Strategic Drug Development in a Funding Crisis: Expert Insights on Risk Profiling, Efficiency, and Innovation

The pharmaceutical and biotechnology industry finds itself trying to navigate a market with increasing pitfalls. With funding constraints tightening and regulatory landscapes shifting, companies must orbit an increasingly complex environment while maintaining quality standards for successful drug development. A recent industry discussion featuring Marina Galvani, vice president, scientific strategy leader, drug development and Joshua GIllum, vice president of business development at Evotec, revealed key strategies for surviving and thriving in this challenging climate.

The funding landscape has undergone dramatic changes since the pandemic-era boom. “During COVID there was quite a boon in funding, and we’ve certainly seen that retract. We are seeing some hints of recovery now, but still the closing rounds themselves take a lot longer than usual, even before COVID,” explained Gillum. “In fact, we have one client who’s been waiting for 18 months for their funding to close.” While encouraging, the slow movement of funding reflects a shift in investor behavior that is difficult for innovators who have become more accustomed to shorter funding cycle times.

Timelines are also less secure on the regulatory front, particularly in US with the ongoing changes within the FDA. This uncertainty has exacerbated poor appetites in an investment market that is already viewed as carrying substantial risk. As a result, there is a shift within the life sciences to move away from the U.S. market, Gillum observed. “We’re seeing a pretty strong shift outside of the U.S., while Europe has emerged as a real possibility now, because of their new EMEA-based structure. And that structure provides some of the stability that the U.S. used to provide.”

Drug development is expensive. Investors need to consider not only the expected cost for bringing a compound to the clinic, but also the expected cost of failure. Much of this cost is borne through inefficient practices, not only in drug development itself, but in strategic planning, hiring practices, poor control of cash burn, and selection of the appropriate partner(s) to operationalize their development strategy. This poor usage of previous funding rounds has soured investors’ appetites to take risk.

For those staying in the U.S. or entering the market, Galvani emphasized that companies must demonstrate comprehensive due diligence beyond what was considered standard in the past, to reduce the risk to investors as much as possible. “When speaking or presenting to investors, it is important for companies to demonstrate that they have done a very diligent and comprehensive evaluation of their asset, not only focusing on the therapeutic potential, the advantage versus the competitors, and the marketability that are absolutely of keen importance, but also demonstrating that they have also assessed developability potential and understand a “long-term development strategy.”

She further elaborates that the evaluation should go beyond typical metrics to include manufacturing and controls (CMC) considerations such as scalability, API formulatability and solid-state complexity. “Issues in any part of the process could really lead to financially catastrophic delays if these things are discovered too late,” Galvani noted.

This process can be confusing and slow-going for those seeking funding, largely because different investors have different focuses and requirements. “The inconsistency in investor responses reflects the market’s instability,” Gillum said. “We’re seeing a push for additional de-risking beyond what the typical partner is planning because investors don’t want to take any risk at this point.”

As financial pressures mount, scientific innovation is creating more complex challenges. Galvani pointed to several contributing factors. “In addition to the advanced and significant presence of multimodalities that are exploring new frontiers, even the small molecules field is requiring more complex approaches. Today’s molecules often require complex chemistry to drive improved biological properties and avoid IP issues, resulting in a higher number of synthetic steps, higher number of chiral centers, and lower solubility properties.”

These contradictory shifts have led clients to approach potential outsourcing partners much earlier in the process than previously observed. Companies are also beginning to engage in milestone-based contracts that allow them to fragment financial risks and implement stage gates with increased frequency.

Galvani explained that the key to risk mitigation is early characterization. “De-risking means characterizing very well a compound to make sure that you really understand the properties and what to expect from it. This approach serves a dual purpose: understanding the likelihood of success in subsequent clinical phases and preparing well-informed development paths.”

Thus, a well-developed early-stage characterization and de-risking strategy provides a mechanism for not only improving the downstream efficiency of subsequent development stages but also can satisfy investor needs for risk management and mitigation.

Galvani further explained that biomarkers play crucial roles in this de-risking approach. “The possibility to anticipate Proof of Concept (PoC) readouts through efficacy biomarkers in early clinical studies, where feasible and applicable, enhances confidence in the development program by generating valuable insights before substantial investments are made. “Another creative way companies are mitigating risk is by adopting innovative approaches to funding challenges. Instead of going for a single molecule, single indication companies are coming in with AI platforms that are completely agnostic to target, or coming in with a platform target of a gene that can be effective in a lot of different indications”, Gillum observed.

In any environment, manufacturing considerations are critical. Both Galvani and Gillum noted that this is especially true in the current investment environment. The result of the current manufacturing environment is a shift in mindset toward when to start thinking about the process. “Manufacturing is so impactful in terms of time and cost on the program that you really cannot underestimate its importance. You really need to address it as soon as possible,” Galvani emphasized. Understanding scalability potential and identifying liabilities early can prevent costly downstream issues. That does not mean having to address all issues upfront: fit for purpose approaches as still valuable to accelerate early phases, but awareness of major challenges to be addressed enables the design of a proper long-term strategy. Furthermore, the initiation of a Phase 1 clinical trial is widely recognized as a critical milestone to demonstrate the asset value. Achieving this milestone can become significantly more costly without a well-defined integrated strategy and plan. To ensure superior cost efficiency, it is essential to optimize API quantities in alignment with preclinical and clinical needs, adopt fit-for-purpose approaches, and maintain continuous, data-driven project reviews. Only true integration enables this degree of cost control while maintaining aggressive timelines. In today’s constrained funding environment, a manufacturing mindset must go beyond risk anticipation; It should position manufacturing as a central element of the integrated strategy. By fostering strong connections across API, preclinical and Drug Product, this approach ensures the most efficient and secure investment path toward the Phase 1 milestone.

In such financially constrained settings, optimizing resources and fundings is paramount. An integrated environment, where all activities are coordinated under one roof, is uniquely capable of providing this need. Such integration enables the reduction of hidden project management costs and idle time, supports flexible planning of interdependent activities, and allows for continuous, data-driven optimization of the overall strategy. It also ensures seamless flow of knowledge across areas, preventing duplications and information losses. Another key driver of efficiency is the possibility to leverage deep scientific expertise and high standard quality, enabling doing things “right the first time” reducing the risk of costly rework or prolonged trial-and-error processes.

Despite the current challenges, Galvani and Gillum are optimistic. The financial constraints are pushing for genuine innovation and “out of box solutions” rather than “me-too” approaches. “Before, we saw a lot of people going after the same target, and change the molecule a little bit,” Gillum reflected. “I think we’re seeing a shift to more focus on innovation, e.g. novel targets.”

Galvani sees a future where collaboration will evolve to adapt to the landscape. “What we are seeing and we are experimenting with is the need for creativity, highly customized approaches, focusing on efficiency, focusing on derisking and this is really creating a strong interconnection between science and business.”

The current pharmaceutical landscape demands a change in mindset. Success requires balancing speed, cost and quality while creatively and collaboratively navigating increased complexity and reduced funding availability. The key is to ensure that good science is supported by equally robust business strategies and operational excellence.

As Galvani concluded, “Science will always win. If you demonstrate good science, compelling data, well-structured things, I think these will win.”

To learn more about this topic, watch Evotec’s experts discuss it at length.

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This article was written in partnership with Evotec.