Active Management
Business skills are vital to the survival of a new venture, but adding senior management and a large staff early in a company’s development is costly and inefficient, and may result in significant founder stock dilution. For this reason, scientists and entrepreneurs often require investment partners who will provide management expertise and services. The Sanderling team has the necessary expertise and experience to assist in this role, and is committed to devoting substantial time to the start-up phase. Sanderling often participates in company decision-making, strategic development and recruiting, applying its experience to the development of company programs as well.
Services and Expertise
Sanderling’s principals can take on the responsibilities of chief executive officer, if desired, and the firm can supply full accounting and financial services at the CFO level. Sanderling contributes other key functions such as corporate development as part of the management team, generally providing top management services and support to new ventures for up to the first two years. In addition, Sanderling’s relationships with outside resources such as academic research laboratories and contract manufacturing facilities can be accessed when needed. Further, Sanderling frequently assists the financing effort by helping to raise private funds as well as developing relationships with investment bankers to effect public offerings. Sanderling Management Company LLC employs professionals with a variety of skills useful to the needs of the start-up biomedical company. Staff member backgrounds include:
Finance and accounting
Law
Human resources
Corporate development
Strategic planning
Research management
Marketing
Public relations
Sanderling’s management services build shareholder value by furnishing cost-effective expertise in financial management and scientific matters, including advice and facilitation relating to successful clinical trials and new product introductions. However, at the appropriate stage of development, it is important for each company to build its own management team and establish fully-integrated corporate facilities. Sanderling actively participates in the subsequent recruiting process, facilities planning and transition to in-house operations.
By offering world-class management expertise, Sanderling effectively removes management burdens to help streamline the operations of its portfolio companies. As a result, company founders can focus their efforts on technology development and commercial applications.
Resource Allocation
Sanderling’s active, hands-on involvement often satisfies a crucial need for careful allocation of scarce capital resources during the early phase of corporate development. Adding a complete management team to operate an early-stage company can significantly increase business expenses and “burn rate.” By providing its own management services during the early stages of a new venture and contracting for additional outside services, Sanderling can save millions of dollars of investment capital over the first few years.
Sanderling portfolio companies have achieved IND filings roughly two years sooner than the typical venture capital-backed biomedical company. This accelerated schedule may be attributed in part to the entrepreneurs’ ability to focus on clinical progress rather than management and administrative issues.
By avoiding significant expenditures on infrastructure and management at the very earliest stages of a venture and focusing instead on research and development, start-up companies can often avoid at least one round of financing. For example, under Sanderling management, from its inception in 2004 through its acquisition 2008, Actimis Pharmaceuticals progressed from a seed-stage preclinical company into initial human clinical trials on a single Series A round of financing. Compared with the typical expenditures of a venture-backed company, over the life of this investment, Sanderling’s management strategy saved Actimis’s founders and investors approximately $15 million of investment capital.
Commitment
Since its beginnings in the 1970s, the biotech industry has experienced investment volatility. The development of successful products by some of the first-wave companies led to very high stock valuations in the early ’90s, followed by a general decline in share prices and corporate valuations. Many investors, attracted by shorter development times and potentially high returns in a booming stock market, moved away from biotechnology and into high-tech and telecommunications. Though investors have moved in and out of the biomedical sector over time, Sanderling believes that consistency through market cycles is critical for early-stage investing in biomedical companies.
Sanderling’s consistent strategy within the biomedical field is validated by its proven record of significant new product introductions which have resulted in attractive market valuations for its portfolio companies. Sanderling believes that the best way to build significant new companies is to focus on innovative technology with multiple product applications, and by investing not only money but the time and effort necessary to manage each company from its beginning stages through its early years. Sanderling’s long-term perspective stems from the recognition that a company’s valuation increases dramatically as its products progress through the different phases of clinical development, obtaining marketing approval and generating revenues from sales. This observation holds true in “bear” markets as well as in good times.