The success rate of biotech startups is relatively low. According to a National Center for Biotechnology Information study, only about 18% of biotech startups make it to market. Only a tiny percentage of those that make it to market are successful enough to generate significant revenue.
As the cost of capital increases, Silicon Valley venture capitalists will be busy amidst a period of consolidation and transformation of healthcare startups. Venture capital firms will dictate investor-friendly terms to companies that find themselves in the unfortunate position of raising capital in this environment to launch new drugs.
It’s not only getting harder for small biotechs to find funding; too many have scaled up operations by adding employees too quickly, forcing them to lay off people as the path to new drug approvals gets more complicated.
Biotech startups are hurting for money as investments in biotech startups start to decline. Biotechs need to think like marketers to cut through the noise and attract investors. It begins with a CEO who not only has a stellar medical background but understands how to get the company on the radar.
Biosplice, once the world’s most valuable biotech startup (reaching a $12 billion valuation in 2018), is laying off nearly a quarter of its workforce and has stopped internal development of one of its late-stage medicines, a treatment for hair loss in men, with hopes of licensing that program to another drug company. As VC funding for biotech companies becomes harder to obtain, patients are the real losers.
Pharma companies are flush with cash and looking to make deals, but there are still a lot of small biotech companies that don’t have enough money to launch their products entirely. It seems that pharma is only interested in drugs that have the potential to sell hundreds of millions as opposed to small products that may only sell to a limited audience.