The Great Biotech Race of 2023: Q1 Conclusions - Data Will Be Exchanged For Gold

Summary of Q1 2023

If Q1 has taught us anything it's that the biotech landscape in 2023 is witnessing a remarkable shift as venture capital (VC) investors remain cautious about where they put their funding. By reading into this quarter's cap raises we can see that VC investors have put their money behind companies that can demonstrate a predictable development pathway with a proven commercial strategy and thus can speak with confidence about the likelihood of a return on investment (ROI).

This more conservative investment approach is driving a shift in industry behavior propelling many new modality and more traditional biotechs into a race for data as they strive to back-up their big ideas with statistically significant results, demonstrate predictability and thus, open the door for future funding rounds.

For those companies not within reach of significant data the financial pressures are very real. We have already seen, and are likely to continue to see, the tightening of belts reflected in the cutting of the total number of active programs and downsizing of teams as cash is prioritized in the dash for data. If we look forward, the reality is that not everyone will make it to data and even some of those that do won't be able to raise enough to stay afloat. Come Q3/Q4 and Q1 '24 this may result in a flurry of last minute mergers and the fire sale of assets as the money-well runs dry.

The Funding Flavor of H1: Protein, Small Molecule, and Known Platforms:

It is no surprise that in this highly data-driven environment, VC investors have paid closer attention to companies that focus on protein, small molecule, and known platforms. These areas are comparatively proven, have shown consistent progress, and are more predictable in terms of development and commercialization cost. As a result, until other companies have stronger data sets, the companies working in these areas are likely to find themselves better positioned to attract funding and secure their places at the front of the great biotech race of 2023.

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Story of The Year: The Need for Speed: Getting to Data Faster

For all new concept & new modality businesses, the need to acquire data swiftly and more efficiently has never been more pressing. This has led to the development of new technologies and methodologies aimed at accelerating the data collection process with many companies investing in machine learning, artificial intelligence, novel automation, and high-throughput screening techniques to expedite their research and strengthen their data pool.

It's likely that those that succeed in harnessing these technologies to reliably generate data faster will emerge as frontrunners.

If any of these companies can combine positive data and demonstrate a platform that will dramatically lower COGs when compared to a prior/current standard (e.g. Gen 1 viral vector platforms) it is likely that we will also see the return of multi-$100m funding rounds and an equal return of the war for talent as those leaders that want a mission, more job security, and the opportunities/excitement that comes with the commercialization journey of near-future game changing medicines rush to sign up.

Conclusion

The biotech sector in Q1 2023 has been heavily influenced by cautious investors and an unprecedented demand by VCs for data. This shift has spurred a race among both new modality and more traditional biotech companies to embrace new technology with the express aim of acquiring statistically significant data as quickly as possible. Until that data is secured priority will continue to be placed on cash runway with portfolios trimmed to only the most promising of programs and teams kept as lean as possible.

It remains to be seen how and when these trends may alter but as we look back on Q1, one thing is for certain: The Great Biotech Race of 2023 is underway and in Q2 and beyond, data will be exchanged for gold.