The Commercialization Light Amidst the Biotech Gloom

By Roger Longman and Ellen Licking

Recent market volatility and commercial false starts for many industry leaders have made for a gloomy biotech sector. Even so, a new analysis by Cure, a healthcare innovation campus in NYC, suggests the dark days may be behind the industry – at least for some companies. Their “Ready, Set, Growth! Biotech Benchmark Report 2024!” report says that optimism, despite funding, technology, and policy challenges, is high across the industry, especially as the underlying disease biology of neurologic and metabolic diseases becomes clearer. ?

The truth is, however, investors remain skeptical about the current biotech stock market. The accompanying chart from Mani Foroohar at Leerink explains why: plenty of still unprofitable biotechs don’t have enough cash to last the next four quarters. Moreover, these companies have little visible hope of raising what they’ll need because investors ascribe no value to their technology, patents, or pipeline -- just their cash. And if investors don’t value these companies, will pharma acquirers? There is still a lot of hope that the pace of big pharma acquisitions, moribund for the last several years, will pick up – especially if interest rates fall. ?

But as the saying goes, hope ain’t a strategy. In a world where biotech companies are less and less valued, even if acquisition rates do increase, most clinical-stage companies which hope to raise money (or attract acquirors) will need to demonstrate proof of commercial value and competence. We’ve seen some great examples of that – Argenx, for one. But we’ve also seen extraordinary innovators in other areas, like gene therapy, stumble badly.?

And commercialization is only going to get tougher as payers get larger and more powerful and do their best to minimize clinical differentiation. That’s at least one reason why so many of the biggest financings we’ve seen have eschewed clinical businesses in favor of very early-stage companies – companies maybe decades from a late-stage product, let alone a marketed one, and whose valuations can be justified by capable and convincing storytellers rather than by solid development and marketing plans.?

Even with these challenges for clinical stage companies, we’re optimistic about biotech’s ability to succeed – if companies demonstrate that they can apply their considerable creativity to solving the commercial, as well as scientific, challenges they face.?

CC Roger Longman Jeff Berkowitz Susan Raiola Ryan Walsh Rob O'Brien Jane F. Barlow, MD, MPH, MBA Julia Murphy