76 TWENTYFOURSEVENBIOPHARMA Issue 3 / October 2025 PHARMATECH ASSOCIATES The economic environment for biotech and pharma drug developers today is challenging, marked by tightening financial pressures and rapidly evolving regulatory landscapes that are redefining development strategies. Biotech IPO activity has plummeted over 75% from its 2021 peak, with only 20 global offerings completed in 2024 compared to 104 three years earlier1. The Nasdaq XBI index declined by over 60% from its February, 2021, peak, signalling broad valuation compression and investor risk aversion2. Many early and mid-stage companies are resorting to bridge or extension financings at flat or reduced valuations to extend their runways. This capital scarcity is forcing sponsors into 12-18-month funding cycles rather than the 30-36-month runways of previous years, with investors demanding valuecreating milestones, IND filings, clinical readouts or strategic partnerships before supporting follow-on investment. The escalating cost of capital is driving companies to prioritise cash conservation and operational efficiency, resulting in widespread pipeline rationalisations and workforce reductions across the sector3. Capital productivity pressures extend to venture capital funding, where investors are notably more selective. There is a prevailing expectation that VC-backed ventures demonstrate compelling regulatory strategies, clear manufacturability and commercial viability far earlier in their lifecycle4. Simultaneously, Contract Development and Manufacturing Organisation (CDMO) costs are rising, while access to high-quality manufacturing slots is increasingly competitive. This has forced innovators to fine-tune development plans earlier under stricter resource constraints. “Perfect storm” Yet this financial pressure coincides with a remarkable regulatory shift. The FDA’s 2025 draft guidance outlines a structured, riskbased framework for AI and in silico evidence in regulatory submissions5, explicitly encouraging early engagement with regulators, robust validation plans and transparent lifecycle management of predictive models. The FDA’s Model-Informed Drug Development (MIDD) Pilot Program has engaged over 80 industry sponsors, creating clear pathways for modelling submissions through its seven-step credibility framework. The EMA’s 2022 physiologically-based pharmacokinetic (PBPK) guidance formally BioBeat Report 2025 by De Facto
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