Biotech Funding And IPO Temperature Check With Create Medicine's Allan Shaw

Allan Shaw, Chief Financial Officer and Chief Business Officer at Create Medicines, is back on the Business of Biotech this week, with a temperature check on biotech funding and the IPO market. We discuss the implications of recent blockbuster acquisitions, strategies for managing the current funding environment for biotech, what to look for in the IPO market in the coming months, alternative financing opportunities, and what besides lower interest rates might bring generalist investors back into the sector. 

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Chapters

• 0:00 Setting The Stakes For Biotech
• 1:29 Big-Deal MA And Ecosystem Effects
• 3:50 IPO Backlog And What Unlocks It
• 6:20 Crossovers, Mutual Funds, And Allocation
• 9:10 Avoiding Broken Issues And Rate Dynamics
• 12:00 Buyout Versus IPO: Value And Returns
• 15:20 Post-IPO Value: Liquidity And Currency
• 18:10 Managing Expectations And Milestones
• 21:10 Timing Catalysts Around An IPO
• 24:00 Generalists Returning And What It Takes
• 27:00 Hot Modalities: ADCs And Radiopharma
• 29:10 Staying Relevant With Catalyst Cadence
• 31:30 Collaborate Strategically, Not As A CRO
• 34:00 Collaboration Tradeoffs And Opportunity Cost
• 37:00 Building A Partnership Pipeline
• 40:00 Alternative Financing And Spending Discipline
• 43:10 Prioritising Programs For Impact
• 46:00 Key Risks: FDA, Capital, And China
• 49:30 Global Speed Advantage And Offshore Trials
• 53:10 Closing Thoughts And Where To Subscribe

Transcript

Ben Comer: 0:03

Welcome back to the Business of Biotech. I'm your host, Ben Comer, Chief Editor at Life Science Leader, and today I'm thrilled to welcome Alan Shaw, returning champion of the business of biotech, back to the podcast. Alan has structured, negotiated, and closed more than $4 billion in public and private financing, including several IPOs, and has served as chief financial officer at five public life sciences companies, in addition to sitting on multiple company boards of directors. Most recently, Alan has emerged from stealth as the CFO and chief business officer at Create Medicines, formerly known as Myeloid Therapeutics. Today, Alan and I are going to discuss the potentially improving funding situation for biotech companies, including the IPO market and collaborations, as well as current risk factors and how company leaders should think about them. Thank you so much for coming back on the show, Alan. It's overdue.

Allan Shaw: 1:13

Thank you very much, Ben. It's great to be back. Always great to be here. And I look forward to having a uh another thoughtful and uh fun discussion.

Ben Comer: 1:23

Me too. Uh let's let's start with uh let's start with the current situation. Are things turning around uh for biotech? Interest rates are are inching down, uh deal activity appears to be up. There's been some big ones, uh Pfizer, Metsera, um Novartis Avidity, both over 10 billion or $10 billion or more. Uh is it is it too soon to predict a better year for biotech uh in 2026?

Allan Shaw: 1:53

I I think um there's a lot of good reasons to be optimistic or at least encouraged, you know, for the reasons that you've mentioned, you know. Well, I think the really the important thing is that people are starting to make money again. And you you need to be able to make money for it to work. And the the deals that you've seen mentioned uh are deals that most of those deals have been really good deals and people made nice returns. And and the good news is that money, a lot of that comes back into the system, and you need that in order to, you know, to find the next winners. Um, so that is that's all very positive.

Ben Comer: 2:29

Yeah, that's I was gonna ask about that, Alan. I mean, these are real, these are you know blockbuster giant deals, they're in the headlines, but how much of that does trickle down, you know, and make for a better environment for you know companies that that may not be looking for quite so well, everybody's looking for a deal that large, right? But companies, you know, that that are probably not gonna, you know, get several million dollars in an acquisition, does it does it benefit the entire ecosystem to see some of these big deals, you know, get announced?

Allan Shaw: 3:02

Oh, I I think on on a lot of different levels, you know, I think sentiment is very important. And I think there's two things that really drive the you know the markets, and that's IPOs and and MA. And they there's a little bit of yang and yang associated with all of that. And you know, and as companies go through the process of going public or thinking about being public, you always look at kind of the cell versus the IPO. So I think those things are are just like mother's milk secondhand. Um but it is, I think from a from a capital markets perspective, when those things are functioning, it it works better for everybody and the cost of capital comes down. Um, I would just say though, that the bar has also been ripp has also rised. Uh and people are a lot more discriminating. Uh, I think when you're looking at the companies that are going out, they're a little bit mature, a little bit longer in the tooth, uh for the most part. And I think part of that'll be because there hasn't been much in the IPO market for the last several years. So a lot of companies have been on the runway. Um, and we can talk about that, but you know, I'm not sure all the planes are going to take off, but there are a lot of companies on the runway, and many of those companies uh have now matured, you know, they've been fundamentally de-risked and they're viable companies. And you're also seeing as as a as a byproduct of that, you've actually seen an increase in the MA in the private company market space, too. Uh so they're picking these companies off, just as I was saying before, you either buy or you do an IPO, and a lot of times you run a multiple, a dual process uh to drive maximum value for the stakeholders.

Ben Comer: 4:44

Well, let's uh let's talk about the IPO IPO market a little bit. It's still pretty quiet. I I think by my count, it's well, it's been averaging about like one a month for the past three months. Um, as you alluded to, there's a meaningful number of companies kind of reaching maturity, sitting on the sidelines. Uh, they have IPO aspirations. Um, maybe they're running this kind of dual track, hoping for a potential suitor, also exploring the IPO market at the same time. Uh, my my question is, you know, what are the specific trigger events or or signals that would likely lead, you know, to uh a group dive into the IPO market or kind of tip several companies uh into that direction. Have we reached it yet? Or what might need to happen in order for those, you know, smoke signals to to make their way out to the companies?

Allan Shaw: 5:40

I I I think there's certainly been a backlog of companies who want to go public. So I think it's gonna be, I think those will be the initial litmus test to your question um in terms of that. And at least from what I've been hearing and understanding that there's like certainly likelihood, uh, again, our mock, we live in a very funny m time where things are changing at at pay at speeds that have never been seen before. But putting that pesky detail aside, uh I think the expectation is that there'll be some IPOs before the end of the year. Um I wouldn't be surprised. And I certainly think, you know, depending on market sentiment coming in and out of JP Morgan, I think that's also gonna be a time where you're gonna see people um uh potentially testing the waters on that. And I think, you know, one of the indicators uh will also be sentiment and whether or not people are getting in front of their skis is the crossover financing environment. You know, when that starts to pick up, people are realizing that there's gonna be aftermarket liquidity and reasons to to to to get involved. I think right now, because of what's happened with the markets, the crossover uh financing market has has certainly been um uh impacted by that too, because that's the holding time on their investments have been much longer than anyone ever expected them to be.

Ben Comer: 7:05

How does the crossover market and the IPO market uh I guess work synergistically or not? I mean, uh does one kind of um move in response to the other or no?

Allan Shaw: 7:19

Uh they they they there's a clear correlation to the way they they they they work. I mean, you can talk about chicken or the egg, but um but there there's definitely a uh a correlation between them. And I think that goes to what's required, generally speaking. You know, there's exceptions to all. Uh but but generally speaking, when you do an IPO as a biotech company, you know, you basically have to bring your own beer to the party. You know, you have to bring your investors, and and really the quid pro quo is that the crossover investors are effectively akin to your beer, and there's an expectation that they're gonna participate in in the uh the IPO round. And depending on on the market, depending on the modality that you're in, uh, you know, whether or not you're one of the more uh attractive modalities, you know, correlates to some of that. And as well as like I was saying earlier, whether or not the IPOs are working. You know, if they're working, you know, you're gonna have more of the generalist investors participating. And I think the real thing that we have not seen, and it's gonna be key, is the mutual funds, whether or not they get involved with this. You need to broaden the investor base. You know, every time you raise money, you really want to be expanding your investor base. Um and that goes with an IPO, it goes up with follow-on offerings. It's all about constructing a good, sustainable uh investor base. And if you continue to execute and make money for them, they'll be there for you when you you need to go back to the well.

Ben Comer: 8:54

And when you say IPO, uh whether or not the IPOs are working or not, you're just you're talking about not, you know, seeing your share price drop precipitously right after the IPO or in the you know first six to twelve months. Is that what you mean by that?

Allan Shaw: 9:10

Yeah, I think the the technical term is you don't want to break issue, which means that that's the price that you came to market with and issued. You know, if you break issue, it's a sign of weakness, you know, to everybody out there. If it doesn't trade very well after the market, you know, that's a sure sign that it's gonna eventually break issue once the support comes off of it. Uh so people want to be able to make money. And if you look at the past IPOs that really led to the situation we're in, you know, they with hindsight, they have they have not performed well for folks. Uh and people lost money. And when you lose money, they go to other places, they don't continue to lose money. And uh and and it goes back to what I said earlier, you know, all of this has to really depends on making money. Uh and I think it's also playing on greed, right? With when interest rates come down, people need other ways to get returns. And they'll take on more risk relative to that. And when interest rates are high, people don't need to take the same levels of risk. So they they they they're you know, they they're happy to be fat cats and do nothing. Um, so it's that kind of uh correlation, which is why, you know, I've always viewed interest rates kind of being the canary in the coal mine relative to, you know, the as a bellwether for the biotech uh markets in their respective health.

Ben Comer: 10:37

And we have seen interest rates uh inched down. I alluded it to it in the uh in the introduction. Is that do you think that's part of what you know uh backends your prediction that towards the end of this year we might see a pickup in IPOs? I mean, is that an an important trigger in terms of companies deciding to take the leap, seeing that interest rate go down? Does it need to come down more?

Allan Shaw: 11:03

Uh it certainly supports the bet the narrative, right? It definitely supports the narrative. And I think if you had if it was flipped, you know, I don't think people would necessarily be feeling the same way about it. So it it's a it's a it's definitely a uh a very important input. Okay. I think uh I think that's certainly in terms of risk profile asset allocation, there's just no getting around around it. Um, but I also think people are starting to see the M & A, they're starting to see deals get done at values that you know are compelling. And as such, you know, people will will will chase that. You know, you get returns in our sector that are outsized relative to almost anywhere else, but you know, you take on a lot of risk, risk too. So uh as I like to say, it's not for the faint of heart.

Ben Comer: 11:58

Is it better, you know, as a you know, from the perspective of a biotech leader and board of, you know, a member of the board of directors, is it better to have that big buyout as opposed to going public? And and I should say one doesn't preclude the other. Metsera, you know, which Pfizer just um is gonna pay 10 million billion dollars for, they went public, I think maybe a year ago or something around that time frame. Um, so it's not like you can't do a a deal, obviously, after you've after you've gone public. But if you're one of those, you know, companies that we've been talking about, mature companies, have some clinical data, are potentially ready for an IPO, if the market is good enough, uh, but are also maybe working a double track, uh looking for potential deals. Is is the deal your first choice uh or or not? What do you think?

Allan Shaw: 12:51

It's a great question. And there's probably not enough alcohol for us to consume and we didn't take that one on. But um, no, it's a it's a it's a great question. And it's really about what's the best way to maximize the value. And you're also looking at it through the lens of how it's the best way of maximizing your returns. And sometimes maximizing value doesn't always necessarily correlate to maximizing returns, and it really gets into stakeholder alignment uh uh as as well. Uh so that's one consideration, and it's also kind of a bird in hand versus uh, you know, two in the bush. Uh, you know, take what's behind door number two. Um because, you know, if you could, you know, some of the deals that are going out now that I've seen in the private market have have been very compelling. And when you look at that relative to the capital that's invested in some of these companies, you know, it's it's it goes to what somebody once told me, you never go broke making a profit. So, you know, there there's something to really be said for that. On the other hand, you know, there are opportunities to really maximize value uh when you have something that's really differentiated. And we've seen look at what Regeneron has done. You know, that uh you know th those two guys really we you know, they they knew what they had, they stuck to it, and they they've they created something rather special. And I can tell you stories about back back when I was at Serono, where you know, there were decisions made uh by f by them that that really that they they had conviction. So they decided that that was the way to go. Um and and with hindsight they clearly got it right. So, you know, there's there's two sides to it. Um and you know, I'd say you're really a bit of a character in a Clint Eastwood movie, you know. How lucky do you feel? Um and but it really comes down to one's desire to execute uh and and the capacity to execute, and what's the best way to maximize the value of this? You know, again, a lot of these big organizations uh have the commercial uh uh infrastructure, the development infrastructure, the translational science. You know, they've got the ability to really squeeze as much juice as possible out of it. So, you know, there's there's I think there's so you know, I'd say the grass always looks greener, but your question is spot on, and it's one that there's no clear answer, but there's a lot of variables, a lot of considerations, and and the perspectives of the of the different stakeholders uh on it.

Ben Comer: 15:38

Well, I mean, I guess one key difference would be uh if you're you know doing a total buyout being acquired for whatever sum of money, uh I think the the expectation is is that's kind of your finish line. Maybe there's you know a contractual thing where you're gonna stay around for a little while or something. Maybe it's longer term, but I think most of the time, correct me if I'm wrong about this, Alan, that's that's kind of the end of the road. You're now part of this new company and they're gonna run it and and you know, grow it as they see fit. Where an IPO, obviously a very important liquidity event, of course, but but not the end of the road, you know, at by any stretch, you know. So you know, for companies that do decide to go the IPO route, um, aside from that important money coming in the door to advance the pipeline, um, what what else does it accomplish for companies in terms of I guess looking at the longer view uh for an IPO company, assume that assuming that you know your your stock price doesn't dive uh below issue immediately.

Allan Shaw: 16:45

No, you it's uh your question had provides really there's a lot of a lot of ways you can go with that. Um and I I would start off with in terms of trying to unpack that. I I put it in two two areas. The first one I would say is it's not necessarily the end of the road if you do do a deal. Uh you know, there's a lot of opportunities depending on how much value is subscribed, right, to the transaction. You know, there's a lot of asset value, uh other products, other programs, other technology that may not be necessarily reflected in what's being done. So there's opportunities to really unlock that value as opposed to just giving it away. And that's when you see situations like spin-offs uh and and other things in that vein. So uh I wouldn't necessarily, you know, so I think it's all about unlocking value and the best ways of unlocking value, and and that that's certainly one way you can do it with a potential exit, with a spin-off. You know, I've seen examples of companies that's like the son of and the daughter of, and they keep they keep spinning uh because it's really a lot of value is typically driven by products. So if that's the case and you have an engine, if you have a platform or a real portfolio or pipeline, you know, there's opportunities to consider, you know, spinning them off. Um switching back the other portion of your question, IPOs, you know, IPOs is not an exit. You know, maybe for some it provides a liquidity event that will enable, you know, some of the stakeholders along the way to, you know, lighten their load and and or or even move on. Um but I think an IPO in itself is really just another financing event in in a company's um uh progression. And the idea here is that going public will help you further um reduce your cost of capital. It allows you to have liquidity in your stock by by and that or then therefore there's an implied cost of capital discount. It gives you the ability to uh transact uh on data. You know, um if you're a private company, you can't raise money on a turn of a dime. If you turn over a card and you have catalyst value inflection points, the markets react very can react favorably to it, you know, given some of the things that have been happening in the market. That's no longer a uh uh you can no longer assume that. There's a lot of other factors that that go into markets reaction. But anyway, that that's the concept and and and the principle. And lastly, I think having a public being a public company gives you another currency as well, and it gives you the ability to do MA and and other things like that with private companies. Um so it gives you just more arrows in your quill.

Ben Comer: 19:40

Right. I uh I had um Mardi Dier, who is the CFO of Madrigal Pharmaceuticals on the show recently. And um one thing, and she's gone through a couple of IPOs, and one thing that she mentioned to me as being very important, and and I didn't follow up on it, so uh, and so I'm gonna follow up with you on it, Alan. She said that it was really important to manage expectations uh with investors uh at the time and after an IPO. And I I wonder, you know, if you could kind of explain what maybe what read Marty's mind and kind of tell me what she meant, or or you know, maybe uh just you know, from your own mind, Alan, is it important to manage expectations and what what does that mean exactly?

Allan Shaw: 20:26

You know, I think it really goes to what I I would say is, you know, a real to me a philosophy, and that is do you want to underpromise and overperform? You know, you don't you don't you know you don't create value by telling stories, you tell you provide value by by delivering. And so I think what you want to do is set reasonable expectations, at least publicly. You can have stretch internally, but your public expectations, you know, as I I've referred to in the past is you want to build some shock absorbers into that. So you know you want to build some flexibility and on the timing of things to the extent, you know. Uh try to put second half of the year, first half of the year, you know. Sometimes you know you get cornered to go into quarters, but you know, you know, accruing patience and studies isn't, you know, unless you're in Switzerland, it's not it's not clockwork, you know. It's uh it doesn't run on a schedule always. So there's variables involved that that that can impact the timing of things. Um and I think you do you definitely want to avoid getting too much over your skis. You know, you want to be somewhat grounded because our business is also about credibility. And you know, if you you you can really blow that up pretty quickly if if you if you if you establish expectations that are unrealistic and you can't deliver on, you know, you start sounding like the boy who cried wolf, and that's that's never been proven to be helpful.

Ben Comer: 21:56

No. Um I I want to I've got a couple more questions about uh IPOs I want to ask you, Alan, and and we'll move on to uh some other topics. One is um again, going back to these companies that are maturing, considering an IPO. Um, are there is it possible to wait too long? Or are there risks associated with waiting too long to pursue an IPO? And I guess I'm also thinking about, you know, a clinical program running, you know, perhaps some some milestones or some key data reveals, you know, coming up or maybe have just happened on earlier phases. Is there, you know, what's your what's kind of your strategy or your thinking on on that? Is it possible to to sit on the sidelines for too long and and lose your chance?

Allan Shaw: 22:48

You know, it's um a very interesting um question. And it, you know, if you if it touches on a lot of different perspectives, you know, I would have told you up until recently that you know one shouldn't even be thinking about an IPO right now. That you know you're you're you're thinking about it in the wrong way, that it's just not available. Um based on some recent conversations with some folks. Um I like and I think it's consistent with what I said earlier that there can be some IPOs later this year, and and certainly I think it's a lot of reasons to think they're coming back. Um when you look at the landscape, you know, there's probably 120 companies with those aspirations. And you know, the math doesn't work, even if the market's working really well, the math is not gonna work. And it goes back to the quality of some of the companies, not to say the other companies don't are in quality, but you know, the cream rises to the top. And during this this backlog period, you know, that there has been cream, and there's certainly modalities that are are very in fashion and attractive to people, and you're seeing and there's a scarcity of them in the public markets. So, you know, there's a little tension, you know, will these companies get ever get out to be public? Uh, going back to the again, the uptick in M&A. So it it's it's all and it all speaks to the fact that if these companies have that kind of attraction, they should perform well in the public markets. And and I think it's really the I hope that they get out to the public markets, because that'll that'll actually pick up the sector because the when the good companies start to make money. Unfortunately, you know, we human society, we always have a tendency to do everything until we break it. But it it will it will initially start to be good as long as there's some discretion and discipline that everybody doesn't go all at once. If everyone goes all at once, we break it.

Ben Comer: 24:48

Um well, that's exactly what I was gonna ask you next, Alan. What what happens, you know, if there's just a big surge in biotech and biopharma IPOs? A bunch of companies decide the time is right. You you know, you say the math doesn't work. There's not enough uh not enough juice to spread around. Is it you know what what what is the risk, I guess, if you're you know, you're sitting on the sidelines, you've seen you've seen several jump off, several more jump off. Uh, you know, what what are you thinking about in terms of am I am I the one that's won too many?

Allan Shaw: 25:21

You know, I think in terms of, you know, if you're trying to I guess I guess it requires a level of self-awareness and and being uh uh cognizant of what are the qualities of the companies that have a better chance than not, right? And I I would I would certainly say those who have you know pedigree investors in their cap table who who are or that validate the story, uh they could support the story, because I I think even for the you know, un I I made a joke about the uh bringing your own beer to the party for the IPO, but you you know, you have to do that for every round of financing too. So, you know, you need people who have that commitment and people like winners. So that's going to attract other winners as well. So sometimes it's not quite self-fulfilling because these guys lose money too. But you know, if you're looking to, you know, pay follow a herd mentality and reduce some of the risk associated with what is very risky, you know, it it it it's uh it does have a level of magnetism associated with it. Generally speaking, these things don't happen by accident, so it also speaks to the nature of the technology, the quality of the management. You know, it's a little bit of a halo effect in some regards, but it's but again, you have to execute it. You know, that in itself doesn't get you anything. You know, it's about how you how you squeeze the juice. Um so I think those companies with that profile in modalities that are exciting.

unknown: 26:58

Uh-huh.

Allan Shaw: 26:59

You know, um ADCs are very exciting, people seem to like them. The money seems to be flowing there privately, there's transactions that are being done. You know, you look at Pfizer's Seagen deal, you know, validates that as you know, just further validates that in this. I've seen a handful of there's a lot going on there, to say the least. Uh Radio Pharma is an area that's got uh incredible levels of uh interest uh in vivo car. So, you know, if you're in the right, in the right modality, you know, you're gonna have uh more of an opportunity to have options and choices and will be chased. You know, um I think a good sign too is you know, just because a banker is calling you up and talking to you doesn't mean that you're really getting out. You know, these guys have you know have their own agenda, but you you know, you so you get you got you gotta be in touch with that. You need to have a um and one of the dangers of being sitting on the sidelines too is is how does your timing align with your milestones? You know, you really want to be relevant when you go public. And if you don't have catalysts and milestones and the right cadence of events is and press releases, you know, you're not gonna get people to really f come into the story. And if you don't get the trading, it's all about trading and having volume in your stock. You know, people focus on stock price, but really volume matters. You know, liquidity matters. If you got liquidity, then you it makes it easy to issue more stock. You know, you people you know, you don't want to have stock that trades by appointment. Um, remember uh one company we used to yell at my GC when the stock moved. We said, Is your mom trading again?

Ben Comer: 28:50

Yeah, uh that's uh that's great. Um I I wanted to ask about uh generalist in well, actually, before I ask you about generalist investors or tourists as you call them, uh Alan, I I did want to ask maybe just one uh follow-up on milestones after an IPO. And and I'm sure this is probably really hard to generalize. It's gonna be unique to modality, to company, to management team, to all sorts of things, but I'm gonna ask it anyway. If you're you know you're in clinical development, you're going into an IPO, you know, what what is too long for your next data, you know, reveal your next milestone? Uh is there a kind of range where you want to say, uh, you know, I want to be able to communicate some results to the market within this X period of time versus waiting too long and risking, you know, I guess a loss of interest?

Allan Shaw: 29:46

No, it's it's time timing in life is everything, right? Um, and this is no different. Um, I I you know, people generally, as a rule of thumb, don't want to get too close to something. So, you know, so you. know if you have data that's reading out within three months of an IPO, you know, it's probably a little soon. Uh you know, people don't want to look like idiots. So, you know, so there's some self-preservation mechanism involved. And as a rule, even for private financings, you know, you start to get into that situation. If you get that close, people want to wait. Yeah. Is basically what it comes comes down to. And then you hope you can move the price on that. But putting that thought aside. So that that so that's one end of it. And then the other end of it is, you know, relevancy. So I would say six months to a year is probably the sweet spot uh of uh in terms of that type of readout maybe a little more a little longer than three months. But again I would say given the fact that the markets are unpredictable, you know, you can't quite land on you know it's kind of hard to choreograph your exact timing when you come out relative to when you have your catalysts I'd give yourself a little bit more of a cushion like that. Yeah.

Ben Comer: 31:05

Um getting back to generalist investors um uh we've all we all know they've kind of left the sector in the past couple of years uh in mass um however interest rates are are coming back down um is that enough Alan or are there some other factors that could potentially bring generalists back to the sector are you seeing them come back are you hopeful that they'll come back um what what's your take on on generalist investors right now you know I don't think the ducks have started quacking yet uh but I but I do think you know some of the things that we've called out are all positive and represent green shoots in terms of hopefully bringing them into the fold uh I I think the fact that there's there is that you're gonna be bringing companies probably public that are being viewed as very as strategic targets I think and then therefore the it gonna kind of feeds off of the M&A I think there's going to be a lot more interest.

Allan Shaw: 32:06

I think you know it almost feels it's almost like a casino type of an event when that happens because these guys are just really chasing chasing the the prospects of of crushing it and really when you crush it it's usually based on an M&A and and some data driven obviously you need data driven events. But they you know I think it kind of there's a lemming mentality I think and I think we've seen it in a lot of different areas but you do get that lemming mentality but I think we start to need to see me people making money. You know the IPOs it's you know I I basically called out when a deal breaks but you know they want to see something remove you know you need more Metseras right, Metsera is a great example of a of a of an IPO that that that cashed out very quickly. Yeah um you know uh uh Karuna was one that that was public for a couple of years but they had a great event and you know that gives people hope in the neurology area that's let's see the other area that that could be of interest. But I I would say and you know I think there's been a lot in cardiometabolic I mean I think obesity is quite quite played out. So I think people are looking for new you know the next great paradigm shift and I think there's a lot of interesting transformational stuff coming. So um not yet is I guess in short not yet but I I think if people are making money and if these deals are working uh the generals won't be far behind.

Ben Comer: 33:34

So that the uh the the acquisitions as well as companies hopping in doing an IPO both of those help to bring generalist investors back assuming the IPOs are successful.

Allan Shaw: 33:47

Yeah I mean I I I think the the markets working are more important and then I think the IPOs are probably if they're working you know people want the access to them. If they're not working they don't care and but the MA I think the MA is the yang that makes this work. The IPO market isn't going to come back just on on I mean on interest rates going down there'll be deals but if you got companies getting picked off now and and there's a lot of reasons to believe that companies are going to get picked off you know uh I there's two two compelling reasons. One is there's patent cliffs that a number of these uh big strategic companies are facing and the second thing is they're sitting on a pile of cash right so that dynamic should should unlock stuff I think the nature of big pharma though is that they're generally risk adverse so they they'd rather pay more than and get something after it's been de-risked than than uh than not or put it another way they're much more focused on self-preservation.

Ben Comer: 34:55

Yeah yeah and they uh you know maybe they'll choose to collaborate rather than make uh you know a a full-on acquisition there's a lot of collaboration that's happened in the sector um perhaps because of some of the difficult issues in the funding environment um I wanted to ask you kind of about the state of collaboration and maybe what what the difference is between external collaboration and and strategic collaboration. What would you say about that, Alan?

Allan Shaw: 35:26

I'd say I guess collaborate collaborate and collaborate. I mean I I think the shortest distance between two points is a shortcut and I think in a capital challenged environment you need you need to think about what you're good at and what others are good at and try to leverage their capabilities as opposed to trying to do everything. Yeah and I think particularly in this environment where capital is harder, you know, you got to also think about how you monetize aspects of your of your technology that not only helps keep your lights on and your runway going, uh, but also helps that can be also validating as well in terms of your narrative and and your story. In terms of external versus strategic I would say an external collaborator can be a vendor somebody that you bring in to like a CRO um or or or helping you with the data management or or anything in in in that type of vein.

Ben Comer: 36:30

Okay more of a service provider type of collaboration.

Allan Shaw: 36:33

I I think I would probably that's my interpretation of external I think strategic you know you're doing it you're doing a clinical collaboration a research collaboration you can be doing something that's more more formal like co-development uh deal with them so you know that that to me would fall more into the strategic side of the equation.

Ben Comer: 36:56

And we've seen some you know pretty big dollars spent on collaborations with you know big pharma and and various small companies over assets over platforms different different areas uh and I'm I'm kind of curious I guess from the perspective of the the biotech company that's getting paid you know for for a collaboration like this I mean is that is that just you know a a win-win you know that that's the best possible scenario or or are there some downsides to collaborating? That's question number one um and then um my my other question about this this type of collaboration is um you know is there is there any risk I guess to the originator company the biotech company uh for you know somehow missing out because they're locked into some kind of you know collaboration um it it strikes me as a nice way to to get some funding you know um if you you know you're otherwise not ready for an IPO and no one's knocking on your door to to make an acquisition. So anyway there's just several questions in there Alan I'll I'll let you answer this how you like but I guess what I what I'm asking is there is there any real risk to tying yourself into a collaboration you know with a big pharma company from the perspective of of a smaller biotech?

Allan Shaw: 38:20

No well that's a lot to unpack but I I would also just also clarify before I forget that I think external collaboration can also be working with an academic center too okay and and doing in ISTs and stuff like that. I think that could would probably fall into that but going back to your question yeah I think I think there's I think there's there are risks with collaborations uh you know I would start with that you got to make sure what what the objectives that you're trying to solve for and making sure that that aligns with what you're collaborating. You could certainly get into a situation where if you're not if you don't structure it right, you know you're working more like a CRO as a to a partner or a co-developer on that. So you know that doesn't work uh and you need to understand what your costs are in terms of doing this so that you know everyone is paying their way uh and getting the appropriate economics or if you're pay overpaying you know you get the appropriate economics as a consequence of that etc. So that that would be one element from a uh a collaboration perspective. The other one that you touched on is a little bit of an opportunity cost. You know you I there's there's numerous examples of of people collaborating on a deal where um I remember uh uh I think it was Al Nylam in the medicines company did a deal on a on a cardiac um uh RNA for um for cholesterol uh management and um you know that got that the that one company wound up getting um acquired by Navartis for I don't know it was like $10 billion or something like that. So you know Al Nylon got a good deal but they didn't get necessarily the best deal if they had developed it themselves. But they you know that it could be also if you look at it through the other way that may not have been a program that aligned and it didn't align with what Al Nylon was doing. So they were able to unlock value and help patients uh in the same breath but it was uh obviously it was not necessarily optimal from a uh from a their stakeholder perspective but you know it depends what lens you're looking at it.

Ben Comer: 40:38

If you're still thinking about that biotech company that's maybe searching for funds, uh looking to collaborations as a potential way to receive some, are there things that um that you know leaders at the company uh members of the board uh have to do similar to kind of like a an IPO track or an MA track is there also a collaborations track are there things that you know a CFO for example can do to make the company uh at least you know open to the mar you know to to to collaborations or to you know make them kind of raise their visibility I guess or or improve their chances of of forming a collaboration?

Allan Shaw: 41:18

No great question uh the short answer is yes you know you got nothing happens by accident you know you got to kind of leverage all your stakeholders and their relationships uh in terms of identifying who is relevant uh and would be partners and and start a dialogue you want to try to have as many different folks uh at a shop aware of you and really I think it's key to have advocates if you can get somebody who's an advocate an internal champion uh I think that's really fundamental in terms of getting things over the goal line and and getting things done uh because there's a million ways for deals to die. So you need you need somebody who can really help you push it forward. Um I think you also need going back to self-awareness. I think self-awareness is is is a fundamental need for everything. But I think you need to be aware of what are the hooks that somebody would want to understand whether or not there's something to be done now. You know, have you de-risked it enough and I would certainly look at precedent deals and seeing really what is the bar, you know, what is the hurdle rate for getting something done and reverse engineer things so you can achieve that. You know, again you want to be able to make a compelling argument or compelling case and you don't necessarily have to have it achieved yet but I think you need to be able to push put it close enough on the horizon that you know that they're aware and then when you got it, you know, they're ready to go. Um you know time is the enemy so you need you need to try to do some things in parallel process. But you know absolutely and I think you know you do it by working with your stakeholders you you you also work with getting hopefully the right types of advisors that can help you and work kind of like a Sierra de Bergiac in the background and and and telling you the best way to push the buttons and pull the strings and and um and I think the other part of it is just being being you need to be out there a little bit uh you know I like to say that you know if you want to get hit by a car you have to be in traffic. So you know I think getting out to the conferences uh and engaging with other BD folk but also being mindful of of the organization right you know and looking at you know um stakeholder maps and other ways to understand who's working with whom and who are the key relationships and how can you influence internal opinion uh I think are also helpful strategies.

Ben Comer: 44:02

We've talked about collaborations, MA, we've talked about the IPO market. Um we're cautiously optimistic that uh the the ecosystem is improving uh for for finances maybe we'll see some IPOs uh towards the end of this year and and we'll see what happens in 2026 uh for companies though right now still struggling and and trying to fund their businesses outside of those areas that we've discussed are are there other opportunities that exist in in alternative financing uh debt lending uh synthetic royalties for examples um are are those still you know good options for those companies uh what are the downsides if so you know I think you know desperate people have to do desperate things so uh you know I think you got to consider everything at the end of the day I think you know you got to be aware that there's generally no silver bullet but you need to be resourceful.

Allan Shaw: 45:02

So I would certainly you know depending again on who your pedigree is and what your story is and what your technology is you know you could potentially find different types of debt financing I would say that my my general advice would be to to beer away from that unless you're really looking at really launching a product you know later stage and I think you can get better terms as well and those lenders are a little bit more um uh have history too because of working with people. I guess what I was trying to say is that you know getting the money day one is great. But what happens when you have some bumps in the road you want people that you can really work with that have who understand your situation and aren't going to just blow you up as as a consequence. So you know so you need to look at some of the the the work the people and when you've had challenging situations, how they've handled it. So it's really I guess my message here is just be careful with who you might consider working with um because there's a lot of a lot of risks associated with that. I think my my advice as well would be to um really really cut back on your spending to the extent possible and really just focus on what you really need to do. And that's really focusing on those hooks and and what are the value inflection points um because it is hard out there and um you want to be able to live for another day. And there there are a lot of uh lot of people who will tell you that they've got that they've got the panacea just make sure you read the fine print.

Ben Comer: 46:46

Yeah do your due diligence learn about those partners uh before uh before you get into bed with them um still in this context of of limited resources uh you you mentioned kind of the importance of resource allocation keeping costs low uh in particular if you're out you know with your hat out looking for for funds uh for for the company um you may have to you know prioritize clinical programs potentially um uh that's that's one area obviously that companies do use you know to to try to trim the expenses and the kind of cash burn at the company is you know if you have multiple clinical programs or or even preclinical programs maybe you focus on one or or two as opposed to five or six um is there anything you would say uh just on that on this question of prioritizing programs Alan um how how do you think about that I mean obviously you want to I think prioritize the program that has the highest potential chance of success but are there other considerations other things to think about if you do need to kind of winnow down your your pipeline uh because you need you know to keep the most promising agents moving forward you know I think you you touched on something that's really really important and that is you know what is their lens and what's the aperture and what do you you look what are you measuring this on right if you're looking at probability of success is that are you just looking at that through the scientific lens or are you looking at what what is the commercial opportunity and you know if you're just doing it blindly to the commercial opportunity you're probably gonna spend a lot of money and waste a lot of money only to find out that there was a it wasn't commercially relevant.

Allan Shaw: 48:35

So you need you need to really understand what does the market want and what does the market need. And you know I think you want to be kind of first in class best in class type of uh you know I think me toos I think are in on the endangered species list. You know China is specializing in MeToos so you know it basically me to's are going to be become officially effectively genetic um and j generic uh before you know it. So um so you gotta really have a a good quality product something that's differentiated. If you're not you it's gonna be hard hard coming uh because it's not just the landscape here. So to answer your question you need something that's relevant that's impactful um and focus on that. And if it doesn't hit measure up to that uh and then you got to look at the obviously the probability of the science too that factors into it if you're if if it's a moonshot you know that's not gonna work either. Yeah think about a different different different program right that's excellent.

Ben Comer: 49:51

I am uh coming up on the end of my time with you Alan but I I wanted to end with just kind of remaining risks that are that are hanging out there. I feel like we've been pretty positive on this on this episode compared to maybe some of our other episodes uh in terms of you know feeling good about the at least the direction uh that the market is moving but there are still some risks out there the FDA uh being one of them um and um I'm curious about how you might I guess how you think about the FDA or or how the investors that you speak with think about the FDA in terms of risk and and if there are any other kind of lingering risks out there that that biotech leaders should should be paying attention to or at least aware of no it sector has is laden with risk right we've got development risk clinical risk regulatory risk commercial risk scientific risk so you know I think generally speaking there there's a lot of risk and you got to really manage those risks uh differently you know um the FDA is clearly a wild card uh you know it's a lot of a lot of people have different thoughts and perspectives uh on the FDA uh I I think it's certainly from my two cents it seems to me to be coming much much more political uh than it's ever been and that's that's unfortunately gonna undermine its its integrity if it if it if it continues in that vein.

Allan Shaw: 51:23

But I think in terms of how people are generally looking at it overall I think they feel like there's going to be some surprises like we saw with Unicor uh Unicare uh but I think over overall I think people feel at this point that it's uh okay it's manageable for the moment until it's their issue I think but uh that that would be my sense I would say the risks in general um you know I think the real risk is capital risk right now among everything else I think there's still a tale of two cities haves and have nots certain folks definitely have access to capital. The follow-on markets are working much much better uh they seem reasonably robust um good precursor for the IPOs um but it's not not everyone's gonna be able to get out and I think it's really important for them to be able to figure out you know merge with folks if you need to you know platform to platform type of collaborations uh you know to leverage each other's best qualities um but but it's it's gonna be uh a different game and I think you need to be mindful of of China uh because they can do things a lot quicker and they can do things um cheaper. Uh so when you took back the time and money which are big inputs in terms of our business you you need to be mindful of what's going on over there. You may not have to like it but you need to be mindful of it.

Ben Comer: 52:58

Well the last time you were on the show, Alan, we talked about uh the implications of China's growing biotech sector and ecosystem. You were just recently in Shanghai. I'm curious you know what you might say about what's changed since the last time you were there or maybe you know I think we spoke like what back in April or something. You know what would you say uh you know about the the environment the biotech uh life sciences environment uh in China now versus you know I don't know six or eight months ago I I would certainly say that it's it's it's incredibly robust it's moving at the speed of light you know they're coming up with more and more um ev evolution in terms of the regulatory side in terms of the way the IITs are being conducted and it really enables the ability to generate data much quicker and inexpensively uh than I had originally envisioned.

Allan Shaw: 54:02

It's they've really got an advantage. You know as I said before humans translate much better than animals. And uh you can really while we can all debate on on the people and and the and and integrity and the need to be able to do things again globally I think for if you look at it simply put as a way to be able to generate data and iterate quickly and efficiently it's really unrivaled um it on many levels. Over at at Create we we've been able to actually do things uh in my opinion in incredibly uh quick we've been able to take products from concept on the whiteboard into the clinic in under 12 months uh and we've been doing that in Australia so it really does speak to the need the ability to be able to uh do things offshore uh versus doing things here on onshore you know I was talking to folks it wasn't that long maybe it was uh but uh I remember when you saw somebody who was doing clinical trials without an IND and they were offshore you thought that there was something weird going on. Yeah and now it's it's it's something it's actually the other way around. What's wrong with you? Why are you doing it on shore?

Ben Comer: 55:21

Yeah right I um I I saw Commissioner Mackery speak at the galleon forum um I don't know a week or so ago and and he raised China specifically said you know this is this is what we're competing against the whole I'd say the whole theme of his his talk was on uh as he said cutting the idle time out of the FDA he's obviously you know trying out a number of different pilot programs but but you know whether or not any of that will work I don't know but uh he does he does clearly recognize the the speed issue and and seems to be attempting to uh address it um we'll see what happens with all of that uh but alan uh thank you so much for for coming back on the show uh I really appreciate it no always a pleasure always a lot of fun uh and I look forward to having uh our next opportunity um too and uh I also wish you and everybody else a uh happy and healthy Thanksgiving holiday yeah thanks Alan same to you uh we've been speaking with Alan Shaw CFO and CBO at Create Medicines I'm Ben Comer and you've just listened to the business of biotech find us and subscribe anywhere you listen to podcasts and be sure to check out new weekly video casts of these conversations every Monday under the Business of Biotech tab at life science leader dot com. We'll see you next week and thanks as always for listening.