Written by Shailesh Maingi, CEO & Founder, Kineticos
Kineticos recently published the results of the Q1 2016 Biopharma CEO Confidence Index. In this article, I’ll discuss some important shifts that we have noticed.
Biopharma CEOs primarily focus on 3 things. First, adequately funding the research ambitions is a full-time job and is always top of mind. When our economy is doing well and interest rates are low, it is easier to raise funds at fair valuations. During these boom times, biopharma CEOs think of harvesting more nuts for the long inevitable winters that come in the cyclicality of capital markets.
Biopharma CEOs also concentrate on their pipelines and execution of their clinical programs. Are platform technologies being adequately developed? Are the clinical endpoints “correct”? Are studies fully enrolling patients? What new studies should be launched? How should we commercialize – partner or go at it alone? These and a myriad of related questions keep CEOs on their toes.
Lastly, there’s everything else.1
What the Q1 data tells us is that CEOs are less confident in the capital markets (both public and private). This is to be expected considering the recent biotech market upheaval.
What’s interesting is that biopharma CEOs have pivoted their focus back to their pipelines and execution. In Q3, 2015, at the peak of biopharma valuations, access to capital markets was the leading driver of confidence in raising capital. This was cited by 18% of the respondents. In the Q1 2016 study, confidence in access to capital markets was halved to 9%.
At the same time, more focus on therapeutic areas as a source of confidence has risen to 22% in the Q1 study results compared to 8% in Q3, 2015. With this nearly 3x rise, therapeutic focus in now the top driver of confidence.
This is an important shift, and one that makes complete sense to the Kineticos team. Company valuations and the ability to raise funds are both macro and micro economic phenomenon. The biotech sell-off has dampened the macro effect, but the micro effect is influenced predominantly by company specific events. The data indicates that CEOs are now more focused on delivering on the promise of their pipelines.
In addition to their pipelines, biopharma CEOs have indicated that they will not hire as many people going forward. In this latest study, 34% of CEOs said that they would add staff to their corporate leadership compared to 55% in Q3. This is a clearly a cash conservation strategy.
Just as importantly, biopharma CEOs are telling us that they have increased outsourcing. In the Q1 study, 61% of CEOs indicated that they outsourced the majority of clinical development compared to 39% in Q3, 2015. Again, this is a logical outcome of conserving cash and not hiring staff.
As I write this, Kineticos has launched the Q2 Biopharma CEO Confidence Index. It will be interesting to see the new trends that emerge.
1 I’m not trying to trivialize this point; in fact, quite the opposite. For most of us, this is the job. We have daily focus on clients, P&L, people and communication as well as longer-term emphasis on strategy, capital deployment, innovation, competition, and shareholders. All these are important to start-up biopharma CEOs also. The big difference is that these issues matter primarily in the context of fundraising and clinical programs for biopharma CEOs.
Shailesh Maingi is the Founder and CEO of Kineticos and has a passion for the role R&D plays in improving healthcare outcomes. Mr. Maingi is also an adjunct professor at the Kenan Flagler School of Business at the University of North Carolina and serves on the board of directors for a number of biopharmaceutical, diagnostic and contract manufacturing companies.
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