Lessons on Transparency, "Sexy Science" and Compelling Business Cases

carol gallagher frazier healthcare First published on MedCityNews.com. Frazier Healthcare’s newest venture partner is approaching her new gig with the smarts of a scientist, the gusto of an entrepreneur and the wisdom of a CEO who’s both exited and shut down a company.

Carol Gallagher joined the firm’s Menlo Park office this fall and told me it was a great opportunity to combine several of her passions and skills, and to help entrepreneurs build companies with the potential to bring new options to patients.

Gallagher most recently held the reins at Calistoga Pharmaceuticals, a cancer drug development company (backed by Frazier as well as Alta Partners, Amgen Ventures and a handful of other VCs) that sold to Gilead in 2011 for $375 million. That certainly doesn’t look bad on her resume, but she also credits another, much less fortunate experience with helping boost her credibility with the Frazier team.

She worked with members of the firm back in the mid-2000s while leading a small molecule drug development company called Metastatix. Eventually, she realized the company didn’t have what it thought it had and made the tough decision to recommend to the board that the company shut down.

“It was a good stepping stone in my career, because I was then recognized as somebody who did understand what needed to go into the package, in terms of what we needed to demonstrate a sufficient hypothesis for investment,” she said. “When the data just wasn’t there to further support the hypothesis, it was the very right thing to do in terms of protecting the investors’ capital.”

That understanding of “what needs to go into the package” comes from two decades in the pharmaceutical industry at companies like Eli Lilly, Amgen, Pfizer and Biogen Idec. A pharmacist by training, Gallagher said that as an investor, she’s intrigued by company founders and CEOs who have a passion for the science behind their product. But she’s also learned that good science doesn’t always constitute a good investment opportunity.

“People sometimes fall in love with sexy science without thinking what the business opportunity should be, or they sometimes get focused on having a clear regulatory path without ensuring that path enables commercial differentiation and adoption,” she explained. “Have you compelled the community that now you have a better choice for a select group of patients? If not, then you won’t get adoption.”

Gallagher said she’ll definitely focus on oncology in her role at Frazier; it’s a good fit given her experience, the unmet needs that still exist and the way that cancer drug development tends to work well with the venture capital model. But expect to see her taking a close look at some other markets, too — potentially antibiotics, ophthalmology, dermatology and therapies for autoimmune diseases and CNS disorders.

“(Having a compelling business case) doesn’t mean it has to be a big market, it means there has to be unmet medical need that can be met,” she explained. “It’s not necessarily about how many thousands of patients are affected by that disease but to what extent can you address that disease with a better therapeutic approach.”

She’s entering the VC world at an interesting time, as the life sciences industry has seen downward-trending dealflow over the past few years (and a few firms even walking away from the sector), yet biotech IPOs seemed to have re-entered the picture.

Gallagher remains bullish on biotech investing and noted that it’s probably good for the industry to have a more focused group of venture investors now. And with public investors back at the table, entrepreneurs have more options to access capital.

“This really does take a village,” she said. “This is such a team sport, so I just can’t say enough about how important it is within a company to build a great team — and investors are part of that, too.”

[Image credit: Frazier Healthcare]