Consumerism and Biopharma Investing
Stacey Seltzer, a Partner at Aisling and Wharton MBA alum, discusses her views on investing in biopharma and how the consumerism trend is affecting their business.
Pulse: What do you look for when investing in biopharma?
SS: First, I look at the management team. Having a good management team is essential when investing in any company, especially in life sciences. Sometimes there is a lot of focus on the asset itself and whether it can get through the clinical trial process. But, strong execution on a clinical development plan is critical, and you need strategic skills when negotiating deals or when taking a company public. The company needs to have a good asset but there also needs to be a good management team to bring the asset to the community. I assess a management team over time in terms of their ability to present, think strategically and execute.
It is also important to think about the clinical and regulatory risk. I typically invest in clinical stage assets, so it is important to understand the true clinical and regulatory risks. When I came to the industry, I thought FDA decisions would be black and white, but there are a lot of judgment calls. You need to anticipate the questions they will ask so you can address them.
Pulse: How have you seen biopharma adapt to the increasingly consumer driven environment in healthcare?
SS: This can come through in several ways. One is through marketing and sales. There is a lot of emphasis on marketing to patients through direct to consumer channels beyond the TV ads you see. When a big pharma company is thinking about acquiring a company, they look not only at how the physician would view the drug, but also how the patient would view it. Lifestyle drugs and aesthetic therapies have become very big markets. Many big companies think about this space because there's a big market for self-pay products – e.g, those that are not covered by insurance but that patients think are valuable. Plastic surgery, weight loss, and ophthalmology are big piece of the industry even though they have a big self-pay component.
Consumerism is also very prevalent in rare and orphan diseases. Patients have a louder voice in these areas. Ten years ago, you wouldn't have thought this would be the case, but the trend now is for patients (and caregivers) to advocate for themselves through foundations and patient advocacy groups. They also advocate to the FDA for a streamlined path to approval. Over the past few years, the FDA has listened to patient advocacy groups and worked creatively to get these drugs to market in a more streamlined fashion, but the pendulum could always swing back to require more rigorous trials.
Pulse: How do biopharma companies think about managing the different stakeholders they interact with, such as the patient, physician, and payer?
SS: Market analysis needs to involve multiple stakeholders, including physicians and patient advocacy groups. This is especially true in rare disease. Advocacy groups can move markets. They can help facilitate identifying and enrolling patients in clinical trials faster. As small biotech companies are developing their strategic plans, understanding this is important.
Reimbursement is also important to understand. It is not automatic to get attractive reimbursement rate; now, drugs need to be differentiated and show how they improve life for the patients. Companies now need to do market research to convince investors and potential acquirers that a product will get reimbursed in an attractive way so the commercial potential can be realized.
Pulse: What advice do you have for people looking to get in to venture capital?
SS: Many firms value higher degrees, particularly PhDs and MDs for both early and late stage investments. MBAs are also valued, but having some background in science is important because the job requires scientific and clinical rigor. Another part of the job to is assess the potential assets of the company, and strong business experience helps with that. Spending time in industry helps in the long run because you have a better understanding of the buyer and seller perspective. You have a mindset to think about where the company can ultimately end up and you can relate to the management team to understand their day to day. It’s also helpful to have startup experience or buyside experience to put yourself in the mindset of the buyer.