Dealmaking and Partnerships: The Future of Financing Innovation

Image Credit: Adobe Stock Images/AlAfiq

In the modern biopharma industry, it’s clear that maintaining proper partnerships are important for success, especially for companies that face pipeline and revenue pressures. While M&A activity has improved post-COVID, there have been a number of regulatory issues associated with it.

At the Financial Times’ Global Pharma and Biotech Summit 2024, a panel consisting of Anja Koenig, global head, Novartis Venture Fund; Spiros Liras, venture partner, Apple Tree Partners; Kirsten Shastri, head of life sciences Tokio Marine Kiln; and Amanda Kay, senior partner, chief business development officer, Flagship Pioneering; discussed whether the renewed surge was sustainable, how venture capital models are changing, how partnerships between small biotech and big pharma are evolving, and potential consequences of increased deal scrutiny by regulators. The panel was moderated by Ian Johnston, global pharmaceutical correspondent, Financial Times.

Johnston began by asking the panelists how they thought the dealmaking and financial landscape has changed in the past year, and whether there have been any new opportunities or challenges in funding innovation.

“For me, it’s all about the interplay between the IPO, the public markets, and the private execs, because the fundamental conundrum of any biotech company is that it is cash burning and that your leverage is not strong unless you have other means to finance your programs, specifically in the later stages, whether you can take it public or not,” said Koenig. “What we’ve seen after the sugar high in the pandemic years of the biotech bubble, the air has to come out. Massive amounts of money went in and it’s slowly draining out. When you’re looking at the M&A sector of deal activity, you only see half of the picture. M&A picked up massively over the pandemic years, but this only showed that alternatives for those later stage companies had become scarcer. My way of thinking of it is always to look at both together.”

The conversation then shifted over to funding toward innovation. Johnston asked the panel what they were the most excited about moving forward in this area.

“I think that there’s a couple of things that we have been investing in historically that that will underwrite some of the future,” said Kay. “We have been leveraging machine learning AI since the launch of Moderna, and that certainly is a key component to the DNA of any of the companies. I’d be hard pressed to mention one that doesn’t. I think what's interesting is how that AI is getting used and you know one area that's been growing lately is thinking about how to use machine learning to optimize molecules or delivery vehicles to specific compartments and avoid the liver. I think that's where we're seeing the most innovation.”

Next, Johnston asked Liras his thoughts on the ability to support innovations with great promise in the current financial environment.

“In terms of finance or innovation, I think there’s a few levers we can pull,” said Liras. “Pharma tends to set a trend, and they have a more effective ability to actually track leading indicators and figure out why these are leading indicators. For example, I spoke about obesity. In terms of obesity innovation, I would say the leading indication is clinical innovation. This has been around for 25 years. In fact, the epidemic has never changed. It’s the same in terms of intensity, but what happens is that people learn how to select patients to do the right trials and teach us about efficacy versus adverse events. You can imagine innovation such as these driving growth in areas such as psychotherapeutics.”

After continued discussion, Johnston brought up partnerships between small biotech and big pharma, asking the panel their thoughts on how they are evolving. Kay, who had recently signed a deal with GSK to develop multiple drugs programs, offered her thoughts.

“I think it’ll be no surprise to hear that when Flagship looks back at our data, the companies that do early deals are more viable to have better deal than the ones that don’t. We’ve been thinking for a while how to put mechanisms in place to help our companies get partnerships sooner rather than later and one is really based on the realization that pharma likes assets. So, four years ago, we started pioneering medicine, which really is a Flagship attempt to drive asset progression and parallel to platform development. In that model, we develop product concepts and are able to look across the ecosystem and say ‘Ok, which technology potentially achieve that profile,’ and then we that asset into the clinic and partner it off after Phase II.”