“That whole class of 2021 has done pretty badly,” Mr De Silva said. “But that’s not to say some of the technology isn’t valuable or useful.”
Seeing opportunities
The market collapse has proved tantalising for investors such as Mr De Silva, who has persuaded entrepreneurs including Chris Behrenbruch, Patrick Davies, Glenn Haifer and Lou Panaccio to tip money into the new fund, which is called KP Rx.
Dr Behrenbruch is the chief executive of ASX-listed Telix Pharmaceuticals, whichrecently receivedTGA approval for its prostate cancer drug.
Mr Davies is chairman of ASX-listed Neuren, which develops therapies for neurological issues. And Dr Haifer sold his bioanalytical laboratory for around $300 million in 2021.
Mr Panaccio, meanwhile has built a long career commercialising scientific concepts, and is now executive chairman of ASX-listed Genera Biosystems, non-executive director of Sonic and chairman of Avita Medical.
“I have personally witnessed the scarcity of capital for early-stage healthcare companies which has further worsened in this market and led to significantly depressed valuations,” Mr Panaccio said.
“From this small group of capital allocators, very few specialist healthcare funds are looking to invest in companies at proof-of-concept stage with the vast majority focusing on very early-stage, drug discovery companies.”
Investment rivals
While the team hopes to snap up deals in companies struggling to fund clinical trials, they will have stiff competition.
Global pharmaceutical companies are flush with cash and in the past 12 months, some megadeals have signalled the start of a consolidation period.
Earlier this year, Pfizer bought Seagen for $US43 billion, and a month later, Merck bought Prometheus for $US10 billion. BioGen bought Reata for $US6.7 billion, Novartis acquired Chinook for $US 3.1 billion and Horizon bought Amgen for $27.8 billion.
Unlike software companies, biotech start-ups require hundreds of millions to billions of dollars to advance a drug from the laboratory to approval.
Smaller players in Australia are now assessing whether they can secure funding to carry on alone, or whether they approach pharmaceutical companies for merger opportunities or licensing agreements.
“There are so few specialist investors that are willing to take risks at the early stages,” Mr De Silva said.
Mr De Silva’s time at Karst Peak was spent picking stocks such as regenerative medicine business Avita Medical, which has climbed 109 per cent this year, and neurological drug developer Neuren Pharmaceuticals, which is up 82 per cent.
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