"We see this as an exciting time to be investing in record-high levels of innovation at very attractive valuations."

Christiana Bardon

CO-MANAGING PARTNER, MPM | BIOIMPACT CAPITAL

April 14, 2023

What have been the main highlights from MPM Capital in 2022?

The biotech markets peaked in early 2021 and have been contracting throughout 2021 and 2022.  This has led to considerable volatility in the sector for both private and public companies. However, for those investors with fresh capital, we see this as an incredible buying opportunity. We raised our Oncology Impact Fund II in 2020 and our BioVentures Fund in 2022, and we are excited to be deploying capital into a buyer's market. For public market investments, we can now buy Phase 3 or commercial assets at the same valuations we normally pay for early-stage clinical assets. We see this as an exciting time to be investing in record-high levels of innovation at very attractive valuations. 

How have geopolitics and rising interest rates affected MPM companies’ performance?

Geopolitics, inflation, and rising interest rates have incrementally decreased the amount of financing available to biotech companies. This is a problem for many companies in the industry because capital efficiency was a concept that the markets forgot about when a large amount of capital was available. Fortunately, MPM has always made sure that its portfolio companies are disciplined in the way they deploy capital at all cycles of the market. That philosophy of capital efficiency has served our MPM companies well, ensuring they can reach key milestones with their available cash balances.

Will the biotech sector be more focused on clinical data rather than platforms in 2023?

It is always a push and pull. It is important to keep in mind that you can build a platform for 20 years and have the best platform in the world, but the ultimate goal is to generate a drug.  That drug in turn generates revenue and cash flow, and those ultimately underly the valuation of these companies. In 2020, several companies invested in platforms without necessarily paying attention to reaching clinical milestones.  In this financing environment, that has changed dramatically. Investors are more parsimonious and looking for clinical-stage assets and tangible value creation.  So yes, I agree that 2023 is a time to focus on clinical data.

How will the M&A environment shape in 2023?

I believe 2023 will be a big M&A year. First of all, big pharma is always ready and able to execute M&A given their tremendous cash flows and cash balances. The only question is whether there are mature, de-risked assets of interest for them to acquire. 2023 is different because there is a big crop of phase 3 and approved assets in the biotech industry. Given this set of mature assets, I expect to see a lot of M&A activity over the next 18-24 months. Incrementally, the difficult funding environment also supports M&A, given that companies see a long road ahead to raise large amounts of capital to commercialize assets themselves, and therefore are more tempted by M&A offers.

Which trends do you see settling in the market shortly?

I think one of the biggest trends will be obesity and obesity-related illnesses. We are about to launch a major category of GLPs drugs for the treatment of obesity. These drugs have incredible efficacy, leading to almost 30% weight loss for people with BMIs of 35 to 40. This will be transformative to the 140 million patients affected by obesity. Additionally, obesity-related illnesses such as NASH liver disease affects 10 plus million patients, and those patients also need to be treated to prevent liver cirrhosis and liver failure. All of the cash flow generated from these new drugs will be redeployed into the biotech and pharmaceutical R&D cycle.

What areas will MPM Capital hone its investment around going forward?

About our private investing, we continue to be excited about next-generation modalities such as circular RNA and the use of novel delivery technology for RNA. Circular RNA in next-generation delivery modalities can potentially be delivered to many organs and will be able to generate high levels of protein production.  This can be applied to concepts such as in vivo car T and protein replacement for patients with genetic illnesses such as Duchenne’s Muscular Dystrophy.

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