After a few years characterised by uncertainty, the narrative across the biotech industry is changing. We have seen a steady upswell in optimism among biotech organisations and other stakeholders over the recent months as new activity announcements set the tone for a ‘return to normal’. The Financial Times noted that the US biotech sector is bouncing back, quoting data from Jeffries that shows January’s capital raised ($6.2bn) reached levels similar to the previous high-water mark of February 2021.
This year has been a pivotal one as biotech organisations shift out of survival mode to keep the industry’s innovation engine running. We surveyed over 100 biotech decision-makers to get a better gauge of their positions (and dispositions) during this transition season, and the results reflected the confidence and optimism now being reported at higher levels and across investors. With the market back on track to support biotech development, companies are confident but will benefit from sharper strategic positioning.
A market on the mend
Despite the challenges biotech organisations faced in securing funding since 2021, there has always been plenty of capital available despite its slower flow. The Index of Biotech stocks (XBI) rose again in Q4 of 2023 and has continued climbing into 2024 and the near standstill in the IPO market has begun to move again. In 2023, the few IPOs were mostly categorised by phase 2 or later stages, which afforded more confidence in a de-risked asset. Already, 2024 has seen more activity around IPO announcements for later stage assets, with some surpassing expectations, signalling that the window is open for well-prepared companies.
M&A tends to increase under these macro market conditions, and 2023 had significant activity with more than half of the 29 disclosed deals pricing over $1bn each according to SVB’s reports. Many biotech companies turned to M&A as a more stable source of funding, given pharma’s multibillion dollar stockpile dedicated to replenishing their R&D pipelines. Of our survey respondents, nearly half received funding from large pharma while a third received VC funds. Although there are fresh VC funds closing, we expect M&A momentum to continue, especially in therapeutic areas of interest to large pharma. Biotech organisations seeking dealmaking would do well to adopt strategies that prioritise generating registration-level data to position better against increasing diligence requirements and make their program more attractive.
Science that meets needs
Large pharma is willing to bet on key therapeutic areas and has shown increasing interest in CNS, obesity, cardiovascular and immunology areas. Recent progress in obesity and Alzheimer’s research is promising and will continue to draw attention from pharma and developers.
Cell and Gene Therapy (CGT) is an exciting space for biotech and is one where we are making a real impact. Last year we saw five CGT approvals from the FDA, which is a significant burst when compared to 2017-2022’s five approvals total. Biotech in CGT is driving real progress toward therapies for diseases previously considered uncurable. Recent progress with sickle cell and movement toward in vivo cell therapies hold exciting potential for meeting patient needs with meaningful applications.
Excitement in AI innovation
As we advance technology and ways of working, we open opportunities to improve development or explore new modalities to deliver innovations to patients – another contributor to the industry optimism. Artificial intelligence (AI) is one of the most significant recent innovations for biotechnology development programs as its rapid advancement has generated many different options for application. When asked which factors have the greatest potential to accelerate their drug development, 26% of survey respondents indicated AI-enabled asset selection in drug discovery. However, some of the other top-indicated areas are also leveraging AI, including remote monitoring technologies in clinical trials, leveraging existing datasets to steer drug discovery and faster site selection and study start-up.
As we iterate AI and tailor its applications with growing datasets, leveraging AI can improve trial designs and data generation and analysis. As biotech organisations prioritise registration-level data, AI capabilities can mitigate costly, time consuming risks while driving R&D forward. We have had noteworthy successes leveraging our Symphony Health datasets and our AI and machine learning technology to generate real-world data and evidence, gain insights into patient journeys, and to identify target populations and ideal sites to improve study startup efficiencies and generate richer, representative trial data.
Optimising the optimism
Respondents in our biotech survey were generally confident in meeting their next investment milestones and in their overall program success, but the realities of the market and the complexity of the development and regulatory landscape mean optimism should be tempered with optimisation.
According to our survey, clinical development is still more of a challenge than securing funding despite the recent focus on funding accessibility. The inherent development challenges compound across phases and when organisations have multiple ongoing trials, which most biotech do. The majority have at least two trials while half have four or more. Optimising R&D spend with earlier planning, more efficient and adaptive strategies and higher quality data generation will be even more important for biotech companies as they position for exit strategies.
Deeper and more strategic partnerships at earlier stages will help biotech companies optimise their R&D budgets, streamline end-to-end operations and more efficiently reach their next inflection point. Taking advantage of the resources and expertise offered by larger global CROs with dedicated biotech units will help close gaps in capacity, grant access to cutting edge technology and build value into their program. Resourceful biotech companies are already making the most of their lean structures by leveraging the full-spectrum benefits of global CRO partnerships, as reflected in a significant 41% of survey respondents indicating that medium or large sized CROs are preferred when it comes to clinical development, as they have a global presence and a wide service offering.
Brighter days ahead
Overall, the proof of the market’s upturn has solidified the sense of optimism that has been brewing among biotech organisations in recent months and the higher-level narrative is reflecting the same. The optimism isn’t blue-sky naivete, it’s more of a silver lining as biotech companies are aware of the current challenges they still face in the complex and ever-changing development landscape. They will have to be mindful about balancing scientific ambition with fiscal pragmatism while they continue to drive their innovations forward. However, biotech companies’ renewed focus on optimising their R&D spend and partnering more strategically will help carry them through tough times into the brighter days ahead.
Dr. Chris Smyth, President, ICON Biotech
