Three months into quarantine, with COVID-19 cases still far from petering out, society has come to accept that physical distancing, Zoom calls, face masks, and other changes may be the new normal. Until we develop an effective COVID-19 vaccine, the events we once loved and cherished – concerts, sports, graduations, holidays at church, synagogue, or mosque – could be those of a bygone era of American culture.
Developing a vaccine, our ticket back to normalcy, is a long and difficult process. Years of research and clinical trials often precede any vaccine’s introduction into the market, and FDA reviews, while necessary to keep our population safe, often further delay rollout. The FDA estimates that it takes companies 12-15 years to get medicines into the market.
These challenges make biomedical research and development a challenging prospect to many investors. Why invest significant sums of money into a product that could take decades to hit the market, perpetually faces new federal regulations, and may not even generate a return at all?
We sat down with venture capitalist and Spectrum Business Ventures CEO Amit Raizada, whose firm invests in cutting-edge medical innovations, to discuss the challenges and benefits of investing in pharmaceutical research.
Raizada has invested in a number of critical medical innovations, including a revolutionary Sinusleeve balloon that has changed the face of ENT care, and a cancer-fighting drug that mobilizes the body’s immune system against cancer cells.
Both products, Raizada said, were the result of careful planning and a significant degree of patience.
“Investing in medical technology is one of the most rewarding decisions – both morally and financially – that a venture capitalist can make,” Raizada said. “But make no mistake, it will likely be years before your investment starts to perform.”
The best strategy for navigating this paradigm, Raizada said, is to fully accept the realities of the FDA clinical trial process before deciding to invest.
“When looking for ventures in the biomedical sphere, it’s important to acknowledge upfront that the process will be slow-moving and that you won’t earn your money back right away,” said Raizada. “Don’t let that be a disincentive, though. A prudent biotech investment that you make in 2020 may not be earning you much in 2021, but it could become the most valuable assets in your portfolio come 2030.”
Trials, Trials, Trials
The FDA’s clinical trial procedure is often a financial and psychological roadblock that scares away investors. While critical to ensuring that drugs available for consumption actually treat patients as intended, clinical trials are an elaborate and slow-moving process.
“There are three main phases of FDA-mandated clinical trials,” said Raizada. “In Stage 1 trials, the drug is tested on a sample group of 20 to 80 individuals. During Stage 2 the group expands to up to 300 participants. By Stage 3, the final of this process, the sample group is increased to up to 3,000 patients.”
These trials often take years, as researches must ensure that all studies are carefully administered and that the drug is fully safe for consumption. Adjustments may need to be made, which could further delay the process.
After successful completion of the third stage of clinical trials, the drug may be submitted to the FDA for review.
“Once you submit to the FDA, you’re looking at a review process that takes roughly ten months to complete,” said Raizada. “So even after years of trials, you still must be willing to wait almost a year for approval to send the product to market.”
Obtaining FDA approval is a lengthy and arduous process, but Raizada urged aspiring investors to consider more than just returns.
“The reason I prefer to invest in biotech is twofold: it generates returns to my firm and my partners while simultaneously delivering life-changing treatments to patients desperate for innovation,” Raizada said.
Raizada said that aspiring investors should always look for socially conscious opportunities that benefit both their individual portfolios and society as a whole.
“As a venture capitalist, investing in the medical sphere gives me an opportunity to give back to the communities that have helped me grow,” Raizada said. “I’m not a physician, but I look for investments that help those who are doctors administer cutting-edge treatments to patients who need them. And that feeling always makes the lengthy approval process feel worth it.”