Despite the increasing number of startups in biotech and pharmaceutical industries, big pharma companies are choosing to go low and slow in terms of partnership opportunities with smaller companies. This year, there have been fewer mergers and acquisitions in the pharmaceutical industry since 2013, and the number of pharmaceutical companies funding drug developments through partnerships also decreased since 2018. As a result, smaller startups are struggling to obtain funding and partnerships, which impairs their ability to innovate and grow.
The lack of activity from big pharma companies has only reinforced their monopoly over the industry, while disrupting start-up development of revolutionary medicines. It is surprising that big pharma companies have been slow to acquire or partner with startups, given that they depend on smaller companies for novel drug discoveries, which they can then commercialize, market, and patent.
As patents expire, pharma companies are constantly searching for new paths to profitability. Funding the research and development of drugs is a costly and risky business, so pharmaceutical companies frequently partner with startups or buy drugs that have already undergone regulatory approval, which carries less risk. Big pharma companies tend to partner with startups early in drug development, or when a drug has reached the final stage of testing, but those at the intermediate stage typically bear the greatest costs of drug development without a reliable partner to support them.
Midsize to small pharma companies are also feeling the pinch. Lower market capitalizations, limited access to capital, and struggles with the public market make it difficult for startups to find partners among pharma companies. In the downturn, we have a situation where a lot of people would be happy to partner around whatever assets or platforms they have, said Thomas Barnes, CEO of Orna Therapeutics. Beggars can’t be choosers.
However, because RSF Bio’s drug is in its final phase of clinical trials, some big pharma companies have taken an interest. Big pharma companies prefer to enter partnerships when emerging technologies or drugs are less risky, which makes them more likely to get approval from regulating agencies. These companies typically have commercialization, sales and marketing teams, which would benefit the startup. However, for smaller startups, it is not easy to find a partnership deal with big pharma companies, who are often focused on their own pipeline drugs that are most profitable.
Overall, the lack of partnerships between big pharma companies and startups is stagnating innovation in the biotech and pharmaceutical industries. Companies that are in the intermediate stage of drug development may be left without the financial support they need to develop revolutionary drugs successfully.
