The majority of companies selected to present at this year’s Mid-Atlantic Bio conference were startup firms focused on therapeutic drug development. The selections, which were made by a committee drawn from venture capital firms, reflect a trend toward funding drugs, not devices.
“Products seems to be more important than platforms these days,” said Todd Brady, a principal with the Princeton, N.J.-based venture firm Domain Associates. “Drug therapeutics are becoming more important than medical devices.”
About $145 million was invested in the Washington-area biotech sector in the second quarter of 2006, according to data from PricewaterhouseCoopers, with the majority of that going toward drug development start ups.
Brady, who was part of a panel discussion Tuesday at the conference, said his firm is currently focusing on drug development companies because it often a better bet for profitability.
For example, big-name pharmaceutical companies often acquire start-up firms with drugs in development with the idea of commercializing those drugs. A venture firm can invest in these early-stage drug companies with some confidence the startup will eventually be acquired by a larger pharmaceutical and the venture firm can make a profitable exit.
However, medical device firms don’t usually get acquired until the product has made it to the marketplace, meaning investors must wait longer for their returns.
“There have been a spate of exits with pre-clinical companies before the drugs have even been tested on humans,” Brady said. Venture firms “can put in [some] money and get out … Medical devices have to prove success through revenue.”
