Mind The Gap…
We’re late to this party, but a really good interview of David Grainger from Index Ventures was published in July of this year.
We encourage you to read the entire interview.
In the meantime, here are a few items which caught our eye:
Market Backwards Approach – Index Ventures takes a “market backwards” approach to sourcing investments. In other words, they develop hypotheses based on problems which clinicians are trying to solve. Then, Index goes out and seeks technologies which could solve these real-world problems.
Dinosaurs & Mammals – The continued merging of large pharma companies will result in larger aggregated revenues, but lower overall R&D budgets. This means the mammals, i.e., small biotechs, can step into the breach and really drive innovation. Mixed metaphors aside, we think David is absolutely right. Not only that, the most significant rewards will come to those Big Pharma companies who not only cut R&D, but also follow a market backwards approach to scouting for novel assets. Many, but not all large companies have a very well-defined “wish list ” of investment opportunities they are seeking.
Being Ruthless – David talks a lot about people in the interview. A key characteristic is having management teams who are willing to kill a project quickly. As he says, if a team does all the right things, but the asset fails, then it’s not a reflection on any management failure. If anything, this is a sign of a good management team who can be entrusted with assets and development programs. Why? Because they are willing to set egos aside and get to go/no go decisions as quickly and as efficiently as possible, even if it means shutting down a company.
We see this in licensing all the time. Just like there are many biotechs who cannot raise capital, we too see many assets which are never out-licensed due to a lack of commercial appeal. No out-licensing process, no matter how good it is, will magically create Upfront and Milestone payments for an asset which lacks a viable commercial outlook.
Is this a poor reflection on management? No, unless management is unwilling to stop and say “let’s do something else.”