February 18 2020
Future of technology in life sciences
Cédric Bisson, M.D., J.D., is a partner at Teralys Capital, Canada’s largest innovation-focused investor, financing private venture capital funds in information technologies, life sciences and clean or industrial innovations, from early stage start-ups to expansion, growth and technology buy-outs. Dr. Bisson has extensive experience across Canada, Europe and the USA, creating, building and advising businesses in biopharmaceuticals, healthcare and the innovation sector in general. He is passionate about growing Canada as a premier environment for innovation. During his career, he has structured and executed over $3 billion in transactions in funds and companies. He shared with us his knowledge about the future trends in technology in the life sciences sector.
Opening Remarks and Housekeeping Sina Pousht-Mashhad, PMCQ Director
- Thank you to Small Dog Communications for doing the creative for this event and Otsuka for their sponsorship of the event.
- Our next meeting is on March 24, 2020 and will feature a presentation by Barry Pokroy, a clinical psychologist who will be speaking to us about the psychology of the workplace. Don’t miss it!
- Save the date! Our summer social event will be on June 11, 2020 and will take place at the Forest & Stream Club. Please reach out to one of the PMCQ Board Members if you are interested in sponsoring this event.
Introduction of speaker Sina Pousht-Mashhad, PMCQ Director
This meeting featured a talk by our keynote speaker:
Introduction to venture capitalism Cédric Bisson
- According to Dr. Bisson, there are elements of truth to the Netflix show Silicon Valley.
- How venture capitalism works:
- Money is raised for a fund (which can vary from $10 million to billions of dollars).
- Those dollars are invested into companies by buying shares of the companies.
- The goal is for those shares to increase in value over time, so that after a certain period of time, those shares can be sold to make a financial return.
- After selling the shares, the initial investment is paid back to investors, in addition to a share of the profits; the fund managers also earn a share of the profits (10–25%).
- The key is to identify promising companies early on and help them to grow and navigate through their challenges.
- Two core sectors that receive substantial investment are IT and life sciences, although there are other sectors.
- In the USA, approximately $80–90 billion are invested per year. (The actual number is closer to $140 billion, but it depends how companies are categorized.)
- Canada invests approximately $4 billion per year; Canada should be investing 1/10th of what the USA invests, but that’s currently not the case, although Canada still ranks fairly high compared to other countries.
- Ranking of countries by amount invested (excluding China):
- China is a big source of venture dollars but it is considered separate.
- Investing at the “seed stage” means investing before there is really a product (e.g. investing in a biotech company that doesn’t have a lead molecule yet). Companies at this stage don’t have any customers or revenue, but usually get about $2–3 million in investments.
- It is also possible to invest at the later stages, but the key to the business of venture capitalism is identifying a promising company before others see and understand its potential. It’s a risky business, but investing early can lead to big returns.
- In the life sciences, companies compete internationally, so it’s important to be aware of what other companies are doing internationally and whether there are companies that are competing against the company in which you wish to invest.
The future of technology in life sciences
- In recent years, the amount of technology and innovation developed has significantly increased; as a result, the amount of dollars invested has grown.
- There is currently $35 billion invested in the life sciences. This figure includes partnership deals with Pharma, so it’s not all completely venture capitalism.
- The traditional sector for venture capitalism has been the biotech sector (i.e. the development of new drugs) and the last few years have shown a tremendous push in oncology and orphan diseases.
- The fastest growing sector, though, is actually not biotech; it’s the health technologies sector.
- Health technologies sector:
- This sector started from nothing and it’s now the second- or third-largest sector.
- It’s broad and includes anything that improves care of patients or improves efficiency in the healthcare system.
- Almost $9 billion dollars are invested (excluding investments in China).
- There are subsectors to the health technologies sector:
- Provider operations (e.g. software to improve the running of operations, such as sending reminders to patients about appointments)
- Alternative care (i.e. new models of care delivery, such as mobile apps that provide care)
- Wellness and education (e.g. fit bits, natural products, educational tools and navigators)
- Healthcare navigation (e.g. Zocdoc, which is a tool that allows users to rate and find doctors)
- Clinical trial enablement (i.e. functions related to the core business of Pharma)
- Examples of Canadian companies in the health technologies sector:
- Innovations in the health technologies sector have brought about the rise of patient empowerment. The majority of investors come from the IT sector. These investors have invested quite heavily, even though they have limited understanding of the regulatory challenges. Why? They look at the problem of healthcare as a problem to solve from the outside in. This has led to a wave of change that has been generally positive.
- “Unicorns” are businesses worth over $1 billion. This is their value on paper — the estimated value does not necessarily equal the value of the company when it is time to sell or list its IPO (initial public offering).
- Examples of unicorns:
- Companies in Asia and China are receiving significant investments but they are being over-valued, which is causing a “bubble[JG1] ”.
- Types of companies/innovations related to the Pharma industry:
- Operations (e.g. clinical trial management and recruitment, clinical data analysis, predictive certification of patients)
- Software (i.e. software that can replace drugs and are regulated by the FDA and may be prescribed and reimbursed)
- Drug discovery (e.g. using AI to discover drugs or validate in silico leads)
- Patient experience (i.e. how patients interact with providers and Pharma companies and patient associations — wearables are less hot right now).
- Provision of healthcare services (e.g. new models of clinics, and ranking and selection of doctors).
- Some of these innovations are either not legal in Canada because of our healthcare system, or are irrelevant because physicians in Canada are not competing for patients. As a result, a lot of the innovations are happening in systems where profit plays an important role (which is not the case in central-payer systems). Thus, Canadian companies have focused on the provision of services to Pharma companies.
Question: Where is integrated EMR in terms of priorities?
In Canada, we are behind on digitization of records, but we are advancing every day. In the USA, because of HIPAA, digitization went much faster. There are fewer investments and start-ups in this area, as the current landscape is more about competition between already established companies.
Value drivers for investment
- According to Dr. Bisson, there are 4 drivers that push investors to invest:
- Operational effectiveness (i.e. generating more with less or increasing profit margins)
- Care delivery (i.e. delivering care more efficiently)
- In Canada, we suffer because there is no system of cost efficiency. There is incentive for hospitals to be inefficient in order to keep their budgets. Similarly, some new medications are denied by public payers because only the cost of the drug is analysed, instead of the cost of the system or the patient.
- This driver also includes operational excellency for suppliers (i.e. CROs delivering on time and with quality).
- This driver also includes the perception of high healthcare costs. There is public pressure on drug pricing resulting in outcomes-based reimbursement models (i.e. pricing linked to efficacy). Healthcare providers themselves are seeing changes in the way they are reimbursed (e.g. complications eating their margins).
- Regulatory drivers (i.e. access to data and privacy laws)
- In Canada, access to data is inferior, limiting our access to innovations such as software that could treat depression and anxiety, which was recently approved by the FDA.
- Consumers, who no longer want to be passively involved in their treatment.
- This driver is about solutions that empower consumers and requires novel patient management strategies.
- Examples of companies showcasing these four drivers:
From a commercial lens, which of these ideas will most likely come to fruition the fastest?
Operational efficiency in all systems (Pharma and healthcare). The second is helping to crack the drug development paradigm and better certification of patients. I’m pretty keen on digital therapeutics because this could track patients but also revive older drugs. For example, generics would not be generic anymore if they were combined with other technologies, either new or old. There is a massive need for this in many conditions, including hypertension, diabetes, etc.
In Canada, the infrastructure to capture outcomes for outcomes-based models is not in place because of the perceived bias that Pharma would have on the assessment of outcomes. Do you have examples from other countries of successful outcomes-based models and how can we learn from these examples in Canada?
Spark Therapeutics is probably the most advanced example. It was bought by Novartis. This type of model could work in smaller patient populations that function in silos (such as orphan diseases and gene therapies). No one has really optimized the model yet. When the fate of a company depends on government intervention, we as investors hesitate to go in. But if we don’t crack it, how will we ever help people with more general diseases?
Given looming changes in PMPRB, how are venture capitalists treating the situation with respect to investing in health sciences or local Montreal biotech?
We have obviously been tracking the PMPRB changes and we honestly think it was a mistake. VC investors are on the boards of various agencies that fight unilateral changes that were done like that. For venture dollars, the short-term impact is that it has been muted because its all very recent. But biotech companies develop drugs for the global markets; not just the Canadian market. Because the costs are too high, no one will develop drugs for the Canadian market; they’ll do it globally. So, short term it has had no impact. My worry is that in the longer term, it will have an impact because those companies may not be able to commercialize in Canada, so there will be no reason to keep a presence in Canada. There will be a drain of talent in Canada. I’m also worried about access to the healthcare system for companies that have shorter cycles, such as medical device companies. Even Canadian innovations almost always commercialize in the USA before Canada. It is a definite problem.
Are there any Canadian companies you recommend we explore?
I’m not going to answer that! I won’t give any stock tips, but the general thing we say is, the earlier you get involved, the bigger the pie slice you should get. When investing, you’re already taking big risks, so might as well go for something riskier. In Canada, in the past, we were too shy, but our boldness has increased. Right now, venture capitalism is looking at orphan diseases, immunology, and oncology. But we are also open to exploring other things, such as vaccines.
What is the best source of information to read about technology in our industry?
There are multiple sources, such as electronic newsletters, like FierceBiotech. We like Endpoints News and BioCentury. For healthcare technologies and IT, it is a bit more complicated, because those are more in the realm of IT. We use sources like PitchBook. It is also useful to attend conferences and be open minded.
Should Pharma invest internally to develop new technologies, or should we focus on collaborating with start-ups? Which capabilities will help provide the greatest ROI?
I think they should probably do a bit of both. Arguments have been made that biotech companies are more efficient than Pharma. But you still need to have some capabilities to analyse what comes out of biotech. You need to have labs and people doing clinical trials. Venture people are not good at CMC. My humble opinion is that when you need to acquire outside capabilities, it is easier and cheaper to invest outside of your silo.
We have been hearing about nanobots for some time. In reality, how far are we from that?
About 10 years ago, there was a nanotechnology craze. That hasn’t really panned out to be honest. We invest more in biologics that are designed to target the right tissues, as opposed to nanobots doing that. The whole field of drug delivery has been challenged in the past few years in terms of returns because investors in the markets value a lot more a new molecule with targeted biological efficacy rather than something delivering something which is already known.
Freelance Medical Writer