It’s not easy being the new kid on the block. DDW’s Diana Spencer speaks to the CEOs of two drug discovery start-ups to find out how they have overcome the challenges of launching a new company in a competitive market.
It’s a challenging time to launch a new company in the life sciences sector. High interest rates and other economic challenges, along with low investment, have made it very difficult for companies to raise funding.
According to Clarivate’s ‘Biopharma Dealmaking in 2023’ report, just $60.8 billion was raised by biopharma companies in 2022, down by 48.6% from 2021 and 54.8% from 2020.
Despite these hurdles, Danish immunotherapy start-up InProTher raised €6 million seed funding from private investors this year, with support from the European Innovation Council (EIC) Fund.
The company is developing immunotherapies against human endogenous retroviruses (HERVs) to treat various cancers from within, a previously undruggable target. Dr Peter Holst, Chief Scientific Officer and Founder, launched the company based on the discovery that the immune system fights cancer the same way it fights viral infections, by deploying the full potential of the humoral (antibody) and cellular (T cell) responses against the invading viruses. HERVs are viral targets that are found exclusively on the surface of tumour cells.
Another recent start-up, UK-based Scarlet Therapeutics, is developing a platform that makes modified therapeutic red blood cells to potentially treat a wide range of diseases. Initially targeted at the rare metabolic diseases, hyperammonaemia and hyperoxaluria, this approach could be used more broadly to target cancer and autoimmune diseases.
Founder Professor Ash Toye spent over a decade working on red blood cells and aims to develop the therapeutic potential of these cells. While red blood cells made in the lab are usually generated from donor cells, Scarlet generates red blood cell producing cell lines.
Listen to potential investors
Developing the therapeutics of the future is an expensive venture. Although every drug discovery company starts with a sound scientific premise, creating a viable business from that premise requires considerable funding and investment, and for that, start-ups have to be able to convince others that their ideas have commercial potential.
Jordi NavalInProTher CEO Jordi Naval explains how the company has benefitted from accelerator support for early-stage companies: “Access to capital is the major hurdle for biotech companies. European start-ups have access to excellent programmes like the European Innovation Council and the EIC Accelerator program. This programme endorses early-stage companies and helps them leverage future private funding.”
Despite access to this kind of initial support, company founders need tenacity to ensure their company has enough financial backing. “It’s about perseverance and listening to the feedback from investors, advisors and pharma companies,” Naval adds. “You need to listen to what they are interested in and to the kind of data they want to see to be convinced that your approach is the right one. And finally, you have to come with an experienced and energetic team, who are able to seamlessly execute the plan.”
While capital provides a starting point, investors also play a crucial role in providing general business support to a new company, through mentorship and industry connections.
“Strong support from our investors is crucial,” Alistair Irvine, CEO of Scarlet Therapeutics, says. “Their expertise, guidance and networks are important for the progression of the company and their investments also lend credibility and validation. It is a difficult time for investment at the moment but if you have a good business plan, strong competitive position, and a management team with the appropriate experience and skill set it is still possible to raise finance.”
Create a compelling narrative
Standing out against similar companies in the same sector can be a problem, but both companies emphasise the importance of establishing a unique selling point (USP).
Alistair IrvineNaval explains the challenges for InProTher: “Immuno-oncology is a very competitive sector, and it is difficult for companies to differentiate their technologies and their positioning in a very crowded market. What is important is to create a narrative that captures the key messages and that can be perceived as differentiated by the investors and by the pharma companies.”
Irvine expands on this further: “Starting a company in life sciences is always challenging. Therefore, one of the most important attributes is persistence. It is important to know what your unique selling point/competitive advantage is and be able to articulate why this will allow you to be successful against competitors/alternative approaches.”
He says that young drug discovery entrepreneurs need to know their market and market potential, and to create a business plan that “shows both an understanding of the near-term value adding inflection points and how you are going to achieve these, and an understanding of the long-term goal and vision for the company”.
