TOUCHED BY AN ANGEL
One source of capital of increasing importance to early-stage life-sciences companies is angel capital. Jeffrey Sohl, director
at the University of New Hampshire's (UNH) Center for Venture Research, notes that since 2007, the venture universe has seen
an enormous "culling of the forest" as the number of active venture capitalists has shrunk to approximately 400 from 1200.
That, along with the hesitance of the remaining firms to invest in early-stage life-sciences companies, has left a substantial
funding gap that is being addressed by syndicates of angel investors. Angel investment in healthcare, biotechnology, and medical
devices and equipment startups accounted for 36% of total angel investments in the first half of 2012, according to UNH Center
for Venture Research.
Avaxia Biologics secured $6.4 billion from an angel syndicate in a series B financing in December 2012 to fund a first-in-human
trial of its oral anti-TNF antibody, AVX-470, to treat ulcerative colitis for which it had just received FDA clearance. The
drug is designed to act in the gastrointestinal tract to suppress inflammation and treat inflammatory bowel disease, which
includes ulcerative colitis and Crohn's disease. Current anti-TNF antibodies work well but they are injected and suppress
the entire immune system, which can lead to serious side effects. Avaxia's funding round was led by existing investor Cherrystone
Angels and new investor Golden Seeds, with participation by nine other angel groups, many of whom are new investors attracted
by the potential of its platform and its ability to localize treatment.
Angel investors in the US have organizations such as the Angel Capital Association that support their activities. Now, the
idea has caught hold in the United Kingdom. Angels for Life Sciences launched in October 2012 as the first national angel
network focused on helping raise money for early-stage life-sciences companies.
THE GEOGRAPHY OF VALUE
Another way that companies are accessing capital is by turning to opportunities to secure funding in countries that are trying
to build their life-sciences sectors. Life-sciences companies, such as CompanDX, are finding that the value of their technology
can vary by geography, and what may have marginal value in a developed market where healthcare providers have many competing
choices, may have much greater value in emerging markets with unmet needs that are hungry for new technologies.
In July 2012, CompanDX, a UK diagnostics startup, raised $6.1 million (39.6 million RMB) from the Chinese government and private
investors to develop and commercialize its products in China. The investment is nondilutive. Instead of taking an equity stake
in the startup, investors will be eligible for a percentage of any revenue from commercialized products sold in China. CompanDX
applies proprietary bioinformatics technology to advance personalized medicine. The company said that the Chinese investment
would speed up its product development because of the regulatory climate in China and the willingness of major regional science
parks there to provide funding for accelerated development for products relevant to the Chinese marketplace.