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All things Pharma

The funding climate for pharma

What does the future hold for the biotech industry? And is the almost decade-long bubble about to burst? Scott Miles, co-chair of the Kreston Global Life Sciences and Healthcare Group and David Rosevear, Account Manager at Kreston Reeves share their insight. 

After 2020 thrust the industry into the spotlight in the fight against the global pandemic, it was highlighted just how the small pharma and biotech industry could compete with the larger, more established pharmaceutical companies.

So, you would be forgiven for thinking that this would pave the way for the biotech funding boom to continue, if not to be even bigger than the last ten years. The early data supported this theory, with the first three quarters of 2021 showing some of the highest levels of funding for biotech companies. Skip forward to the start of 2022 and Pitchbook data shows that in the USA alone they saw the lowest level of first round financing activity since prior to 2011.

Is this just a blip in the road or has the downturn in the public markets finally trickled downstream to the early-stage start-up companies? And, with many initial public offerings being delayed, or pulled altogether, is there also any sign that the venture capital funds have started to dry up?

Well, it would appear not! Many venture capitalists have looked to establish new funds in Q1 2022, so although the end game may have been delayed, or been reconsidered, it doesn’t appear that there is a lack of funding available. Our team has assisted with the inception of two new start up biotech companies in April 2022 alone. So maybe January was just an anomaly – only time will tell.

What lessons have been learned?
Bringing a new drug to market is complex, costly and time consuming, often taking between 12–15 years and costing in excess of $1 billion, which can be daunting figures and timelines. I’m afraid precious little could be done about the timelines, with times often being dictated by regulations put into place to ensure therapeutics are safe and effective.

That leaves us with the cost. We have seen on many an occasion the success of the asset centric virtual company, where an idea on a specific target or mechanism of action is essentially outsourced to selected contract research organisations (CROs) saving on capex and creating an agile and flexible research and development cost base.

We have helped many companies take this one step further, taking in-house their entire finance function which has helped reduce costs even further and allowed management to focus on what they do best; discovering and developing novel therapeutics. Given the high level of reorganisations and restructures that have gone on in the industry in recent times, it looks like many of the longer established companies are coming to the conclusion, too, that there are cost savings that can be taken in the outsourcing model.

So, is the funding future outlook bright? It most definitely looks that way, we may just need to wait for the new funds to find the right funding opportunities.

Go to www.krestonreeves.com

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Emma Cooper
Emma Cooper
Emma is Content Manager at Pf Media.


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