Strategy

"In all my years in venture capital the least satisfactory part of the business plan has been the understanding of the market. To be successful in business you need to understand the market. This does not mean the ultimate market size. It means the knowledge of who the initial customer is and what will influence him or her to buy your product. We are talking about who will buy your product at what price and how many. Ideally you will have met the customers face to face and received a down payment. Many start up biotech businesses just focus on developing their science or product and assume the market will take care of itself. These companies usually just end up as a bottomless sink for money."

Dr Mike Hirshorn - Founder Four Hats Capital

"Build it and they will come' was the visionary message of 'Field of Dreams', the 1989 movie about a farmer who built a baseball field in a cornfield, to which came a Chicago baseball team. Great movie, bad business idea, especially for the world of medical product development. The imperative in drug, device and diagnostic development is to make things that people pay to use. Every product -- there are no exceptions -- has to pass the 'Will somebody use the product, identify the value it provides and hence, pay for it.' Investing in data about a product's chances of getting used and being useful to patients, physicians, nurses, carers, relatives is as necessary a task as meeting the requirements of medical product regulators. Investors in biotech companies now expect to see evidence of market and product validation studies in business plans and throughout a product's development life. Otherwise, the lack of such data sits as an unmitigated risk, a potentially expensive investment disaster just waiting to happen."

David Blake - Editor of Bioshares
Bioshares is an independent Australian stock report which
covers ASX-listed biotech, pharma and healthcare companies

"Having covered the Australian biotech sector over the last 13 years as an analyst at Bioshares and now as an investment manager, one of the biggest mistakes that has been made and continues to be made is poor understanding of existing or prospective markets for biotech products in development. Whilst technology and regulatory risk is always present and can't be removed, market risk is one that can be mitigated. In the 500th edition of Bioshares, we looked at some of the largest losses that have been made in this sector. Featured commonly in that list was poor market research, leading to hundreds of millions of dollars lost by investors.

There's good rational not to conduct proper market research for some; it may give product developers an answer they don't want to hear which will end their project. It's also just as important to get independent market research.

And good market research is great for investors as it reduces the risk on their investments. I'd like to see all listed biotech companies undertake independent market research and make those reports available to investors."

One Australian company that has built a core strength in strategic market assessment in the biotech sector is Cogentum, which continues to champion the commercial merits of better understanding the market for its customers' innovations. This approach will arguably lead to greater ROI for investors and a better track record of success for our biotech industry."

Mark Pachacz - Research Principal
Mark Pachacz is a Research Principal at Bioshares and the CIO of
Canterbury Funds Management, the trustee for the Biotech Select Fund

"The surest way for a company to provide a return to its investors is to produce a product that succeeds in the market place with the development conducted with the most efficient quality/cost/time combination. This requires not only a thorough knowledge of the strengths, limitations and weaknesses of the technology involved, but also a detailed understanding of the requirements of the market and the features of competing technologies. The earlier it is possible to define the preferred specifications of the product the more efficient the process will be.

Elaboration of these specifications requires an understanding of who the real customer is and what are their needs, expectations and key drivers. Investing without a thorough business case analysis is akin to buying a ticket in a lottery."

Dr Barrie Finnan - Founder, Board Member & Investor, Acrux Ltd

"There are many factors that an investor takes into consideration within the broad categories of "technical feasibility" and "commercial attractiveness" and it is hard to imagine anything besides IP that is more important than time to, and accessibility of, a defined and well-understood market"

Dr Graham Mitchell - Principal Foursight Group