Patient Capital: How Life Sciences Investments Touch Us All –

Media interest in the metrics of the venture capital industry-how much money we invest, how much we raise, and how investments perform-is a clear indication of the financial world’s respect for what we do. Flattering as that may be, it sometimes misses the point: that venture capital is ultimately about nurturing new technologies and models that enhance the quality of our lives.

And there is no better example of this phenomenon than in the life sciences sector. Shortly, the National Venture Capital Association will issue a report authored by Pacific Bridge Life Sciences and The Weinberg Group that begins to explain the role of venture capital in expanding and enhancing our health and medical system.

The report asserts that 1 in 3 Americans has benefited from at least one venture-backed medical innovation in the past 20 years. Even more important is the report’s conclusion that biotech, pharmaceutical and medical device products can be developed and brought to market as much as three times faster with venture backing.

The venture capital industry has invested nearly $41 billion in more than 6,600 biotechnology and medical device companies during the last two decades. Life sciences accounted for 29% of all venture capital invested last year. Our asset class has continuously invested in the treatment of chronic diseases, including those among 7 of the 10 leading causes of death in the United States. Sufferers of asthma, kidney disease and rheumatoid arthritis have been the respective beneficiaries of Xopenex, Epogen, and Enbrel. Those with diabetes use blood glucose monitors to test blood sugar to determine the proper amount of insulin to administer. The pulse oximeter, developed by Nellcor, makes safer 25 million surgical procedures requiring anesthesia. MRI and diagnostic imaging have virtually ended the need for exploratory surgery. Cardiovascular disease, which afflicts more than 22% of the U.S. population, is being treated by venture-backed innovations, including angioplasty and implantable defibrillators. The list goes on.

If all venture capital had done was to save one life, it would have been an investment of immeasurable value. Yet, venture investment in the life sciences arena has also contributed significantly to the U.S. economy. Here the benefit can be measured. There are many who assert that venture capital created the life sciences industry, which employs approximately 700,000 people in the United States. Most of these jobs are high paying with an earnings average of more than $70,000 per year. Employment growth of venture-backed companies in this sector from 2000 to 2003 was 6.5%, compared with an average decline of 2.3% nationally.

Each time a venture-backed company succeeds, competing companies arise, often with complementary technologies. This spawns a multiplier effect; those that gain invaluable experience at VC-backed companies often start their own companies in subsequent years, as has been the case with alumni of Genentech and others.

Venture investment is a key contributor to future innovations in life sciences, but it does not operate in a vacuum. For the United States to continue along the path of medical and health advances, we must foster an environment that supports the risk takers in the field. This means securing additional government funding for basic research and development, which help new technologies. It means allowing VC-backed companies to receive Small Business Innovative Research Grants so that they maintain the momentum needed to bring their products to market. And it means resisting the notion that drug importation and price controls are the best means to lower prices for consumers.

No one can predict when we will have cures for such diseases such as ALS, cancer, AIDS and Alzheimer’s. But it is a good bet that venture capitalists will have a role in funding the companies that one day will make breakthroughs in treating and preventing these horrible afflictions.

Such efforts give the phrase “life’s work” its truest meaning.

Dr. Jonathan Root is a General Partner at U.S. Venture Partners and incoming chairman of the NVCA’s Medical Industry Group. His email is jroot@usvp.com.