Upbeat on life sciences

Aisling Capital’s Dennis Purcell believes a change in the dynamics of the pharmaceutical industry spells good fortune for life sciences investors. By Ken MacFadyen.

Life sciences has nearly always been a cornerstone of the venture capital market, at least for the past quarter century since the Bayh-Dole Act gave birth to the biotech industry. The promises of cancer cures and AIDS vaccines have yet to materialise, but that doesn’t mean progress hasn’t been made.

Dennis Purcell, senior managing director, Aisling Capital

“The industry is about 25 years old now, and there’s been explosive growth in the understanding of diseases, especially in the post genomic revolution,” says Dennis Purcell, a senior managing director at Aisling Capital (FKA: Perseus-Soros BioPharmaceutical Fund).

The dislocation at the top of the food chain, specifically big pharma, has opened up opportunities for the smaller companies, while reforms in how drugs are approved have also lent support to biotech. Purcell believes venture groups stand to benefit from both dynamics shaping the industry.

The ballooning of the pharmaceutical companies over the years has led to major cost cutting, which has spawned opportunities for the biotechs and smaller pharmaceutical outfits to work with big pharma on drug development. In the past, the giants would close their doors to such an arrangement. However, a calendar full of patent expirations and a desiccating pipeline has given urgency to the search for new drugs, even if that means sharing the spoils. This, Purcell says, has led to a shift in where innovation occurs in the sector, with VCs playing an ever increasing role.

Meanwhile, Purcell portrays the Food and Drug Administration as being pulled by two sides. On one end there’s the backlash that stems from Merck’s Vioxx-recall debacle, which is pushing for more heed in clearing drugs, and on the other is the cry for the agency to move with more haste in releasing treatments, especially for mortal sicknesses. “There’s competing winds, but the approvals continue to go up, particularly for cancer drugs and life threatening diseases,” Purcell says. That too, bodes well for the space.

However, while the life sciences groups may have the wind at their back, there’s still a mountain to climb in front of them – the mountain being that this is a brutal industry.

“Only one in 10 drugs that ever get into the clinic gets improved, so ninety percent of the time you have failure,” Purcell states. “The challenge is how to improve that yield and decrease the time and money it takes to get to market. To date, it takes a very long time and a lot of money, and the success rate is not huge”.

But nobody ever said life sciences were for the weak.