According to a former venture capitalist (VC), a recent deal involving a royalty in exchange for a cash infusion to develop and commercialize a cancer drug designated by the Food and Drug Administration as a “breakthrough” therapy could be a sign of things to come in VC financing. CBT Advisors CEO Steve Dickman contends that, given poor returns from startups, “the royalty play illustrates the ‘new normal’ in life sciences VC investing: a search for investments with short time horizons; a lack of faith in preclinical or even phase 1 molecules and the teams developing them; and an irresistible pull to ‘sure-fire’ deals of a more financial nature.”

Dickman does not believe that traditional VC investing will disappear, however, noting that VCs “are usually more adept at (and more interested in) the messy reality of picking management teams, intellectual property and assets that will make companies work instead of primarily crunching the numbers.” Still, if royalty deals make money for investors, Dickman believes they will remain a viable option for raising biotech capital. See, August 16, 2013.