An interesting consideration on this front is the impact of adjacent industries on the pharmaceutical world. While the largest players continue to build out pipelines of novel molecules, IQVIA estimates that 40% of new launches in 2020 were by emerging biopharma firms (3):

To parse this figure, one interesting consideration is the increasing specialization and agility of the venture capital industry. Gone are the days of traditional venture capital “silos”: generalists and specialists, regionalists and globalists, corporate venture capital firms and privately raised funds(2). Venture capital is continually innovating on new business models to unlock emerging advances across industries, and pharmaceutical development is no exception.

Take, for example, Flagship Pioneering, an American life sciences VC firm located in Cambridge, Massachusetts – a fertile breeding ground for ideas and innovation, drawing on the deep pool of academic talent at nearby Ivy League institutions such as MIT and Harvard. Flagship was famously an early investor in Moderna, recognizing the potential opportunities associated with mRNA-derived vaccines years before COVID became front and center around the globe. In fact, Flagship prides itself on identifying novel areas of scientific discovery, converting potential breakthroughs into independent companies, and injecting capital to turbocharge the development of innovation:

*Source for graphic can be seen at Flagship Pioneering

From a pharmaceutical development perspective, the agility derived from exploring a single path paved with a pre-vetted business case (not to mention, the huge amounts of capital being thrown at development of a limited scope of potential products) has been a catalyst towards accelerating the development time traditionally associated with pharmaceuticals, at least in the case of Moderna. However, no solution is without pitfalls. As is the case with venture capital, many ventures fail. It is the “moonshots” that guide a large portion of the firms’ investment strategies, seeking out a 10x return (or more) to offset the losses from failed ventures. Only time will tell if, ultimately, this is a sustainable strategy for continued pharmaceutical innovations, with biotech groups listing in 2021 trading on average 37% below initial public offering (IPO) price (compared with a 22% fall for all newly US-listed companies)(4):

While identification of novel areas of exploration is a key component towards this accelerated model of pharmaceutical development, so is the injection of capital to fund research and development efforts. What happens when the money leaves? Only time will tell, but the ride will be interesting to watch.

Works Cited

1. PHRMA, 2015. Biopharmaceutical Research & Development: The Process Behind New Medicines. [online] Available at: <http://phrma-docs.phrma.org/sites/default/files/pdf/rd_brochure_022307.pdf> [Accessed 22 February 2022].

2. Rin, M. and Hellmann, T., 2020. Fundamentals of entrepreneurial finance. Oxford: Oxford University Press.

3. Scrip. 2022. More Small Biotechs Are Launching Drugs On Their Own. [online] Available at: <https://scrip.pharmaintelligence.informa.com/SC144394/More-Small-Biotechs-Are-Launching-Drugs-On-Their-Own> [Accessed 20 May 2021].

4. Smyth, J. and Asgari, N., 2022. Biotechs face cash crunch after stock market ‘bloodbath’. [online] Ft.com. Available at: <https://www.ft.com/content/c90d17c6-6196-4c8a-88c2-e2cef9a692f2> [Accessed 22 February 2022].