5 February 2024
Our Cambridge Life Sciences and Healthcare team hosted a brilliant Bruntwood SciTech event, 'Planning for a TechBio Exit – what does 'good' look like?'. Here, Nick Vollers and Adrian Toutoungi have put pen to paper to give the lowdown of key takeaways for techbio founders considering their exit strategy.
Our key takeaways:
Think carefully about what your 'product' should be
During the life sciences fundraising boom of 2020-2022, before the current financing downturn, techbio founders were able to raise money - in particular from tech investors - with a commercial model that was not much more developed than a plan to generate data and libraries (eg of in silico targets, hits compounds and lead series). Investors did not require a clear plan of how to commercialise that data. Now the market has tightened, and investors now require techbio companies to define much earlier than in the boom years their product and business model. This is a critical decision for founder teams, as your business model and product will largely define your exit opportunities.
The panel emphasised that not all techbio companies are "AI for drug discovery", even though media attention in recent years has focused on the emergence of that modality. Other techbio drug discovery approaches include computational biology or bioinformatics – quite different to AI. Schroedinger, Nimbus and Lambic are good examples of this. And many techbio companies do not focus on drug discovery at all. Benchling, Inivata and Unlearn.AI are good examples of those. It goes without saying that companies in all these different sub-verticals will have quite different business models and exit opportunities.
These include:
This is a tricky exit strategy to pull off. There have not been many big biopharma acquisitions of techbio platforms. The BioNtech/Instadeep acquisition quoted above was a fairly rare example. The old adage that 'pharma buys assets' continues to hold true. Pharma has developed its in-house techbio capabilities to some extent through organic growth, but otherwise has focused on discovery collaborations with techbio companies rather than bolt-on platform acquisitions.
Exiting to a more established techbio company looking to consolidate the market is viable. However, to date these deals generally do not attract high valuations in the current market (consistent with what we are seeing in other sub-verticals, exceptions aside).
The age-old debate on how to value a company with a drug discovery platform continues to rage, and requires careful thought and planning by founder teams and boards of techbio companies. Techbio companies with a drug discovery platform are in this respect similar to previous more traditional drug discovery platform technologies such as phage display, transgenic mice or fragment-based 3D structure drug discovery. However, as techbio companies sit at the intersection between the tech sector and life science sector, valuation methodologies, exit strategies and venture capital requirements from the tech sector also play a role.
Collaborations between a techbio company and big pharma can be a helpful source of non-dilutive funding, and crucial validation for the techbio's platform. However, before entering into a high-value, long-term collaboration deal, big pharma will typically first insist on a low-value, short-term collaboration as it dips its toe in the water. Some of the panel suggested that techbio companies should only pursue these pilot collaborations if they are well funded in themselves, or linked to a longer-term plan with a significant prospect of further deals with the big pharma. Many big pharma companies have entered into large numbers of pilot collaborations with techbio companies, as a way of keeping tabs on a fast-moving technology field, but with no real intention to move forward to larger-scale deals in more than a handful of cases. An isolated pilot collaboration may offer low financial backing and could push your company in a direction you hadn’t intended, leaving your company stranded once the pilot has finished.
by multiple authors
by multiple authors
by Alison Dennis and Nicholas Vollers