LSIPR 50 2018: An agent of change in healthcare

Managing around $8 billion in funds, Deerfield is a big player in the healthcare investment field. The firm focuses on every area of healthcare (including healthcare services, medical devices, pharmaceuticals and biotech) at every stage of development, from funding academic research before it’s been spun out through to public markets. At any one point in time, Illinois-based Deerfield has approximately 300 investments.

While these are impressive statistics, this is not the only reason James Flynn was selected for LSIPR 50. His role in making Deerfield an “important agent of change in advancing healthcare” merited his inclusion in the list.

Flynn joined Deerfield in 2000, at a time when it was operating as a public equity trading firm. Since then, he’s been on a mission to make Deerfield important to human health by creating infrastructure and activities to fill in social gaps where the company sees them.

The Deerfield Foundation, which has invested and committed over $30 million in its partner projects, is predominantly focused on children’s healthcare issues.

The foundation, which is managed by a rotating group of eight employees, approaches funding in a similar way to Deerfield’s approach to investments, ie, measuring the impact of the investments.

“If we can’t measure the impact or things don’t progress the way they should then we stop funding in that area. But if they do improve, we increase funding,” Flynn explains.

Work in progress

The foundation has invested in healthcare clinics in New York City, and obstetric clinics in Haiti, and has funded mobile medical units for homeless children.

There have been some very long-term partnerships (such as the Children’s Health Fund and Partners in Health) which, according to Flynn, have “done a phenomenal job” of creating the types of services and change that the company hoped to see.

Funds for the foundation are provided through partner contributions and directly from Deerfield’s profits. All the profits from Deerfield’s Healthcare Innovation Fund, which is focused on very early seed and series A investments, go into the foundation.

Completing the trio is the Deerfield Institute, the research base. It consists of 40 information specialists: epidemiologists who focus on patient populations, IP lawyers and people who focus on survey research.

“It’s often the case that patient populations in literature are described incorrectly,” notes Flynn. For example, he says, if a patient advocacy group is describing the patient population, then everyone has the disease. But if a drug company is going to launch in Europe for instance, then it will describe no-one as having the disease there as typically the price of a drug rises with the fewer people who have the disease.

When the institute discovers a patient population to be incorrect, it publishes an article on that topic. Since 2015, Deerfield has published more than 40 articles, reviews and abstracts.

Collaborations

In October 2017, Deerfield announced a collaboration with the Broad Institute of MIT and Harvard, aimed at “advancing therapeutics by funding promising early-stage research”.

In February this year, the partnership announced the advancement of two projects to focus on novel targets that reveal underlying vulnerabilities in acute leukaemia and common genetic alterations in cancer. The partnership may start on a third target shortly.

“In our collaboration the Broad identifies targets it thinks are interesting and we fund them. If they’re working, we can pull them out and turn them into companies,” Flynn explains.

Deerfield has a similar agreement John Hopkins University: Bluefield Innovations, a collaboration between the two which will provide up to $65 million in initial funding over five years to support the commercialisation of early-stage therapeutic research at the university.

The investment management firm hopes to obtain 50 discovery molecules in the next four years and aims to spend half a billion dollars developing them.

Diversity is key

Deerfield understands the value of diversity, in its people and in the work it does, according to Flynn.

Deerfield’s fellows programme brings in students just before their senior year, and funds them during their studies. At the end of the year, Deerfield tries to find a place for them at the firm. In the programme’s third year, 80% of the fellows were women and many were non-white.

Flynn believes that one of the issues with diversity in investments is that “people aren’t perceiving your opportunity as their opportunity”.

Deerfield is also trying to tackle the lack of women in the boardroom.

“The diversity of the firm’s work makes Deerfield stand out from its competitors,” Flynn declares. Deerfield has a complete operations team, so if it starts a company it can provide IT, finance, legal and human resources capabilities, whether it’s a for-profit or not-for-profit business.

Work at the company is not without its challenges—there’s a lot of complexity in the subject matter and how Deerfield operates as a team.

“We have a very collegial culture. We get together as a team every day for an hour and talk about everything we’re doing,” Flynn explains. “Although sometimes we can’t get everybody in the room, it does allow everyone to get on the same page.”

The advice Flynn offers to those seeking to enter the healthcare investment field is realistic and to the point.

“Bring a lot of cash and a lot of patience. It’s a complicated, expensive, and risky field but this is an extremely exciting time,” he says.