Biotech VC trends to watch in 2010 (3)

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So what are investors looking for? Here are some suggestions from the experts:

  • Datin says there's a high demand for improved drug delivery technology. Boosting the effectiveness of already approved drugs is a no-brainer for investors.

  • Interest in molecular diagnostics is heating up. It's one of the most attractive areas because physicians are increasingly demanding test that can tell them which treatments have the best chance of working before expensive medicines are issued. And diagnostics fit well with the healthcare reform efforts. Bloch adds that any technology that improves the efficacy of how care is delivered will be attractive to investors.

  • Regenerative medicine, says Datin, is the next revolution in medicine. It goes beyond just treatment with a drug to completely fixing an illness or condition. Regenerative medicine could totally change the way people receive treatment.

  • Infectious disease is another area that's garnered investor attention. Serious, hard-to-treat infections are worldwide problems, and antiviral, antibiotics and vaccines are the most effective measures for creating a healthier population. "We're very interested in broad-spectrum antivirals," notes Bloch, as well as new technologies that can get married up to create oral drugs for infectious diseases.

In addition to specific technologies, VCs are attracted by companies that have a commercial plan, even in the earliest stages of development. "Many venture capitalists have underestimated the commercial side and have gotten burned," warns Bloch. He suggests starting with the terminal value of the drug and working backwards, and carefully figuring in what kind of impact healthcare reform could have on the drug's potential performance in the market.

And finally, if it wasn't clear already, novelty and innovation will always get rewarded. Venture capitalists are being driven to invest in truly disruptive technology which, while risky, is beneficial for VCs as a whole. Says Bloch, "Firms are going back to the roots of venture, which is to take more risk. We're taking big bets on truly innovative products."