Biotechs Refocus and Run Lean
In response to falling valuations, slowed acquisitions and IPOs, and funding challenges starting in late 2022 and continuing into 2023, biotech companies are undergoing significant layoffs, dropping less promising programs, and refocusing on core clinical assets while analysts predict a cautious rebound through increased mergers and acquisitions, unconventional funding strategies, and government policy impacts, all amid a strategic shift toward lean operations and enhanced use of complex, siloed data to guide research and investment decisions.
In late 2022, biotechs were being asked to fill pharma’s innovation gap in an environment where valuations were falling, acquisitions and IPOs were slowing, and funding was increasingly hard to secure. Biotechs have had to do more with less: less opportunity, less money, less time, and, as we enter the new year, less staff.
2022 Layoffs Spill into 2023
Layoffs that began in 2022, with more than one hundred biotechs cutting staff, are continuing into 2023. Many companies are also dropping programs, moving away from platform technology, and refocusing on their most promising clinical assets. While the industry has historically bounced back from downturns, the speed of recovery this time is uncertain.
Rebound Ahead?
Analysts from PwC, RBC, and Baird predict a mix of change and continuity in 2023:
- Mergers and acquisitions are expected to pick up as biotech valuations stabilize and big pharma seeks to fill pipeline gaps and drive inorganic growth.
- The IPO market may remain challenging, prompting biotechs to explore unconventional options such as additional private funding rounds, cost reductions, licensing agreements, or special acquisition deals.
- Government policies could impact the sector, including rate hikes that may hinder investment and new US Medicare price negotiation laws that could influence investment and program decisions, particularly favoring large molecule drugs over small molecules.
Weathering the Storm
The uncertain market has forced biotechs to refocus, run lean, and differentiate themselves. Companies must make strategic decisions, reduce inefficiencies, and focus on core competencies. Key strategies include:
- 1.
Leveraging Data – Data is more important than ever for guiding research and strategic decisions, adopting predictive technologies, and assuring partners and investors. However, challenges include the overwhelming volume and variety of siloed data, complex workflows, and disparate instruments and software. Adopting a scientific operating platform can help ensure R&D data is accurately captured, accessible, and usable within specialized applications.
- 2.
Optimizing Processes – Process inefficiencies can escalate into major problems during layoffs, budget cuts, or rapid growth. Companies need to improve collaboration among team members and tools, allowing experts to focus on core work. Process efficiency is a key strategic goal, with technology investment and transformational process change both necessary. Integrated software, guided workflows, and decision-support tools that span the hit-to-lead workflow can help reduce manual data transfers, avoid redundant experiments, improve tracking, and minimize IT reliance.
- 3.
Outsourcing – Many biotechs are turning to CROs to balance innovation and cost control. Outsourcing allows companies to focus on core competencies, increase scale and capacity, diversify pipelines, and access advanced tools and talent. Estimates suggest biotechs are outsourcing two-thirds to 100% of their R&D efforts to CROs, who assist with tasks such as target identification, assay creation, AI, compound synthesis, formulation development, and data/system integration.
If your company needs help weathering the biotech downturn, contact Dotmatics to see how they can assist.
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