A top investor at Pfizer's $1 billion VC arm reveals the 2 biggest mistakes startup biotechs make when trying to win her cash

Andrew Dunn

Feb 14, 2020, 20:03 IST

A top investor at Pfizer's $1 billion VC arm reveals the 2 biggest mistakes startup biotechs make when trying to win her cash

Pfizer Ventures senior managing partner Barbara Dalton

Barbara Dalton is senior managing partner of Pfizer Ventures, which has more than $1 billion to invest in startups on behalf of the drugmaker Pfizer.
Dalton says she often sees two big mistakes when startups try to convince her to invest.
The biggest mistake startup biotechs make is failing to appreciate the competition, she said Tuesday at the BIO & CEO Investor Conference in New York.
Biotech companies often think too narrowly about potential threats, Dalton said. Given rapid scientific progress, especially with gene therapies, a viable market today can disappear in a matter of years.
Startups also frequently lack an understanding of who they are pitching, she added. Dalton said she still receives pitches related to erectile dysfunction, given Pfizer's blockbuster pill, Viagra.
"That was us 20 years ago," she said. "That's not us moving forward. So do your homework."
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In running giant drugmaker Pfizer's venture-capital arm for the past dozen years, Barbara Dalton has received a deluge of pitches from startups hunting for money.

Pfizer Ventures invests about $100 million per year and has a portfolio of roughly 50 companies, mostly early-stage biotechs. Pfizer committed an additional $600 million to the venture arm in 2018, bringing the value of its assets to over $1 billion.

As Dalton sorts through pitches, she said she often sees two mistakes that instantly sink a startup's chances of landing a deal. Dalton shared those biggest mistakes in a fireside chat this week at the BIO CEO & Investor Conference in New York.

Mistake #1: A short-sighted view of competition

"One of the biggest mistakes that a lot of startup companies make has to do with their analysis of the competitive environment," Dalton said.

These firms think too narrowly about the risks they might face, particularly given the lengthy timeline of drug development, she said. It can take a decade to bring a new treatment to market.

"The world may change in the 10 years it's going to take you to get anywhere with that product," Dalton said.

She singled out rapid advancements in gene therapy as an example. The space has exploded in recent years with dozens of ongoing gene therapy trials testing treatments for patients with hemophilia, sickle cell disease, phenylketonuria, and other rare diseases.

"If you are creating a therapeutic that is going to help a patient who is also being targeted by gene therapy, suppose that gene therapy is quite successful," Dalton said. "Your patient population can go away."

"You need to be paying attention to not only the direct things that are happening, but the big picture going forward," she added."

Mistake #2: Pitching the Pfizer of 20 years ago, not the Pfizer of today

The other mistake Dalton commonly sees from startups is a lack of awareness of who they're pitching.

In the case of Pfizer Ventures, she still sees a flood of pitches related to erectile dysfunction, given the pharma company's well-known blockbuster pill, Viagra. But Viagra now faces competition from generics, and is no longer a focus for Pfizer.

"I see business plans for products in that space all the time because they think: Pfizer, Viagra," Dalton said. "No, that was 20 years ago. That's not us now moving forward. So do your homework."

Pfizer Ventures largely follows the parent company's interests, she said. Areas of focus now include oncology, rare diseases, and vaccines.

A rare exception for the venture group is neuroscience. Even as Pfizer made a high-profile exit from research in the space in 2018, Pfizer Ventures has earmarked approximately 25% of its funds to neuroscience, Dalton said.

She recommended startups review Pfizer's pipeline and the venture group's recent investments to get a sense of their interests. While she cautioned this can equate to "an archaeological dig of the interests of the corporation at the time the investments were made," it still is helpful in understanding a prospective investor, she said.