Joe Coletti
Welcome back to Pathfinders, a podcast series from RBC Capital Markets, where we uncover the key trends and catalysts shaping the fast moving world of biotech and healthcare. I'm your host. Joe Coletti. In today's episode, we're rebroadcasting a webinar RBC hosted with Endpoints News titled Venture Capital Velocity: What's Driving Renewed Momentum in Biotech? The conversation was moderated by RBCs Noel Brown, head of us biotechnology investment banking, and includes an esteemed panel featuring Andrew Aherrera, Partner at Panacea Venture; Jeni Lee, Partner at Pivotal Life Sciences; Regina Salvat, Principal at Sofinnova Investments. They'll touch on the themes that are going to continue to shape the private and public market landscape, as well as VC deal activity moving forward throughout the year. Now, let's dive right in.
Noel Brown
Thank you all for joining us, and let's kick off the discussion. The Fed's dovish pivot, combined with significant M&A, has recycled capital back into the sector. It's helping drive some sector recovery. It seems that biopharma is beginning, you know, to show some increased health across all therapeutic areas and modalities. Jeni, your firm, Pivotal life sciences, recently raised its second fund. Obviously, assignment for biotech is looking more positive, and it's time to invest in new science with fresh capital. So with that backdrop, let me kick the first question over to you.
Jeni Lee
Yeah, sure. Thanks, Noelle, it's an honor to be here and really appreciate the invitation to be on this panel here. Yeah, so our fund has certainly benefited from the significant M&A activity, you know, that that's contributed a lot to the recycling efforts underway. But I think even before that, there was quite a bit of private capital raised. You saw a lot of these large funds close, large funds, right, that are then investing into these new opportunities, I think with XBI. I mean, has been essentially flat since beginning of year. You know, obviously there's a lot of macro tailwinds and headwinds there, but I'd say what we've been watching, and kind of the broader commentary among and within our team and among folks that we talk to in the industry, is really this idea of the haves and the have nots, where you have this K shape recovery curve, you know, coming out of a really inactive period, 2022 and 2023 where, you know, you saw a lot of the companies where, you know, they went out to raise 100 million dollar financings end up upsizing 175, right? And then companies trying to raise 30 million aren't able to raise that at all, really, this broad bifurcation if they have the two spaces and folks really chasing the companies that are really going to perform and have these really product focused and value focused milestones. And certainly, that's what we're seeing, and we are focusing on making sure that we are picking the winners in the space. You know, it's not always easy and straightforward. You know, there's a bit of luck to that, but certainly, you know, we are excited about new modalities and novel technologies, but there is a certain risk appetite that I'd say we're still risk on very much so in this environment.
Noel Brown
That's great to hear. Regina, do you have any additional thoughts, or maybe any views? On where we are today versus where we were last year at this time?
Regina Salvat
Definitely in Q1 the IPO activity and follow on offerings have been higher than in 2023. I think the IPO activity is still, you know, definitely weaker than what we've observed during the pandemic. But, there's also been significant M&A deal numbers. I think that this has led a lot of companies to really run dual-track processes with their next financing. So we've seen many examples of that. I would say on the private side, we've also seen, you know, during the pandemic, a lot of companies went to IPO very early on in their life cycle, while they were still preclinical. And so it's taken some time for companies to really mature on the private side, and we're just now seeing a number of clinical stage companies with real value inflection points on the horizon that you know, we can invest into on the private side. So our deal flow has definitely been higher than it's been in years, and it's been a really exciting time for us on kind of the clinical side of investing,
Noel Brown
Maybe Andrew, you can offer some insight from the public market perspective.
Andrew Aherrera
Yeah, I couldn't agree with, you know, Jeni or Regina more. I think the best way to characterize this environment is sort of recalibration, as opposed to a total recovery, right? I think there's been a clear recalibration in sentiment. I think there's been a recalibration as relates to, you know, capital allocation and capital formation strategies, both on the part of investors and biotech companies alike. And I think there's been a recalibration in discipline, right? That kind of just went out the window during the Covid era. You know, conversely, I think, on the subject of recalibration, where I think that has sort of lagged is in, you know, this prevailing ‘have and have not’ dichotomy, right? That we see on both the public and the private side. But, you know, we are still very much in sort of a transition phase. But I think that you know, on the public side in particular, in the context of, you know, the anecdotally abundant dry powder, record levels of innovation and persistent pockets of market dislocation, I think there's, there's a lot of restraint excitement, right, that that certainly didn't seem to be there a year ago. Well, you know, 13-14, months ago or so, right around the banking crisis. So I think it's a great time to be deploying capital. It's great time to be raising capital. You know, as we're seeing with some of our peers, you know, we ourselves had raised our second fund in in 2022 and as a result of our, you know, kind of flexible mandate and exposure on the public side, particularly in commercial stage, companies that we were able to own at, historically phase two prices that, you know, ended up getting acquired. We've already begun to return capital to our LPs. So it's a very different topic from last year.
Noel Brown
Fantastic. That's great news. I mean to your point about the increased activity we're seeing, you know, Q1 having approximately, like 105 offerings across, you know, IPOs, follow-ons, PIPEs, RDs, all these different forms. On the VC side, though, it seems like, you know, close to 48% of VC financings have been, you know, sort of add on, slash insider rounds. And some VCs, you know, some would say, many have returned to the strategy of focusing on Series B deals that are based on clinical data. So, some of the positive notes, I would say, of this market is the sizes of the rounds have continued to increase, and we've seen the resurgence of mega-rounds this quarter. So the private financing market seems quite encouraging from that perspective. If I could turn to you Jeni again and get your thoughts on, you know, what themes are going to continue to shape the funding landscape for these companies?
Jeni Lee
Yeah, it echoes something that Regina said before is really the focus on clinical stage and then also focus on product. In this market, right? There's always a dichotomy right platform versus product, and certainly our fund has done both, you know, we go early to late stage. But certainly, I think, in this market, right, having that focus on a clinically validated, either target or mechanism or drug, right? And being able to fund that, you know, being willing to pay more for something that had some of that validation, whether internally or from external parties, I think that that certainly will continue. But it's not to say the platform opportunities won't still be well funded. I think the especially, you know, even our platform portfolio companies, we're really focused on getting those folks right to a DC or beyond, you know, I think, you know, coming out of Covid, you know, there was a lot of capital. A lot of companies had raised a lot of capital, candidly, at very high valuations. You know, a lot of VCs bridge these companies right, did either a convertible notes or extension rounds. That was very common at flat valuations. I think, you know, with the public markets down, that is trickling in more to the privates. You know, it always lags. And I'd say even for our portfolio companies, we've really pushed them to say, look, if you did get an extension, or you were able to have a bridge financing get further with that, right? So I think there were a lot of cuts and kind of tightenings that happened even on the private side, that are now enabling those companies to get further with what they have. And so ideally, they have some kind of clinical milestone to report that will really drive future financing. And we are seeing that even with our portfolio companies now.
Noel Brown
If you were to describe what is a have and what is a have, not, how would you characterise those profiles?
Jeni Lee
Yeah, I'd say it varies for the space, right and therapeutic area, of course. But, you know, as an example, you know, if a company were to come to us and say, ‘Hey, look, I need, I need 30 million to get to an IND,’ we’d say, ‘Okay, raise 40 to get the clinical data,’ or something like that, right, where you really have to push further with, you know, it's not a $50 million raise right to get to the clinical data. So it's a really making sure these teams are hyper focused on that. I think the companies that were able to make that pivot a couple of years ago are certainly the haves right where they said, ‘Okay, we're going to really actively deprioritize, you know, X, Y and Z,’ or we say, ‘We're going to put all our A's in this basket, you know, de-prioritize the lead, which is an IO and then, you know, push forward something that that all, all strategics are really focused on.’ And so I think there is a to Andrew's point of recalibration, right where it's okay, yes, there is this idea of chasing hot targets, but at the same time making sure that those are viable. Of interested strategic, you have a way out, so to speak. Of can I license this out? Can I enable a partnership or an M&A deal with the funds that I have today?
Noel Brown
Got it. And I appreciate that. Andrew, how do you see this?
Andrew Aherrera
Well, actually, I mean, on the subject of mega-rounds, I thought that was an interesting point right where I think that it's, it's probably worth establishing the devils in the details there where, you know, just as with the XBI resurgence, right? I mean, somewhat belied by the wider return dispersions that we're seeing across different market cap segments. I think these mega rounds that we're seeing of late on the private side are really quite different from those of the Covid era, right? And that they're arguably more reflective of, I think, investors being more thoughtful around right size capitalization and having an eye towards, you know, really ensuring runway to a real, meaningful value inflection point, right? And so, just because the headline number falls into mega round territory doesn't mean that investors are back to writing checks indiscriminately. I mean, if you look at these companies, these are either really robust platform companies with tremendous breadth and potential, or companies with a pipeline of later stage assets that require that quantum capital right in order to fund the requisite phase two or phase three clinical programs that if positive, could then justify the step ups commensurate with the degree of de-risking afforded by those expensive later stage trials. So I think that's an important distinction to make right where it also, nonetheless, is still quite encouraging, right, to see all these rounds come together and the syndication that's formed around these companies, where it'll be interesting to see in the next 12 to 18 months or so, you know, ultimately, what their trajectory is, right, as far as how concordant that may or may not be with some of the, you know, mega rounds that we had seen, you know, during the 2020, and 2021, period.
Jeni Lee
I was just going to add, I think a lot of those mega rounds are seeing as well, are underpinned by tremendous teams. And so when we think about kind of the haves as we would classify them, right, certainly, having money is, is great. You know, having a great syndicate is, is fantastic as well. But it really is speaking to the caliber of the teams that are founding these companies, right? You do put a lot of trust in the execution ability here. So I'd say that's definitely something that we keep an eye on as well.
Regina Salvat
Yeah, and maybe also to add, I mean, I think there are two underlying themes that are also leading to some of these mega rounds, right? Pharma has to really fill huge revenue gaps, and they're moving towards larger and larger indications, I think also partially driven by some of the IRA policies. And so we're starting to fund larger and larger indications on the venture side as well. I think obesity is a great example of that, where you need a lot of capital to get some of these inflection points and to Andrew's points, you know, they are funding pretty large clinical trials in order to get to data readouts that require a lot more capital.
Noel Brown
That's an exciting point, Regina, because, you know, we came out of an era, not too recently, where we're focusing on increasingly high levels of precision, which is great for getting at really tiny populations that, you know, in certain rare diseases or rare cancers, where people just weren't spending to get results in. But ultimately, even at high pricing for those therapies. They're smaller markets, right? And now things have sort of turned, you know, this wave being led largely by obesity, no pun intended, but other therapeutic areas benefiting cardiovascular, CNS. I mean, we're seeing companies being funded for indications where historically, I mean, 15 years ago, I would, you know, get door slammed in my face. So it's a it's an exciting time from that perspective. You know, one thing we're seeing a lot of is these PIPE driven sort of wall cross deals that are happening. And what's fascinating from the banker perspective is, in certain cases, we're hearing some a bit of blowback from investors, particularly those that are unable to participate, because they don't, do you know, they don't walk across and so they didn't hear about the deal. Andrew, you're probably seeing this a lot more. But what's your sentiment around this type of deal?
Andrew Aherrera
Well, first of all, I think that in the context of all the deal flow that we've seen in the first quarter, right, I think it speaks to both the recovering health of the sector as well as some of the hallmarks of, you know, I'd say potential implications of this investing paradigm shift that we've seen play out over the past few years, right, where there's clearly been a flight to safety and a flight to quality, right? And so, I guess, on an overwhelmingly positive note, the fact that a large proportion of the recent deal flow is tied to M&A recycling I think, tells you, at the very least, that the drug development functions of the sector are doing just fine, right? Great companies with real drugs, the benefit patients get acquired for significant premiums. That's what the sector is designed to do. What's interesting to me, though, is that, even though it's unsurprising that the nearly what 20 billion or so right of capital raised in the first quarter was heavily skewed towards existing portfolio companies of large specialists that arguably are already well capitalized to begin with, and you know, for the most part, do represent a later stage phenotype, I think it will be really interesting to see how the balance of you know, the 100 plus billion or so in aggregate, you know, 2023 M&A winnings, gets put to work in the second half of the year. And in particular, how much of it, if any you know makes its way to you know, these ‘have nots’, right? Or a third or so with publicly traded biotechs that have less than a year of cash, you know. But that said, to answer your question more directly, I think that it's, I think we all know what's driving a lot of the deal flow that we've seen. So the bigger implication is, you know, what happens to some of these other companies that fall into that have not camp whose stock price trajectories may otherwise be misleading as far as the kind of value they have to offer, right? So I think that should be one the biggest takeaway there,
Noel Brown
Regina in Q1, 56% of private financings have been focused on clinical stage companies. And for you on the private side, you know what's the source of the deal flow that you're seeing.
Regina Salvat
Yeah, I think I mentioned earlier, it's been really robust. We've seen a high level of, really quality companies that have been coming to us over the last six to 12 months in the clinic. And I just want to make one distinction and one note, I know there has been this shift towards looking at clinical asset driven deals. But at Safonova, we have historically always kind of been in that realm. So we invest about 70% in clinical stage opportunities across multiple funds, and we're really set up to help companies in that realm. So we have a large number of investment professionals with a combined 120 years of operating experience, and really focus on providing clinical and regulatory insights with our executive partners to help companies get to the market. And so that's led, on our end, to 27 FDA approvals that we've helped support, and 4.3x higher clinical success rate than the industry average within our portfolio. And so I think that's really what's been driving our success in this in this market. It's just our expertise on the clinical side. But I would say, right now, there's just been so many clinical stage companies on the private side, again, as I mentioned, that have value inflections in the near term that are really setting themselves up for the right financing to get them through the right clinical readouts that it's been an exciting time on the private side,
Noel Brown
As you think about these companies sort of maturing and then getting to be IPO candidates, you know, we saw a lot of preclinical companies that didn’t IPO I think you were talking about that at one point, and now those companies have matured. Any other thoughts on you know that that deal flow translating to the IPO market? Any commentary on syndicates?
Regina Salvat
Yeah, I think one, one thing we've seen is that high quality companies with, again, you know, great drugs are willing to take down rounds in this market in order to build the right crossover syndicate. And I think that for some of these companies, that's a really great path for them, because they build the right crossover syndicate and they're moving towards an IPO when the timing is right for them, with the right crossover syndicate to support their IPO, which is important in this market. So that's one theme we've seen. And again, I mentioned, I think already we've also seen a number of dual track processes, where as companies are raising on the private side or public side they're also running an M&A process, right? And, and we've seen just so much M&A activity, and I can think of a couple of examples where that process has really worked successfully for a few companies.
Noel Brown
Andrew, what do you think is the gating item with like these IPOs, you've only seen a single digit number of them. Does it tie into what Regina is talking about with the M&A market? Is it because these dual tracks have been so successful on the sales side that there aren't good companies to go IPO, or is it more of a demand issue and that investors aren't clamoring for IPOs?
Andrew Aherrera
Yeah, how much time do we have? I think it's both self-interest, specifically, a fundamental misalignment between corporate and investor self-interest, and then there's pattern recognition that comes into play, right? Where, you know, I think that's important to emphasize, because while a lot of us, you know, really understand the corporate mindset, the reverse isn't necessarily true, right? Especially on the part of first time management teams that we've seen proliferation of over the past few years. And I think two things that you know, these management teams seem to be, at least in my view, putting its a less importance on, if not totally ignore, are one, you know, the importance of right size capitalization, right? Just because there's more money available to you than you need, doesn't mean you should take it. And two, you know, how critical positive aftermarket performances is, you know, especially after lockup expert. And you know, our view is that this has just as much to do with the ability to attract and retain high quality talent, as it does in attracting and retaining high quality investors, right? Because if your stock works, not only do you typically get a pylon effect, as we've seen with some of the more successful IPOs in the past few years, but more importantly, the financial incentives become aligned, right, for all shareholders of the company, which include its employees, you know. So at that point, everybody from the bench to the boardroom are now just betting on the company based on science, and they can do what they do best in their respective functions without having to worry about their financial situation. And this is kind of where, you know, pattern recognition kind of takes over where you know the bottom line is that there needs to be opportunity for return generation to justify supporting these deals, right, over the long term. Now, that said, I think, you know, building a book is certainly an art form, right, and kind of a delicate balance to achieve, but at the very least, any book that is truly 10x oversubscribed, right? With real orders shouldn't break. I mean, let alone the first out, right? But I think the point is that any management team or board that isn't thinking in this way is bound to wind up with a broken deal, and is doing a company and its employees a disservice in the same way that, you know, we as investors will be doing our LPS a disservice if we've returned anything less than a 1x DPI, right? There's never a promise of returns. But I think thoughtfulness around not losing money should be much more front and center, because if you then zoom out from the individual company level, I think the more these deals keep breaking, especially those that break earlier on, you know, the kinds that trigger deep seated buyer’s remorse, especially for, you know, new long term investors who come In, really buy into the story. The heart rate becomes to entice journalists back, you know, into the space, and will continue to keep specialists focused on supporting their existing portfolio companies, and thereby keeping the IPO window narrow, right and exacerbating the you know, this prevailing have and have not dynamic on both the public and the private side.
Noel Brown
What I will say is you covered about four different topics for future webinars with that answer. But one thing I want to make sure was clear for folks that are watching this is this concept of these deals breaking when, you know, when Andrew’s talking about having 10x demand, it’s, you know, when you put in the numbers, these are companies that are looking to raise 100 million bucks that are ending up with a billion dollars of what we believe is real demand to be in the order book. And despite having that much demand, these companies are breaking issue, i.e., they’re, you know, they trade down below their issue price. And it, it is, baffling, because, again, if something is in such demand, right, these prices should stay up. But then it begs the question of, is the stock being put into the right hands if it’s getting sold off, right? Like, doesn’t that mean there’s an allocation issue? You have to be very specific about the lender, right? Because, again, you’re you feel somewhat removed in the context of an order book. But ultimately, these are investors you’re going to be interacting with, probably on a weekly basis, right? And so you want them to be, again, a positive force in your shareholder list, in your shareholder register. Regina, is there anything else you would add just about the IPO market?
Regina Salvat
One question that has come up that I don’t think we’ve directly addressed is just kind of, what are the themes around, what are people getting excited about, from a TA perspective, and I would say, you know, our firm, has really benefited from some of the M&A activity as of late. I think you were probably referring to ALS, in terms of companies that barely saw the light of day, that was in the INI space. But we’ve also had some wins and radiopharma with raised bio, where we led the last five around, and Karuna as well, which I think we shared with Jeni. Some areas we’ve seen a lot of excitement in lately is ABCs, additional radiopharm, obesity and CNS, I think, is the newest area where we’ve seen a lot of activity. INI continues to be of interest with a lot of companies in the bispecific space within radiopharm and still a lot of rare disease activity as well, where we see clinical data from rare disease companies that’s really compelling and exciting for patients. So those are some of the areas of many that we’re excited about, either making an investment in, or where we’ve recently made an investment that, you know, really ties to our strategies.
Noel Brown
So perhaps we can talk a little bit about this M&A activity that all of you have frankly pointed to, that market continues to rally right? And it’s been we’ve also seen, like very robust partnering deals established a lot of strategic collaborations, the ADC space has seen a tremendous amount of activity. Seems like everybody has to have a, you know, a foothold there. Radiopharma, both, both alpha and beta emitters have had, you know, a lot have garnered a lot of pharma attention. There still seems to be pharma players that have not yet made their move in. Radiopharm. Eli Lilly recently acquired a French antibody drug conjugate developer, Mablank. So maybe Jeni you can offer some thoughts on you know, we all know that pharma has been on this acquisition tear for the last little while to try and replace a lot of the patent expiration product exposure that’s happening, and Pivotal, through its investments, has been a beneficiary of some of that M&A interest. And so another question directed to you is, you know, how do you see this kind of formula deal activity continuing to impact the space?
Jeni Lee
Yeah. I mean, it's hugely impactful, right? And certainly it's a way for us to recycle and return capital to our LPs. You know, we were major beneficiaries, kind of end of year into the beginning of year with Karuna, Fusion and Grey Cell. And I'd say it's interesting. Thing, right? Because Karuna very much so is that kind of fill, fill the gap of pharma, you know, Fusion and Grey Cell less so, right? Those were earlier stage companies, or at least earlier in their clinical development, When we look at these companies on the private side, obviously it's a little harder to plan for an M&A, you know, you want, obviously, the strategics to be there. And we make sure that each company that we invest in has a list of strategics. But you never really know, right, like, what, what the appetite is, and, and I recall we had done, actually, some diligence on one of the acquisitions where we talked to the head of BD, who said, ‘Nope, you know, that's not something that we're going to look at.’ And then, lo and behold, you know, six months later, it months later, it happened. So you never know what changes at some of these pharma, it’s just more difficult to plan around. The M&A, obviously, you know, we then, you know, push tough companies towards an IPO. But certainly the M&A path is a really viable one to consider. You know, we do have the flexibility to invest across the pipeline, so we try to pick winners in these hot spaces, I will say something that's been interesting, as we've seen, right? So Karuna obviously went well for us. We're also investors in a company called Maplight. You know the idea of kind of this, these spaces heating up, right? Sarahville preceded Karuna, and so you see these spaces heating up, but you have to have gotten in them right earlier. Certainly you can. You can buy them publicly, but, but the real return is having invested, I think, privately, or at least as early as you can. And so as we landscape and survey some of these heating up spaces, I'd say it's still tough to pick the winner. I think you know you have to be good, but you also have to be a little bit lucky in these in these spaces. And it's hard to tell often preclinically, what is going to make, you know, Company X versus Company Y a winner, especially as there's been, you know, as an example, right? A mass pivot of a lot of the CAR-T companies into autoimmune when we look at those, you know, everyone kind of references the same data, and we're like, okay, sure, but you know, I don't know how preclinically you're going to be able to show me that you're better, and whether that's going to pan out clinically. So I think there's an interesting dynamic as well, of kind of the ‘me toos’ and the acquisitions, as opposed to the truly innovative where, you know, we kind of have a bifurcated strategy, at least when we invest, as we do those super early we do company builds, company formations, but we try to be really thoughtful. Like, you know, if there's a total novel target in a really hard area, that's probably not great. You know, you see in neuropsych as an example, you know, it's a lot of the around the same targets, around the same ideas, that are actually really successful, and we know that those are going to move the needle, because clinically, you can demonstrate the benefit. And there is a lot of already belief that that biology is well validated, understood, and that removes a ton of the risk when downstream, you may have commercial risk to deal with, and so I think for us, it's hyper important to have the M&A track. I do think that M&A companies have a little bit of a different flavor and profile than IPO bull companies, though.
Andrew Aherrera
I will add though to Regina’s point earlier about dual tracking. I mean, just over the past few days alone, right, there seems to be a bid out there to buy private companies, which I think in this environment makes total sense, especially in the context of, if you look on the public side, where you've got a little bit of crowding, right going on, and some of the, you know, tops mid targets who are also themselves flush with cash as well, on the sort of opposite side, just persistent dislocation among some of the potentially interesting smaller or micro-cap targets, right? That pharma would be very unlikely to offer up, you know, these, whatever, 10x plus premiums, right? Or whatever, that relatively larger spread those companies, boards may believe, gets them the fair value for, you know, for some of these interesting private companies, I think there's, there's fewer investors to worry about. I mean, each of them could, you know, potentially get a great return on an upfront coupled with, you know, risk share, additional upside downstream, that really makes for a good setup. So, you know, running a real process in parallel with any financing, you know, is quite prudent these days, especially for those facing the, you know, proverbial existential crises, if you will, to help them maximize optionality.
Noel Brown
I mean, make a great point, right? I mean, one of the big benefits of companies selling while private is, and, you know, you sort of demonstrated, this is the difficulty in benchmarking how much you're actually paying for it as acquirer, right? And in a way, I would think it almost reduces anxiety, because there isn't a publicly listed and known premium that you're paying that you then have to go justify to your boss, because everybody's got a boss, right? With private companies, you know, the price is kind of what you've negotiated it, and often is reflection of what seller is demanding and what you're willing and stomaching to pay. Right? So there's almost, you know, as an advisor. Are, I sometimes see there being a little more freedom for those deals to get done. But part of the hold back on privates historically has been it took a long time for that market to sort of rationalize and kind of recalibrate relative to the public market. So it's not a lot of the public's getting taken out because, I mean, their prices quickly adjusted and a slowdown on the private side, and sort of recalibrating valuation. What's fascinating now, though, is again to the point Jeni was making. If you're thinking about neuropsych, those companies have gotten huge, right? And if you think about something like ITCI, I mean having tremendous commercial success as well driving valuation. I mean, these are pretty big bets. I all think very good bets, but larger and so then going earlier is, you know, hopefully you can kind of catch fire before it really becomes a towering inferno of cost. Regina. We should get some color from you, because I know you guys have witnessed the same trends, you're benefiting from the same things. That'd be good to hear your thoughts?
Regina Salvat
Yeah, no, I agree with everything that’s been said here. And I would just say on the DNS side, definitely seeing renewed interest in that space, which is really exciting for patients. And you know, we’ve made several recent investments in this space, where oftentimes the pipeline of products that the company is developing is a mix of the risk targets, typically as a lead and then getting into the more novel space with earlier stage pipeline agents. So, you know, hoping to bring some innovation into the CNS
Noel Brown
i think we covered a lot on the M&A topic, but maybe we could talk just about some of the stuff you all touched on earlier, about where there’s going to be, you know, continued innovation.
Jeni Lee
Yeah, so at least for Pivotal, you know, we do quite a few landscapes internally. So we keep tabs on kind of spaces as they evolve, as they emerge. You know, we try to track, for instance, you know, regulatory updates and maybe changes in regulatory views that may be a huge tailwind to an area you know, for example, osteoporosis is a space that we historically would never have touched yet, FDA, next year is considering right, making fracture basically not the primary endpoint, right? And if you can use bone marrow bone mineral density instead, right, you have basically a biomarker or an earlier readout that suddenly makes a phase three op trial tenable, right? In quotes from, from a fundable, from a VC, fundable perspective. I think this very much goes to Regina's point around moving to towards larger and larger indications. You know, we're certainly doing that as well. But as you kind of enter into those sectors, right, like we've done, or tried to do deep dives around CV met, you know, those are huge, huge spaces that have a ton of heterogeneity that may not actually be understood from a patient even perspective, right? And so you do require, then, either Big Pharma or foundations to run these natural history studies and just have a better understanding of the disease. There's a lot of questions around orphan interest certainly, we're still interested in an orphan but it is important for us. You know, if you go after an orphan indication, that's very, very well defined, you know, enough is understood about that population. And if it's a gateway to a larger indication, you know, we see some of the pulmonary hypertensions, for instance, right? It's a gateway into a much broader indication, but that then presents larger risks as well, if the patient population is too heterogeneous, or you don't have a good understanding of the clinical endpoints that are required. That keeps us a bit on the sidelines, but certainly ones in areas that we continue to explore. So I think CV has been a big one for us. Everyone talks about INI and immunology, that's certainly a next wave and quite hot. They think that there are, right? Can segment down those broader areas into very specific, you know, smaller indications, larger indications. You know, we recently started talking about IBD again, right? So these are all things that I think come in cycles, almost where, you know, you kind of bring them back, and you circle back and say, Hey, has anything changed? Do we understand more about the disease, or is regulatory appetite improved? Then it becomes kind of more top priority for us.
Andrew Aherrera
In our industry, the sort of creative destruction phenomenon is, is just, It's pervasive, right? So for us, the companies that we look at when it comes to, you know, having real products, I think, is the ability to maintain what we perceive to be, you know, their disruptive capacity, right of the current treatment paradigm with continuity integration, whether that's, you know, by virtue of first mover advantage, that's likely to make it, you know, somewhat entrenched across multiple large indications, Oli dupixent, you know, for example, or just best in class therapeutic index. That just blows the competition away. Even if not first to market, right? They came to say carvic, for instance, right? Or some other, I guess, differentiating quality that is tied to, you know, convenience cost, or even just non-generalizability, right? Or some combination thereof, the latter, which perhaps are a pharmaceuticals for instance,
Regina Salvat
Those are great points, Andrew, and I would say two modalities that I've been spending a lot of time thinking about what kind of is the next wave of innovation. And I think for radiopharm, we're still really early days, and there are ways to really improve upon the supply chain, waste management, things like that, where you know novel radioligands and novel target, I think are really going to open the Fields up in the future, and also for cell therapy. I think, you know, we've made a lot of ways in cell therapy, but still, it's a pretty complex CMC and commercial scale up area of modality. And you know, we've been spending a lot of time thinking about, how do we get cell therapy to the masses, and what technologies are really going to enable that? So you know, whether it be in such a CART-T, t cell engagers, some other modality that hasn't invented itself yet. So but the space we've been really thinking through and making some select investments and already,
Noel Brown
That's all the time we have for today. thank you to our panel. We really appreciate you guys participating I'm Noel Brown from RBC Capital Markets.
Joe Coletti
Well, thanks again for listening to Pathfinders in Biopharma brought to you by RBC Capital Markets. Remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on May 29 2024 if you'd like to learn more or continue the conversation, please visit rbccm.com/biopharma. See you all next time.