Magazine Article | March 1, 2023

Ongoing Economic Uncertainty And The Exit Of Generalist Investors From Biopharmaceuticals Continue To Put Pressure On Biopharma Company Leaders. What Advice Would You Offer?

Source: Life Science Leader

UNFORTUNATELY, NO ONE HAS EVER INVENTED A CURE FOR THE BUSINESS CYCLE. While the causes are different, there are many structural aspects of the current downturn that are comparable to prior depressed markets. Valuations have declined precipitously, and cash preservation is paramount. The lesson from history is how companies manage to progress their technology meaningfully during these financial downturns. Key among the decisions is the need to closely evaluate and focus the company’s R&D pipeline. While a company may not be pursuing as many products as had been planned and promoted to the financial community, such focus allows the company to make meaningful progress with its chosen medicines. Then, when the markets reopen, these companies drive an acceleration and a return to the market for both major investors and generalists, and another biotech wave ensues. The forced focus may not be detrimental to valuations because, realistically, financial markets tend to reward only the most advanced products in a pipeline. The most difficult or most impressive idea a company can pursue from a scientific perspective, even if it represents the greatest unmet need or the greatest economic potential, may not be the right thing to do from a business perspective if it has higher technological risk and/or requires financial resources that are not available during downturns. Company leaders have to make sure the technology survives, and their company survives, until the market rebounds.

KENNETH MOCH is president at Euclidean Life Science Advisors and a faculty affiliate at the Division of Medical Ethics at the NYU School of Medicine.