What is your assessment of the current health of the life sciences investment climate?
Since the peak of capital inflow into the industry in February 2021, we have been in a period of dramatic correction where the biotech indices have fallen over 50%. I believe we are close to the bottom of that correction period because many biotech companies are trading at cash balances, meaning very little is being attributed to their technology and programs.
Many of these corrections are appropriate, because a lot of credit was given to companies that had exciting technologies or platforms but were still far from developing a real drug that would enter a clinical trial, receive regulatory approval, and ultimately help patients. When shifts like this happen, we must remember the fundamentals of the industry; despite how attractive a company's technology or platform may be, the ultimate goal is to make progress towards bringing new drugs to patients.
Additionally, not all companies deserve to have their assets taken forward. Having a more stringent funding environment is not negative; it just means that companies must generate clinically meaningful data to deserve their valuations. I see corrections as a positive force in the industry, as it reminds us of basic principles such as capital efficiency.
MPM Capital is optimistic about the future and sees the present as a great buying time to be entering the market. The long term fundamentals on the industry are healthy and intact.
Do you believe this market correction will lead to an uptick in M&A activity?
I do not believe that lower valuations lead to more M&A activity. M&A is like picking apples – you only want to eat the apple when it is ripe. No one wants to eat an unripe apple, even if its 50% off. M&A occurs when companies meet their proof of concepts and have de-risked their assets such that the drug looks promising to be successful in future clinical trials. From this perspective, the M&A environment is evergreen, which is that pharmaceutical companies have an ongoing need for new and innovative drugs to fill their commercial distribution pipelines and they want to buy companies who have met their proof of concept.
To what extent has the turbulence impacted MPM Capital’s portfolio companies?
MPM Capital portfolio companies were the beneficiaries of a great capital fundraising environment over the past two years. Many of our portfolio companies had the opportunity to raise private financing, IPO and secondary financings as public companies. That said, all our companies have been affected by both the upward and downward drafts, but we hope they will go on to be successful in their clinical trials. At the end of the day, a successful outcome is how you create value, and it is not subject to volatility.
What advancements within the biotech industry are you most excited about?
In the oncology space we are in the middle of an incredible period of innovation, particularly regarding the genome sequencing revolution. This started in the early 2000s when we sequenced the first human genome. Two decades later, we now have genetic information about almost every cancer patient as well as about various rare diseases. We can start to understand the genetic causes of diseases and therefore what targets we should address with our new developed drugs. Additionally, we have developed many genetic tools that have enabled whole new classes of treatments, such as using living cells and living viruses to treat cancer or genetic illness. We are in the midst of an incredible innovation era that is only accelerating. For example, last year we saw the first patient who was genome edited and cured of their hereditary genetic disease.
Several innovations abound regarding RNA and DNA; mRNA enabled us to vaccine the world against Covid-19. Circular RNA is particularly exciting as it enables us to not only deliver RNA more broadly to the organs but also to produce proteins beyond for vaccination purposes.
Looking ahead, what themes will MPM Capital hone its investment around?
We are on our second oncology impact fund. While we have made great progress regarding immunotherapy, cell therapies, and our ability to cure certain types of cancers, we cannot yet cure all patients with those cancers, nor can we cure all cancers. We still see a lot of exciting work to do in this space. Additionally, we are excited about the next frontiers in virology and neurology.