The Biotech Industry Today: What Leaders Need to Know

What is the state of the biotech industry today?

Today, biotech companies face a difficult environment when it comes to funding (as I recently reported from the J.P. Morgan Healthcare Conference). The recent collapse of Silicon Valley Bank didn’t help in a situation which was already shaky post-COVID. And many biotech investors have withdrawn from the field because they themselves faced financial difficulties. For biotech leaders, restricted funding means their investor pitches need to be even more convincing than in the past. It’s not enough to have a good product anymore; to receive funding, biotechs must offer an ideal scenario for ROI, an extremely good plan for the next ten years, and the answers to all possible questions a funder might ask. Clearly, the bar for pitches has been raised.

For an earlier generation, the leader of a biotech company could be a science expert, but not necessarily a finance whiz, or vice versa. Today, biotech executives must be incredibly versatile. In fact, the entire management team needs to be able to link the medical science with its value in the marketplace and tell a compelling story about what makes not just the innovation but also the company itself special. Sometimes investors are very focused on the science, and sometimes the finance, so company leaders have to be prepared to talk about either or both. Biotech leaders must be transversal: highly strategic and operational while able to understand and connect clinical, market access, commercial, finance, and strategy.

What trends are impacting biotech companies?

In an industry where evolution was once gradual, biotech companies could take an existing product, tweak it, and create a new product with an improved story. Today, everyone from patients to investors is asking biotech leaders to design therapies that are innovative to the point that they are disruptive. This is definitely possible; in biology, we are able to disrupt medicine quite rapidly (gene/cell/RNA therapies are perfect examples). But what it means is that biotechs must build a new product from scratch, accompanied by an excellent value story, with almost no fundamentals that can be reused.

And, the trend of disruptive innovation conflicts with the standardized regulatory framework. The market demands that biotech leaders come up with highly disruptive products, but to get them approved, they need to go through an out-of-date process. The other wrinkle is that biotechs must design a clinical trial today based on regulations that will probably be different in five years; while the regulatory environment evolves more slowly than biotech innovations, it is evolving.

In addition to the unpredictability of future regulatory changes, market fundamentals are difficult to predict because the funding dynamics are evolving. Today, there’s a crisis of funding, but will that be the case in a year or five years or ten years? Also, pricing fundamentals are going to change, especially given the impact of the Inflation Reduction Act (IRA) in the U.S and the new EU pharmaceutical package just proposed by the European Commission. Biotechs must anticipate what will change between drug development, the clinical trial, and product launch; there are many moving parts on top of your product innovation, which may evolve and change as well.

How can biotechs overcome the challenges of today’s environment?

Biotech executives today need to ensure that their companies can perform three key functions – planning, funding, and executing – and do all of them brilliantly, mastering each and the links between them.

Planning – To bring a drug to market often takes more than ten years. As a result, biotechs must carefully plan in advance because each step is critical, interconnected, and directly impacts the product’s commercial positioning. The plan should anticipate the market, precisely describe the drug development steps, and lay out the skills and the financing needs for every single phase. While this “backbone” plan is essential to drive teams in a common direction, it must also allow flexibility, agility and possible changes of direction depending on key milestones and scientific results along the way. Planning for multiple scenarios is critical, existing not only on paper but fully embodied by all leaders of the company.

Funding – Most of Alira Health’s biotech clients are spending most of their time fundraising these days. Great planning makes a difference, as does the ability to convince investors on the solidity of the entire value story. Biotech leaders must convince investors that the planned activities they fund are the right ones that will result in the company reaching the next value inflection point and the overall goal depicted in the business case.

Executing – Especially in innovative healthcare, companies typically encounter difficulties with execution because the underlying assumptions of plans can evolve during implementation. Clinical trials, regulatory plans, and commercial preparation all require careful execution and require many different skills. In the current context of limited funding, an increased pressure mechanically applies on operations as companies are limited in their available resources.

The success for biotechs lies in the ability to mobilize both human and financial resources on these three connected functions. Future articles in this series will address each function in greater detail.

How does Alira Health help biotech companies?

Alira Health’s structure mimics that of a biotech company. We understand planning, funding, and executing, both strategically and technically, and how they connect with and impact each other.

We have robust experience in aligning drug development with commercial ambitions, and have concrete approaches to place patients at the center of the story, ensuring a real medical value creation that translates into positive ROI.

As a transaction advisory company, funders are also our clients; we know what they need from biotechs and how to pitch to them. Strategics, VCs, family offices, and Private Equities all have different cultures and approaches to risk, requiring a tailored pitch.

And we remain present with clients during execution; we know what happens when you translate plans into reality.

Ultimately, the goal everyone shares is to create an innovative product that brings medical value for patients. This cannot be achieved in a single step, however, and Alira Health helps biotechs along the journey to reach that goal, structuring the drug development process into a series of clear and reachable value inflection points.