Worldwide Clinical Trials' Peter Benton on the outlook for biopharma funding
BPR: What are some of the most significant factors influencing biopharma investment decisions in 2024?
Overall, the current economic climate presents a number of significant challenges for the biopharma industry. While geopolitical tensions may have risen to the forefront of investor consciousness lately, we can’t overlook some of the longstanding, fundamental economic difficulties associated with sustained cost increases, interest rate woes, and inflation worries.
Still, we must keep these things in perspective; the biopharma industry has always gone through funding cycles. Funding levels naturally ebb and flow, often in tandem with prevailing M&A activity. So, what interests me now are two trends, the demographic shift toward an aging global population, and the ongoing advances in personalized medicine.
I believe these trends will remain the most influential factors shaping biopharma investment decisions for the foreseeable future. We can’t escape the reality that we need more healthcare as we age and we can’t ignore the increasing demand for targeted therapies. Together, these factors will help ensure that the desire to invest in clinical research remains strong. While the biopharma investment picture may not miraculously improve overnight, I expect we’ll see a gradual positive shift.
BPR: From an economic perspective, what lasting impacts do you anticipate the biopharma industry will experience from the COVID-19 pandemic?
The COVID-19 pandemic affected nearly everything about the industry, of course. But if we think back, biopharma funding was quite robust before 2020. Then, as the pandemic surged and waned, funding for the biotech community may have been too strong. One could argue that some research was probably funded without quite the level of due diligence that should have been performed. So, the investment pullback we’ve seen more recently may be due to a slight “course correction” combined with the current economic conditions.
That said, companies are still getting funding—and sometimes at higher levels than they would have in the past. Some are raising big checks; a client partner of ours recently raised $800 million in a single round.
So, I believe the pandemic’s lasting financial impact may actually turn out to be quite positive: sustained investor confidence in biopharma. However, the companies that will continue to attract investment will be those that demonstrate resilience through solid management teams, innovative assets, and a clear vision.
BPR: In today's economic landscape, why are partnerships with Contract Research Organizations (CROs) important for sustained growth in biopharma?
I remember the days when large biopharma organizations dominated the landscape. They hesitated to sell their assets because they thought it might harm their business if another organization developed them. But those days are gone.
Now, we see a more fragmented market. An increasing number of emerging to mid-size companies are the driving force behind an amazing amount of innovation. Overall, it’s a healthy and vibrant ecosystem, but that doesn’t mean companies aren’t being cautious. Most sponsors—especially smaller ones—are preserving their cash runways and reprioritizing their portfolios to weather today’s economic uncertainties. They need partners who can help them be agile and competitive.
This is where experienced CROs come in. We are just as cautious with our customers’ precious cash as they are, in fact sometimes more cautious. We want to support more research and that takes precision and thought. With our deep and focused expertise, we can provide tailored solutions to enable sponsors to achieve the most significant growth impact. Especially for companies focused on just one asset, it’s crucial to have a CRO that is equally enthusiastic about getting their asset to market – and one that works as an extension of their team. Unlike larger CROs that may face inherent challenges because of their size and bureaucracy, “right-sized” CROs can help biopharma companies be entrepreneurial and nimble.
At the end of the day, it’s all about partnership – a theme that was prevalent in our 2024 industry survey, a report that examines the changing perceptions about large and midsize CROs within the pharmaceutical and biotech sectors. A CRO’s experience and expertise allow sponsors to navigate drug development’s complexities more effectively. A collaborative approach makes it easier to optimize resources, accelerate timelines, and ultimately deliver life-changing treatments to the market.
BPR: What should biopharma companies consider when evaluating traditional and non-traditional funding options?
With so many different funding options to pursue, that’s an excellent question.
If we consider the more “traditional” funding mechanisms, they typically fall into one of five categories: angel investors, private equity (PE) (including hedge funds), venture capital (VC), capital markets, or government funding. Sponsors should remember that angel and VC investors tend to be more open to risk, often backing companies in the early development or startup phases. By contrast, more mature companies are usually best suited for PE’s buy-manage-sell model or the rigors of the initial public offering required to benefit from the capital markets. Government funding comes in many forms, but companies should consider the timelines and qualification requirements before pursuing them.
For smaller companies, particularly, “non-traditional” funding sources such as grants or debt financing may offer more options. The Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, for example, support U.S. small businesses, while programs like the Global Health Innovative Technology (GHIT) Fund and the European Investment Bank (EIB) support global development initiatives.
Many questions and variables must be considered before deciding on the best funding path forward. Regardless of the funding source pursued, however, sponsors must be able to demonstrate a solid management approach. As evidenced by recent market movement, the management of emerging pharmaceutical or biotechnology companies is as important as the asset in development.
BPR: How are the industry's current financial dynamics shaping what sponsors need from CROs?
Today's financial climate puts sponsors under significant pressure from investors to ensure every dollar is spent wisely. That means being as cost-conscious as possible and minimizing development costs and disruptions. Consequently, sponsors want collaborative CRO partners who drive efficiency and support the agile pace of innovation.
Every sponsor company requires excellent project management, accurate cost and timeline forecasting, and effective communication. What’s different about the most productive CRO partnerships is often the speed of data sharing and decision-making. Sponsors are looking for CROs who can give them access to all the right data as quickly as possible—supporting fast decisions to advance the development timeline.
But the truth is that no single solution fits every company’s needs. Sponsors need a CRO partner that is flexible – one willing and able to adapt when needed; and one in which they have confidence. The sheer volume of technologies and services available can be overwhelming. However, sponsors can lean on a CRO partner's experience and focused expertise to help select the most cost-effective and appropriate tools for each individual study.
Over the years, I’ve found that the “simple” things, like good customer service and good communication, often achieve the best results. Sometimes, picking up the phone or meeting over coffee is the most productive way to align goals or brainstorm solutions to challenges. Given today’s environment, biopharma companies don’t need more constraints. They need CROs who will be genuine, flexible partners. They seek CRO teams as passionate as they are about getting their assets out into the world.
