City of Paris

“If you build it, will they pay?” So asked George Poste, DVM, PhD, at the 5th Annual Burrill Personalized Medicine Meeting, and the panel of venture capitalists offered good insights. While all agreed about the potential of personalized medicine, they differed in their definition of the field and how they assess the risks and opportunities. Risa Stack of KPCB suggests starting with the key clinical question: What is the physician’s information need for a given therapeutic category? Is that information available through diagnostics? How important is that information to the physician and the patient, and therefore what is its economic value? Brent Ahrens of Canaan Partners agreed that how a diagnostic affects therapy is the key to value creation, but that the acuity of the problem being addressed (e.g., severity, public health impact) is an added consideration. Stack suggested that the cost of therapy is a key part of the equation, in that the more expensive the therapy the more leverage from diagnostic information. Sue Siegel noted that her firm, Mohr Davidow Ventures, takes a broader view of personalized health (vs. personalized medicine) in the investment portfolio. As the panel discussed the importance of IP position, she stressed the importance of execution and considerations of reimbursement and how a diagnostic impacts workflow in the clinical context. Michael Shuster of Fenwick & West also felt that the importance of IP depends on the company.

The discussion about regulatory risk highlighted interesting contrasting views. Stack believes that, across the board, regulatory approval will be tougher, since the FDA appears to be taking a more conservative stand. She also noted that the current rules that apply to single or few genes and specific analytes do not translate easily to multivariate analyses. She echoed Margaret Hamburg’s comments about the need for educating regulators, and mentioned the efforts by the 21st Century Coalition on Medicine to work with policy makers to balance regulation with innovation. Siegel and Shuster, on the other hand, both felt that regulatory risks are there, but not higher than in other areas; Siegel suggested that there are ways to mitigate those risks.

In closing comments, Ahrens suggested that entrepreneurs reach out to the venture community and explore multiple avenues for funding as a key strategy for success. Siegel urged companies to demonstrate their understanding of risks. Stack suggested that sound knowledge of the targeted venture capital firm’s portfolio and strategies is the price of entry. Steve Burrill commented that most entrepreneurs are poorly prepared to discuss valuation in a meaningful way, particularly within the framework of perceived value. He suggested that funding is available—much more so than a year ago—but valuation is at a low today. In fact, in his opening remarks, he suggested that entrepreneurs put the concept of “dilution” out of their minds and focus on securing the needed capital.

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