LongeVC’s Sergey Jakimov explains why although things look shaky for biotech, a correction phase for longevity can only make it stronger.
Earlier this week, we published our Q3 2023 Longevity Investment Report, providing an overview of global longevity investment in the third quarter.While it’s still a tough market out there, we are, at least, in the foothills of recovery. While the longevity space is very much-forward focused, looking for those glimmers of recovery, we would do well to take time to evaluate the recent biotech winter, and learn lessons from those leaner times.
Sergey Jakimov, the CEO of Swiss investment group LongeVC joins us to discuss why the current recession provides a different perspective for analysis, post-down turn recalibration is a roadmap to success and why looking for translatability is vital.
Biotech downturn – deciphering the impact on the longevity ecosystem
by Sergey Jakimov
The longevity ecosystem, predominantly steered by biotech advancements, is grappling with a series of down rounds and layoffs [1]. While undoubtedly upsetting, these interruptions can also be instructive. In a world where innovations are constantly on the verge of the next frontier, they present an opportunity to reevaluate the balance between ambition and viability; they also present an opportunity to weed out companies that were not backed up by solid data.
It is important to keep in mind that down rounds represent decreased valuations, but they also signify a recalibration, tying expectations to reality.
Perceptions versus reality: dissecting valuations
The biotech sector, often perceived through the lens of high-risk and equally high reward, is currently amidst a wave of speculation, primarily due to the recent disconcerting events. At the forefront, the industry might appear to be on shaky grounds, with its vitality in question. This viewpoint, though, might only be a cursory analysis of a more complex situation.
It’s imperative to consider the nature of biotech investments. Biotech businesses have a history of taking a long time to become profitable, requiring significant capital investments, and long research periods. Even early exits, happening long before company’s profitability, take years. Consequently, they’ve always attracted high valuations driven by potential rather than immediate returns. This potential-based valuation, although speculative, found its basis in the revolutionary promise of biotech discoveries that could reshape healthcare paradigms [2].
The current recession, however, provides a different perspective for analysis. Astute industry observers and insiders are now advocating for a shift in valuation models – from hyper-speculative to a more measured, data-driven approach [3]. The objective is to align valuations with the sector’s realistic potential, making sure they are based on concrete benchmarks, reachable research objectives, and valid market demands.
This recalibration is more of a practical approach to the sector’s assessment than a direct criticism of its value. By adopting this realistic stance, stakeholders can better anticipate growth trajectories, manage risks effectively, and establish more precise roadmaps for success.
The longevity ecosystem within biotech targets healthy life extension and aging-disease mitigation. Crucial to its evolution is grounded research, authentic data, and scalable strategies, transcending mere longevity aspirations. This ecosystem thrives on resilience and skill, considering every challenge a refining moment that reshapes entities, enhances strategies, and redefines objectives. Such ‘correction phases’ potentially mold sturdier, more sustainable, and agile biotech firms, notably in the longevity sector.
Investor interest now leans towards compelling pre-clinical data supporting the beachhead hypothesis and disease indication. The previous emphasis on pre-clinical data has waned due to acknowledged translational hurdles from mouse to human models. Potent pre-clinical data, coupled with modest and realistic valuations, signifies a successful funding round.
A shift in investor focus away from platform technologies, especially those lacking specificity, is evident. Proposals emphasizing platform technology with diverse candidates across various disease domains lack appeal unless a clear, prioritized candidate validation timeline exists. Consequently, numerous funds have pivoted towards single-disease therapeutics, such as small molecules, albeit with inherent binary success potential, providing a clear success pathway.
Amidst the funding landscape, down rounds are evident, embraced by companies with varied data backings. A paradigm has emerged where well-supported companies secure funding, albeit with the necessity to navigate founder team dilution and collaborate with existing investors to expand ESOP pools, ensuring team motivation.
Emphasizing the pivotal role of balanced teams, even at pre-clinical stages, fostering a symbiotic relationship between science and business development is imperative, cementing early institutional affiliations. I believe focused platform technologies remain pertinent, given their adherence to a clear and concise operational and developmental focus.
Mental health repercussions in the biotech landscape
The biotech realm, focused on prolonged healthy living and combating age-related diseases, interlinks robust scientific discoveries with tangible applications powered by researchers and stakeholders. Yet, the overarching physical health objective has historically dimmed the spotlight on the equally critical mental aspect within biotech and longevity research. The effects of the industry’s fluctuations extend beyond financial statements, permeating the mental well-being of its dedicated professionals.
Recent times have witnessed a sharp uptick in mental health challenges. A striking 40% of American adults reported anxiety or depressive symptoms in 2020, quadrupling the 2019 figures, with such mental states proven to amplify biological aging by up to two years. Notably, mental health conditions like schizophrenia and bipolar disorder can curtail life expectancy more severely than certain lifestyle choices, such as smoking.
Biotech navigates through a sea of unspoken mental health ramifications, where years of research might hang by the thread of a single trial’s outcome or funding decision. Fluctuations in staffing, adjusted expectations, and scaled-down valuations destabilize financial frameworks and erode the mental stability of professionals, leading to elevated anxiety and feelings of inadequacy. Companies navigating this intricate landscape include Freedom Biosciences, co-founded by Dr John Krystal and Dina Burkitbayeva, pioneering the development of next-generation psychedelic pharmaceuticals. It innovatively leverages the pharmacology of ketamine and psychedelic therapeutics, promising potentially transformative treatments for numerous individuals grappling with debilitating mental health disorders. Similarly, Delix Therapeutics is pioneering efforts in brain health therapeutics by leveraging neuroplastogens to potentially improve cognitive function and treat various neuropsychiatric conditions.
However, the longevity community is now poised at a crucial juncture, underscoring the necessity to develop a nurturing environment that prioritizes shared experiences and collective endurance. A vital emphasis on peer support, mentorship, and networking to offer solace, direction, and a rejuvenated purpose is now more pivotal than ever.
The efficaciousness of all therapeutics against age-related conditions will be markedly optimized with a concurrent focus on mental health recovery and supportive action. This duality of focus on physical and mental health will be indispensable in enhancing treatment outcomes and ensuring the well-being of professionals within the field and the individuals it seeks to serve.
Reimagining the longevity ecosystem post-down turn
The longevity ecosystem routinely engages in meticulous scientific investigation in its quest to lengthen human lifespan and improve health. Invariably tethered to market swings, investor sentiment, and global occurrences, it endures cyclical downturns, fostering periods of introspection and recalibration. Though demanding, the recent series of down rounds and staff reductions have unearthed serendipitous insights, underscoring the imperative of transitioning from relentless growth to sustainable, judicious scaling.
Within the ecosystem, a critical awareness has begun to take shape: it is now blatantly obvious how detrimental overreach and placing pace above stability can be. The emerging philosophy leans towards holistic success metrics, where companies evaluate their impact not just through fiscal accomplishments but also through their sustained societal impact, contributions to science, employee welfare, and authentic breakthroughs in longevity. The shift in focus towards enduring contributions over ephemeral triumphs heralds a profound, meaning-centered approach to biotech ventures.
Additionally, the current environment mandates that businesses exhibit innovation, adaptability, and agility. Lean operational models, cross-disciplinary collaborations, and exploration into novel domains of expertise and knowledge have come to the fore. Alliances are now sculpted on a matrix of financial metrics, aligned values, enduring vision, and synergistic competencies.
Fundamental studies and grassroots innovations are once again admired. A respect for moral, creative research that lays the groundwork for significant advancements in longevity science is replacing the allure of quick wins. In addition to these reflections, pivotal data-driven fundraising narratives have emerged. A tangible shift towards focused clinical programs and judicious budget allocation is essential, particularly when evaluating potential short- and medium-term projections. As a result of the frequently limited capital availability, it is frequently impossible for young companies to maintain a clinical pipeline of three or more programs developed concurrently. While platform technologies are in demand, scrutiny is increasingly oriented toward validation mechanisms.
It is imperative to note that while animal data provides valuable insights, it cannot singularly propel inflated valuations – translatability remains crucial. Furthermore, preserving the founder’s stake is imperative to avert demotivating the team, and cultivating teams that harmoniously blend scientific and entrepreneurial expertise proves to be instrumental.
The longevity ecosystem is gradually improving its strategies, embedding stability, and nurturing a future enriched by its learned experiences from its journey as it navigates through this recalibration phase.
A renewed vision for biotech’s future
The recent challenges in the biotech landscape aren’t just market fluctuations. They mark a critical evolutionary step. Instead of viewing them as setbacks, the sector delves deeply into self-reflection. The goal? To align ambitions with the real world. The longevity ecosystem is known for its grit. It’s not merely enduring this phase; it’s harnessing it for growth and innovation.
The emotional impact of the downturn is real, as are its tangible effects. But this is also a wake-up call for thoughtful, sustainable advancement. Looking ahead, there’s a renewed focus. The biotech sector is gearing up to rise again with more precision and intent. A future of innovation, resilience, and pushing health boundaries is on the horizon.
[1] https://www.biopharmadive.com/news/biotech-layoffs-job-cuts-industry-consolidation/647164/
[2] https://www.biospace.com/article/opinion-is-the-biotech-winter-beginning-to-thaw-/
[3] https://www.labiotech.eu/in-depth/venture-capital-biotech/
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