Government grants for biodefense-related research have ballooned in the last few years, creating a potential windfall for many scientists using techniques derived from genomics to discover new approaches to battling infectious disease. Now, life sciences merchant bank Burrill & Co. is considering whether to inject a new source of capital into the equation by launching its own venture capital fund to support early-stage biodefense-related companies.
Steve Sammut, a venture partner with San Francisco-based Burrill, thinks a VC fund could contribute to society’s ability to respond to threats from new infectious diseases, a concept he refers to as biosecurity, but he doesn’t think a fledgling biosecurity industry will much resemble the biotech sector we see today. Instead of existing biotech companies engaging in side projects for the government to develop vaccines or diagnostics, Sammut foresees a new crop of companies arising that specialize only in biosecurity-related government contracts — similar to the way the defense industry operates today.
Not only are the margins for government contract work much slimmer than the biotech “blockbuster” model, but requirements for engaging in government contracts, such as mandatory federal audits, tend to be unpalatable to typical biotechs, Sammut says. “It’s my own position that we are going to have a subindustry evolve in its own right, where the core competencies extend beyond the traditional drug development and discovery skills into things that are much more precise and focused, manage risk in a very different way, work with smaller amounts of capital, and work more on a contract basis, than [anything] we see in the industry [today],” he says.
Philadelphia-based Sammut and his colleagues at Burrill are still figuring out whether a VC fund specializing in biosecurity companies makes economic sense, and plan to make a decision on whether to proceed by the end of the fall. “We and several of our advisors feel that the firm is in a position to provide something here, and we’re trying to figure out if we can do that in a way that’s consistent with our own capabilities as well as [our] business model,” Sammut says.
— John S. MacNeil