Dr. Leen Kawas, an experienced biotechnology innovator, highlights the current biotech industry landscape and offers practical suggestions to overcome today’s challenges.
Launching a biotechnology company is an exciting proposition. The founder brings a passion that often stems from their personal experiences. Alternatively, the founder seeks to apply their expertise to solve a wide-ranging problem. They may seek a therapy for a serious disease or wish to develop a game-changing technology.
After reviewing the challenge’s parameters, the founder envisions an effective solution and structures their biotechnology business to achieve it. In today’s 21st-century business landscape, healthcare solutions and healthcare innovations are at the forefront of this rapidly evolving industry.
As might be expected, pursuing this worthwhile goal is decidedly non-linear in nature. Multiple challenges can slow the fledgling company’s momentum. Some obstacles may require the biotech business to revamp its priorities and/or retool its operations. Some challenges could even threaten the company’s very existence.
Leen Kawas, Ph. D. is Propel Bio Partners’ Managing General Partner. This Los Angeles-based venture capital firm works with biotech and life sciences start-ups and early-stage businesses. Besides beneficial funding, Propel Bio Partners offers multiple types of targeted expertise. Dr. Kawas discussed five obstacles that can threaten to derail newer biotech companies’ growth.
Cost and Funding Challenges
The United States’ limited number of biotech hubs leads to stiff competition for laboratory space, team members, and clinical trial participants. This greatly increases costs for cash-strapped start-up and early-stage biotech companies.
Research and development activities, extended clinical trials, regulatory approvals, and intellectual property protection also require substantial financial resources. In addition, reliance on laborious manual processes often means these fledgling firms burn through cash at a breakneck pace.
As a biotechnology venture capital firm’s principal, Dr. Leen Kawas knows many emerging biotech firms greatly underestimate their funding needs. To further complicate the issue, biotech funders often expect product launches within a less-than-reasonable time frame. If the biotech company doesn’t produce timely results, the business could see its critical funding evaporate.
Continued Decline in Biotech Initial Public Offerings
Biotechnology industry initial public offerings (or IPOs) have substantially declined since 2021. Biotech firms that successfully completed an IPO during that period also saw their funding gradually decline. Three major factors have contributed to this investment funding decrease.
First, widespread economic uncertainty and geopolitical conflicts have caused investors to become increasingly cautious. This reluctance to invest affected biotech stocks, which are often inherently risky investments. Fewer investors mean more competition for limited funding resources.
In addition, the United States Food and Drug Administration (FDA) has recently issued more stringent drug approval criteria. Dr. Leen Kawas acknowledged that this fosters a more complex regulatory environment, which is often more difficult for newer biotech companies to navigate.
With these factors in play, the biotech IPO landscape now favors companies with more mature drug pipelines, robust clinical data, and unobstructed regulatory tracks. Therefore, early-stage biotech businesses may have difficulty completing an IPO unless they have a favorable competitive position or partner with an established company.
Fewer IPOs Can Lead to Funding-Related Layoffs
Biotech companies unable to complete an initial public offering must often revamp their business strategy and operations. In 2023, over 100 drug manufacturers announced layoffs that affected over 10,000 workers. These layoffs were largely a result of insufficient financial resources.
Besides the impact on employees, the biotech layoffs also negatively impacted the biotech industry’s innovation capacity. With fewer highly skilled researchers on staff, a biotech company would need to reduce its research and development (or R&D) programs. This decreases the business’ ability to develop new drugs and other patient therapies.
Drug Development Obstacles and Delays
Each drug development candidate must be tested during extensive pre-clinical and clinical trials. For perspective, an average United States clinical trial can extend for 12 years. During the process, obstacles can arise that require the trial’s management team to revamp one or more aspects of the trial protocol. For the drug developer, successfully navigating each trial stage becomes increasingly difficult.
External factors, such as evolving market demand and regulatory requirements, can also affect a trial’s outcome. Therefore, an initially promising drug candidate can become increasingly non-viable as the trial proceeds. From a financial perspective, the drug developer has likely gone to great expense without any subsequent reward.
Even if the drug candidate receives FDA approval, the drug developer must continue to monitor the drug’s performance throughout the product’s life cycle. These Phase IV studies require patient data acquisition, further increasing the drug development costs.
Dr. Leen Kawas has extensive familiarity with clinical trials. Prior to Dr. Kawas’ Propel Bio Partners’ role, she served as Athira’s Chief Executive Officer (or CEO). During her Athira tenure, Dr. Kawas played a key role in the design and completion of multiple clinical trials. Her firsthand trial experience enables her to deliver detailed guidance to Propel Bio Partners’ biotech clients.
Decrease in Multi-Application Platform Technologies
Platform technologies, or tools applicable to multiple applications or products, have historically been well-received for their potential benefits. Ideally, these technologies would spur creative solutions for challenging problems while decreasing costs and risks. Investors previously favored these technologies because of their wide-ranging applicability.
Today, Dr. Leen Kawas noted that platform technologies have fallen out of favor. Stated another way, fewer investors are participating in biotech companies’ funding rounds. Difficulties in verifying a platform’s benefits, and scaling the technology’s production and manufacturing, continue to be significant concerns. Intellectual property protection and complexities also present substantial obstacles.
Finally, newer platform technology companies must compete with existing platform players. Some of the latter firms partner with well-capitalized entities that better enable innovators’ projects to come to fruition.
Regulatory and Compliance Challenges
Each biotech innovation integrates numerous scientific procedures, and each one requires FDA oversight. Achieving (and maintaining) regulatory compliance is challenging. To realize these goals, the start-up or early-stage biotech firm must first understand the complexities of applicable laws and regulations. Completing exhaustive clinical (and preclinical) trials helps advance the newer biotech firm’s credibility.
Finally, creating a regulatory affairs group, and collaborating with regulatory leaders, helps the biotech firm to increase its compliance odds. Ongoing adherence to ethical and public safety standards, and consistent communication with investors and other stakeholders, are also positive strategies. Taken together, these practices better position start-up and early-stage biotech companies to compete on this highly competitive stage.
Dr. Leen Kawas: Due Diligence is Paramount
The biotech industry’s rapid advancements mean challenges (and opportunities) can appear with little notice. Instead of rushing in unprepared, Dr. Leen Kawas recommended that start-up and early-stage biotech companies step back and objectively evaluate each situation. With thorough due diligence and guidance from industry experts, the emerging biotech firm’s founder and their team can work toward an optimal outcome.
