Capitalizing On Collaboration and Confidence: Survey Insights and Expectations For Biotech in 2024

Dr. Chris Smyth
President
ICON Biotech

In the last few years, the financial and clinical development landscapes for the biotechnology industry have fluctuated significantly. ICON has recently published its biotech sector survey, conducted by Citeline, of 133 influential decision-makers within the biotech space, including biotech organizations and venture capital firms across North America, Europe, and Asia Pacific to capture a snapshot of the behaviors and responses these resilient companies employ to navigate multifaceted challenges.

In general, biotech companies have done their share of belt-tightening but have not succumbed to handwringing. They recognize the challenges–with more than a third citing cost management as the biggest barrier to organizational innovation, followed by lack of resource expertise and capacity constraints–but have pressed ahead with recalibrated strategies to deliver crucial innovations. Even with the macro-level obstacles, the biotech sector continues to grow across multiple metrics, with a backlog of emergent companies and R&D spend rising across the board. Our survey showed 60% of respondents expect their R&D spend to increase in the next 1-2 years, reflecting the flush of confidence and optimism that set the tone for the sector in the last year.

Biotech companies are already engaging more strategically and leveraging more holistic relationships with large pharma, venture capital, and CRO partners to optimize their R&D spend. In 2024, we expect them to leverage the benefits of partnership to bolster their confidence with tangible operational efficiencies that will protect against the increasing clinical development and regulatory complexity.

Delivering innovation with confidence

Biotech companies are an invaluable source of innovation infusion for the industry and are fundamental to developing medicines that address unmet healthcare needs. In response to recent market pressures, we saw the biotech sector dynamically shift strategies to cope with cutbacks and keep their innovations on track. They are more often recognising the value of more intentional, thorough strategy development at earlier stages. We also see increased interest in earlier implementation of end-to-end operational efficiencies to protect their programs from costly delays or missteps in development.

Almost half (47%) of respondents said the rising cost of capital will have the greatest influence on future operations, and paired with the rising R&D spend, biotech organizations will need to be sufficiently prepared. Despite the financial pressures, 93% of the respondents were at least somewhat confident in meeting their next investment milestone. The increased focus on early efforts translates to their overall sense of preparedness and, importantly, will help them avoid dedicating precious time and resources to delivering the wrong strategy.

Respondents were similarly confident in the overall success of their product, with 87% reporting at least some confidence and 38% being very confident. More biotech companies are engaging in end-goal planning earlier in their development process, including development of reimbursable TPPs and positioning strategy. As they select partners that can help generate these strategies and commercialize their drugs, we expect biotech confidence will continue to rise.

Funding flows

The market’s vital signs are healthy–new VC funds have closed and large pharma has banked impressive sums for reinvestment in their R&D pipelines. Emerging VCs invested at greater rates for Series A investments in 2022¹ while established VCs tended to focus more on insider rounds to keep their portfolios afloat after the market ‘frothiness’ died down.

At the time of our survey, nearly half of respondents (48%) were using partnerships with large pharma, while a third of respondents (32%) secured investment from venture capital firms. Pharma is increasingly acquiring biotech assets at the preclinical stage while biotech companies have shown more openness to partnering and dealmaking with their lead compounds. The benefits of these partnerships, namely the stability and non-dilutive funding, are particularly attractive when the high cost of capital is a concern. However, it is key for biotech organizations to be keenly aware of the expectations and effective management of these partnerships.

High-impact, meaningful therapies

Overall, we see that science addressing unmet clinical needs and driving progress in key therapeutic areas is still receiving funding – another positive sign of wider market health. The imperative for high impact, differentiated science encourages biotech companies to clearly demonstrate asset value at earlier development stages. This sets their science apart to help secure the funding they need to reach the next inflection point, illuminates long-term potential and emphasizes the importance of the asset’s real-world impact.

The high impact and high interest areas have remained more or less the same, as oncology, CNS and immunology have continued to capture VC interest and capital more so than other therapeutic areas. Specifically, there has been a flurry of activity in CNS around the recent Alzheimer’s breakthroughs.

Pharma has a new hotspot in obesity, though in-licensing deals and investment continues to be highest in oncology. In 2020 and 2021, biologics remained a key focus area and, to a lesser extent, so did small molecules. The number of cell and gene therapy deals remained constant over those two years. These newer modalities received the largest upfront cash and equities payments in deal structures indicating the significant interest in these areas.

Strategic partnerships

Strategic partnerships are supporting and streamlining the complexity of asset development, especially for lean biotech organisations. And this partnership runs both ways: large VCs want to know they can work with their portfolio companies to solve problems and minimise risk, and with less cash on hand to cushion a pitfall, biotech companies need partners that can help them navigate challenges efficiently and effectively.

Through our engagement with biotech companies across different industry areas, we noted a trend toward more comprehensive, early engagement with CROs, using them more as strategic partners to drive efficiencies and realize the full value of their program. Our survey confirmed this trend, as 41% indicated a preference for medium or large sized CROs when sourcing new partnerships for clinical development. The end-to-end capabilities, global presence, and wide service offering of larger CROs provide specialized biotech organizations with a level of continuity across their development program that ad hoc contracting doesn’t, facilitating integrated access to the necessary operational excellence, resources, and capacity.

Optimizing R&D together

As R&D spend rises across the board, from large pharma to emerging biotech companies, optimization will be a continued focus into 2024 and beyond. Biotech companies are asking more from their partners to deliver tailored, flexible solutions at every step of asset development to insulate against the rigors of clinical trials.

Clinical trial scope, size, and complexity continue to rise, as do protocol complexity and the average number of protocol amendments, which in turn increases the associated execution burden and risk to timelines. However, biotech companies are more often opting for CRO partners that can bridge gaps in expertise and ensure full-spectrum efficiencies, including optimizing trial designs, streamlining protocol development, thorough regulatory strategy, and identifying opportunities for timeline acceleration and value generation. Early engagement with strategic partners will also provide better opportunities for gap analyses and holistic outsourcing can proactively identify potential false starts or drop-out points to facilitate smooth and efficient operations across the continuum. As biotech companies lean into integrated partnerships with large CROs, they can better plan and execute adaptive strategies to maximise return on outsourcing investment and deliver their innovations more confidently under multifaceted challenges.

Dr. Chris Smyth is president of ICON Biotech.

Sources

1. The next generation of biotech VCs, Bay Bridge Bio. August 2022