CHICAGO – As innovation in the retina space has grown over the past quarter century, so has the need for capital to finance those activities. One way innovators are meeting that need is by entering into partnerships with ex-US entities, one of many issues explored by a panel session on financing retina innovation at OIS@ASRS 2019.
“Financing has matured, much like many of our companies have matured, and the whole strategy has become extremely interesting,” said panel moderator Pravin Dugel, MD, managing partner at Retinal Consultants of Arizona. He noted an emerging trend of companies entering into partnerships with entities outside the US, particularly in China and Japan, along with some in Korea. The companies exchange licensing for products in those countries but keep licensing in the US and European Union, and gain access to capital.
Panelists parsed the pros and cons of ex-US strategies to obtain financing.
Due Diligence a Must
Ron Weiss, MD, managing partner at InFocus Capital Partners and founder and owner of Chicago Eye Consultants, concurred that he’s seen this trend. “For the most part, we’ve been OK with it because it does provide non-diluted funding for the company,” he said. “You want to be sure that you partner with an entity that has the financial capacity, the expertise, and the resources to drive your program forward for that particular company.” The potential downside he pointed out is that neither side may be able to meet expectations. “From the company standpoint they have to do their due diligence with whom they’re partnering,“ he said.
Protection of intellectual property is one area where such a partnership may be a concern, said Firas M. Rahhal, MD, partner at ExSight Ventures and partner and executive at Retina-Vitreous Associates Medical Group, Los Angeles. He said questions of jurisdiction, conflict resolution, and arbitration processes should be spelled out carefully beforehand.
Ash Khanna, PhD, venture partner at Pivotal bioVenture Partners, noted his firm has a sister fund in China. “The key thing for us is to be sure the team that we license the asset to is credible,” he said. “The other thing we are very mindful of is that strategics are paying more and more attention to the Chinese market.”
Access to Large Patient Population
Michael Keyoung, MD, PhD, managing director and head, North America, at CBC Group (formerly C-Bridge Capital), sees multiple benefits for a clinical-stage company to partner outside the US. Part of that is the large untapped patient population outside the US that could lead to faster recruitment for trials, and create new validation in terms of the data point that could accelerate development.
Dr. Keyoung also pointed out that US venture capital firms focus on trials within the US, so having a strategy including an ex-US partner creates non-diluted partnership capital for the company. The biggest con of working with an ex-US partner, said Dr. Keyoung, is educating key people so they’re comfortable working in the new environment.
It Comes Down to Economics
Companies of any size will probably need to consider partnering, because raising a large amount of money otherwise is difficult, said OIS@ASRS co-chair Emmett T. Cunningham Jr., MD, PhD, MPH, senior managing director at Blackstone Life Sciences. The decision depends more on the internal team than on the company itself, he added. For most multinational corporations, the teams are generally competent; they look for the best economics. Other factors come into play, Dr. Cunningham said, but economics are the primary driver.
“When you start talking about partnering in Europe or partnering in Asia, it’s very different because many of these companies are smaller or less established, or completely unknown in the case of China,” Dr. Cunningham explained. “You have to get comfortable; you have to get to know them, you have to meet them, and even then we really don’t know the Chinese pathway.” Despite that, he added, “I personally think Asia is a tremendous market to look at, especially China.”
Dr. Dugel said he thinks China will play an enormous role in financing US innovation going forward. He added, “It’s amazing to see that in the last two and a half decades we’ve gone from lasering the fovea and having no funding, and just applying for National Institutes of Health grants, to having a whole strategy of funding just for retina.”