Posted by Damien Downes, PhD & Charlotte Culpin, MA VetMB on May 3rd, 2024.
Summary
This spring, Blue Matter’s London team hosted the third meeting of the UK Biotech Club for C-suite leaders representing 20 London-based biotech companies. The leaders shared their perspectives on the outlook for the UK’s biotech sector and keys to succeed in a competitive industry. Conversation focused on how managing stakeholder relations, particularly with investors and academic partners, is critical to success. In this article we share their insights and outline the key takeaways on how to: (1) identify the right partners, (2) develop a shared vision for the company’s destination, and (3) align on what is needed to achieve this vision.
Introduction
Following the unprecedented surge of biotech investment in 2021, there have been two tough years of market balancing. This downturn has seen industry executives searching far and wide for funding to develop their innovative therapies. Despite these challenging times, the UK biotech scene is robust and remains the strongest in Europe. The UK secured 41% of Europe’s venture capital investment in 2023, including £763M ($950M) in the second half.[1] This strength has continued into 2024 with 15 raises so far totalling £430M ($540M)[2], a strategic collaboration between Autolous & BioNTech valued at £160M ($200M)[3], and Jazz Pharmaceutical’s acquisition of Redx’s KRAS inhibitor program, potentially delivering the Alderley Park based biotech £700M ($880M).[4]
This activity demonstrates positive signs for growth in the UK biotech sector and supports the rising optimism that biotech funding will recover in the next 12 months.[5] With this environment in mind, the financial capital of the UK, London, was the ideal location for the third meeting of the UK Biotech Club.
On April 24, 2024, C-suite leaders representing over 20 London biotech companies, joined Blue Matter’s London team for a reception and dinner. The C-suite leaders had wide ranging experience, including in academia, pharmacy, finance, and beyond. They shared their valuable perspectives on the state of biotech in the UK, and their experiences, particularly on how to manage stakeholder relations to ensure successful growth. Three core themes emerged on the night:
- Identify the right partner
- Share a vision on the destination
- Align on how to reach the destination
Identify the right partner
Developing novel therapies is a capital-intensive exercise, so it is unsurprising that funding is often top of mind for biotech leaders. One of the challenges facing UK biotechs currently is the depletion in funds available from European VC firms following Brexit. Ex-EU investments can be capped at ~20% of a fund, and UK companies now need to compete with US companies for this investment. Many companies are therefore turning to alternative sources of funding, including grants, industry partnerships, Family Offices of ultra-high-net-worth individuals and emerging markets – such as India and China. For funding from Family Offices and emerging markets, making the right connections and being certain of funding provenance can be challenging – leaving the US as one of the main markets for investment in UK biotech.
To be successful in the US, three key tactics are recommended. Firstly, and simply, get on a plane to the US. Investors are more receptive to companies after a face-to-face meeting, with nucleating events such as JP Morgan providing an excellent opportunity to set-up a series of meetings. Successful leaders take time to get to know their potential investment partner and gain a sense of whether they’re aligned on the company vision.
Secondly, be bold. Although adding a zero to an ask may feel overambitious, US funders will take a request for $50M more seriously than a request for $5M. Several leaders shared anecdotes whereby adding a zero, they raised double or triple what they hoped for. Key to the success of these stories was a strong company vision and understanding the needs for the journey (discussed below). Being bold also translates to interactions with the investment arms of large pharmaceutical companies, highlighting their capability gaps and ensuring a biotech’s skills are clearly outlined.
Finally, and most importantly for early-stage companies, successful leaders recognise that early-stage science can be hard to judge, and investors often need to rely on their valuation of the leadership team. This means ensuring you build a team with demonstrable success, either through previous experience, or out-licensing. Maximising success in each of these areas can differentiate an over-subscribed raise from a failed raise.
Outside of funding, research partnerships often lay the foundations for a company’s long-term success. Leaders recognised they must strike a balance between using CROs and academic partners, with pros and cons for each. While academic partners can provide niche expertise at minimal cost, there are often challenges with timeline accountability and control of intellectual property rights. On the flip side, CROs are more expensive but can limit human resource costs and ensure key timelines are met.
Key takeaways
- Explore alternative sources of funding, such as grants and Family Offices, in addition to large funding markets like the US
- Be bold in interactions with funders, don’t shy away from ambitious requests
- Consider all types of partnerships and associated pros and cons before committing to a single strategy
Share a vision on the destination
The predominant vision of biotech companies is to deliver innovative therapies to transform patients’ lives. While this emotive vision may be enough to sustain angel investors and family offices initially, investors also need a vision for financial success. Aligning on an overall vision early will minimize discord and maximize the potential for success.
A compelling value story can be conveyed in ~5-10 slides and aligns to both the emotive and commercial visions. The emotive case clearly outlines the unmet needs of the patient, and how the company will address them. The commercial case, underpinned by a well-defined and researched TPP, puts a value on the likelihood and worth of that impact.
For many investors, the most attractive companies to invest in have one lead asset underpinned by a pipeline of potential assets to deliver revenue. Key to realizing revenue is establishing a defined strategy, be it licensing assets to big pharma, an IPO, self-commercialising a drug or company acquisition. Ensuring all parties are aligned on this destination, or go-to-market strategy, is key to a successful partnership. Keeping this in mind, successful leaders recognise that as a company’s assets progress through development, there is a need to re-evaluate and refine the destination.
Key takeaways
- Build a concise value story that aligns to the emotive and commercial visions
- Ensure the value story is underpinned by a well-researched product proposition
- Gain early alignment on the go-to-market strategy
Align on how to reach the destination
A key realization for many of the leaders throughout their careers was that good science alone won’t deliver a drug to market. However, this awareness is not widely shared by investors and academic founders, and education on the importance beyond R&D is often required. Other functions are critical to ensure that a drug is ready for market approval (CMC and Regulatory Affairs), and that the market is ready for the drug (Access and Medical Affairs).
Stakeholders with limited pharmaceutical industry experience can overlook that preparing a drug for market approval requires scaling up manufacturing and distribution to ensure supply can meet demand immediately following approval. For UK biotechs, it’s also important to recognise that an initial approval from the FDA is likely to have a greater impact than from the UK’s MHRA. The implication being that clinical data needs to be generated in the US as early as Phase 2. Although US clinical trials are more expensive to run than in the UK, the value is recognised through fewer cancelled trials than in the UK (the NHS is struggling with the COVID backlog and a high rate of industrial action), fewer post-approval requirements, and providing data for US payers to secure reimbursement.
Finally, engagement with clinicians and KOLs can help to smooth any changes in the treatment paradigm pre-launch, priming the market for entry. Leaders who educate academic founders and investors on the importance of these factors for an asset’s commercial success reported having less discord during strategic conversations.
Key takeaways
- Ensure the full team is aware that “good science” alone won’t lead to commercial success
- Explore running clinical trials in the US early to generate data for an initial approval by the FDA
- Communicate the value of investing beyond R&D and invest in these capabilities early to ensure successful market entry
Parting Thoughts
Having survived several tough years London’s biotech leaders share great optimism for the future of UK biotech. Building and maintaining productive stakeholder relationships is crucial for their companies as they continue to operate in a fast-evolving and competitive market. Key to these relationships are honest and upfront conversations between founders, leaders, and investors on their objectives for the company – and we appreciated our guests’ willingness to candidly share their opinions and perspectives on the sector with us. We look forward to supporting the continued success of UK biotechs in delivering innovative therapies.
End Notes:
[1] https://biotechfinance.org/
[2] https://www.labiotech.eu/recent-biotech-fundings/
[3] https://autolus.gcs-web.com/news-releases/news-release-details/biontech-and-autolus-announce-strategic-car-t-cell-therapy
[4] https://www.prnewswire.com/news-releases/jazz-pharmaceuticals-enters-definitive-agreement-with-redx-pharma-to-acquire-global-rights-to-kras-inhibitor-program-302055488.html
[5] GlobalData Analyst Briefing (Feb 2024): Biotech Funding Optimism Rises as 44% Predict Recovery in 2024
