Abby Roberts, Director of Merrill Insight™ | June 28, 2018
Our Merrill Insight™ Video | Healthcare M&A audience left us with lots of unanswered questions, including several in the biotech space. Dr. Bill Williams, CEO of Phase I cancer immunotherapy drug company BriaCell Therapeutics, gave us his thoughts.
Q: What is the one area you see as a big healthcare need, or problem, that people with money can fund?
A: There are many, but I think the hottest right now is cancer and especially immunotherapy. The promise of immunotherapy is being realized and we know that the patients, as well as companies who have already entered into this sector, are reaping tremendous benefits. For many years, it has been known that cancer is able to evade immune surveillance. Only recently have the key mechanisms leading to this evasion become known. This has led to several breakthrough therapies, such as Merck’s Keytruda® and Bristol-Myers Squibb Opdivo®, which both target the same pathway. As we grow in our understanding of the mechanisms by which cancer escapes immune surveillance, this will lead to new and better cancer treatments that target additional mechanisms. As cancer is a major health problem, our society is willing to devote significant resources to the development of novel treatments. People with money see this as an opportunity for significant returns on their investments.
Q: A recent Cambridge Associates (PE Benchmark) study shows Biopharma VC outperforming ALL VC Sectors by c.5% (on realised investments) achieving an IRR of 26.8% vs. 21.8% from 2006-2016. What are your thoughts on this?
A: The recent excellent performance of Biopharma VC stems from several factors. One is the rapid advance of knowledge in the pathogenesis of multiple diseases. This has led to insights into novel approaches to develop effective and safe therapies, in many cases for diseases that lack any effective treatment currently. This has created tremendous value for Biopharma VC investors. Another factor is the maturation of this sector. When biotechnology was in its infancy, many start-ups were founded from academic centers with exciting new science. However, there was a lack of expertise in drug development and many of these start-ups ultimately failed, leading to a downturn in the sector. The VCs have caught on to this and other factors predictive of success. They now screen their potential companies to make sure they have the expertise to take novel therapies through the development process. They also tend to invest in later stage assets; those that are in the clinic or at least close to entering the clinic. This further enhances the probability of success and has led to significant returns for multiple Biopharma VCs as they have seen big pharma license many of these drugs and bring them to market.
Q: What contributed to those Biopharma VC returns?
A: The major factor here has been the ability of these VCs to pick winners. They have invested heavily in clinical stage companies that have good management and know how to navigate the drug development process. This has led to many lucrative deals with large pharma companies who are looking to fuel their pipelines. The return for the VCs has come both with the licensing of assets to large pharma companies, the outright buying of the small biotech companies by larger companies, and the ability of small biotechs to grow up and take their drugs to market.