Chapter 14 - Due Diligence and Angel Incentives

Abstract

Commercial development of biotechnology requires early support from Angel investors. Scientific theses need to be shaped to support investment propositions that are relevant to these investors. Angels make investment decisions in part through a methodical due diligence process that analyzes unmet clinical need, the size of the addressable market, the adoptability of the product in clinical practice and the potential for sustained competitive advantage. Accurate assessment of these due diligence parameters is critical, but so is, frankly, experience-based intuition. Industry pricing strategies focused on extreme pricing, especially for drugs that treat small numbers of patients, have changed the investment equation, and reimbursement and financial implications for clinical practice have assumed overriding importance as determinants of whether a drug can achieve traction in clinical practice. Bexxar and Provenge are examples of drugs that fared poorly because of failed reimbursement strategies, whereas Abraxane has been very successful because it makes financial sense for physicians. Sustained competitive advantage is difficult to predict and cannot be ensured by intellectual property protection.