Sunday, October 11, 2009

A BIG Deal

In 2003, two guys (with whom I used to work) started a company. No big deal. Happens all the time.

At first, the company looked at using some new vaccine delivery technology. Both guys had other jobs. But they wanted to build a company together. They had a start on the WHO, but not really the WHAT yet.

But they were fortunate. One of them lived in a town where the Centers for Disease Control has laboratories. And where the land grant university has a number of scientists working on infectious diseases in the developing world. And a few non-profits that were working on products and services to improve public health in the developing world. And it probably didn't hurt that there were a few good local breweries to support "beer storming" ideas. An idea for a company began to evolve.

And these guys were knowledgeable. They knew about doing research. They knew about drug development. They had worked at top research universities and in the biotech and pharmaceutical industries. They had a lot of respect for what the drug companies did. But they also wondered about what the drug companies didn't do. One thing the drug companies didn't do was develop many drugs or vaccines for the billions of people in the developing world. Their business models didn't work for these markets. Their pipelines were focused on the diseases of the affluent- expensive medicines and treatments for chronic diseases. The developing world was a place for off-patent medicines or the occasional charitable venture, not a place to target R&D efforts.

So these guys thought about how they could build a company that created products for those billions of people. They studied the markets. They spoke with early leaders like One World Health. Could they do research on new vaccines? Instead of expensive treatments, could they develop affordable vaccines that would prevent disease. Could they develop products that would also work for the middle class in these countries? For travelers to these countries?

Well, from those ideas, they started building a company. Global from the start. To develop vaccines to fight infectious diseases. Top quality research, top quality manufacturing. Partnerships with clinics around the world. Picking diseases, such as dengue fever, which did not receive much attention from other companies, but had huge impacts on public health. A big idea, maybe. But still not a big deal.

At first, they got told they were well intentioned, but crazy. Why develop products for these less developed markets? Why develop vaccines, which don't have a continued revenue stream? Why move manufacturing outside Western countries? But they kept plugging away. And they began to win a few awards (Colorado's most promising biotech Business Plan in 2005). They raised some start up capital from friends (including me). They were awarded some grant funding from the NIH. With each step, they looked a bit less crazy. They added a few more smart, well-intentioned people to the team. A good idea, good people. But still not a big deal.

They knew that bringing a vaccine to market takes tens of millions of dollars. That was going to require venture capital, and venture capital requires competitive returns. In 2006, the company decided it was time to start raising money to start building the company. They pitched and pitched, making the case that these markets and diseases were attractive and that the company could profit from preventing these diseases. To put it diplomatically, they got a polite reception, but not an enthusiastic one. Professional investors asked some of the same tough questions about the markets and vaccine based business models.

Over time, the company stayed afloat, and the perceptions of this company, the attractiveness of its target markets and its business model, began to change. At several points, the situation looked dicey. But these guys, and their employees and partners, persevered. In 2008, they found a lead investor. Got a term sheet. But then the global financial crisis made it tough to fill out the group of investors. They survived and kept working. Which was a good thing, but not a big deal.

Finally, last week, more than three years after they started working on Series A and after over a hundred investor presentations, these guys, and their company Inviragen, closed the round. $15 million dollars. Enough to take the company through the early clinical trials of several vaccines. You can read more about the company at their website. And more about the Series A investment, and merger with Singapore based Singvax, in their press release.

So, why do I think this is a big deal? It's not because of the money (although that is certainly helpful). It is because of whose money it is. Sometimes you hear an entrepreneur say "all money's green; who cares who the investor is." Well, those entrepreneurs are wrong. It matters who your investors are. And Inviragen's investors are top notch biotech VC's. Experienced. Main stream. Connected to a network of people who know how to bring products to market. They found Inviragen to be a compelling investment.

This is one of the first of what I hope to be many deals where mainstream investors see the benefits of starting high tech ventures that serve global markets, including the poor. And I hope that it shows that the drive for attacking global public health challenges can be very profitable for investors. That the value they create can attract top private capital firms. In fact, I hope it shows that the financial returns required of this venture will drive the successful commercialization of several vaccines, saving thousands and thousands of lives. And yes, I think that is a BIG deal.

Congratulations to Dan Stinchcomb, Jorge Osario and the rest of the Inviragen team, and best of luck in continuing your worthy work.
Note: I am not an unbiased source. I have known Dan and Jorge for years, and was an early investor in their company. I also served as a director of the company until recently.

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