I’m far from the first person to point out the prolonged market challenges that have depressed the biotech fundraising environment over the past few years. While we’ve recently seemed glimmers of optimism in the form of positive data read-outs, sizeable M&A transactions, and increased clarity on topics like drug pricing and tariffs, we remain far removed from the (all too unsustainable) boom of five years ago.
A limited access to capital places undeniable strain on nearly every stakeholder in the sector. From a corporate perspective specifically, as a leader looking to build a company for long-term success, the strain is particularly acute. In a field like drug discovery, innovation simply can’t happen overnight – it takes years to bring forward and develop new medicines, and these years come with an unavoidable capital cost.
In navigating these current waters, I’ve found myself reflecting on some of my past experiences – be it the downturn of the early 2000s or the 2008 recession – for not only the lessons learned, but for the perspective gained by having to guide a ship through a difficult course.
Each of these downturns felt existential at the time, with many jobs and companies lost in the absence of capital. And yet with hindsight, each of these cycles also created the fertile soil from which new leaders emerged, sharpened strategies took root, and truly innovative companies began to grow.
And this dynamic is worth sitting with: as painful and seemingly endless as a market contraction can feel, they inherently necessitate clarity of vision and decisive focus for companies.
Forged in Scarcity: The Nimbus Story
Looking back to 2009, during my days as a member of the founding team of Nimbus Therapeutics, we were deeply inspired by the promising findings of our early computational work, yet faced the uphill climb of establishing our footprint in an era in which skepticism around computational drug discovery abounded. At the time, one colleague joked “computational chemistry can tell you why a molecule didn’t work two years after you shut down the project.”
Capital was incredibly hard to come by in this climate. We ground our way through countless meetings with VCs who thought we were crazy. “We’ll get back to you on Tuesday … ” was oft the response (and when we didn’t hear back for months, it was clear the VC hadn’t specified which Tuesday). Despite these frequent closed doors and dead ends, we triaged the feedback, focused our vision, and sharpened our story. Amidst all the negativity, we never lost the conviction that Schrödinger’s 20-year innovation powering the Nimbus team/business model had something very special to offer when directed the right way.
Despite tremendous headwinds, we were able to secure key investments from non-traditional pockets of capital, such as from Bill Gates, that anchored and ultimately enabled our first proper Series A financing. During this time, I especially appreciated the active engagement of our founders (Bruce Booth and Ramy Farid) as it took all hands on deck to navigate through this specific downturn.
Looking back at the early days at Nimbus, I still remember the pain, but also can plainly see how the enforced discipline made the company stronger and laid the groundwork for the company’s ongoing success. A clear and decisive early strategy was a key ingredient in what has ultimately allowed Nimbus to successfully demonstrate how computational chemistry can indeed be used prospectively to design breakthrough medicines.
Today’s Environment: Parallels to the Past
Fast forward to today, and the industry is living through another prolonged correction. Following the pandemic boom, the tide rapidly receded and the persisting hangover is severe. I feel this acutely while running an early-stage private company, as a large proportion of capital has shifted to later-stage clinical stories or, in the case of generalists, away from the sector all but entirely.
The contours feel familiar – skepticism, scarcity, triage – but the duration may be even longer this time. The implication for founders and CEOs is clear: discipline isn’t optional. Clarity isn’t a nice-to-have. The bar for capital efficiency and differentiated science has permanently risen.
Principles for Leading Through Scarcity
Looking across these cycles and reflecting on my own journey, a few themes stand out for those leaders navigating the current environment.
The Upsides of a Downturn
None of this is to downplay the pain – and potential permanent costs – of the current market. Over just the past two years, 156 public biotech companies have ceased to exist, representing a 16% contraction – such a large number of shuttered companies and shelved companies undoubtedly carries unknowable costs. And yet we can also view this contraction through a different lens – a lot of bloat has been culled, leaving focus, discipline, and innovation in its wake.
The companies that survive this period will skew toward those with genuinely differentiated science, thoughtful capital strategies, and resilient teams. And these are the precise ingredients that enable the industry to advance real medicines to patients. Moreover, past experience suggests that these companies will be rewarded. The post-contraction IPO market has historically been extremely robust, in large part due to the pent-up demand from many high quality companies that effectively weathered the storm of the contraction and now sit in queue.
While each market downturn I’ve lived through causes deep pessimism and anxiety, it’d be inaccurate to deny the lens of hindsight, wherein each has also cleared the path for a new wave of innovation and for a generation of leaders who were forged in adversity. That’s the quiet promise embedded in today’s challenges: clarity, discipline, and resilience are being cultivated in real time.
