Dare to fail greatly

Closing shop is never easy. When commercialisation firm NetScientific made the decision earlier this month to wind down two of its portfolio companies – digital health company Wanda and cancer diagnostics developer Vortex Biosciences, both based on research at University of California (UC) Los Angeles – the move was doubly painful because an undisclosed party had actually expressed an interest in acquiring the startups. But the cost of keeping the businesses running through due diligence and negotiations was deemed too much considering the offer price, and thus two interesting ventures were doomed to disappear.
It is not the first time this has happened to a commercialisation firm. US-based UK-listed Allied Minds famously cut its losses in 2017 when it took a nearly $147m writedown as part of restructuring efforts that meant a whopping seven spinouts were discontinued.
It is almost certain to happen again. Spinouts – much like regular startups – have no guarantee of success, even with the best research behind them.
But this is not an argument against commercialisation firms, it is an argument for more diverse funding sources.
Investors willing to put cash into an early-stage biotech remain few and far between – a reality also faced by Anne Dobrée and her team at Cambridge Enterprise Seed Funds (see interview) – but without that all important equity funding from the beginning spinouts can fail simply because they become too expensive to run for the majority shareholder.
So it is welcome news that spinout-focused investment firm Osage University Partners (OUP) closed its third fund at $273m this month, exceeding its $250m target. OUP has a knack for finding promising spinouts and helping drive them to incredible heights – one of its recent successes is Precision BioSciences, a spinout of Duke University, that filed to raise $100m in an initial public offering on the Nasdaq Global Market a few weeks ago.
The fund will invest in 40 to 50 spinouts, and while, of course, this will not prevent the ecosystem from experiencing more failures, a great many companies stand to benefit. At the upper end, it would bring OUP’s portfolio to some 140 companies – an impressive number for any firm, but especially for one aimed at university-linked businesses.
It is also welcome news that Harvard University has partnered investment firm Deerfield Management to launch a research and development partnership focused on the development and translation of biomedical and life sciences research.
Lab1636, which has been incorporated as a wholly-owned subsidiary of Deerfield, has $100m to help advance research to a point where it can either be licensed or spun out.
Despite the somewhat confusing decision suddenly to follow a naming scheme adopted by drug discovery company Evotec with its own R&D partnerships, such as the flagship Lab282 formed with University of Oxford, Lab1636 could prove to be a gamechanger for Harvard.
It is arguably already a gamechanger for Deerfield itself, which had until now put “only” $65m into each of the existing such initiatives with Johns Hopkins, Vanderbilt, Northwestern, UC San Diego and University of Carolina at Chapel Hill.
With our quarterly data analysis not due until next month’s issue, we will have to wait to see where the ecosystem currently stands after a record-breaking 2018. But with more than $370m in funding announced in the space of a couple of days, 2019 looks very bright indeed.
And as former US senator and attorney general Robert Kennedy said in his day of affirmation address at University of Cape Town in 1966: “Only those who dare to fail greatly, can ever achieve greatly.”