The Future of Biotech: What’s in store for biotech companies navigating uncertain waters of market environment
Dan Chevallard, Chief Financial Officer, Viracta;
John Crowley, Chief Financial Officer, Fusion Pharmaceuticals;
Jeffrey Rona, Chief Business and Financial Officer, Ovid Therapeutics;
Rowan Walrath, Life Sciences Reporter, Boston Business Journal;
Jen Nwankwo, Founder & CEO, 1910 Genetics
Roan Walworth, life sciences reporter for the Boston Business Journal, moderated a keynote panel at the Finance and Accounting for Bioscience Companies conference, which took place as part of Biotech Week Boston in September 2023. Panelists included Jeff Rona, chief business and financial officer of Ovid Therapeutics; Dan Chevallard, CFO of Viracta; Jen Nwankwo, founder and CEO of 1910 Genetics; and John Crowley, CFO of Fusion Pharmaceuticals.
The first topic that the panel covered was the IPO and venture capital market today versus in the past couple of years.
“It is estimated that there are over 270 companies with less than 12 months of cash on hand which highlights that there’s a big need in competition for cash today,” said Crowley. “It’s becoming a tougher market, and what we’re seeing is that investors are just having more concentrated investments and they’re just more judicious and thoughtful about it.”
Crowley also shared that alternative financing methods have come into play, including project-based, and risk-based project-based options. These primarily reward the investor with higher returns when they assume most of the risk upon approval.
“There’s a lot of interesting creativity going on in this space because of the challenges that we see with the XBI [SPDR S&P Biotech ETF industry index] and market,” said Crowley. “According to research there is a noticeable difference between private company and public company access to capital.”
For companies that are struggling, one strategy they recommend is to selectively target insiders or other investors and to start small before doing something bigger.
Nwankwo noted that many clinical stage biotech investors are now competing for the same cash that primarily the private investors had, with the exclusive focus of putting this capital into private companies.
“We are having to think about ways to not just meet scientific milestones but find alternative sources of capital, be it non-dilutive, be it strategic collaborations with big pharma, with who can fund that last mile to bridge between a scientific milestone and a true value inflection point, and then you can raise the next round of capital,” she said. Rona discussed the different landscape that the tech industry faces, with fewer large companies to compete with compared to life sciences.
“One of the things I’ll tell you is that there isn’t that much entrepreneurial management out there respectively based on research,” said Rona.
“As a startup, one of the things I am focused on is finding other individuals who’ve been through this process before — ones that have networks and relationships that are collaborative too.” He explained that learning from those experiences through the whole process would help develop improved execution strategies for startups.
Raising Capital
Rona shared that persistence, planning and execution, are extremely important, especially for startups. There’s lots of capital out there for public companies, but it takes work to find the right investors.
“From a planning perspective, you must make sure that you do all the things that allow you to execute properly as the potential capital raises quickly because the market can slow down or shut completely,” he said. “I suppose this is about being financially wise and saving where possible. A dollar saved is a dollar raised respectively.”
Fusion Pharmaceuticals’ Crowley discussed RayzeBio’s recent IPO, which raised a billion and a half valuation. “The last private round was a 50% discount, but things worked out. RevoNA [Bio] was a company at $50 million market cap, stock price at $3 to $5, raised $200 million pipe, executed on their phase three, [and] they went from a $50 million market cap to $1.6 billion market cap.
“So these things can get worked out, but you got to take the capital when there and get the capital to fund through a meaningful valuation inflection point because cash has never been more important than ever,” he continued.
Crowley noted that runway investors want to ensure you have enough to really carry out meaningful evaluation inflection points. He said one of the biggest concerns often heard from investors and board members is dilution.
What constitutes a meaningful inflection point these days?
1910 Genetics’ Nwankwo said: “A value inflection point is human face proof of concept data. You are developing a therapeutic concept, which is supposed to do something. It’s not safety data, it is efficacy data. Now that’s the general description. In its simplest form — proof of concept is what we are interested in.”
