Four Questions to Ask Before Investing in Life Sciences

1. Four Questions to Ask Before Investing in Life Sciences Life sciences and technology have converged and the resulting discoveries are redefining medicine as we know it. Artificial intelligence, software, and synthetic biology are transforming everything from R&D through to diagnosis and treatment of a disease. It’s an incredible time to be a life sciences investor. Between my training as a doctor and experience as an early investor in some of the technology trends dominating the life sciences sector today, I field plenty of questions from people who want to begin investing in this space. Mainly current operators of companies or former physicians asking where do I start? What do I need to look for? How do you know if it’s a great investment or just strong science? Here are four key questions that I think about for any investment: 1) What is your subsection? The most critical question to ask yourself is what part of the life sciences sector you want to cover and why. The life sciences sector is vast and for certain areas, you absolutely need a deep scientific and/or medical background. For others, you don’t. When most people hear life sciences, they think about patients being cured from breakthrough medicines. Many great firms choose to focus in on that type of therapeutics investing. So much so, that certain firms focus on early stage while others focus on later stage once a therapeutic has demonstrated safety in clinical trials. There are plenty of other places to make an impact, each requiring a specialized focus. I really like investing in those companies that offer services, tools and software products that enable research and development. Synthetic biology is a great example of a new way to manufacture drugs using yeast. 2) Is the technology proprietary / what is the barrier to entry? Investors can get easily distracted by the wow factor of large and growing markets and assume there must be a way for the service or product to win. Does it solve the problem? Who are the competitors? Does this team have what to takes to deliver? One company that I have backed is a synthetic biology company that designs organisms. They use proprietary software and hardware to automate the process of organism engineering. Basically they can code a yeast cell to manufacture everything from, yep, you guessed it, beer, but also fragrances and flavors, food ingredients, alternatives to fertilizers, and therapeutics. 3) Is the business model as strong as the idea? In the life sciences space, there are a lot of incredible ideas that don’t make good investments. A great idea may solve a problem, but a great investment also has a business model that drives value for investors. I have often passed on companies who either can’t clearly define their

2. business model or have a business model that requires a sale to a customer who has a strained budget e.g., hospitals. 4) Is the team (and Board of Directors) diverse? When you invest in technology, you are also investing in a team’s ability to make solid decisions. How do you know if you’re backing a good team? How do you know if a team can execute on a plan? I have backed the same team multiple times because I know they can deliver. Also, it’s helpful to back a team who are mature enough to know their strengths and weaknesses and who have a plan as the company evolves. Finally, it is absolutely essential to back teams who are diverse. This is a simple test and should be one of the first questions you ask - how diverse are the senior management team and board? The data are clear - diverse teams yield the best returns on investment. Published By Michelle Dipp​, MD PhD Co-Founder and Managing Partner at Biospring Partners I often receive inquiries from investors thinking about the life sciences space and decided to take some time today to share the questions that guide me. #lifesciences #investingtips #technology