We are long past the era when drug development was a convenient byproduct of pure chance. Now, steady innovation tends to require steady capital. But, after 2021, venture capitalists have been understandably hesitant to invest in an industry where risk is high and rewards require extreme patience.
However, that may be changing. According to the State of the Biopharmaceutical Industry's 2024 Edition (Mid-Year Update) published at the end of May, 44% of healthcare industry professionals said they are optimistic or very optimistic about the recovery of biotech funding in the next year.
At Corealis, we have a more nuanced outlook. We're seeing more venture capitalists getting savvier at assessing which partnerships to pursue and which to avoid. It's a welcome trend and one I'd like to help nurture. So in this blog, I'll provide a few insider tips on how to consistently beat the odds in an industry where risk and loss are common.
Identify Investment Opportunities in Formulation Development
In 2024, most venture capitalists are avoiding getting involved in the early stages of drug development, preferring to wait until a promising new drug has already been tested in humans before making a commitment. However, early-stage investments often offer the highest potential returns.
I understand that our industry deserves its reputation for being somewhat inscrutable to outsiders, which is why knowing exactly what to look for in a drug proof of concept (POC) can be especially helpful. If a POC doesn't offer sufficient information around 10 key factors, the project may not be the best use of your time or your capital.
How To Review Drug Proof of Concepts
A thorough drug POC should provide solid information about each of the following areas:
1. Efficacy
Obviously, this is the go/no-go data you need before anything else. A POC should contain clear evidence that a potential drug is likely to have its intended effect and that this effect would provide a significant therapeutic benefit for its targeted patient population.
2. Safety Profile
How would this new drug be different from existing treatments? Are there any potential safety concerns you should be aware of? This should clearly be outlined in a drug POC.
3. Target Engagement
Even in the early stages of drug development, there should be some evidence that a potential drug will reach and interact with its intended target. A drug POC should also spell out the dosage required to do so.
4. Clinical Trial Design
The clinical trial should contain a substantial and diverse segment of the drug's intended patient population, and supplies should match the protocol. While this may seem basic, failure to match supplies to protocol is a shockingly common yet completely avoidable pitfall in drug development.
5. Significant Market Potential (Drug Abuse-Deterrent Formulations, etc.)
The eventual commercial success of a drug depends on more than just its efficacy.
In a perfect world, a new drug would address an unmet medical need for a large patient population. However, a drug that addresses a need that's already being met — only with fewer unpleasant side effects — could still bring tremendous value. So, too, would a drug that could either boost compliance for a significant portion of patients or is less likely to be misused.
6. Intellectual Property
Make sure your investment is also protected from risks unrelated to the drug's performance. A good drug POC should make it clear that your partners can protect their intellectual property, and that the new drug can safely be developed without infringing on any existing patents.
7. Intended Regulatory Pathway (Including the 505(b)(2) Regulatory Pathway)
Because the US tends to see more drug launches, with an average lag of one year until a drug is launched in a subsequent country, I'll focus primarily on the US regulatory environment.
The CFR505(b)(2) regulatory pathway is potentially faster and less expensive than traditional new drug applications (NDAs), but it's certainly not the only way to save time and money in drug development. Fast track, priority review, breakthrough therapy, accelerated approval, or orphan drug designations are also incredibly attractive to financiers hoping to launch in the US.
Fortunately, these designations aren't rare.
In 2022, two-thirds of all new drugs received at least one special designation by the FDA. And in 2023, 36 of the Center for Drug Evaluation and Research's 55 drug approvals (65%) used one or more expedited programs.
Of course, expedited pathways in other parts of the world are also available, and like their counterparts in the US, these pathways aren't exactly known for their simplicity. Unfortunately, that often means they're not used as frequently by US drug developers who aren't as familiar with navigating them.
8. Resource Requirements
Before moving forward, the following should be crystal clear:
- What equipment and facilities are required to complete the project
- Your drug development partners already have the necessary space and equipment or can easily acquire them
This may be another area that seems basic but where I've seen projects get delayed or derailed completely. Where there are sometimes great sums of money to be made, I understand that there's a huge incentive for a small biotech to overstate its capabilities or to, shall we say, engage in wishful thinking. That's not a part of our culture at Corealis, but it's certainly out there.
And that leads me to my next point...
9. Team Expertise and Pharmaceutical QA
Not all pharmaceutical teams are created equal.
Do your due diligence when evaluating any drug development partners and prioritize attending industry events. We make a point of being available to meet new potential clients and investors around the country to provide them with information, regardless of whether or not they have an upcoming oral solid dosage project. This industry changes quickly, and there's no better way to stay informed about innovations in drug development than to connect with people who are actually doing the work.
When you meet with potential partners, don't be afraid to ask open-ended questions and do a little digging beyond just price. For example, some CDMOs can also offer a number of ways to reduce your risk and offer an expedited process, which can reduce overall cost and risk.
10. Scalability
A surprising number of smaller biotechs don't pay enough thought to scalability in the early stages of the drug formulation process. However, the process of moving from the lab to commercial production isn't without its own risks.
Perhaps because we're a niche CDMO that focuses on formulation and Phase I, II, and early Phase III clinical trials, anticipating any issues that may arise from the eventual transfer to a large-scale manufacturing facility is a key component of our business.
Before I move on from this section, I'd also like to mention that there's very little excuse for a biotech hoping to launch an oral solid dosage project to provide an incomplete POC. Our Druggability Assessments are complimentary and provide much of the necessary information.
Watch Your Exit Strategies and Overall Portfolio
At Corealis Pharma, we enjoy a close relationship with two venture capital firms, which has perhaps given us additional insight into the intersection between venture capital and pharma. In fact, we were involved with 11.4% of the pharma industry acquisitions in 2023, contributing $18.6B to the total deal flow. When our industries work together well, we can transform the lives of millions of people. But too often, we see what happens when there's a mismatch.
While a good CDMO can help reduce risk throughout the process, clear exit strategies and balancing high-risk, high-reward investments with more stable ones are important. Biotechs typically have lengthy timelines that can be difficult for investors without a pipeline of investments at a variety of stages.
Don't Get Too Distracted by Emerging Trends
When innovation is directly tied to profits, it's easy to get swept up by trends and new technologies. Genomics and AI are exciting, and it will be interesting to see how both shape the future of pharmaceutical science. However, it could soon become a very crowded space.
There is still a lot of money to be made in advancing the aspects of our industry that have lagged behind and where more interest (and funding) could produce an almost limitless amount of new therapies with enormous commercial potential.
For example, advancements in excipients have the potential to:
- Improve the bioavailability of APIs
- Enhance drug delivery to specific areas in the body
- Increase stability
- Enable the formulation of poorly soluble APIs
- Reduce side effects and unwanted interactions
- Lower the required dosage
- Lower production costs
- Boost compliance for certain patient populations
- Facilitate more multi-drug formulations
The same APIs that are currently in successful commercial products could be paired with new excipients...and then qualify for a streamlined approval process. It's an ideal scenario for smart investors.
Advancements in excipients were explored at the most recent CPHI North America, but for my money, this topic still doesn't receive the attention it should.
Connect With Us at DCAT Week, Bio 2025, DDF, and Other Events
Being a niche player in a larger industry has allowed us to become highly skilled at reducing risk throughout the oral solid dosage (OSD) development process. From pre-formulation on, we help clients make informed decisions based on sound data and solid science. It may not grab headlines, but it's what our elite team has been doing, day in and day out, since 2005. And I, for one, couldn't be prouder of how far we've come.
Our growing team and recently expanded lab facilities allow us to keep pushing the boundaries of modern medicine — an industry I remain relentlessly optimistic about for scientists, healthcare professionals, and venture capitalists alike.
If you'd like to stay up to date on how our area of pharmaceutical science is evolving, you're welcome to visit our facility or connect with our team at an upcoming industry event.
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