The opening months of 2024 in Europe have proven to be relatively uneventful for the biotech sector, still though there is a strong sense the bad times are set to change. Precipitating a more positive business environment primed to kick off later in the year, probably following upticks in the US market. One catalyst for the European scene will be new partnerships and deals driven by biopharma’s need to secure future pipelines and new markets.
Many C-level executives, that have commented for this blog, note that last year the sector went through a time of highly focused funding in both the public and private investment spheres. VC funding particularly is expected to continue being focused in the coming months, but to a lesser degree.
A point highlighted by Jan Van den Bossche, Partner in the Life Sciences team at private equity firm Andera Partners, “Our current priority when looking at new funding options is to be prepared to fund companies for longer,” is implying that VCs are having to manage their investments strategically and focus portfolios for the longer term.
An opinion supported by Alexander Gebauer, co-founder and executive chairman of Galimedix, a Phase II-stage private company developing novel oral and topical neuroprotective therapies: “This cleansing is a good thing. Investors are more stringent than before, only supporting the strongest companies,” he said, adding that “partnering was O.K. last year and this will continue in 2024.” Furthermore, he noted that pharma partners take a longer view with greater scrutiny and rigour, compared to investors.
In these terms, Gebauer anticipates that deal valuations will increase again, “with more back loading, lower up-front with greater milestone payments.” He noted, the Asian market continues to look strong for deals. “Our Théa Open Innovation ophthalmic deal is great, now our focus is on the Eastern markets for partners. For our Alzheimer’s program, we are seeking funding, globally.”
For public companies, despite the ongoing geopolitical situation and unpredictable markets, there have been positives, as Niels Riedemann, CEO and co-founder of anti-inflammatory and complement system specialist InflaRx states, “The past year has taught us that, even in difficult times, good things can happen and we did see some successful catalyst-triggered financings in 2023, including our own.”
Riedemann expects this to hold true for the year ahead. Additionally, he sees the pace of deal-making to be accelerating, “with a steady stream of billion-dollar-plus collaborations and acquisitions making headlines. With many big pharma drugs coming off patent in the near future, we expect this trend to continue.” Biotechs are taking new approaches to addressing unmet medical needs, especially in hot areas like immunology, which is creating win–win opportunities for biotech’s and big pharma players. “We look forward to seeing more breakthrough developments in 2024,” he added.
Strong cooperations accelerate development
From the point of view of a leading international contract development and manufacturing organization (CDMO) for biopharmaceuticals, Benedikt von Braunmühl, CEO of Rentschler Biopharma, noted, “We also see our industry becoming more collaborative, as stakeholders across the value chain work together to address the unmet needs of patients and society.” Adding that, “at Rentschler Biopharma, we believe in fostering a culture of collaboration and strategic partnership to leverage our strengths and synergies to deliver innovative and high-quality services.”
With an eye on the future, von Braunmühl noted, “The global biopharmaceutical market is poised for significant growth, with CAGR projections of 9.8% from 2023 to 2030 and a market value of USD 749.9 billion.” In his view, the main drivers for this growth will be biopharmaceuticals, including Advanced Therapy Medicinal Products (ATMPs), which he noted, will account for about 44% of the market. This growth is attributed to the effectiveness of biopharmaceuticals in providing personalized treatments for a range of indications, notably oncology, immunology, and rare diseases.
“However, the complexity of these molecules poses substantial challenges in development, manufacturing, and regulatory compliance, necessitating a high degree of expertise, quality and innovation from CDMOs,” von Braunmühl added.
The future in data, AI and decisions is now
In essence, Liesbeth Ceelen, CEO of BioLizard, the bioinformatics, data analytics, data management services and consulting company, sees the biopharma sectors near-term future from a data and AI perspective. She observes that today, many life sciences companies are adopting new technologies for applications ranging from process automation to in silico drug and biomarker discovery and development. “In order to create value from the vast amounts of data gathered over years of research, clearly, digital transformation in the life sciences industry will continue to grow rapidly,” Ceelen said.
In the coming year, BioLizard expects to see the pharma sector build up its data infrastructure to enable high-quality data analytics, while implementation and utilization of AI will ultimately remain the task of a small number of experts with both biological and data analytics expertise. “Creating valuable biological insights will always require the right research questions, data and expert evaluation – putting the combination of computational power with human input and collaboration at the core of making the best data-driven decisions.”
Targeted therapies will become the new oncology standard
In terms of specific new technologies and indication areas, Selwyn Ho, CEO of TCR-T specialist Medigene, holds a very similar near-term view. Citing, for example, the next generation of T-cell receptor engineered T-cell therapies, he notes, “Currently, TCR-T therapies under development will bring three major improvements, including: optimal TCRs that target newly identified tumor-specific antigens; enhanced and armoured therapies with the ability to survive and thrive in the immunosuppressive solid tumor microenvironment; and improved drug product composition for the development of safe, efficient, and cost-effective therapies.”
Moreover, Ho observes that, despite the establishment of CAR-T cell therapies as approved treatments in hematological malignancies, large unmet medical needs remain for solid tumors. “Here, TCR-T therapies with their ability to target a wider range of tumor antigens and their persistence in the body with potential for durable responses, offer great opportunities towards future curative therapies.” Highlighting this point, Ho notes the first TCR-T is expected to be approved in 2024.
Immunotherapy has become an essential pillar in cancer treatment. Currently, the field is dominated by drugs targeting the PD-1/PD-L1 pathway. “However, these cancer therapy approaches represent only the beginning of the cancer immunotherapy paradigm and show variable efficacy across tumor indications,” said Nils Debus, CBO of iOmx. “In the majority of cases, these therapies fall short in meeting the needs of cancer patients, leaving a gap in immuno-oncology treatment options.”
iOmx aims to close this gap with a differentiated approach that follows the route of new immune-evasion biology discovery and drug development. The company is developing first-in-class therapies with single-agent efficacy, focusing on targets that are biologically distinguished and orthogonal to the PD-1/PD-L1 suppression pathway.
“At iOmx we are translating unexplored immune escape mechanisms into a growing pipeline of biomarker-enabled drug programs,” Debus said.
Beyond immunotherapies, antibody drug conjugates (ADCs) are showing remarkable results in the treatment of various types of hematological and solid cancers, especially breast cancer. After a bit of a slow start – the first ADC was approved in 2000 – their recent therapeutic success has ignited a lot of interest in the field and new billion-dollar deals are frequently reported.
However, the development of ADCs remains challenging as the final molecule is not just the sum of its parts. Prof. Dr. Andreas Pahl, CEO of Heidelberg Pharma, a clinical-stage company focusing on developing improved ADCs with optimized payloads, said: “ADC development requires a lot of deep expertise to find the ideal combinations of target antigen, antibody, linker and payload to maximize tumor cell killing, while limiting any side effects.”
With its platform based on the toxin Amanitin as a payload, Heidelberg Pharma is developing several ADCs that offer a novel therapeutic mode of action in oncology and therefore are less likely to face tumor resistance mechanisms. “Furthermore, Amanitin-based ADCs can even eliminate non-dividing tumor cells, which are not susceptible to most other payloads and a major reason for cancer recurrence,” Pahl added. With the advances in ADC technology and new payloads such as Amanitin or topoisomerase I inhibitors, the future of cancer treatment looks brighter than ever.
Targeted therapies beyond oncology are in demand
Other promising technologies currently in the starting blocks will grow more influential in the field of targeted therapies. One example is Secarna Pharmaceuticals, the leading independent European antisense drug discovery company. Secarna is developing best-in-class antisense oligonucleotides therapies using its proprietary ASO discovery platform. In general, the ASO technology has matured significantly over the years, resulting in improved overall efficacy and safety profiles, with several products on the market and many programs in advanced stages of clinical development.
“With more approvals in recent years and commercial success, big pharma now understands there is more to ASO technology than its application in classical genetic diseases,” said Konstantin Petropoulos, CBO of Secarna.
In terms of ASO technologies, there are programs addressing major CNS diseases like Parkinson and Alzheimer’s, as well as in oncology, cardiovascular, fibrotic and kidney diseases. “In the next few years, the race is on for developing shuttle mechanisms that specifically deliver these compounds to the affected organ or cell types, resulting in further improved potency and less side effects,” Petropoulos predicts.
Ways around old hurdles…
As many young science-driven biotech companies will know well, it’s difficult to fundraise for trials and particularly pivotal clinical trials.
“The current financing environment is more challenging than ever,” says Christian Pangratz, CEO of Atriva Therapeutics. “Unfavorable macroeconomic factors combined with a plethora of companies seeking funding create a high hurdle to win investor attention.”
Consequently, truly creative and unusual financing approaches appear to enjoy a higher probability of success in comparison to well-trodden paths.
“Moreover, after the SARS-CoV-2 pandemic, therapies for the treatment of severe RNA virus infections such as influenza, dengue and zika seem to be out of scope for many investors despite the continuously high unmet medical need and severe public health threat from existing and novel virus versions,” Pangratz noted.
In this current tough environment, there seem to be additional obstacles, for instance, historically risky unpopular indications. As Richard Jones, CEO of Adrenomed, the vascular integrity company, points out, “Although our lead product candidate in septic shock addresses a huge, global unmet need, this indication is blemished with earlier unsuccessful attempts. In these risk-averse times, investors shy away from such indications, and we expect this to continue through 2024.”
“With support from public and patient pressure groups, we are seeing approvals for vaccines against malaria and dengue. Drug development against previously incurable diseases, such as ALS and Alzheimer’s, have successfully raised funds.”
Giving up on advanced clinical research is not an option. “We owe success to millions of sepsis patients, past, present and future. Never surrender is our mission for 2024,” Jones insisted.
There are also examples for successful financings: G.ST Antivirals, a Vienna, Austria-based biotech company, is developing broad-spectrum antivirals to treat respiratory tract infections such as the common cold. In January, the company announced a fundraising for its Phase II clinical trial. The trial is now set to evaluate lead product 2-Deoxy-D-glucose nasal spray, which tackles rhinoviruses.
Guido Gualdoni, CEO of G.ST Antivirals, emphasized the importance of the indication and the financing: “While viral infections of the upper respiratory tract are ubiquitous and millions of people get a cold every year, they are currently insufficiently treated.” He reported the company had raised over EUR 6 million to complete the Phase II trial. “This influx of funding supports pivotal advancements in developing our therapy for patients in need,” added Gualdoni.
Short term skips and long term leaps
“The reality is that a lot of M&A attention is going to public and/or late-stage companies right now,” said Van den Bossche of Andera Partners. This, he explained, is because pharma is focused on short term needs as they near patent cliffs in the next five years and need to look for assets to refill their pipelines. “For us, this means managing our portfolio carefully, and concentrating our bets before pharma moves again towards mid-sized, private companies.”
When choosing a financing strategy, it is important to keep in mind that the current market volatility will likely continue into 2024. “Nevertheless, the IPO market will remain selectively open for high quality companies,” Van den Bossche added. This unpredictable environment needs to be taken into consideration when developing a financing strategy.”
There is a lot of cutting-edge science being done by biotechs in both Europe and North America. “We are seeing that big pharma is increasingly willing to make a bet on earlier-stage innovation, rather than just partner for late-stage assets,” noted Stefan Fischer, Managing Partner Finance of TVM Capital Life Science. “We saw this pay off with Lilly’s bets on obesity and Alzheimer’s disease.”
Fischer sees this trend continuing, “As pharma must look beyond short-term revenue generation towards longer-term growth strategies. Areas of particular interest for pharma include indications such as cardiovascular disease; immunological conditions; neurology; metabolic disease; and oncology,” he added.
“We expect for 2024 the funding environment will gradually improve, however for smaller, development-stage companies with no revenues it will remain challenging. It is critical that companies spend wisely and drive programs forward in a focused way,” Fischer predicted. “At TVM, we take a capital-efficient approach for our early-stage, project-focused companies – providing sufficient funding to get to a key value inflection point – clinical proof of concept,” he concluded.
Tough times do end and make for stronger management teams and companies to breathe success into future therapies, better patient care and finely tuned effective treatment options.