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August 7, 2012

Further thoughts stemming from Luke’s piece, U.S. Biotech Clusters Are Losing Their Anchor Tenants, and It Hurts.  I’m going to employ some numbers, although probably not a whole lot of math.  Maybe somebody else can pick up on this thread and do that!

It isn’t easy to organically create and grow a biotech anchor tenant.

Taking a classic biotech startup–a Quadrant 1 company–to biotech anchor tenant is tough anywhere.  And more difficult in some places than others.

Just throwing out some concepts and references…

This came from Lilly’s website.  It’s 2004 data, but it says, “[o]nly five in 5,000 compounds that enter preclinical testing make it to human testing.”  So you put together a Quadrant 1 company, get some seed money in, and set out to build your biotech anchor tenant; only 1 out of 1,000 preclinical compounds will make it to clinical trials.  Nifty odds.  Not sure I totally buy those numbers, but they are citable.

And say you do get into the clinic.  According to data from BIO and BioMedTracker, if you are developing a small molecule, you’ve got about a 14% chance of success.

This was going to be my closing zinger summary bit, but fits here:

17h Michael Gilman Michael Kidd-Gilman (yeah, I know, it’s a UK reference, people) @Michael_Gilman
) Drug devt is HARD, dammit. 2) Monday-morning quarterbacking is EASY. 3) Trials fail for many reasons. 4) Nothing ventured, nothing gained
Right, it’s hard.  That doesn’t mean don’t try.
Taking it perhaps a bit afield from the company being “independent, with local executive management;” totally get Luke’s point.  But, if you are a community building a biotech cluster or “ecosystem,” (arrrgghhh! I said it), you may end up “losing” some companies.
When we were putting together the idea for an “incubator” approx. 12 years ago, we did stakeholder interviews with community leaders.  In part to define “success.”  “Success” can be as squishy a term to define as “early stage.”  Six were asked, “If all our graduates left Louisville and the incubator received $30 million from its equity position in them, would it be considered a success or failure?”  Five said a success and one said a failure.  In late 2000, it was more about raising both the community’s and UofL’s profile.
Building a cluster is hard.
So you get your Quadrant 1 company off the ground, you are moving along.
More references…
7 Jul Bruce Booth Bruce Booth@LifeSciVC
@MartinEglitis @daphnezohar With 80/year, avg life of 8+ yrs = >500 VC-backed biotechs steady state: only a fraction w/ real Pharma interest
I’ve posted before about how many opportunities make it to signed deals with pharma; here and hereApproximately 0.6% – 1% of total potential deal opportunities actually become “deals.” 
The circuitous point I think I’m trying to make is; many of us want to grow these Quadrant 1 companies and sell them.  Hopefully in success mode.  That gets technology out there for use.  Then you’ve got some experience under your belt, too.  And, importantly, you’ve made some investors some money (again, hopefully) and therefore they might back you again.  And there’s this “ecosystem” that’s created.
Maybe next go ’round–or the next–a company gets to Quadrant 4.  A larger financing round.  “You can’t expect the broader public to get excited, or support an industry in any way, when the local area only has 100 little bootstrapped companies no one has ever heard of.”  Again, I’m right there with Luke.  
So, you keep pluggin’ away.
Does that make sense?  Great, thought provoking article.

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