Kent Manson doesn't need investment reports to tell him that it's been a tough year for biopharmaceutical companies to raise money from investors.
The vice president of strategy and commercial development for Diasome Pharmaceuticals Inc. in Cleveland recently finished helping his company raise about $20 million to continue clinical trials for its drug that helps treat diabetes.
The global investment in biopharmaceutical companies fell "to its lowest level in recent years" during the second quarter, down 54% to $1.3 billion from this year's first quarter, said CB Insights, provider of market intelligence on private companies and investor activities, in an Aug. 22 report.
Meanwhile, the pace of initial public offerings — which provide young companies with cash to advance their drugs through clinical development and venture capitalists the opportunity to cash out of their investments — stalled late last year as the stock prices of newly public companies plummeted, according to BioPharmaDive.com, a digital trade publication.
Manson talked to Cleveland Business Journal about the challenges of fundraising in a market roiled by inflation, rising interest rates and the fear of economic recession, not to mention the lingering effects of Covid. This interview has been edited for clarity and brevity.
Can you describe the recent fundraising market for biopharma companies?
Biotech went from being the hottest IPO market that we've ever seen to ice cold early this year. We weren't planning to go public, but we were doing a private placement round. So we went from trying to sell during the hottest IPO market to trying to sell in a completely frozen market.
How did you observe venture capitalists respond to this frozen IPO market?
Venture capitalists made far fewer investments. The VCs were essentially saying, "Listen, we can't place money right now because our public companies are operating like private companies. They can't generate capital from the public markets." So that made the environment that we were raising money in very, very challenging.
What helped Diasome Pharmaceuticals raise money during this challenging time?
What helps you succeed in this kind of funding environment is having really strong clinical data. Raising money right now is basically going to be impossible if you don't have really strong clinical data.
Diabetes drugs are the largest revenue-producing drug category in the United States but receive many times less venture funding than oncology drugs, which is the second-largest revenue producer. Diabetes has been a forgotten industry where there's little innovation, so we already had strong headwinds from a fundraising standpoint. You have to overcome all of those hurdles.
Our strong clinical data and committed development team enabled us to eventually break through. It's been quite the journey.
