Believe it or not, 2024 might actually be a record year for pharmaceutical investment, but most of that money is not being directed toward drug discovery. My perspective is this: Many pharmaceutical and biotech venture capitalists are once-bitten, twice-shy. They still value the enormous returns that accompany a successful new drug. That hasn’t changed. But they’ve developed a much better nose for sniffing out a project that may be doomed from the start.
That’s not a bad thing — at least, it’s not if you’re already approaching drug development with risk mitigation in mind. So in this blog, I’ll explore what a venture capitalist is secretly hoping to see and offer my tips on securing a mutually beneficial partnership.
Prove There’s a Market for Your Potential Drug Product
What does the current market look like for your product? How would your product potentially compete with what’s already out there?
This is true of any product — pharmaceutical or otherwise: If there’s very little market for it, or it doesn’t offer a competitive advantage, it’s probably not worth investing in. And considering the hefty expense and risk associated with drug development, you’ll need to highlight potential returns.
In addition to providing clear answers to the questions I outlined above, here are the types of things venture capitalists are looking for:
- A first-in-class treatment
- Best-in-class efficacy (e.g. expanded indications, higher potency, broader activity spectrum)
- Enhanced safety due to fewer adverse reactions or interactions, or lower toxicity
- Better pharmacokinetics, like improved bioavailability or less frequent dosing requirements
- A novel mechanism of action that may, for example, overcome growing resistance to existing therapies or help introduce a new category of therapies
- A formulation or delivery method that improves the patient experience
- Formulation that offers a longer shelf life or more flexible storage options
- Production requirements that would make a new therapy more affordable to patients while still preserving profitability for investors and drug manufacturers
- Potential to create a valuable new patent or to provide successful exit strategies
The Attractiveness of Drug Abuse-Deterrent Formulations
I could have listed this earlier, but I wanted to talk in more detail about abuse-deterrent formulations (ADF) because, for some therapies, any innovation in this area could be game-changing for patients, prescribers, and the greater public — and therefore, also incredibly attractive to investors.
Depending on your active pharmaceutical ingredient (API), there are typically three main ways you’d go about creating an ADF:
- Reducing the harmful effects of your chemical compound
- Formulating it in such a way that abuse becomes very difficult or unpleasant (e.g. including antagonist ingredients or gelling agents that impede injection)
- Altering the route of administration
Many creators of transdermal patches and oral thin films (OTFs) are currently trying to develop new ADFs using that last method. However, so far, most of these methods are far from perfect; they can contain a larger drug payload and are associated with accidental pediatric exposure.
There are many challenges with bringing a novel ADF to market, but the demand is definitely there. In fact, the FDA is actively encouraging the development of prescription opioids that are at least more difficult — if not impossible — to misuse.
Conduct a Thorough Druggability Assessment
If you can prove that there’s a market for your product, then you still have to make sure you can get it there. Attracting investment at the early stage of a drug development journey is more difficult these days, but with the right data, it’s certainly not impossible.
And considering a druggability assessment is something you should be doing anyway to make sure your product has the best possible chance of success, it’s very important not to rush this step. Unfortunately, quite a few enterprising biotechs do, which is one of the reasons why larger pharmaceutical companies and investors alike tend to regard anything other than robust data with extreme suspicion.
A positive druggability assessment will help confirm:
- Your drug's properties and the target patient profile are not in conflict
- Science validates that your drug has potential and would be of value
- Your anticipated timeline and costs are reasonable
It sounds simple enough — perhaps deceptively simple. A comprehensive druggability assessment can help you make informed decisions and catch problems quickly — before they become quagmires. But rushed, incomplete, or faulty druggability assessments are one of the reasons we see such high rates of failure in clinical trials.
This is exactly when many biotechs should consider bringing in an experienced CDMO to help them, which is why at Corealis, we offer druggability assessments for oral solid dosage (OSD) projects at no charge. However, the tendency in our industry is to wait too long before engaging an experienced CDMO in a misguided effort to save money, only to spend even more when critical work needs to be redone. And that leads me to my next point …
Assemble an Experienced Team
If you don’t have the specialized expertise you need in-house, and you haven’t already partnered with a CDMO, you’ll need to make some tough decisions about when it makes sense to outsource versus bringing on additional scientific advisors, regulatory experts, and business development professionals.
On the one hand, you may have more control over an in-house team (or at least the illusion of it). On the other, it can be very difficult for small to midsize biotech organizations to eliminate critical skill gaps. Unless you work on similar projects day in, and day out, it’s very difficult to stay on top of rapidly evolving regulations, and, in essence, know what you don’t know.
Having a well-rounded team with a proven track record will inspire more investor confidence earlier in the process, which can help offset the costs of scaling up or, for that matter, of outsourcing.
Pro tip: If you’re not sure where to start assembling your team, don’t hesitate to ask an investor or a consultant! Many experienced pharmaceutical investors pay close attention to individuals and teams that tend to outperform their peers and will be happy to steer you in the right direction.
5 Tips for Attracting Additional Investors During Clinical Trials
Many drug development projects will require additional investment during clinical trials. At this stage, investors will be looking for signs that your clinical trial is well-designed in order to provide meaningful data and satisfy regulatory requirements, along with additional data that indicates your project is likely to succeed.
1. Provide a Robust Drug Proof of Concept
While some of this information should build upon the information outlined in an earlier druggability assessment, a drug proof of concept (POC) will also contain additional information gathered in preclinical studies demonstrating your drug product’s potential viability and effectiveness.
Expect a potential investor to be especially interested in any additional information about how your drug will be an improvement over existing treatments, its potential for patentability, and its ability to be manufactured at scale.
2. Outline Your Regulatory Strategy
Investors at this stage will want to see a well-planned regulatory strategy because it will give them valuable insight into any potential hurdles to approval, and the timelines and additional costs they may need to keep in mind.
3. Highlight any Advantageous Pathways, Including the 505(b)(2) Regulatory Pathway or the Fast Track Program
Investors understand that special regulatory pathways are often associated with reduced costs, reduced risk, and accelerated timelines. Some designations also offer much longer periods of market exclusivity.
4. Don’t Skimp on Drug Compatibility Studies
Drugs that can be used in a wider variety of situations are associated with a longer-term market viability. But solid compatibility studies might also provide helpful clues about opportunities to use your drug in different populations or treatments. And if that’s the case, that’s music to an investor’s ears.
5. Include Your Comparative Bioavailability Studies
These studies will typically be required by regulators anyway, but many investors will understand that superior bioavailability can represent a significant marketplace advantage.
When Should You Bring in a CDMO?
Unless you know, without a shadow of a doubt, that you have the skills and equipment you need in-house, a skilled CDMO that’s heavy on the “D” may be the key to attracting the funding you need in 2024 and beyond. And their skills also tend to pay for themselves in ways you might not expect.
For example, if you haven’t guessed already, Corealis is partially owned by a venture capital firm, which offers us a unique perspective on the intersection between pharma and venture capital, and how these two worlds can work more effectively together. And because we’ve helped clients position themselves for investors and licensing opportunities and brought 19 formulations to market since 2005, our track record has earned us a closer relationship with regulatory agencies and pharmaceutical companies alike.
Whether or not those skills and relationships are what you need for your next project, if you’re considering outsourcing at all, the next question you probably have is when do I engage? It’s often a complicated question, but my colleagues have simplified the answer in a recent whitepaper.
Click the link below to get your copy!
