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Executive Summary

NEUROSCIENCE START-UPS HAVE DRAWN VENTURE CAPITAL FUNDING OF $50 MIL. "upwards" during the 1980's, according to an estimate by the consulting firm SRI International. The vogue in CNS research firms has led to the formation of about 15-20 specialty firms in that area "since the early 1980's, many within the past three years," SRI reports in a recently released study of central nervous system diseases. The development of new corporate entities in the CNS research field may be about to outgrow the funds available from venture capital, SRI believes. "Given SRI's view of the long-term nature of CNS research," the consulting firm said, "it may well take four times that [$50 mil.] amount to enable just one company to survive for the 10-15 years it may require to develop a successful product." The need for larger amounts of capital over a longer period makes further venture capital investments "problematical" in SRI's view. The consulting firm suggests that the start-ups will begin to turn to more strategic alliances with established pharmaceutical firms in the 1990's to fund the long-term work. The venture capital well has not yet run dry for CNS firms. At least one new firm has emerged in the area with venture capital funding since the preparation of the SRI report. Interneuron Pharmaceuticals, a Cambridge, Massachusetts firm associated with an MIT neuropharmacologist, was founded with capital from D.H. Blair in October of 1988 ("The Pink Sheet" March 27, T&G-7). CNS Research closed a $10 mil. second round of funding in January. The CNS start-ups differ from their biotechnology predecessors in their focus on research and product development, SRI says. "In many cases," SRI observes, the CNS start-ups are pursuing "a better understanding of a fundamental problem or system, not . . . a single disease or a single product" as many of the original biotech firms did. SRI cites the venture capital activity in the neuroscience field as a sign of the interest and possibilities in management of CNS diseases. SRI forecasts a market for established psychotropic products which will grow "well" but without "exploding" over the period until the year 2000. The U.S. and Western European (four countries) market for established products will grow about 9% annually from $5.3 bil. in 1990, SRI predicts, to $12.4 bil. in 2000. The fastest growing segment will be antidepressants and products for Parkinson's disease with 13% annual growth rates. The Parkinson's class should grow from $420 mil. in 1990 to $1.4 bil. in 2000, SRI says. Antidepressants are expected to grow from $985 mil. to $3.2 bil. in the same period. SRI also analyzes different sectors of the CNS research field to predict the areas with the highest market potential and probable research breakthroughs. According to that analysis, the prime target areas are chronic stroke which has a high degree of expectations for successful research and the fourth largest market, and chronic pain with a market almost seven times as large as stroke but only one-third the likelihood of research success in SRI's estimation. Obesity treatments and substance abuse also rank high in the SRI analysis. The consulting report is entitled "Central Nervous System Disease: Dynamics & Opportunities in Disease Management". SRI (Menlo Park, Calif.) is selling the report for $30,000. Chart omitted.

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