Ensuring a Vibrant Medical Innovation Ecosystem

Venture capital’s contribution to the technology and Internet sectors are well understood, with VC partnering with the founders of iconic brands like Facebook, Uber, and Netflix.  What is not as well understood is how venture is tackling the world’s deadliest diseases and afflictions through the patient investment of capital in life science startups.  A prominent example is Genentech, the world’s first biotechnology company, which was founded in 1976 by a venture capitalist and a professor at the University of California, San Francisco.  Today, venture is building on past success to solve our nation’s most pressing health care crises, like lymphoma, multiple myeloma, sickle cell disease, cystic fibrosis, multiple sclerosis, and many others.

Small, venture-backed companies play a critical role in bringing groundbreaking medical innovation to market that diagnoses, treats, or cures previously intractable diseases like cancer and HIV/AIDS.  These fast-growing and hungry new enterprises are responsible for a considerable amount of breakthroughs in life sciences, so much so that drug companies now rely on acquisitions for three-quarters of their drug pipelines rather than develop new products internally.  In many other cases, VC-backed life science startups grow into successful enterprises of their own, with 51 having gone public in 2015.  In fact, life science startups drove two-thirds of all VC-backed IPOs in 2015.

In the last decade, venture capital has deployed over $100 billion to 4,000 life science startups that are working in a variety of areas.  For example, Exelixis is developing treatments for skin, thyroid, and kidney cancer.  CardioMems has developed an implantable device for monitoring heart conditions.  And Inogen has developed a portable oxygen concentrator to provide freedom of movement for oxygen therapy users.

It is important to understand that while many venture-backed life science startups have seen incredible success, medical advancements are very challenging and expensive to develop.  Life-saving innovation requires perseverance by a brilliant team that includes the startups leadership, scientists, advisors, universities, and venture capitalists.  In addition, considerable resources are needed to deliver medical innovation.  For example, the cost of developing a single new drug has skyrocketed to over $2 billion and can take ten to fifteen years to develop.  That’s a 10-fold increase over the last 30 years.  And even with all that time and money spent, only 10% of drugs ultimately reach the market.

In part due to VC investment, the level of advancement in medicine is the strongest it has ever been, and we are well-positioned to make transformative discoveries in the future.  Developments in new cutting edge technologies like gene editing, immune cell therapy, and the microbiome, would not be possible without such private investment, as federal government commitments alone are far from sufficient.  We cannot, however, take our leadership position in life science for granted.  We must sustain the winning blend of policy priorities that has helped Americans live longer, happier lives.

To ensure that a vibrant medical innovation ecosystem continues to exist in the U.S., policymakers should make the advancement of medical innovation a national priority and adopt modern approaches to FDA regulation and Medicare and Medicaid reimbursement.  The federal government must also re-commit to robust basic research funding and technology transfer programs so promising developments can be commercialized, thus creating jobs and improving health.  Patent rights must not be weakened as they facilitate VC investment in life science.

NVCA is committed to promoting the role venture capital plays in supporting medical innovation and ensuring that entrepreneurs in the U.S. have the opportunity to bring life-saving innovation to market.  This week we’ll be highlighting VC-backed life science companies.  To learn more about the role venture capital plays in supporting medical innovation and what NVCA is doing to ensure that there is a vibrant medical innovation ecosystem in the U.S., visit us here.