Biotalk

On this episode of Biotalk, Locust Walk’s Andy Meyerson welcomes Dr. Lindsay Rosenwald, Chairman, President and Chief Executive Officer of Fortress Biotech, a company focused on licensing and developing high-potential marketed and development-stage drugs.

Lindsay shares his journey from physician to biotech entrepreneur and outlines Fortress Biotech’s strategy of licensing high-potential marketed and development-stage drug candidates, avoiding early-stage technologies. They discuss how Fortress capitalizes on inefficiencies in the drug development market, such as acquiring drugs approved abroad but not in the US, and the role of AI in improving drug search and evaluation efficiency.

Despite concerns about macroeconomic risks and changes in healthcare spending, Lindsay believes Fortress can navigate these challenges by being a low-cost producer of drug candidates. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:

1:26 Lindsay, you have had an interesting and varied career across finance in life sciences. I always find successful people’s career arc fascinating – How did your career develop, and what lead you to your current role at Fortress Biotech?

3:58 What spurred your interest in life sciences?

5:26 What we hear over and over in our current discussions with investors is an interest in identifying high-quality assets from within pharma or biotechs that can be spun out into new companies. This has been gaining in attractiveness over the last 3 years as investor focus increases on clinical-stage assets. What I find interesting about this shift is that Fortress’ strategy has been to do this since its founding. This leads me to a couple of questions: What do you think about this current investor trend?

10:15  How did you arrive on the Fortress business model?

14:11 What do you see as the overall implications for everyone now that so many people are hunting for the same opportunities?

17:12 What potential do you see for AI in revolutionizing drug discovery and development at Fortress Biotech?

19:52 What is your current view on the biotech market, and what trends do you foresee shaping the industry in the coming years?

22:09 Given the dynamic nature of biotech, how is Fortress Biotech positioning itself to navigate future challenges and opportunities?

In this episode, Geoff provides valuable insights into our report, focusing on critical areas such as:

Biotech capital markets: The XBI remained flat in Q2, diverging from the bullish S&P 500, with fewer IPOs but more capital for later-stage companies.

Private biotech markets: Venture financing rebounded with $5.5 billion across 44 deals, though the industry is divided between companies able to raise capital and those struggling.

Strategic transaction activity: M&A and licensing deal values stayed consistent with Q1, focusing on Phase 2 companies and notable ex-US acquisitions.

Market outlook and advice for the months ahead: Locust Walk expects continued positive momentum, advises careful cash use, notes non-dilutive capital accessibility, and predicts gradual recovery through 2024 with a stronger 2025.

We invite you to listen to our podcast and read our report and welcome the opportunity to discuss its contents with you. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:

0:39 Deal Context, Quarter Highlights and Key Takeaways, and Future Outlook

8:31 Our Advice for the Current Market

Transcription:

Welcome to Biotalk. My name is Geoff Meyerson, CEO and Co-founder of Locust Walk, and you are listening to Biotalk, our podcast for biotech deal makers. This episode of Biotalk is focused on Locust Walk’s 2024 Second Quarter market conditions Report, in which we apply the latest data to analyze current activities in the biopharma deal landscape. Locust Walk maintains proprietary transaction and finacning databases and each quarter our deal team compiles key statistics and trends showcasing what is happening in the global private and public capital markets and strategic partnering and M&A activity.

Deal Context, Quarter Highlights and Key Takeaways, and Future Outlook

To provide some structure, I will first cover biotech capital markets, touching on both public and private market performance over the past quarter. I will then transition into strategic transaction activity, covering both M&A and licensing. Please note, the full report published on the Locust Walk website is over 60 slides, so while I will do my best to summarize, as always, I encourage you to check out the full report for additional detail. To download this report, please go to locustwalk.com and go to our “Insights” page.

The XBI traded relatively flat across the second quarter, diverging meaningfully from the broader S&P 500, which saw bullish gains. Key drivers of this divergence were the XBI being more impacted by the higher-than-anticipated CPI reading in April relative to the S&P 500 and the record-breaking growth of AI/tech companies. One stunning non-biotech stat to consider: Nvidia alone accounts for more than a third of the S&P 500’s gains in 2024.

In terms of public fundraising, IPO activity slowed in the second quarter, with only 3 such deals. The weakened macroeconomic outlook and generally poorer performance of first-quarter IPOs reduced market demand for new companies. From my perspective, public biotech markets remain closed to all except a selection of late-stage companies with de-risked approaches, ideally accompanied by insider support and sufficient near-term news flow. Follow-on market activity also cooled from Q1, but interestingly, the average capital raised ($178M) in Q2 is up over 47% relative to the 2023 quarterly average, highlighting the accessibility of large chunks of capital for more de-risked later stage companies with strong data.

Venture financing continued its rebound from Q1, with the 44 deals summing to $5.5B in raised capital marking the best quarter for venture financing since Q3 2021.While Xaira’s notable $1B Series A was the talk of the venture community, the quarter also saw a $400M Series A raised for a NewCo spinning out Jiangsu Hengrui’s incretin drug pipeline led by Atlas, Bain, Lyra and RTW, and a $372M Series D for Formation Bio lead by a16z. These deals ultimately represent just 3 of the 18 companies that raised over $100M during the quarter.

Q2 saw a more even investment split across development stages, but 2024 activity in aggregate remains bifurcated, focusing on lower-risk, clinically validated opportunities (e.g., Phase 2+) and promising, nascent preclinical/discovery opportunities led by exceptional teams. Similarly to public financings, average round size continued to increase this quarter to $126M (i.e., 53% increase over average deal value from Q1 to Q2), with new investor participation in Series B and later deals reaching highest levels seen in the last 12 months. While the robust overall value and high-profile financings may signal positive investor sentiment and belief in private investment exit potential, the larger average deal sizes with flat deal volume in Q2 highlight the dichotomy between the haves vs. have nots. Outside of the U.S., there seem to be very few “haves”, as venture financing remained depressed in terms of deal volume and value, with no sign of a similar recovery as in the US. For those able to raise capital, the money is flowing. For those that are struggling to raise, it feels like a depression. The contrast couldn’t be more stark as the industry continues to work through it’s excess inventory of private companies.

In terms of strategic transaction activity, aggregate M&A and licensing deal value was on par with the relatively limited activity seen in Q1, with volumes lower than any quarter in 2021 – 2023. Discovery and preclinical deals continue to dominate the majority of licensing deal value, whereas M&A has continued Q1’s trend of increased exposure to earlier-stage opportunities (vs. late-stage/commercial focus in 2022/23), with most of Q2 deal value concentrated in Phase 2 companies. M&A premiums continue to remain elevated, reflecting the increased scarcity for post-Ph 2 companies with the lower risk validation profile desired at the current point in time. From the ex-US perspective, two Japanese pharmas, Ono and Asahi Kasei, made major acquisitions in Q2 of Deciphera and Calliditas, respectively. These acquisitions came despite the weak Yen, marking a trend to watch for the second half of 2024. On the European side, 3 of the 4 M&A deals this quarter were greater than $1B in deal value and centered around mid-clinical stage opportunities, supporting the trend seen in the US/global market, while suggesting some initial appetite for earlier stage opportunities with greater risk profiles. We continue to see larger numbers of $1B+ acquisitions, which is great for companies to achieve an exit. The total value of deals is still down signifying that either the best deals have been picked through and more data needs to be generated or that pharma is waiting for direction on the market from both the federal reserve and the US election. Since plenty of dry powder exists, our view on the reason for lower activity is that many pharmas are in asset shedding mode as much as they are in acquisition mode, putting a ceiling on dealmaking.

In non-deal related biopharma updates, Q2 saw a long-awaited win for DLL3 and novel modalities, as Amgen’s DLL3 bispecific T cell engager IMDELLTRA received accelerated approval based on the encouraging response rate and duration of response data. Insmed, Rezolute, and Merus notched wins for their later clinical stage programs in neutrophil mediated diseases, DME and head & neck cancer respectively. Two of the hottest modalities at the moment, B cell depleting cell therapies and radioligand therapeutics, saw lukewarm clinical readouts. Kyverna’s autoimmune CD-19 CAR-T reported a relapse in a patient that initially responded to the treatment in a Phase 1/2 trial, while JNJ’s Anti-hK2 radioligand demonstrated meaningful tolerability concerns, even for the oncology space, accompanying its robust initial clinical efficacy in a Phase 1.

Our Advice for the Current Market

We believe that the second half of the year will continue to carry positive momentum based on the robust activity in both the private and public financing seen in Q2, along with the recent June inflation report that provides a strong path for the Fed to begin cutting interest rates. Obviously, this may be subject to change as we’ve seen interest rate outlook change on a dime and uncertainties around the upcoming election, but we believe 2024 will continue to be a better year than 2023. Our perspective is investor sentiment continues to improve and the exits seen in Q4 of last year have returned liquidity to investors, supporting the strong private financing activity in Q2 and the case for future improvement in conditions. However, companies need to remain vigilant with their use of cash and should continue to be cognizant of the level and type data required as we saw capital raising mainly accessed by the haves vs. have nots – those with strong PoC or post-PoC data and exciting emerging technologies backed by superstar teams. The number of biotechs trading below cash continues to trend down, which is positive but, in our view, remains quite elevated compared to baseline. It will be painful at times and non-linear, but we are clearly continuing down the path of recovery through the remainder of 2024, and I firmly believe 2025 will be a stronger year for the sector.

Although strategic licensing deal activity was limited last quarter compared to prior years, we saw aggregate upfront deal value double compared to Q1, highlighting that non-dilutive capital has become more accessible. We’re seeing large pharma continue to seek smaller and less risky bets compared to expensive M&A deals. On the flip side, we’re seeing large pharma continuing to take on smaller bite-sized acquisitions in the single digit billions range as well as risk-appetite opening to earlier stages of development, mainly Phase 2 pre-POC.

The Asian markets remain challenging with the continued trend of low financing activity in both the Japan and China market. Macroeconomic conditions in both geographies play a key role and suggest that deal activity and investor risk tolerance will continue to remain limited in the near-term. Given these challenges, Asian companies should continue to seek opportunities to obtain non-dilutive capital through global ex-Asia out-licensing and remain capital efficient through this downturn.

Overall, positive momentum continues to build across US public and private markets, and we expect the second half of 2024 to continue to outperform recent years, particularly in terms of financing activity. The road to recovery will be gradual and can be accelerated based on key factors such as cooling inflation.

On this episode of Biotalk, Locust Walk’s Geoff Meyerson welcomes Stephen Sands, former Vice Chairman of Investment Banking and Chairman of the Global Healthcare Group, and currently Senior Advisor at Lazard, a renowned name in global financial services. Together, they explore Stephen’s journey into life sciences finance, his transition into financial and management roles within healthcare, his mentors, and how these relationships impacted his career.

Geoff and Stephen also tackle the evolution of banking in today’s healthcare investment landscape, highlighting specialization’s role. They cover navigating challenges and strategies in investments, including banking structures, capital markets, trends, IPOs, banks’ role in deals, and future biopharma investment trends.

Stephen offers valuable advice throughout the episode, specifically addressing CEOs on navigating the changing winds of the industry, providing insights into the intricacies of healthcare finance and investment strategies in the biopharma sector. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:

1:26 To start, I’m eager to learn about your journey into the life sciences, and more specifically, to the financial and management side of healthcare. You to use your degrees in Biology and Chemical Engineering in this way. Tell us about your store and what brought you through the arch of your career.

7:11 Can you speak about the evolution of healthcare banking from your experience?

15:22 You have seen a lot of cycles in your career. How do you think this cycle compares to prior cycles?

20:45 What’s the secret to building relationships and and what’s your strategy for building such a robust M&A franchise?

23:52 What biopharma trends do you think will be emerging over the next 3-5 years?

27:57 How do you navigate these changing winds and what advice would you give to a CEO of a smaller company?

30:29 Are you a free agent, retired, board member? What’s next for you?

During this episode of Biotalk, Geoff Meyerson, CEO of Locust Walk, unpacks our 2024 Q1 Report: Global Trends in Biopharma Transactions Report. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing the current state of global private and public capital markets, strategic partnerships, and M&A in the biopharma sector.  

In this episode, Geoff provides valuable insights into our report, focusing on critical areas such as:  

We invite you to listen to our podcast and read our report and welcome the opportunity to discuss its contents with you. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:

0:36 Deal Context, Quarter Highlights and Key Takeaways, and Future Outlook

6:23 Our Advice for the Current Market

Transcription:

Welcome to Biotalk. My name is Geoff Meyerson, CEO and Co-founder of Locust Walk, and you are listening to Biotalk, our podcast for biotech deal makers. This episode of Biotalk is focused on Locust Walk’s 2024 First Quarter market conditions Report, in which we apply the latest data to analyze current activities in the biopharma deal landscape. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing what is happening in the global private and public capital markets and strategic partnering and M&A activity.

Deal Context, Quarter Highlights and Key Takeaways, and Future Outlook

To provide some structure, I will first cover biotech capital markets, touching on both public and private market performance over the past year. I will then transition into strategic transaction activity, covering both M&A and licensing. Please note, the full report published on the Locust Walk website is over 60 slides, so while I will do my best to summarize, as always, I encourage you to check out the full report for additional detail. To download this report, please go to locustwalk.com and go to our “Insights” page.

Q1 of this year continued last quarter’s recovery of the XBI and saw a sharp upswing at the end of February on the heels of multiple positive data readouts. The XBI has since normalized but ended Q1 above prior 2023 highs. In support of this positive momentum, we saw several strong indicators of a potential recovery for the public biotech markets. Q1 saw an increase in follow-on offering’s volume and deal size (up $8.1B from $3.5B in Q4’23), and a meaningful increase in PIPE volume and size (up $2.6B from $1.7B in Q4’23). We’re seeing a trend of increasing PIPE activity that started in Q2 2023, reflecting companies’ preference to reduce financing risk by securing capital prior to data announcements, despite the cost of providing less favorable terms. For example, Avidity raised a $400M PIPE, a week before they announced positive data from their Phase 1/2 trial for their lead asset. IPO volume also doubled from Q4, which is positive, although there has been limited activity after the first half of Q1 and the companies going public largely remain limited to later-stage companies. I believe the IPO window is still relatively shut and the public market for early-stage companies will remain challenging, with the two preclinical IPOs, Metagenomi and Fractyl Health, struggling to perform already.

To a lesser degree, the private US biotech markets saw some recovery in Q1 with 15 rounds >$100M, the second-best quarter in aggregate deal value since 2021, and nearing the 2023 peak seen in Q3. Overall, activity is still relatively flat when compared to the robust fundraising seen in 2021, but we are seeing signs of life. Private biotech investors remain somewhat risk-averse, as signaled by the relative share of value attributed to mid-to-late-stage clinical deals, increasing to 43% from 36% in Q4’23. We expect the private venture markets to be slower to recover, with meaningful upswings likely to be limited until rates are meaningfully cut, which appear less and less likely by the day for 2024. Interestingly, Series D & later rounds saw continued growth in the percentage of new investors vs. existing investors, which could point to crossover investors anticipating the IPO market re-opening in the near-term. A similar level of recovery has yet to be seen in ex-US geographies, with activity in Europe and Asia remaining stagnant this quarter.

In terms of strategic transaction activity, the year was kick-started with several multi-billion-dollar acquisitions by big pharma (i.e., Gilead/CymaBay, AstraZeneca/Fusion), but this trend was not sustained throughout the quarter, and Q1 closed with the second lowest aggregate deal value and volume in the past 3 years for the US, a sharp correction from the Q4 deal value spike of $60B. On a more positive note, M&A deal activity for EU-based companies was strong this quarter, with four $1B+ acquisitions, including AstraZeneca’s $1B+ acquisition of Amolyt Pharma, a Phase 3 rare disease company based in France. We expect buyers will start to show an opportunistic increase in risk tolerance for earlier stage acquisitions as post-Phase 2 proof of concept companies become scarcer outside of oncology, and competition for these companies and assets drives premiums further up. For now, however, it seems that larger pharmas who can afford to wait-and-see will largely continue to do so, prioritizing the need for clinical validation at the cost of a higher price tag, as demonstrated by public M&A equity premiums, which increased nearly 10% from last quarter.

In a similar vein, licensing activity fell compared to the volume seen in Q4, resulting in the second lowest quarter of aggregate deal value and volume in the past 3 years. Despite the markedly lower activity, one interesting indicator that may bode well for early-stage biotech is that Q1 licensing activity saw preclinical and discovery deals amass a much larger share of deal value than in 2023 (73% vs. 36%). This may suggest interest in early-stage opportunities among strategics is recovering as it relates to licensing opportunities.

Our Advice for the Current Market

We believe that the year will not be a linear low to high scenario, which we’ve already seen the ups and down after only one quarter. That said, 2024 will be a better year than 2023 on most metrics. Both public and private markets will continue their positive momentum as the year goes on with the caveat of course around further exogenous events, like wars, and a rapidly changing interest rate outlook. As we see European and Asian financing activity continue to falter, the US market will get increasingly competitive to raise capital. Signals pointing to the crossover and IPO market re-opening are starting to appear, but securing investor dollars will continue to be a challenge given the backlog of private companies. Remaining clear-eyed about the data required to secure private and public capital continues to win the day, and we believe that creative solutions to get to value inflecting data milestones, even where dilutive or less favorable regarding terms, will be required for survival for early-stage companies. Notably, the continued pruning of public biotech companies trading below cash indicates that the market rebound is well under way, with the number of such companies returning to levels not seen since March 2022. Continued consolidation through take-privates, as seen with Xoma acquiring Kinnate and The Column Group taking NGM Bio private, reverse mergers, and shutdowns will be painful, but ultimately signals that the sector is returning to health.

The increase in early-stage licensing deals offers a bright spot that suggests non-dilutive, strategic capital is becoming more accessible as large pharma works to balance their bets between large, expensive M&A deals for clinically validated opportunities and smaller, less risky licensing deals for discovery and preclinical technologies. Clinical-stage companies without proof-of-concept efficacy data will continue to face challenges funding trials, necessitating a forward-thinking approach in early development to be as capital-efficient as possible while deal and financing activity recovers.

We expect Asian markets to continue to lag the recovery of global markets, with Japan and China facing unique challenges. Japanese equities are soaring with the Nikkei 225 up 43% in the past 12 months, but the yen continues to depreciate, future rate hikes will likely limit the biotech sector’s ability to rebound. Conversely in China, equity markets continue to struggle, and as a result, we have seen an increase in companies seeking access to US capital markets, whether through re-domiciliation or other means.

Overall, we are starting to see positive momentum build across US public and private markets, and we expect 2024 to continue to out-perform recent years in both financing and transaction activity. We do not expect the recovery to be quick, but initial signs are positive that companies with strong data packages and, just as importantly, good timing with respect to the shift in market sentiment, will face an easier road than in 2022 and 2023.

On this episode of Biotalk, Locust Walk’s Geoff Meyerson welcomes Kendalle Burlin O’Connell, Esq., CEO and President of MassBio, the nation’s pioneering biotechnology trade association, which plays a pivotal role in representing and supporting the vibrant Massachusetts life sciences industry.

In this insightful conversation, Kendalle discusses her journey from law to leading MassBio in 2008, her evolving role within the organization, and her vision as CEO for MassBio’s future.

Geoff and Kendalle delve into Massachusetts’ leading position in biotech, examining the strategies driving innovation. Kendalle addresses current industry challenges and shares her perspective on its future.

Discover MassBio’s role in fostering innovation and growth in the life sciences sector, from initiatives like the Align Summit to talent nurturing and collaboration.

Don’t miss this engaging discussion as Kendalle shares her insights, experiences, and vision for the future of the Massachusetts life sciences industry. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:

1:27 To kick things off, I’d love for you to provide our audience with some background as to what led you to the life sciences.

6:04 How did your role evolve, how did MassBio come to be, and how did thing evolve to you becoming CEO?

11:10 What is your vision as a CEO and where do you want to take the organization?

14:27 Every state and country who has an interest in biotech wonders what Massachusetts is doing right to make it far and away the number one cluster. What do you think is the secret sauce that has propelled MA in to such a leadership role and what is going to keep it there?

19:50 What are you hearing from the companies and investors you speak with about how the downturn is impacting them and what they see in their crystal ball in the future?

26:20 What types of things is MassBio doing to foster innovation in the sector?

30:47 Let’s move to the Align Summit, how did the idea for this come about and what do you hope to accomplish with the conference?

During this episode of Biotalk, Geoff Meyerson, CEO of Locust Walk, unpacks our 2023 Year-In-Review Report: Global Trends in Biopharma Transactions Report. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing the current state of global private and public capital markets, strategic partnerships, and M&A in the biopharma sector.

In this episode, Geoff provides valuable insights into our report, focusing on critical areas such as:

We invite you to listen to our podcast and download our report for the Insights page and welcome the opportunity to discuss its contents with you.  

Timestamps:

Deal Context: 0:37

Our Advice for the Current Market: 6:11

Transcription:

Welcome to Biotalk. My name is Geoff Meyerson, CEO and Co-founder of Locust Walk, and you are listening to Biotalk, our podcast for biotech deal makers.

This episode of Biotalk is focused on Locust Walk’s 2023 Year-In-Review market conditions Report, in which we apply the latest data to analyze current activities in the biopharma deal landscape. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing what is happening in the global private and public capital markets and strategic partnering and M&A activity.

Deal Context, Quarter Highlights and Key Takeaways, and Future Outlook

In the next few minutes, I will provide dealmaking context, highlight events that have had a critical impact on the biotech industry, and provide our outlook for the future along with our advice on how you can survive as a biotech dealmaker.

To provide some structure, I will first cover biotech capital markets, touching on both public and private market performance over the past year.  I will then transition into strategic transaction activity, covering both M&A and licensing. Please note, the full report published on the Locust Walk website is over 60 slides, so while I will do my best to summarize, as always I encourage you to check out the full report for additional detail. To download this report, please go to locustwalk.com and go to our “Insights” page.

As the listener of a biotech podcast, you may well know that this has been a relatively challenging year for the XBI until the middle of the 4th quarter. The index traded below end-of-year 2022 levels for much of the year, but in spite of this, finished up 8% due to a remarkable 4Q rebound. Digging in a little deeper, concurrent with this upswing, Q4 saw a significant uptick in total follow-on offering volume and size (up to $3.5B from $1.4B in Q3), as well as PIPE volume and size (up to $1.7B from $600M). Although IPO volume in the 4th quarter dropped from Q3 levels, annual IPO volume increase 30% from 2022 levels. Performance for IPO, follow-on, and PIPE offerings in Q4 was also generally positive in line with market performance. While all these indicators suggest the beginnings of a gradual thaw for biotech public markets, biotech public investors will be hoping Punxsutawney Phil does not see his shadow come February, heralding another XBI downturn, as was the case in 2023.

Unfortunately, winter continued through 2023 for biotech private markets. Overall private financing deal value and volume in 2023 remained relatively flat with the depressed levels observed in 2022. Financing activity continues to be increasingly dominated by clinical stage opportunities, with deal value attributed to these deals increasing from 38% in 2021 to 58% in 2023. Interestingly, the distribution of Series rounds has remained relatively consistent over this period, suggesting that the bar for each financing round stage has risen somewhat uniformly across this period. The general malaise in biotech private financing markets also extended to European and Asian geographies, where 2023 levels remained about on par with 2022, and well below levels observed in the prior bull market cycle.

In terms of strategic transaction activity, the string of multi-billion-dollar acquisitions by big pharma in Q4 was the catalyst many of us have been hoping to see for some time. In December alone, there were 7 biotech M&A deals greater than $1B, with 10 such deals occurring over 4Q. These transactions drove the largest quarter for biotech M&A since Q4 of 2020, and propelled aggregate 2023 value to $162B, significantly surpassing the $94B observed in 2022. And while I could wax on about the M&A activity observed this quarter for hours, I will end with one final statistic of note: Despite the significantly increase total value in 2023, M&A deal volume was roughly equivalent in 2023 and 2022, with 81 and 76 deals respectively. This massive uptick in average deal value alludes to the size and profile of the acquirees, suggesting positive transaction momentum for the sector moving into 2024.

In a similar vein, 2023 saw the greatest licensing deal activity observed over the past three years, both in terms of overall deal value and volume. While aggregate value was certainly boosted by a selection of large, high-profile licensing transactions such as Daiichi Sankyo and Merck’s ADC collaboration, the consistent relationship between value and volume may speak to these transactions serving as an alternative means to capitalization given the frosty state of capital markets (especially private). However, throughout 2023, licensing deals continue to be heavily backloaded, with total upfront consideration accounting for only ~18% of total deal value in Q4. One final interesting indicator for the current state of biopharma deal making is that aggregate licensing deal value for Ph 1 assets jumped ~3x from 2022 levels in 2023, potentially signifying a reversal in the bimodal preclinical / post-PoC deal distribution that characterized the 2022 landscape. That would make a good sign for early-stage biotech.

Our Advice for the Current Market

So, what is our best advice for the current market? While public biotech markets may be beginning to thaw, the limited IPO volume and restriction to late-stage approaches suggest that the improvement in circumstances and capital access is limited to a subset of late-stage, large biotechs (at least for now). There are earlier stage biotechs in the IPO queue, which could change this trend. Our bet is that these will be one offs and early-stage companies will continue to struggle with an IPO financing. Access to capital for earlier stage, private biotech may continue to be restricted although we believe that there will be an uptick in 2024. We’ve heard rumblings of a crossover market emerging given the backlog of private companies with maturing data and investors who have fund timelines where they will need to start deploying capital. Unfortunately, investors who can choose to invest publicly or privately have largely shifted public. That reversal will need to occur concurrent with an uptick in IPOs.

Fortunately, the increase in licensing volume and value especially at phase 1 suggests that now more than ever, monetizing undercapitalized programs represents a key tool to secure non-dilutive funding to advance core programs and platform development. Such partnerships have the added benefit of providing external validation that may become instrumental to securing fundraising, whether public or private, as market conditions improve.

For private companies with investors who are tired or public companies who have traded below cash for an extended period, it is important for both their investors and management to be objective about whether the company can and should exist as an independent entity or whether pursuing alternatives business combinations represents the best strategy, especially as larger biopharmas continue to transition into ‘buy mode’. One of the best indicators from JPMorgan was the increase in transactions for companies that did not have randomized controlled phase 2b or later data. The companies that get bought before this data point encourages capital formation and overall industry positivity. To capitalize on this emerging trend and based on our experience, exit value is maximized by making informed strategic decisions with sufficient runway to accomplish the desirable outcome, though I fully recognize the difficulty of making such a call. However, while the tides may seem to be turning based on the XBI and large-cap M&A deals, I reiterate my belief that it may be a little while until the top-down improvements in macro conditions lift the boats of the smaller public and private biotechs, and thus companies must plan accordingly. 2024 will absolutely be a better year than 2023 and I share the enthusiasm from many at JPM because of the shifting macro winds and increase in M&A, especially pre-POC. That said, this year will be non-linear, could be very bumpy and will not be easy. When we’re writing our market conditions for 2024 at the end of the year, I predict more IPOs, more crossovers, similar M&A and a general uptrend that might be hard to see without zooming out on the year. The good times are far from back but we’ve passed the bottom of the market. This from someone who has been bearish on the record for 3 years.

As evidenced by the significant approvals seen in the past year, the pace of innovation continues to be driven by strong companies advancing differentiated technologies, emphasizing the importance of pursuing robust science that addresses patient unmet needs. The beginnings of a thaw observed over the past quarter is a good reminder that eventually, the macroeconomy and capital markets will eventually heal, ushering in a new growth era for the sector. In the interim, continued focus on controllable factors that will improve innovation, differentiation, and position will enable companies to evolve into strong entities maximally positioned to take advantage of the coming spring.

In conclusion, I want to thank everyone for listening to this episode of Biotalk. Please share your thoughts and feel free to suggest potential topics and guests for future episodes. We look forward to a productive dialogue and hope you tune in to our next podcast. Please share with all your friends and colleagues to help us grow the audience. This is Geoff Meyerson for Biotalk signing off.

On this episode of Biotalk, Locust Walk‘s Geoff Meyerson welcomes Soufiane Aboulhouda, Co-Founder and Chairman of the Board of Nucleate, a global non-profit dedicated to empowering future biotech leaders through education and fostering innovation in life sciences companies. The discussion explores Soufiane’s journey into early-stage biotech and delves into the founding story of Nucleate, highlighting the organization’s mission and its pivotal role in shaping the biotech landscape.

Soufiane, who served as President of Nucleate for over 5 years, shares valuable lessons learned during his tenure. Listeners also gain insights into Soufiane’s current work at the Wyss Institute under George Church, exploring the intricacies of his research in the lab.

The episode concludes with Soufiane addressing the biggest challenges facing the biotech industry and Nucleate, expressing optimism for the organization’s future. The positive note of the conversation emphasizes the reasons behind Soufiane ‘s confidence in the promising future of Nucleate.

We invite you to tune in to this compelling discussion on biotech, education, and innovation. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:  

1:21: To kick things off, I’d love for you to provide our audience with some background as to what led you to your initial exploration of early-stage biotech? 

5:15: What is the founding story of behind Nucleate? What you’re trying to solve and how did it come about  

8:56: You also served as President of Nucleate for over 5 years. What lessons have you learned throughout your time as president? 

16:04: You currently work at the Wyss Institute under George Church. Tell us more about your work in that lab.  

19:37: In terms of Nucleate as an organizations, where do you operate, how many members do you have? 

22:58: How has the biotech market downturn impacted Nucleate? Your lab? Your research? 

26:48: At Locust Walk, we believe that dislocations are a great way to spot opportunity.  What would you say are the kinds of opportunities that are revealing themselves to you as the industry goes through a little bit of a struggle?   

28:54: To wrap up a great conversation, do you believe there is a biggest issue currently facing the industry, or potentially impacting Nucleate? 

30:44: Why are you optimistic about the future of Nucleate? 

On this episode of Biotalk, Locust Walk‘s Daniel Brog welcomes with Shehnaaz Suliman, M.D., CEO of ReCode Therapeutics, a clinical-stage genetic medicines company using its selective organ targeting lipid nanoparticle platform to power the next wave of mRNA and gene correction therapeutics.

With over 25 years of experience, Shehnaaz brings a multifaceted perspective to the discussion. She has held diverse roles, from practicing physician to dealmaker, and now leads the charge at ReCode. Join us as we delve into the distinctive qualities that set ReCode apart and to discover the groundbreaking technology behind their selective organ targeting lipid nanoparticle platform, known as SORT.

As a seasoned Biotech CEO and respected board member, Shehnaaz offers insights into what qualities make a great board member and why diversity is crucial in shaping the future of biotech leadership. We’ll explore the role of boards in promoting diversity and address the barriers that persist in achieving this essential goal within the biotech industry.

We invite you to tune in to this engaging podcast episode. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:  

1:08: To kick things off, I’d love for you to provide our audience with some background as to what led you to your initial exploration of biotech?

5:23: You mentioned a keen interest in the activism side of things. Coming from your physician background in South Africa, alongside deal making, how you have incorporated activism throughout your career?

7:51: Recode is doing innovative work with targeted lipid nanoparticle platform SORT. Tell us more about the platform and what makes ReCode’s approach so unique.

14:14: Your SORT platform can target several potential organs. How did you select the lung for your lead assets?

19:49: Within the field of RNA therapeutics and outside of delivery, are there other technologies that you think will play the most significant role in moving this space forward?

28:38: As you look at where Recode stands today, what are you most excited about looking forward?

30:40: How has the biotech market downturn impacted your business and how you think about prioritizing next steps for the company?

33:58: You recently closed a Series B financing – congratulations! The current macro biotech environment has been challenging, especially for earlier stage platform companies. What was critical to success in your most recent fundraise?

41:00: Was there a particular reason ReCode decided to deprioritize some of the CNS programs, at least for your own internal development and focus on those as partnering opportunities?

42:25: You are an experienced Biotech CEO, board member and of Women in Bio’s Board Ready Program. What qualities do you think make a good board member? Why is it important to focus diversity when shaping board composition?

51:01: What would you say are the major barriers that you see in terms of increasing diversity in the biotech industry and at the leadership level?

56:25: What is your actionable advice to minority groups as they advance their education and careers in the life sciences?

On this episode of Biotalk, Locust Walk‘s Geoff Meyerson welcomes Errik Anderson, CEO and Founder of Alloy Therapeutics, to the podcast. Alloy is a trailblazing drug-discovery company, bringing collaborative platforms and services to the biotech world, making cutting-edge biologics accessible to everyone, from academia and small biotechs to major pharmaceutical companies.

Errik, with a unique blend of entrepreneurship, venture capital, and a passion for rugby, shares his journey from Adimab to founding Alloy, highlighting Alloy’s distinctiveness in biotech. He also discusses Alloy’s future plans and their excitement about the anticlastic ASO technology.

During the conversation, Errik explores the funding landscape for later innovations, its impact on Alloy’s business, and his prognosis for the short to intermediate-term future of the industry.

We invite you to tune in to this engaging podcast episode. Subscribe or follow Biotalk on Apple Podcasts | Spotify.   

Timestamps:  

1:25: What led you to your initial exploration of early stage biotech?

2:55: Can you share a bit about your beginnings in your professional career and, what sparked your entrepreneurial spirit?

7:29: Can you provide the backstory of Adimab and how that led into Alloy?

13:25: What’s the exit for an Adimab shareholder or Alloy shareholder if it is a forever company?

24:43: You recently launched the anticlastic ASO technology platform. Can you tell us more about this, why you are excited by it, and your plans?

40:21: How do you avoid 82VS competing with your typical arms-length licensing clients?

45:11: How do you think about later innovations being funded, how does it impact your business and what is your prognosis for short to intermediate-term future?

During this episode of Biotalk, Geoff Meyerson, CEO of Locust Walk, delves into our 2023 Q3 Report: Global Trends in Biopharma Transactions Report. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing the current state of global private and public capital markets, strategic partnerships, and M&A in the biopharma sector. 

In this episode, Geoff provides valuable insights into our report, focusing on critical areas such as: 

We invite you to listen to our podcast and download our report for the Insights page and welcome the opportunity to discuss its contents with you.  

Timestamps:

Deal Context: 0:58

Future Outlook: 8:50

Our Best Advice for the Current Market: 11:32

Transcription:

Welcome to Biotalk. My name is Geoff Meyerson, CEO and Co-founder of Locust Walk, and you are listening to Biotalk, our podcast for biotech deal makers.

This episode of Biotalk is focused on Locust Walk’s 2023 Third Quarter market conditions Report, in which we apply the latest data to analyze current activities in the biopharma deal landscape. Each quarter, Locust Walk’s deal team compiles key statistics and trends showcasing what is happening in the global private and public capital markets and strategic partnering and M&A activity.

Deal Context

In the next few minutes, I will provide dealmaking context, highlight events that have made a critical impact on the biotech industry, and provide our outlook for the future and our best advice on how you can survive as a biotech deal maker.

European and Asian Markets

Context on Continuing Innovation

Future Outlook

Our Best Advice for the Current Market 

In conclusion, I want to thank everyone for listening to this episode of Biotalk. Please let us know what you thought and feel free to suggest potential topics for future episodes.  We look forward to a productive dialog and hope you tune in to our next podcast.  Please share with all your friends and colleagues so we can grow the audience.  This is Geoff Meyerson for Biotalk signing off.