Diagnostics as an interesting investment object
Every year billions of euros are wasted on medicines that have no effect on the patient. Even worse, quite a few medications even cause serious side effects. However, such medications are still widely prescribed. But since regulatory agencies have made the development of biomarkers a prerequisite for the approval of new drugs (Companion Diagnostics) and pharmaceutical companies can impose very high prices for their most innovative treatments in the target segments, the personalized medicine succeeds step by step in the breakthrough. By Karlheinz Schmelig
More and more new companies are working on new diagnostic methods for determining the effectiveness of possible treatment approaches. In addition to a classification into "responders" and "non-responders", statements about side effects probabilities and dosage recommendations can be made.
An exciting development for venture capital funds
For example, every year thousands of cancer patients are unnecessarily exposed to the rigors of chemotherapy. The Creathor portfolio company Chundsell Medicals proves that this need not be the case with its gene expression test. The test helps the doctor to decide if a prostate cancer patient has ever had to undergo grueling chemotherapy. The company Sividon Diagnostics, which was sold to Myriad Genetics by Creathor Venture last year for EUR 50 million, offers a similar procedure for breast cancer patients.
A further boost to personalized medicine is to be expected from the steadily improving possibilities of systematic evaluation of Big Data. Vendors who manage to collate and evaluate patient information from multiple stakeholders with genetic information provide VCs with exciting investment opportunities. For example, Chundsell has also built a database and evaluation software with biomarker data and treatment methods for thousands of prostate cancer patients.
No investments without side effects
Unfortunately, unlike in personalized medicine, eliminating or bypassing side effects in venture capital is not possible. Every investment involves considerable challenges and risks for investors. In the field of personalized medicine these are in addition to the usual question of scalability in particular the following:
- Statistical relevance: Prospective studies are hardly affordable and hardly feasible in terms of time frame.
- Approval : The approval is usually tedious and based on detailed, prospective studies. This is out of touch with reality and hampers innovation. Without secure reimbursement of drugs or tests, an investment is highly risky.
- The influx of the pharmaceutical lobby: Big Pharma has little appetite for new diagnostic tests that subsequently limit the target patient segment. The comment of a member of the Federal Joint Committee in the run-up to the approval of a diagnostic test is indicative: "Nobody has ever died of a bit of chemo."
- Competition: Are other start-ups, pharmaceutical companies or tech giants working on a similar process?
- Big Data: Do patients accept that large amounts of sensitive medical data are collected and evaluated?
- Patents / IP: Protecting technologies is extremely important to potential strategic partners and buyers. The problematic patenting of gene expression testing in the US does not make things easier.
Winner and Loser
Who will emerge as the winner of the trend towards personalized medicine, who will be the loser? The latter is easier to answer: the losers will end up being those pharmaceutical companies that continue to rely exclusively on bulk medicines, although these do not help much of the patients.
However, this does not mean that investors who now focus on personalized medicine start-ups can automatically hope for "health-tech unicorns". It is important to carefully weigh the opportunities and risks of each provider and approach. At the right time in the right place, however, investors can make substantial profits in the coming years.
The biggest winners are already certain: the patients who receive customized treatments - and those who, thanks to earlier and better diagnoses, do not even become patients.
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