When evaluating placement agents, many companies often focus on the cost, with the more expensive firms being several percentage points higher on each cash compensation and warrant carry. However, in my experience, biotech companies would serve themselves well to find a placement agent with true biotech expertise and a sincere commitment to your company. If you can find that, it will be worth the additional cost.
Placement agents come in all forms, but they generally draw on their network of funding sources to raise the required money. When evaluating placement agents, it is useful to understand their fund-raising success rate, as well as the success rates of the companies for whom they have raised money. This will help you develop some insight into the capability of the placement agent and the investment appetite of their investor base.
Even with a placement agent, management should be closely involved with the fund-raising, working with the placement agent to prepare the private placement memorandum, identifying target audiences, and getting out on the road and meeting your prospective investors.
Virxsys has used Signature Capital as its placement agent for a number of years. We found that many venture capital funding sources tend to be negative on gene therapy. However with Signature spearheading our financings, we have been successful in identifying high-net-worth individuals, family offices, and selected hedge funds that were enthusiastic about gene therapy and our story. Our placement agent was critical to identifying them and executing this fundraising strategy.
Gene therapy eventually will deliver safe and effective treatments for serious and life-threatening diseases. This is the vision that attracted many of us to this industry in the first place. It represents a genuine revolution in medicine and it looks like we are on the verge of clearing the final obstacles and making this a reality. Successful financing is one of those obstacles. With the right approach, more companies will be able to secure financing and continue to move gene therapy technology forward.
According to the title of an article by Arlene Weintraub that appeared in the December 5, 2005, issue of Business Week, “Gene therapy is respectable again.” The article observed that “Recent success stories in clinics and labs add to the sense that gene therapy is moving back into the mainstream. ‘We’ve been in gene therapy a long time, and we’ve seen the ups and downs,’ says Richard Gregory, Genzyme’s (www.genzyme.com) senior vp of research. ‘But we’re optimistic.’”
We are optimistic too. With recent fund-raising successes like Virxsys’, there will be more advances in the field, which in turn will drive more investment money to gene therapy. This will be good for the entire industry and for modern medicine.