43. Why Angels Don’t Do Drugs | Life Sciences Investing (Sergio Gurrieri)

The Full Ratchet Podcast on iTunesNick Moran Angel List

Sergio Gurrieri of Tech Coast Angels joins Nick to cover Why Angels Don’t do Drugs | Life Sciences Investing. We will address questions including:

  • Can you first talk about the sector at large and the sub components of investment opportunities within the life sciences category?
  • Who are the traditional players that invest in this area?
  • At a high-level can you talk about why the venture investing model is so different for businesses of this type than, for instance, a B2C app company?
  • We’ve recently discussed SaaS on the program and some of the key metrics and milestones that are important through the early-growth, growth and scale phases. What are some of the key data points, metrics and/or milestones that are critical to monitor for life sciences companies?
  • What are some of the ways that life sciences startups can reduce risk at the early-stages in an area that is often considered incredibly risky and capital-intensive?
  • Where do you see the most significant growth opportunities in the life sciences sector over the next 10 years and what advice do you have for early-stage investors that are interested in the sector?

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Key Takeaways:


 1- The Three Categories within Life Sciences


1. Drug Discovery & Drug Development: Highest risk and highest reward
2. Molecular and Clinical Diagnostics: Medium Risk
3. Medical Devices: Lower risk relative to the others
2- Why Life Sciences is so Risky
  • Very capital intensive…Starting from scratch it takes about $1.2B to take a drug all the way to market
  • Very long to get to an exit… Sergio mentioned that if a company can move very quickly it still will take 10-12 years to get a drug to market
  • Significant clinical testing hurdles… Recall that Sergio talked about how testing results of drugs on other species rarely transfers to humans and
  • Regulatory Approval… So even if a drug gets through clinical trials, there is still a challenging path to get all the third party testing and data in order to get the approvals required

And the two critical milestones that the investor is looking for in this category are:

  • Regulatory Approval
  • Clinical validation, which is essentially proof-of-concept: Does this drug or device work in humans?


3- Ways Sergio Reduces Risk & Uncertainty in Life Sciences

  • Investing later: If the startup can get through some of those critical clinical or regulatory hurdles prior to investment, it reduces the risk profile significantly
  • Avoids new drugs: Instead of looking a totally unknown formulations, he can look at new formulations of existing compounds or treatments.
  • New delivery mechanisms: Sergio had cited that an existing method of delivery may be intravenous and, for example, he looks for oral applications, or inhalation that delivers the drug through the respiratory system.
  • Re-purposed drugs: These may be in other geographies or may be used to treat other disorders, but have found to be useful in new areas.
  • Orphan Drugs:  Disorders that may affect populations less than 200,000. While the market size may be lower, this reduces risk in the development process because the FDA gives market exclusivity for seven years in the U.S. and faster processing.

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