February 2022 issue, BioElectRx Business Report
February 28, 2022 | The 2022 BIO CEO & Investor Conference, held earlier this month in New York City and via remote video conference, featured several sessions of interested to entrepreneurs and emerging firms in the healthcare industry. One particularly noteworthy panel was devoted to the role that incubators can play in the commercialization process.
The session was moderated by Chris Garabedian, the CEO of Xontogeny, a life sciences accelerator in Boston, MA. Panelists included Julie Gilmore, the COO for business development at Eli Lilly & Company, Sally Allain, a regional head of J&J’s JLABS in Washington, DC, Vivian Doelling, vice president of investments at the North Carolina Biotechnology Center, Glennis Mehra, director of BioLabs in New York City, and Christopher Jeffers, managing director of Hibiscus Bioventures in Rockville, MD.
We offer highlights from the session here.
Chris Garabedian: How do you prioritize the research projects that will get the most attention and be supported with a seed investment?
Glennis Mehra: BioLabs at NYU Langone is unique in that though we do have a university affiliation, a majority of our applicants are coming from a wider pool than the New York ecosystem. So the small cohort that is coming from NYU is one that’s evaluated like everyone else. We evaluate first on the scientific foundation, but we also look at specific team executional plans and clear milestones. The idea behind our incubator fundamentally is the economic impact and the ecosystem impact so we look for companies that will likely have a significant impact on the field of therapeutics that they’re targeting. We have a selection committee that’s composed of representatives from NYU and the New York City Economic Development Council, so the job opportunities that each of these companies can create for New York becomes a paramount consideration.
Vivian Doelling: We’ve invested about $49 million in 250 companies to date and we have a somewhat long process where we meet with all the companies and we go through a pre-app and application process. We look at team, technology, IP, market,and competition. We have about 80 applicants a year and we find about 20 to 25 of those so it’s a pretty deep dive in due diligence into those individual companies.
Chris Garabedian: We know that many of these early stage programs ultimately don’t get the support or the funding and we have all heard the objection, “You’re too early. What are the reasons that you hear the most for why something is not ready to be supported, whether it’s through a seed investment or collaboration?
Vivian Doelling: Our history in North Carolina has been interesting, especially the last five years. There’s more and more spinouts coming, there’s more and more companies coming to do biomanufacturing or CRO development. We’re seeing companies being funded earlier. Those that aren’t getting funding usually have a critical issue missing, whether it be a team or their ability to present the story, or even the technology is not of interest to investors. There’s usually a weakness there that we try as mentors to work with the company to fix so that they’re more appealing to those investors.
Glennis Mehra: One of the things that’s interesting about our communities is that we require seed funding in order to be able to even apply and be presented in front of the selection committee. So we have confidence that investors believe in the proposition that the teams are putting together. But when we see people applying early and they haven’t received their funding it usually comes down to lack of executional plan whether it be the team dynamics and the roles of team members not clearly mapped out or the milestones aren’t very well defined.
Chris Garabedian: Chris, your organization casts a much wider net. How do you decide which programs are going to get support from Hibiscus Bioventures given that you can find opportunities anywhere ?
Chris Jeffers: It really depends on what sort of support the company needs. If it’s just capital and we’re just making an investment then obviously the standards are as high as they are for any other venture investment. We of expect things to be at the level by Vivian and Glennis just described. There’s often a piece missing but if not it’s probably ready for capital. So that’s the easy part. The beauty of alternative models like what we’ve built with our studio–we have a hub and spoke management team—is that we can bring in assets that maybe do have something missing. Maybe they don’t have the right people, maybe their reimbursement is not quite worked. We can actually incubate them for a period of time—as much as a couple of years—to provide capital and get them to a point where they’re sort of ready for a Series A. So in those cases we can be a little more permissive. But we are going to be looking for those companies where we can very clearly identify where the missing piece is and understand a path to get from here to there. If we think that we can get from here to there, that’s an ideal that’s an ideal company for us.
Chris Garabedian: If you are looking at a program where you know eventually you’re going to need to get another investor interested, are you doing any prospecting ahead of time?
Chris Jeffers: It really depends on how it comes in. We have some academic collaborations where we have capital sources at places like Mayo Clinic where we already have other investors involved. We all look at things and agree that yes, if these things were different or these data look in a certain way that we would be ready to invest. For things that are just a studio play or something we take out of pharma, we will always, as part of our diligence process, reach out not only to other investors but acquiring parties. We’ll talk to pharma, we’ll talk with potential acquirers and say “If we were to generate X or Y, would you invest, would you potentially be willing to transact on this company?”
Chris Garabedian: In recent years, larger pharma organizations have increasingly become more involved in early-stage programs, external innovation, and collaborations. J&J has established quite a wide network. They’re very well known with their JLabs at various locations. Sally can you describe exactly how J&J works with early stage founders and startups and how to best engage with J&J?
Sally Allain: We work Johnson & Johnson Innovation as a whole with multiple tools in our toolbox. We’re clearly interested in partnering. We know innovation can’t just be done within J&J—we have to partner in the external space with science and technology that’s transformational. JLabs is our incubation model. We are now 10 years old we have 13 locations around the world. We want to incubate companies that are at that early stage. There’s no strings attached—we don’t take equity and we don’t take IP. There is a selection process; we’re looking for companies that are either strategically aligned to our areas of interest or companies that we think are going to be incredibly disruptive and transformational. Having that strategic alignment enables us to bring our expertise to support and mentor the company—this is a big part of our incubation model. We also want to provide big company benefits to entrepreneurs and early stage companies. We provide a turnkey facility for companies to walk into, so that they can use their capital to drive their research. They don’t have to worry about getting access to that specialized expensive equipment. We work very closely with our colleagues at innovation centers that drive our research collaborations and deals with companies. Our JJDC colleagues within Johnson & Johnson innovation—those that are doing equity investments—are another tool in our toolbox.
Chris Garabedian: So JLabs space is open and available for any startups. Is that correct?
Sally Allain: We want to see the strengths of the company–their science and technology, where they are on their funding path. We have a broad spectrum of companies that incubate with us. They could still be at the early non dilutive funding stage or all the way through Series A. We have companies incubating with us that are in the clinic. We also want to make sure that our colleagues within our pharmaceutical division and within our medical device sector really know about their science and technology so that they can also mentor this company while they’re incubating with us.
Chris Garabedian: You have so many regional representatives and so many Jlabs. How do you determine how much emphasis each region might get?
Sally Allain: We work in a regional team and I think there’s strength to that. While we’re broad and we have a global footprint, our regional teams stay very close. We want to accelerate great science and technology; we want to bring solutions to patients faster.
Chris Garabedian: Julie, Lilly in the last several years been very active with deals and collaborations and it sounds like what your leading is even more of an extension of that. How would you describe Lilly’s effort in this area?
Julie Gilmore: We do have a long history of collaborating, investing, and partnering with biotech companies but we did not move into this incubator/accelerator space until the last two years. We initiated our footprint in the Bay Area and South San Francisco. We have one site there currently and a second opening next month. Our current model is relatively small and people like Sally at JLabs and their collaborators have been great partners. We are almost more of a graduation space. By the time you come to Lilly you’re getting your own lab—it isn’t shared space. It’s a similar model in that there’s an evaluation process. We have an executive board at Lilly that evaluates companies and engages these companies once they’re here. We look at every opportunity to support, whether that’s through direct investments, working with some of our venture fund partners or an LP.
Chris Garabedian: How much weight do you place on ventures in Lilly’s existing areas of interest? Are you willing to go into other areas?
Julie Gilmore: We’re pretty agnostic. We definitely have companies that are aligned with our existing therapeutic areas but we’re also really excited to see amazing innovation that’s popping up that’s outside of anything that Lilly is currently doing.
Chris Garabedian: What’s your involvement in terms of helping companies secure financing for the next round
Julie Gilmore: We develop a relationship with these companies at our site. We evaluate every opportunity whether we choose to go in directly on that fundraising or whether we’re introducing them to some of our venture fund partners. We’ll do whatever we can to help ensure they have a successful round.
Chris Garabedian: Glennis, what role do you play or how do you get involved in helping them secure that next financing?
Glennis Mehra: Our model is actually focused on the idea that when companies apply they have a group of investors that will likely participate in successive rounds. What we try to do is make sure that their milestones to get that additional funding are met in as efficient manner as possible. We focus on technical operations—making sure that whatever proof of concept or development work that they’re doing is being executed as efficiently as possible. We bring we bring in collaborators from NYU and other academic institutions and we also bring in advice from the VC community. We are planning to have a VC summit this year.
Chris Garabedian: Vivian, how wide of a swath do you have for other venture funds outside of North Carolina?
Vivian Doelling: Our investments are very early. We represent these companies in North Carolina by attending major conferences and meeting with investors. We also set up two years ago a whole system in Salesforce so we could track what we’re doing, who we’re representing. We have a much more active role than we’ve had in the past and with that we’ve got more investor interest in our companies. We also do spend a fair amount of time getting them ready for these meetings.
Chris Garabedian: I’d like to close out this session by asking what are the key factors of success that entrepreneurs should be focusing on to secure an investment?
Chris Jeffers: I would say reach out for help early. I know many of you here are leaders in your field scientifically, but reach out to people who do development. It’s a different world dealing with the venture community and understanding what’s needed from a commercial perspective is a different universe. We formed these organizations specifically to provide this guidance. It’s so much easier to take an idea and build it correctly than to fix a company after it’s started.
Vivian Doelling: The best piece of advice I can offer is knowing your IP strategy, making sure that you have sound advice and that you have the expertise behind your decision making process.
Glennis Mehra: I would just add ensuring that you’re derisking to get to regulatory approval. Make sure you have the best chance of success. Unfortunately we see a lot of companies that don’t start to consider that until it’s too late
Sally Allain: It’s important to know what is your resource, what are your research timelines, what are those big milestone points and then what is the funding that you need to get to those milestone points. Tapping into mentoring programs is really valuable.
Julie Gilmore: Think about the long game. As you map out your development plan with the goal of hopefully meeting an unmet medical need, do what you’ve got do. If you have to do another study and it’s going to take another six months, just do it. Invest the way you need to invest so that you are ensuring the best chance of technical success and hitting your end goal.
