either way, Correlation will put more money into the market at a time when it is sorely needed. If the fund succeeds, and I tend to believe that it will, then the impact will be self-limiting. Some VC-backed companies will refuse to take additional money and those that do will not take so much that the market will be warped. One VC summed it up nicely: Correlation’s approach does not have to outperform that top ten or fifteen per cent of VC funds, which will likely keep doing better by actively selecting the best deals. It just has to perform well enough to deliver consistent “bottom of the top quartile” returns to its LPs.

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Partnering360: A New Social Network Aims At Biotech – And Succeeds

By Steve Dickman, CEO, CBT Advisors
October 31, 2011

We recently test-drove a new social network for biotech and pharma executives that meets a real need. The new network is called Partnering360. It was launched today by conference organizer EBD Group to coincide with the start of the BioEurope conference in Düsseldorf.

Yet MORE social networks? After Facebook, LinkedIn, Twitter, Foursquare, Quora (for nerds), Mindbloom (for spiritual networking), Xing (for silent Europeans) and Google+ (no one has figured out yet what this one is for), hasn’t that trend peaked? We think it hasn’t and P360 demonstrates why that is the case.

Before detailing what makes this network look like it will be a winner, let’s think about this apparent paradox: an organization that makes its business out of in-person partnering events is joining the headlong rush into online social networking. What are they thinking?

The thinking is actually quite clear. The people who attend partnering events are a self-selected group. They already want to be with each other. They are interested in meeting more people like them in social as well as professional settings. And their organizations often insist that they use the in-person partnering events to broaden their networks in hopes of landing new opportunities. In-person networks get bigger not just through actual partnering meetings but also via social connections – meeting at breakfast, at coffee breaks or at the evening mixers.

But those connections are often fragile. Sometimes they are not immediately work-related. And unless one is a stickler for saving and logging business cards in a contacts database and then following up, the fleeting contacts can easily be lost.

Enter Partnering360. The only participants in this network are people who have attended this group’s events – 14,000 of them at the outset. (Additional industry players may be able to join by invitation later.) Participation is not mandatory but in the early going, Anna Chrisman of EBD Group told me, hardly anyone is opting out. (Good move making the opt-in the default – that makes the platform much more useful). So there is less worry than usual about meeting the “wrong” kinds of contacts e.g. time-wasters. The “right” contacts are all there. And the software, similar to that of LinkedIn, makes it easy to find people and request to connect with them.

The Partnering360 platform, which has been months in the making, grew out of the observation by those at EBD Group that conference participants had flocked to the online partnering platform, called PartneringONE, which had been set up for the group’s frequent events. But the participants had no way to maintain their connections from one event to the next. And PartneringONE’s default was to inform all members of a company’s delegation of each member’s online contacts. That was not a recipe for taking advantage of the serendipity of chance or social meetings.

The rest of the platform is much like LinkedIn, to which some of its content can be linked. It avoids some obvious pitfalls: it costs nothing (charging for this would be a non-starter). It integrates with both LinkedIn and Twitter instead of trying to compete with them. It allows for uploading of a profile photo and other information. If you are on PartneringONE, your profile information will automatically be imported.

Research has shown that one key to benefiting from social networks, online or in-person, is the so-called “weak” connections. As consultant Stuart E. Jackson put it in a mid-October article in Bloomberg Business Week, “The power of weak connections rests on … the assumption: Don’t worry … about having a small number of close friends. Instead, concentrate on making a much larger number of acquaintances—who might be called ‘not-so-close friends.’”  The reason is that this richer and more diverse set of contacts can be a source for all sorts of useful connections. That, of course, is where LinkedIn and social media tools like it come in.Before he started doubting the political import of Facebook and Twitter here, the New Yorker’s Malcolm Gladwell wrote about this power in his prescient 1999 story “Six Degrees of Lois Weisberg” and the point was driven home by social network mavens Nicholas Christakis and James Fowler in their popular book Connected and Christakis’ entertaining TED talk.

Networks that enhance existing professional networks get a +1 (aka a thumbs up) in my book. Here are some areas where this one has room to grow:

  • More promotional information. No, I don’t mean ads. Partnering360 is ad-free and it had better stay that way to maintain its value. But just like web sites, information companies want to share is valuable. Chrisman said that there is a plan to add paid video captures of company presentations and I believe this will be welcomed by the community.
  • Real discussion groups. In my view, LinkedIn has failed at this. It seems like every group I join is soon swamped by unwanted, often overly promotional posts. Or the group goes silent. Twitter does this well but the discussions die off because they are too public and limited to 140 characters. The exclusive nature of P360 should lend itself to some productive discussions. I hope this functionality is added soon.
  • Links to more platforms. I dissed Quora above but in fact it can be useful. Google+ also has promise and shares with Partnering360 some degree of self-selection.

Of course, Partnering360 faces some of the same limitations that any online medium does: this material is legally discoverable. It’s semi-public. It certainly does not enjoy the protection of the high walls of a company’s intranet. Its main challenge is how to get above and stay above the noise. But given how regularly the partnering events occur and how often my readers and I find ourselves attending them, I suspect that this platform is here to stay.


Full disclosure: I was a moderator of a social network-related panel (video here) at an EBD event earlier this year and I will moderate another one at BioEurope Spring in Amsterdam in March, 2012.


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How Sanofi Could Start Off on the Right Foot in Cambridge

To: Chris Viehbacher, CEO, Sanofi Aventis
From: The Boston Biotech Community
Re: Making the Most of the Impending Merger

Dear Mr. Viehbacher,

In the heat of the discussions regarding an acquisition of Genzyme that now look like they are on track for rapid completion, you may not have had much time to think about exactly what will happen in the aftermath. Sure, you have plans for Genzyme’s products as well as for the teams and facilities involved in producing them. Those products—and their revenue streams—are presumably why you are buying the company.

But don’t forget Genzyme’s excellent R&D….If you downsize Genzyme the severe way that some expect, you might be throwing away enormous potential for future products to benefit human health.

To read the rest of today’s post, visit Xconomy here or copy-paste the link:


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We are our bugs – hot Boston startup mines the gut

by Steven Dickman, CEO, CBT Advisors

Seeing the human being as a “superorganism” composed primarily of freeloading or symbiotic bacteria and other parasites and designing products accordingly – that is the basis for a new startup with the alluring name of Libra Biosciences being incubated by PureTech Ventures in Boston.

Daphne Zohar, PureTech Ventures

Daphne Zohar, top Boston innovator

News of Libra began to come out in a piece in yesterday’s (Oct. 4, 2010) Boston Globe citing PureTech managing partner Daphne Zohar as one of Boston’s top 15 innovators. Little else is publicly available about the startup except a one-page web site stating that the company will be active in diagnostics and consumer products as well as therapeutics. Disease areas will include developmental, immunological and epithelial disorders.

The idea of humans and other eukaryotes as walking sacs of bacteria is not new. It was raised elegantly by Lewis Thomas in his seminal and delightful 1978 book Lives of a Cell: Notes of a Biology Watcher.

Libra Biosciences logo
Nor would this be the first time someone tried to apply this concept to predictive disease modeling – witness this paper from Nicholson et al. in Nature Biotech in 2004 exploring applications of “omics” to human-residing bacteria. But this appears to be the first time that commercial activity has coalesced around this interesting field of science, likely driven by advances in high-speed genetic sequencing. (The latest presentation we’ve seen from BGI – formerly Beijing Genomics Institute – reports that BGI alone will have increased to 5 TB of genome sequenced per day – that’s 1500 human genomes – by the end of 2010, up from 100 GB a day at the end of 2009.) There have been some interesting publications pointing to links between the nature of gut bacteria in individuals and their weight. According to these studies, as reported in the Los Angeles Times in June of this year, the more efficient the gut bacteria are at processing food, the more overweight the hosts are. We prefer the inefficient ones!

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Except for the brief mention in the Globe today, Libra is not talking to the media just yet. But this interesting piece of startup news confirms PureTech’s role – alongside Third Rock Ventures and just a handful of other Boston-based firms – as one of the few key bridges across the current yawning gap separating creative academic science and fundable biotech companies.

# # #

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Company Serves New Genetic Testing Market: The Not-Yet-Conceived

By Steve Dickman, CEO, CBT Advisors

What’s the next key population for personalized medicine? We’ve got it: not those with hereditary disease nor those with chronic conditions. Not even anyone who is sick, well, young or old. It’s the not-yet-conceived.

As the New York Times reported on the front page in January, the Redwood City, California-based company Counsyl is offering to prospective parents a unique, one-price panel of SNP-based tests for over one hundred genetic diseases, including cystic fibrosis, Tay-Sachs, spinal muscular atrophy(SMA), sickle cell disease, and Pompe disease. Pay $349 a parent and you too can learn whether your offspring will be at risk for these diseases and a host of other single gene disorders.

Counsyl logo
Based on our understanding of the genetic testing space and on the information available about this company, it seems like Counsyl’s test, on the market for several months, is in a position to do very well. After all, assuming the testing is done accurately and discreetly, what parent would not like to put his or her mind at ease by quantifying this risk?

But the very ease-of-use and consumer friendliness that make the test appealing as a commercial proposition raise intriguing questions about the ethical and societal implications of such screening tests as their availability and scope grow.

This post comes in three sections: we will first describe what Counsyl does, how it differs from existing genetic testing services and what its business advantages and challenges might be. Then we will consider some of the societal and practical concerns raised by experts in medical genetics and bioethics whom we have interviewed on this topic. Finally, we will look to the future of pre-conception screening to consider the implications if techniques providing higher information content – especially full sequencing – are brought to bear on the specific market segment of would-be parents.

As our readers know, we are most eager to shine our light on a personalized medicine company if it is viable as a venture investment. Counsyl has not raised VC money and may never need to do so, but after the usual important caveats (e.g. about cost of sales, gross margin etc.) it sure looks like a “doable deal” to us. In two angel rounds reported on the SEC Web site, Counsyl has raised a total of $4.9 million in angel investment. The company declined to be interviewed for this post.

What makes Counsyl look like a good deal? We continue to believe strongly in the criteria we laid out, courtesy of Dion Madsen, GP at Physic Ventures in San Francisco, in our mid-December, 2009, post entitled “Medicine Gets Personal – But How Do VCs Make Money?” These require that a potential investment be

1. Actionable – it informs a decision around treatment, preventive action or behavior

2. Cost-effective

3. Based on validated science; and

4. Clinically meaningful.

Based on these criteria, Counsyl’s test passes with only a few small hesitations.

Once handed the results, potential parents – married couples, unmarried people considering having a child together or even customers at sperm banks – could choose not to conceive (e.g. to adopt instead) or to go through in vitro fertilization (IVF) followed by preimplantation genetic diagnosis (PGD). Counsyl’s customers could in principle even select a mate based on whether the person carries risks for the hundred or so genetic diseases in Counsyl’s panel. Other actions are possible and will be addressed below.

Counsyl UGT graphic - cost of test vs. status quo

Counsyl claims its test will save thousands and be reimbursed by insurers

The company’s price point of $698 per couple is low given the many tests it offers. Tests for some of the most common diseases on the list, such as Tay-Sachs disease, can cost $100 or more when tested for alone or in combination with a small number of other diseases. At just $349 a person for Tay-Sachs and a hundred other diseases, Counsyl’s test would seem to be a bargain.

Based on validated science
This one is harder for us to judge. But all of the diseases listed on the company’s web site can be tested for with a simple (in the jargon of genetic testing, a ”SNP-based”), rather than a complex (“sequencing-based”), test. In many cases, such as sickle cell disease, a large majority of carriers have just a one-base-pair mutation in their genetic code. A blood test or, in this case, a saliva test ought to be highly effective at identifying carriers with a high degree of confidence and without a large number of false positives. (The web site claims greater than 99.9% sensitivity and specificity i.e. virtually no false positives or false negatives). And of course, in every case where there is an initial positive result, a confirmatory test can and should be performed.

Clinically meaningful

This is the toughest one of all. We have to consider at least two scenarios: How meaningful is it to know in advance that one’s child would have a 25% or greater chance* (See Footnote) of being afflicted with a genetic disease? And how meaningful is it to know if the child has a chance to wind up a carrier?

Gattaca Movie promo pic - Uma Thurman and Ethan Hawke

PGD for all – except Ethan Hawke

The first scenario is more important – it represents the raison d’être for the test. We’ll look at both below.

Business challenge: barriers to entry
But before that, let’s consider a business challenge: competition. There do not appear to be too many barriers to entry in this area of genetic testing. Counsyl probably does not even own the rights to the DNA underlying most of the tests included in its panel. Even if Counsyl strikes deals with patent-holders on single-gene diseases, DNA “ownership” is under siege. Indeed, in a controversial court ruling on March 29, 2010, a U.S. district court judge struck down the patent protection of Myriad Genetics on the breast and ovarian cancer susceptibility genes BRCA1 and BRCA2. This ruling, which will undoubtedly be appealed, opened the door to even wider competition on diagnostic tests than before. Large-scale reimbursement will provide a more meaningful barrier than any other; it is still too early to tell how widely the Counsyl test will be reimbursed by insurers.

Now back to the question of whether the Counsyl test is “clinically meaningful.” First, consider the case where both prospective parents turn out to be carriers of a (recessive) gene for a devastating and untreatable disease like spinal muscular atrophy (SMA), a motor neuron disease related to ALS (Lou Gehrig’s disease) that is often fatal in early childhood. The parents’ carrier status puts their offspring at 25% risk for inheriting the disease. Parents who know that might choose to undergo IVF and PGD or to adopt instead of having biological children.

Indeed, carrier screening for specific diseases in specific populations has been widely adopted even when it is more expensive and less revealing than what Counsyl is offering.

Take cystic fibrosis (CF), for example. This genetic disease causes the accumulation of sticky mucus in the lungs as well as digestive problems. Life expectancies have increased from the teens and twenties all the way up to thirty-seven but given the option, many parents have avoided bringing children into the world who have a high chance of having CF. Kaiser Permanente recently was reported by USA Today to have identified 87 couples who were among the 10 million CF carriers in the United States, and when their fetuses were tested, twenty-three were found to have the disease. Seventeen of these were shown to have the more severe form of the disease and parents chose to terminate sixteen of those pregnancies. Four of six pregnancies were terminated in cases where the fetuses were shown to have a less severe form. More broadly, USA Today also reported that couples who were informed after prenatal screening of genetic disease present in their offspring-to-be chose to terminate pregnancies about fifty per cent of the time.

For many parents, the pre-conception decision to adopt or to undergo the rigors and expense of PGD is much less problematic – and perhaps more consistent with their religious or ethical beliefs – than the decision to terminate a pregnancy. Indeed, both advocates and opponents of prenatal screening might be able to agree that there are advantages that this type of pre-conception screening provides.

For a case in point, think about the Ashkenazi Jewish population which is prone to severe genetic diseases including Tay-Sachs because of founder mutations in the early (small) Eastern European population combined with the tendency especially of orthodox Jews to marry within their group.

The scourge of Tay-Sachs disease, which is typically fatal in early childhood, is what prompted Rabbi Josef Eckstein to found Dor Yeshorim, a Brooklyn-based group that offers free blood tests to Jews. Before he started Dor Yeshorim, Rabbi Ekstein lost four children to Tay-Sachs. He told USA Today “I am a Holocaust survivor. I was born in the middle of the Second World War. I hope that I am not a suspect for practicing eugenics. We are just trying to have healthy children.”


Eugenics in a new light?

Dor Yeshorim said it has 300,000 members and has branched out to test for not only Tay-Sachs but eight other genetic diseases including CF. Tay-Sachs births are down to about a dozen a year in the United States. “In the Orthodox Ashkenazi community around the world, we have virtually wiped out the diseases we screen for,” the group’s development director Allan Binder told USA Today.

Downstream consequences

But what Counsyl is selling is the opposite of targeted. It calls its product the “Universal Genetic Test,” which is a bit of a misnomer given how many genetic diseases (thousands) are NOT included in the current panel. The idea is that the test be offered as broadly as possible. Over a hundred U.S. clinics are providing the test and Counsyl claims that it is already being reimbursed by insurers. Customers can even mail in saliva samples and receive their results directly.

In interviews with Boston Biotech Watch, medical geneticists and ethicists raised concerns about Counsyl’s test based in part on this accessibility and ease-of-use. Whereas the test itself is “actionable” since it can lead to a decision to pursue adoption or PGD, the PGD route is “extremely expensive, burdensome and risky” said Gail Geller of Johns Hopkins University’s Berman Institute of Bioethics . IVF cycles cost $10,000 each and PGD thousands more (e.g. reported at $5,800 on the web site of an IVF clinic in California. IVF is covered in some states (e.g. Massachusetts and New Jersey) but in most U.S. states and most other countries, it is paid out of pocket.

This leads to another objection from Geller: that the downstream consequences of screening, including IVF and PGD procedures, raise not only cost issues but also “other weighty issues such as … access … [and] deleterious effects on people who undergo it. We don’t even know the long-term effects of [the ovarian] hyperstimulation” required for IVF.

Of course, adoption and PGD are not the only potential actions that can be taken following a positive signal on the Counsyl test. Another likely – if controversial – action for some couples will be to test the fetus early in pregnancy (for example with chorionic villus sampling – CVS – which is already indicated for women with high-risk pregnancies) and terminate in the event of a positive test. Some would argue that this route preserves the fifty to seventy-five per cent of offspring who would not have been born with the disease in question. But that decision comes with a price, terminating a pregnancy, likely to be too high for some.

Michael Murray of Brigham & Women's Hospital

Michael F. Murray: A Screen Too Far? Photo courtesy Partners Healthcare Center for Genetic and Genomic Medicine

The actionability of Counsyl’s test was also questioned by Michael F. Murray, a medical geneticist at Brigham & Women’s Hospital and a faculty member at Harvard Medical School in Boston. Murray says that the all-comers access to Counsyl’s test means that “they are doing genetic screening for people who have no reason to be screened.” This can lead to issues with the outcomes of the tests. “Doing a cystic fibrosis test in an African-American or a sickle cell test in a Caucasian-American, you will get a very low yield from those tests. When you come up with a positive in those settings, it will be hard to interpret it.”

Both of these sets of objections are reminiscent of some criticisms of 23andme.com, Navigenics and other “consumer genomics” companies. Those companies offer similar DNA-based tests for adults and then reveal genetic predispositions for everything from diabetes to ear wax type. Lately, the popularity of 23andme and its peers has seemed to stall, according to the New York Times. Actionability is a big reason. After the novelty of knowing one’s predispositions has worn off, is life really all that different?

In that regard, the Counsyl test is “more actionable than all the other genetic platforms like 23andme” said Santiago Munné, Director of PGD at The Institute for Reproductive Medicine and Science at Saint Barnabas in Livingston, NJ. After all, what could be a more decisive action than choosing not to have a child at all?

Munné, who agreed that his practice stands to benefit if the Counsyl test is widely adopted (“for my business, this is great,” he said), was also not concerned about the potential for false positives and other inaccuracies in the Counsyl SNP-based test. “For at least 90% of what we test for, the SNPs are the real mutation.” Furthermore, “they can always do a more rigorous test like PCR” if a SNP-based test comes up positive.

Too much information?
Perhaps the largest question raised by the experts about more extensive pre-conception testing concerns anxiety. When a couple are told, for example, that their child will not inherit a genetic disease because both partners are not carriers but that there is a likelihood that the child will him- or herself be a carrier, what does that mean? Most couples would likely go ahead with a pregnancy upon being informed of carrier status. After all, every one of us is a carrier for something. But the same way that learning one’s own genetic predispositions via a 23andme.com or Navigenics or Decode Genetics test may provide “too much information” and not enough meaning behind it, learning that about one’s potential offspring might be even harsher.

Geller, Murray and others expressed even deeper reservations about the likely next stage for pre-conception genetic testing: full sequencing of both prospective parents. Counsyl does not offer sequencing-based tests but other seed-stage companies have come to our attention that are considering doing so. None of these companies has emerged from stealth mode, so the comments here about sequencing-based tests can be considered speculation. On the other hand, the cost of sequencing is dropping rapidly. The $1,000 genome seems just months away. And has there ever been a medically relevant technology that was developed but not used?

The pre-conceived genome
Concerns about sequencing in the pre-conception setting run parallel with concerns about whole-genome sequencing in general. There is a “triple whammy” with sequencing in this setting which makes the observers’ concerns even graver: that sequencing provides much information that is NOT actionable; that therefore, the more data there is, the more anxiety it will create; and that THIS patient population above all others is prone to irrational decision-making and costly second-guessing none of which can really provide the answers the couples are seeking.

“Going to full sequencing would represent a disproportional increase in data and a decrease in the understanding of that data,” said Murray. At least the SNP-based data in Counsyl’s test will be more focused than that. “SNP data will tell you “yes or no” at 500,000 points or whatever it is,” Murray said. “Sequence data will come up with all kinds of variation. We will know even less about how to interpret a lot of that. In fact, people are starting to talk about the $1,000 sequence followed by the million dollar workup.”

Other medical geneticists concurred because of the nature of the customer population. Murray said, “Those couples tested are going to be frantic with whatever the data is. They will be seeing ten specialists to talk about ten diseases that they never heard of before and it will be an unclear risk to begin with. So I think that that model [of pre-conception sequencing] will generate tons of downstream costs with uncertain benefit.”

This concern dovetails with the one we alluded to earlier: what does a couple do with the knowledge that their child will likely be a carrier of some severe disease? Isn’t that the kind of knowledge that couples might rather not have? Will Counsyl have to begin to offer more limited test results telling parents only when their offspring have the potential to have these diseases rather than just carry a gene for them?

George Church of Harvard Medical School

Prof. George Church, sequencing proponent

We contacted George Church, a Harvard professor and sequencing technology innovator, one of the first people to have his genome sequenced and the results published as part of the Personal Genome Project. Church is professor of genetics at Harvard Medical School and also heads the Lipper Center for Computational Genetics there. To Church, the dichotomy between SNP-based tests and sequencing-based tests is not going to be around for long. “Many medical genetic traits have a large enough number of genes and alleles that are highly predictive and actionable,” Church wrote in an email message. “It is more than fit onto a simple chip, and the list grows at a rate that is hard to update with chips but easy to update with sequencing software.” Examples he cited include the hereditary eye disease retinitis pigmentosa, which can cause blindness, and BRCA1 and BRCA2, which are linked to risk for breast cancer.

Furthermore, Church said, “sequencing is routinely used for many/most clinical genetics right now (e.g. Myriad Genetics [and its BRCA1/BRCA2 test]).”

Church also rejects the concern about causing anxiety to prospective parents. “This sounds paternalistic,” he wrote. It is “as if patients and doctors aren’t able (with appropriate fact sheets or software) to combine diverse data to get better predictions — and for many variants wait for new research or new symptoms. Perhaps we should start implementing safeguards against economically incentivized overinterpretation rather than against low cost multiple tests.”

Church’s argument echoes one heard widely by advocates of personalized medicine on the merits of decentralization. By putting the data, however ambiguous and anxiety-provoking it is, into the hands of the customers themselves, Counsyl allows each person to choose exactly how to respond, if at all.

A business or a public health measure?
The next objection puts the Counsyl offering into perspective. When asked whether the Counsyl test – cheaper, more comprehensive and available even to people who live far away from the nearest diagnostics lab – was actually a net benefit for society, Murray said, “It’s true that if you screen everyone in the world, you will help some people who might otherwise not have been helped. But,” he continued, “it is a business plan and NOT a carefully considered screening plan.” From a public health point of view, pre-conception screening might be done very differently.

Ramji Srinivasan, CEO of Counsyl

Ramji Srinivasan, 28, Counsyl’s founder-CEO

We agree with that. Counsyl is a business. It has been set up to provide a return for its investors. And like so many other experiments to come in the world of personalized medicine, Counsyl has isolated just one market within many and resolved to address it very thoroughly. Counsyl’s business plan seems to follow “Entrepreneurship Rule 101” very well: focus, focus and focus some more.

We also have to remember that the Counsyl test is a “1.0” version, with all the potential for bugs and subsequent improvement. The next generation of Counsyl’s offering might be much more sophisticated, offering more nuanced results for specific customer subgroups both inside and, eventually, outside the United States. (Newsweek reported in December, 2009, that the government of Taiwan is considering offering reimbursed access to the Counsyl test to its entire population.) The “2.0” version may well contain even more tests since, as Murray put it, “there is a tidal wave of these tests coming.”

A final ethical issue we see even thought our sources did not emphasize it is the “designer babies” question: the Counsyl test, especially as later versions of it incorporate more and more disease-causing genes, strongly supports a world-view that says human beings can control their destiny by controlling the gene pool. The free market in genetic data exploited by Counsyl accelerates humanity on a path down the slippery slope toward attempts to control IQ, weight, height and other factors, much the same way that in some cultures, the most sought-after piece of genetic data about a future offspring is whether there is a Y chromosome present i.e. whether a baby will be a boy.

They’re my genes, and I want to know what they are

Counsyl seems to have made a strong start, giving it a “first-mover advantage” toward grabbing a big share of a new and growing market. Personal genomics companies like 23andme and Navigenics – whose DNA tests are after all based on the same technology and priced in the same range of a few hundred dollars – might well be kicking themselves for not getting to these customers first. It may be that the customers who are most anxious about the results of a test like this are also those most eager to pay the fee, get the data and then decide what to do with it.

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*According to the rules of Mendelian inheritance, so-called “recessive genes” (more precisely “recessive autosomal variants”) that also breed true (i.e. that have “high Mendelian penetrance”) lead to a 25% chance that an offspring will have two copies of the disease gene and thus have the disease. If the disease gene happens to fall on the X chromosome, the likelihood is 50%. In cases where the disease emerges haphazardly rather than predictably (i.e. of “incomplete penetrance”) and of multi-gene traits (QTLs or “quantitative trait loci”), the likelihood of disease would be lower and would vary widely.

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Domain Sheds the VC Blues

by Steven Dickman, CEO, CBT Advisors

Looking for a silver lining in the current challenging climate for healthcare VC? Look no further than Domain Associates. Amid the exit drought brought on by the economic crisis, Domain has put together an impressive string of exits. By our count, Domain has had seventeen significant exits – 3x or better, sometimes much better – since 2005. Even after the doors slammed on IPOs in 2007 and the crisis hit in the fall of 2008, the exits have continued with 2009 acquisitions of BiPar (for up to $500 million to Sanofi), Calixa ($403 million to Cubist) and Corthera (up to $620 million to Novartis – see Table 1).

We hasten to add that we don’t know exactly how well Domain did in some of their investments in companies that had IPO “exits” or even if they have sold their shares. The true profitability of venture funds is known only to the funds themselves and some of their investors aka limited partners. For real accuracy, performance comparisons among venture funds should be made for funds raised in the same year (the “vintage funds” approach) and for funds with roughly the same sizes and strategies. Still, after looking at a couple of dozen top funds and were hard pressed to find any with more than five or six decent exits in the 2005-2009 time frame. Aside from Domain, The highest performers we found had seven or eight.

Therefore, Domain’s exit numbers – and, presumably, the returns that result from them – have to be the envy of the firm’s VC peers. That is especially true now, more than a year into the economic crisis. Although pharma and big biotech have been spared, the current tough times have hit VCs hard. The IPO market may come back in 2010 but don’t get your hopes up. Ironwood on February 3 was the first VC-backed biotech company to go public in 2010 and one of a handful of biotherapeutics companies to go public on any exchange since 2007. But that was not a rousing success given the “haircut” in the price ($11.25 not $14-16 per share) and the lower amount raised than planned ($187 million, not $272 million).

Worse for VCs, fund-raising is down and the returns for many if not most funds have been negative for years. The actual numbers are unknown, though Boston Biotech Watch’s parent CBT Advisors got access to some aggregate data in 2008 that was pretty sobering, showing a majority of 232 healthcare funds over twenty-two years returning barely more than their invested capital, data we will share upon request. The reasons for this fund-raising roadblock have much to do with that performance, intensified by the structural issues that have beset many of the funds’ limited partners, an issue Boston Biotech Watch covered in an earlier post.

But despite the most challenging climate in ten years or more for VC fund-raising, Domain capped off their recent run in mid-2009 with the biggest life sciences fund raised that year, the $500 million fund Domain Partners VIII, which closed in August and increased the firm’s lifetime amount raised to $2.7 billion. To the firm’s partners, accustomed from the good times to raising money in weeks, not months, the fund-raising seemed arduous – it began in January, 2009, took seven months and yielded a fund that Domain acknowledged was 28% below its original $700 million target. To the rest of the industry, of course, the fund-raising represented a rare bright spot.

Meeting some Domain partners at the JP Morgan healthcare conference last month, it occurred to us that even here, breathing the rarified air of VC triumph, one can find the roots of the current VC malaise, which is affecting the entire innovation economy. Indeed, connecting the dots through Domain’s exits yields answers to several interesting questions, to wit:

o Why, as long as it can find syndication partners, Domain ought to continue to be successful;
o Why so many other VCs will continue to struggle to the point that some will go out of business;
o And why the most urgent conversations at JP Morgan were not between biotechs and VCs, nor between bankers and VCs, but rather between VCs and big pharma.

First, the Domain success story. Let’s eliminate any doubt that Domain was “just lucky.” Yes, the number of events – in this case exits – is low, too low to consider this analysis a scientific one. But we strongly doubt that we have been fooled by randomness and that Domain’s success is a so-called Black Swan (an unpredictable outlier as described in the book of the same name by Nassim N. Taleb).

We further acknowledge that one of the presumed exits reflects the spectacular turnaround for specialty pharma shop Vanda), whose schizophrenia drug was first rejected by FDA, then approved, and is now on the market). Vanda stock was on a turbocharged roller-coaster (from $5.12 to $0.50 and all the way back up to $14.64 – all within a single year! see Figure 1) and Domain – if it sold shares – likely wound up reaping a large. But Vanda – if it was lucky, and even that is up for debate – is only one of many good exits (see Table 1).

Figure 1: The Vanda (NASDAQ: VNDA) rollercoaster – note logarithmic scale!

In fact, the repeated and apparently pre-programmed success of one particular business model, layered onto an otherwise productive clinical development and medical device strategy, has made an enormous difference in the firm’s returns.

Therapies only please
Unlike some of its life sciences VC peers, Domain does not do tools or health IT or cleantech. It stays tightly focused on building companies and taking judicious clinical trial risk on promising devices or molecules – or, as in the case of Vanda and other less high-flying portfolio companies like Alimera, on promising management teams. Moving these molecules through relevant clinical milestones – especially Phase 2 trials – is a tried-and-true path to success, provided that they are the right molecules and provided the management teams execute well in moving them forward. Domain has done fine – as well as anyone in the industry – at assuming this type of clinical risk and then working hard to minimize that risk through astute management and good trial design.

But this explanation begs one question: where does Domain get the molecules? The answer: mostly from Japan. As has been well documented, Domain is particularly good at finding viable preclinical or early clinical molecules inside Japanese pharma companies, placing them in US-based companies and ushering these molecules – which are usually the most promising candidates in their Japanese originators’ pipelines – through a value inflection point, at which point they can be sold or partnered with US and European pharma companies at big premiums.

Boston Biotech Watch sat down with Eckard Weber, Domain’s resident expert at shaking loose these valuable assets from Japanese companies and shepherding them to their future homes in mostly San Diego-based companies. Weber, who until 1995 was a former university professor at UC Irvine, makes a humble and buttoned-down impression — this despite his having one of the more impressive track records in VC dealmaking the past five years, And in his initial description of how he and Domain do it, he made it sound positively pedestrian, almost trivial: “If there is unmet need with a big market opportunity, [a product] could be worth a lot of money. If you can take the product through Phase 2 for $30-40M, show safety and efficacy for that, it’s a good investment!”

So go to Japan, pick up molecules that local pharma companies have developed and license the rights for the United States and North America. Weber makes it sound so easy! But it isn’t. After all, these companies traditionally out-licensed ONLY to US and European big pharma. VCs needed not apply – until Domain’s deal with Takeda for the antibiotic Ceftaroline, out-licensing of products developed by Japanese pharma for its home market to western VC-backed companies was exceedingly rare. “What was not accepted as a business model until we came on the scene,” Weber said, “was to license the product to offshore VCs – or any VCs.”

For the first deal, Weber recounts, the major Japanese pharma took a very long time because they’d never done an out-licensing to a US VC or even a venture-backed company. That was a cultural shift that took two years. What made them eventually come around was “relationship building,” Weber said, which “is even more important in Japan than in the United States. You have to spend a great deal of time presenting your case. You need to go repeatedly, discuss, negotiate, make a proposal, listen [to their feedback or counterproposal].”

Weber’s efforts bore fruit and the rest is history – a molecule from Shionogi helped Peninsula create a $245 million exit; then a molecule from Takeda made Peninsula spinout Cerexa a $580 million exit; then a molecule from Astellas that helped Cerexa spinout Calixa (where Weber had become interim CEO) be sold in 2009 for over $400 million to Cubist.

Improving the odds
The string of exits has continued for three reasons, none of them dumb luck:

(1) Weber and Domain got results with their early efforts, undoubtedly earning the drugs’ original Japanese owners much higher returns than in traditional pharma-to-pharma licensing deals;

(2) The early results translated into repeat invitations to visit Japanese pharma companies and look in their cupboards. “Eventually,” after some exits, said Weber, “we became a well-known quantity. [Our prior deals] opened a lot of doors. We established a relationship with most of the Japanese pharma companies because we’ve done deals with them and made them want to do more deals. Now we are approached regularly.”

(3) Domain and its syndicate partners knew what to do with the drugs once it had the rights. Borrowing a model from the medical device world, where management teams are often created around assets identified by investors, Domain drew upon its reservoir of accomplished management teams and consultants – including Weber himself – during diligence, company-building and clinical development. “It’s not just a question of finding the products but also creating value in them,” he said. “We spend extensive time evaluating products and their positioning,” Weber said. “There is a great deal of [time and effort spent] developing a clinical and regulatory strategy,” which he characterized as one of Domain’s big value-adds. “Products can fail because of poorly conceived clinical and regulatory strategies.” It’s not that products never fail in Domain’s hands – sometimes they do – but the firm’s work pre- and post-closing of a deal has managed to improve the odds.

Before the window slammed shut

But take the deep dive into Domain’s portfolio further, all the way back to the days when the IPO was still a viable exit, and BBW found a more conventional story. Like many VC firms, Domain was – at least until 2007 – able to shed large chunks of its more speculative investments onto public-markets investors, before the risk of early-stage drug development was taken out. Yes, Domain had several IPO exits in the 2005-2007 time frame. But some of them (Novacea in the prostate cancer space; Northstar Neuroscience in medical devices) did not provide better than modest exits when their shares had to be sold at cost or the companies shut down. In this, Domain’s performance was roughly consistent with the performance of other funds in those years. The chart for Somaxon shows a typical pattern: a strong IPO and post-IPO performance followed by a disappointment in clinical development – in this case in a delay in the approval of an insomnia drug – resulting in a slide in the stock price (see Figure 2).

Figure 2: Somaxon (NASDAQ: SOMX) suffers the wrath of the market

This type of investment – any investment that requires an IPO exit along the way – no longer fits the risk profile of what Domain is doing these days, or many other financial VC firms for that matter. The retail investor is not buying or buying only at a discount, as evidenced by the years-long near-absence of IPOs followed by Ironwood’s haircut. VCs have to expect to remain invested and involved in the companies until they either have been generating years of strong revenues – which is usually too long – or until they get acquired by pharmaceutical companies. And if the exit will be an acquisition anyway, why have the IPO at all?

All of these trends help explain why the 2010 JP Morgan healthcare conference, while it felt much more vigorous than the previous year’s shell-shocked atmosphere, continued to have as its main focus a dialogue that had become prevalent in the 2005-6-7 time frame: pharma-VC discussions. VCs are more dependent on pharma than ever for virtually every phase of their business: exits; deal flow (pharma spin-outs being one of the more “sure-thing” investment vehicles VCs invest in, although most VCs have found these in US and Europe-based pharma and it has been Domain finding them in Japan); reality checks in regard to “what pharma is buying” – what indications, what types of molecules etc.; and fund-raising (pharma companies are often limited partners in VC funds). The days when JP Morgan was a place for VCs to “look at deals” and to kibitz with entrepreneurs seem to be numbered. Many of the VC firms may not be around in a few years to share in the dialogue.

Steady as she goes
Based on the source of many of its most valuable assets, Japanese pharma, Domain can expect to continue its string of successes for years to come. “These [Japan-based pharmaceutical] companies all have R&D. They are replenishing the pipeline,” said Weber. And now, of course, Domain has the inside track.

But for the VC industry as a whole, the outlook is not so promising, at least for the next two or three years. Many VC funds have postponed raising new funds until 2010, which was probably wise given the nasty environment of 2008-2009. But now these funds really need to raise money, and their performance – which if it does not include an Eckard Weber deal or one of the few comparable high-value exits of recent years – will not make it easy.

This rough patch will likely hit Domain too as it searches for the syndication partners it needs to raise $30 million to $40 million per company. It may find itself doing big deals like this with fewer partners who each put in more; optioning rights for other geographies (e.g. Europe) earlier to raise cash for development; or selling the companies to the pharmaceutical industry, painful as it might be, earlier and for less.

Still, Domain’s and Weber’s impressive winning streak stands out against the gloomy backdrop. As long as Weber finds the pursuit of new medications more appealing than golf at Torrey Pines, there is every reason to expect it to continue.

# # #
Disclosure: Domain and the companies mentioned in this piece are not consulting clients of CBT Advisors

Company Location Indication Source of Compounds Acquirer or IPO Year of Acq’n or IPO Price at Acq’n or Value* post-IPO
BiPar SF Bay Oncology In-house Sanofi 2009 ≤$500M
Cabrellis (W) San Diego Oncology Dainippon Sumitomo Pharmion 2006 $94M
Cadence San Diego Acute pain In-licensed IPO 2006 $500M by ‘07
Calixa (W) San Diego Infectious Dis. Astellas Cubist 2009 $403M
Cerexa (W) SF Bay Infectious Dis. Takeda Forest 2006 $580M
Conforma San Diego Oncology In-house Biogen Idec 2006 $250M
Corthera SF Bay Heart failure Connetics Novartis 2009 $620M
GeneOhm San Diego Diagnostics In-house Becton Dickinson 2006 $230M
Intralase Irvine Eye device In-house AMO (Abbott) 2007 $808M
Novacardia (W) San Diego Congestive Heart Failure Kyowa Hakko Kogyo Merck 2007 $350M
Nuvasive San Diego Orthopedics In-house IPO 2004 $500M by ‘07
Orexigen (W) San Diego Obesity In-house drug combination IPO 2007 $400M by ‘08
Peninsula (W) SF Bay Infectious Dis. Shionogi J&J 2005 $245M
SenoRx Irvine Onc. device In-house IPO 2007 $150M by ‘08
Somaxon San Diego Insomnia Reformulation IPO 2005 $300M by ‘06
Volcano San Diego Cardio device In-house IPO 2007 $900M by ‘08
Vanda Rockville, MD Schizophrenia Novartis IPO 2006 $600M by ‘07

Table 1: Domain exits 2005-2009. Eckard Weber deals marked with a “W”.

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