On July 16, we posted an item, "Greed, Fear and Stem Cells," quoting Ken Haas of Abingworth Management, a venture capital firm specializing in life science biomedical companies.
We received the following response from Haas, who wanted to clarify inaccuracies that he said were in the Wired News article that we quoted. In addition to setting the record straight, he provides insights into the nature of the stem cell industry and investment climate, which he says can hardly be seen as bleak. Here are his remarks:
"While I very much enjoyed browsing your site, the Wired News article referenced in your posting about a talk I gave recently contained numerous inaccuracies that are unfortunately repeated in the California Stem Cell Report piece.
"For starters, I did not speak at the International Society for Stem Cell research annual meeting but rather at a luncheon sponsored by the British Consulate in San Francisco, to which certain annual meeting attendees were invited.
"I was asked to present a realistic view of the current state of venture capital investment in stem cell research and began with an assessment of the general venture capital climate. Among other things: the biotech industry is maturing and investors are beginning to expect the kind of performance that is normally associated with such maturity (e.g., capital efficiency, commercial focus, profitability); Big Pharma, biotech's ultimate customer,is increasingly reluctant to invest in 'pure research'; and venture capital has, in response, moved more toward "later stage" investing.
"In this context, stem cell ventures are 'early'-- the science still has quite a bit to prove, for example, that it can move successfully from in vitro to in vivo, and that reintroduction procedures associated with cell therapies will be safe and effective. There are also significant questions as to what successful business models will look like in this space.
"Nevertheless, I pointed out in my remarks that the principal issue with respect to stem cell investing is timing-- when, not if. On the positive side, there are significant academic initiatives underway in the U.S. (e.g., Stanford), Europe (e.g., Edinburgh) and Asia (e.g., Korea) and major governmental support in places like the U.K. and California (e.g.Proposition 71). As a consequence, venture capital is now closely monitoring stem cell developments and is poised to jump in, though still cautious.
"Specific 'mature' applications (e.g., analogous to bone marrow transplantation) could lead investment activity. Ultimately, the floodgates could well open based on just a few groundbreaking successes, for example, in tissue reengineering, cell therapy, human disease models for testing and target definition, cancer or degenerative diseases, etc.
"The above views on stem cell investment should hardly be seen as "bleak" and are widely held within both the venture and scientific communities. For instance, an article in the July issue of Nature Biotechnology (published after my talk) led with the comment that: 'Biotech companies with business models as diverse as the products they are developing are laboring to move cell-based therapies into the clinic. Without commercial success, however,investors will remain on the sidelines.'"
I concluded my remarks at the luncheon by advising those in the audience who might be seeking to start stem cell ventures to maximize their fundraising chances by coming to us, insofar as possible, with plans that embody mature
science, a credible business model, capital efficiency, commercial focus and a clear regulatory path. In short, stem cell investing, while a bit premature, will surely be an exciting part of our commercial biotech future."
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