Biotech Financing Flashcards
What is biotechnology?
The use of biological systems and organisms to develop new products, including pharmaceuticals, diagnostics, bioengineering, and agricultural biotech.
What has driven the evolution of biotech?
Advances in genetics, molecular biology, and bioprocessing.
What are the four key factors for success in biotech?
- Access to Funding – Large capital needed for R&D.
- Exit Strategies – IPOs or acquisitions for investor returns.
- Commercialization – Licensing & partnerships with larger firms.
- Economic Climate – Investor risk appetite varies.
How has the NASDAQ Biotechnology Index performed?
Outperformed the broader market, attracting high investor interest despite long development cycles.
What trends have increased biotech investment?
159 biotech IPOs (2013–2016), providing exit opportunities and boosting R&D investment.
What are the four main stages of biotech development?
- Discovery & Company Formation – IP secured, initial funding.
- Early-Stage R&D – Team building, validation studies.
- Product Development & Clinical Trials – Licensing deals, funding balance.
- Commercialization – Product approval, revenue generation, exit strategies.
What are the main sources of biotech funding?
Pharma & Biotech Firms, Private Foundations, Venture Capital (VC) Firms, Government Grants, Crowdfunding.
What are some major VC firms in biotech?
Flagship Pioneering, Atlas Ventures, J&J Ventures.
Name some notable biotech startups and their funding.
Moderna (Flagship, 2010) – mRNA technology. Nimbus Discovery (Atlas, 2011) – Sold clinical asset for $400M upfront. Rodin Therapeutics (Atlas & J&J, 2013) – Acquired for $100M upfront + $850M in milestones.
How do VCs support biotech startups?
Invest in early-stage biotech, provide strategic guidance, and use systematic or ad hoc investment models.
What are the key revenue sources for biotech firms?
Collaborative R&D, Technology Licensing, Clinical Trial Funding from Pharma.
What are the key steps in biotech fundraising?
- Send executive summary to investors.
- Pitch presentation.
- Share a detailed business plan.
- Due diligence phase (evaluation of financials, science, and company structure).
What are common fundraising challenges?
100+ meetings, lack of investor feedback, investors tracking startups for years before committing.
What is the ‘Valley of Death’ in biotech?
The funding gap between basic research and applied R&D, due to high costs and uncertain outcomes.
What does NPV measure in biotech investments?
Expected cash inflows (product sales, licensing) vs. R&D and operational costs, adjusted for capital costs.
Why is the cost of capital high for biotech firms?
Long development cycles, high risk, and investor return expectations (50-75%).
What are estimated capital costs at different biotech stages?
Preclinical: 17.7%
How do global markets affect biotech investment?
Cold markets = Lower investment, higher financial risk. Hot markets = Easier fundraising, lower risk.
What are key exit strategies for biotech firms?
Mergers & Acquisitions (M&A), Initial Public Offering (IPO), Licensing Deals.
How do biotech investment cycles align with public markets?
VCs invest when markets are weak and exit when markets are strong.
What are the estimated Internal Rates of Return (IRR) for biotech investments?
Unfavorable markets: 7% IRR
What are key paradoxes in biotech investment?
- Investors prioritize short-term returns over long-term research.
- Neglected diseases (e.g., malaria, Alzheimer’s) receive little funding.
- Investment focuses on diseases with high commercial value.
What are the six key takeaways for biotech financing?
- High-risk, high-reward industry.
- IP, partnerships, and funding diversity are key.
- Early-stage biotech faces funding challenges.
- VCs demand high ROI.
- Economic conditions shape investments.
- IPO or acquisition strategies must be planned early.
