CONTINUED: BEST PRACTICES – BRINGING MEDICAL INNOVATION FROM BENCH TO BEDSIDE

What has been your greatest professional challenge in bringing a new treatment to market?

Bringing a new treatment to market is full of challenges. First, it's expensive to be successful. It takes a lot of money to make a treatment commercial. Even if you understand the scope of what is involved in bringing a treatment through clinical trials, it is very hard to predict how long it will take to complete key milestones successfully. And, frankly, it takes most often longer than you would hope, which leads me to the next greatest challenge—managing the regulation process. People have no idea how highly regulated this industry is—which is a good thing—but again it comes back to making sure you have the resources you need to get through it all. From the ethics committees to the monitoring boards to the manufacturing approvals, and so on, you need to be prepared. You can't underestimate what it will take. You need to have enough money in the bank and you need to have contingency plans in place. Understanding what preparation is required has definitely been a professional challenge. The good news is that if you can be prepared, stay the course and prove out your idea, the rewards are tremendous.

Have you ever encountered surprises in the clinical trial phase? If so, are there ways that you prepared yourself for these surprises?

Absolutely. Of course we are always prepared for unwanted side effects. And through pre-clinical work, we've always managed to work our way through those problems. But I have found that you also need to be ready to deal with surprises that you couldn't possibly expect. For example, we've recently encountered a series of obstacles around our trial sites that we never could have predicted. First, we had several trial sites in New Orleans and just as we were completing that trial phase, Hurricane Katrina struck putting us at risk for losing our data. Then just last month, we were set to begin trials in Israel just before the war broke loose. We were able to manage our way through both situations because we had two things going for us: first, enough cash in the bank and, second, solid relationships with the right people who were helping to manage the clinical trials for us. But the lesson is that you need to be prepared for the unexpected. After all, we never would have thought weather conditions or political climates would have an impact on the clinical trials of one small company, but here we are!

What is the best advice you can offer others who are working with the FDA for the first time?

Having worked for a big pharmaceutical company and now a small start-up company, I have learned that working with the FDA is all about relationships. When I was with big pharma, there was always a tendency to view the folks at the FDA like low-paid bureaucrats who have nothing to offer. But in the course of my career, I have found the opposite to be true. I have often found that the FDA has valuable advice and opinions to offer on how you can achieve necessary approvals to get to market. I have also found that having an ally at the FDA is critical. Let's face it: every company will encounter issues as they are navigating the approval cycle. It is best to have someone at the FDA on your side when it happens!

How do you go about composing a great board of directors?

The composition of your board should be driven by the stage of your company and the skill set you need to help you successfully navigate that stage. In the very beginning of NovaCardia, for example, we built a board of directors that had deep experience in drug discovery and clinical trials. Now that we see the opportunity for a public offering on the horizon, we are looking to move towards a board with outside executives who understand the needs of a later-stage company. People who know what it takes to achieve commercial success as well as people with appropriate financial skills for a public company - who understand SOX, working with Wall Street, and so on. It's a matter of continually assessing what you will need and when—and then taking the time to get the best possible people on board for the next stage that you are approaching.

When you are building a management team, do you select people who you expect to stay with the company from the early days of R&D and preparing for clinical trials all the way through bringing the approved treatment to market? Or do you anticipate the composition of your management team to change over time?

I always try to hire people on my management team who I think will grow with the company. Having said that, I don't always expect to keep those people in the same type of positions throughout the company lifecycle. For example, the people you put on your management team early on are those who are really strong in the drug discovery phase; yet when it is time to make the treatment commercial, those people aren't always best suited to stay in the same position. You need to go out and look for people who have experience in the go-to-market phase. But I don't look to get rid of the smart people I hired in the first place. I try to hold on to that good talent and channel it towards tasks that will benefit the company in the long-term, for example, building a pipeline of new ideas that the company could pursue down the road.

What metrics have you used to decide when fundraising is required?

Quite simply, I always look to have at least a year's worth of cash in the bank. And I am not conservative about the amount I'll need. When you are fundraising, it can be tempting to put forward an aggressive timeline and take on the minimal dilution possible, but it is just not worth it. You can't be sure. And if you don't have enough funds to get your company to the next milestone, you can get yourself in an impossible position. Moreover, you have to continually build and nurture your VC network. The first time you meet a good investor should not be when you are putting out your hand. You should make it a point to build connections over time so that when you do approach potential investors, they know who you are and what you are capable of achieving.

Do you have any advice for entrepreneurs who may be attempting to bring a new treatment to market for the first time?

George Rathman, the founder of Amgen, once told me early in my career, "When they pass the peas, take the peas." In other words, take money when it is offered to you. Although you would like to think the opportunity will come up again, you can never quite be sure it will happen when you need it. And it's much harder to achieve success on an empty stomach.

CONTINUED: VENTURE DEBT IN ACTION AT GLOBOFORCE

With a unique offering and a vision for how it could lead the global incentive industry, Globoforce won over top-tier investors including Atlas Venture and Benchmark. Using this financial backing, Globoforce built out a flexible recognition tool that can scale from one user to millions of users, offering global companies a powerful solution for implementing reward and incentive programs. By creating the incentive industry's largest selection of local languages and local reward options, Globoforce attracted some of the world's best known global companies as customers, including Dow, IBM, P&G, Reuters and more.

To bolster its growth and expansion in the US, the company decided that raising additional capital would be advantageous. Given the traction Globoforce was already gaining in the marketplace, the company did not believe that attracting additional venture dollars would be an issue. The company faced a conundrum: it needed the operating cash to support its working capital needs, yet the executives knew they were on the verge of signing a few very large customers that would strengthen their valuation for the next venture round.

Taking on venture debt emerged as the best resolution to this challenge. The additional cash would give Globoforce the extended runway it needed to sign on these new customers before raising its next round. But Globoforce CFO Steve Cromwell was not willing to go with just any venture debt provider. According to Cromwell, "We are a unique company with specific working capital requirements. First, we are co-headquartered in both Massachusetts and Dublin, Ireland so we needed to go with a debt provider that could work in both geographies. Second, we wanted flexibility in our debt structure. We needed to work out a payment schedule that suited our specific outlook and would not confine us with strict operating covenants. And, third, we of course wanted competitive rates."

"Lighthouse Capital fit the bill across the board," continued Cromwell. "Not only because they are able to operate in both Europe and the U.S., but because they showed a willingness to work out a payment structure that aligned with our business plan, and offered flexibility should that plan change down the road."

"By combining our innovative ideas and strong execution with the best possible financing strategy, we believe we've positioned ourselves for long-term success," concluded Cromwell. And with wide recognition that spans from being named a Top 100 company by Red Herring to being honored with Product of the Year from HR Executive magazine to gaining public praise from major customers worldwide, it appears the industry agrees. 

To learn more, visit the company's website at www.globoforce.com.

BACK TO TOP

Since joining the firm in 2002, Cristy has spent her time identifying and funding the promising and innovative life sciences companies she can find. In just four years, her investments have ranged from novel approaches for genetic disease detection, to more effective ways to engineer new drugs, to new treatments for congestive heart failure. Cristy, along with the rest of the LCP life sciences team, now boast the largest life sciences portfolio in the venture debt arena.

Before joining LCP as a principal in the Menlo Park, California office, Cristy spent seven years of experience in public and private equity investing, most recently having spent two years as a Senior Associate at Highland Capital Partners. Prior to Highland, Cristy spent five years at Robertson Stephens. Cristy's area of investment focus is in life sciences, encompassing biotech and medical devices. While at Lighthouse, Cristy has sponsored the firm's investments in Novasys Medical, Inc., Hemosense (AMEX:HEM), Aryx Therapeutics, Interventional Rhythm Management, Pacific Biosciences of California, ForteBio, Cell Biosciences and Glaukos Corporation. Cristy has also been involved in Bayhill Therapeutics, ParAllele Biosciences and Pharmix, among others.

Q&A with Cristy:

What is the one piece of advice you would offer entrepreneurs?

Be prepared for the unexpected–which means keeping your eyes and ears open, but also having plenty of cash in the bank. The regulatory process for a device or drug is almost impossible to perfectly predict. Often times the pre-clinical design work takes longer than expected. Enrollment of patients and physicians is usually harder than imagined, for a variety of reasons including competing trials and/or unexpected FDA protocol issues. Needless to say, it is a lot easier to raise money before you encounter one of these challenges.

What do you look for in an investment?

Of course there are the usual requirements–an experienced management team, a first-to-market idea, solid equity backing by top VCs, and focus on a billion dollar market. But beyond that, what I really look for is passion in the voices of the executives behind the company. The great thing about building life sciences companies is that you actually have the potential to benefit human beings. It may sound trite, but it's true. So when I hear a passion for doing that, along with killer business credentials, I know it is an investment worth making.

What is your favorite book?

I have many so it is hard to choose. But if I were to select from among my recent reading, I would have to choose Kite Runner. It includes all the required ingredients for a great book–friendship, betrayal, redemption. And while it is a fictional story, it offers a very real look at political turmoil in another part of the world–in this case Afghanistan. The story stayed with me long after I finished it.

What would people be surprised to learn about you?

I don't like being put in the spotlight–which is why I hate being profiled in this newsletter!

What words do you live by?

You shouldn't go through life with catchers' mitts on both hands. You have to be able to throw some things back.

If you had $100 left to your name, what would you do with it?

Buy food. Boring, I know. But what can I say? I'm practical.