US Biotechs Face Shifting Landscape Amid Rising Costs and Global Competition

In a rapidly evolving pharmaceutical landscape, US biotech companies are grappling with significant challenges that are reshaping their strategies and operations. Rising costs, regulatory uncertainties, and increasing global competition, particularly from China, are forcing these firms to adapt their approaches to drug development and market positioning.

Antares Therapeutics: A Case Study in Adaptation

Antares Therapeutics, a spinout from Scorpion Therapeutics following Eli Lilly's acquisition of Scorpion's PI3Kα program, exemplifies the strategic shifts occurring in the industry. Led by CEO Adam Friedman, M.D., Ph.D., Antares has secured $177 million in series A funding and is charting a course that reflects the new realities of the biotech sector.

"There are some changes in how we think about what targets we will be pursuing because the environment has changed," Friedman explained. The company is focusing on first-in-class programs, targeting novel small molecules against well-validated targets or attempting to drug previously "undruggable" targets like transcription factors.

Financial Pressures and Strategic Imperatives

The biotech sector has experienced a significant tightening of capital since the COVID-19 pandemic-induced investment boom. This financial pullback has forced companies to be more selective in their R&D efforts. "Scorpion was founded in an environment where there were many, many companies being started," Friedman noted, contrasting it with the current climate that favors biotechs with later-stage, de-risked drugs.

The high cost of capital is driving biotechs to prioritize programs that offer maximum benefit for both patients and shareholders. This shift has implications for how companies approach partnerships and potential acquisitions. "Optionality is a fiduciary responsibility right now for the industry, because the cost of capital is so high," Friedman stated, emphasizing the importance of maintaining dialogues with potential partners or acquirers.

Global Competition and Regulatory Challenges

The rise of China as a biotech powerhouse is reshaping the competitive landscape. Chinese companies benefit from lower capital costs and a more efficient discovery and development apparatus. The country's share of new clinical trials sponsored by the biopharma industry has surged from 8% in 2013 to 29% in 2023, according to IQVIA.

Regulatory challenges in the US are compounding these competitive pressures. Friedman pointed out that inefficiencies in the US framework, including longer wait times for activating clinical sites and engaging with the FDA, have been slowing drug discovery for years. Recent changes at the FDA, including staffing cuts, have added further uncertainty.

In response, companies like Antares are diversifying their clinical operations globally. "The U.S. will always be an incredibly important part of our clinical operations and how we approach the market, but it's also important for companies like Antares and others to be looking globally to be able to move faster to access different patient populations," Friedman explained.

As the pharmaceutical industry continues to navigate these challenges, the ability to innovate, adapt, and maintain a global perspective will be crucial for US biotechs seeking to maintain their competitive edge in an increasingly complex and dynamic market.