Winning over Wall Street: Biotechs’ comeback playbook — a Guest Commentary by Jami Rubin

Advice for CEOs and CFOs as they navigate the year ahead

The last four years have been a difficult period for the biotech sector. But there are ground rules that can tip the odds in a company’s favor, and while several of them might go against the grain for executives, they’re worth the effort of going out of one’s comfort zone to navigate the still-tough terrain of 2025.

As a group, biotech has struggled since the peak of the pandemic bubble in 2021. Hundreds of new young companies are competing for attention and capital. Generalist investors have turned away, leaving a more discerning and impatient group of specialist investors focused on near-term catalyst-driven returns. M&A volume has been lower than investors had expected. And the macro environment features high-interest rates and government policy uncertainty.

But a look under the hood reveals a more complex story, with some companies posting record gains — nearly 50 biotech stocks had gains over 100% in 2024. Others have made innovative strategic moves to set themselves up for potential future success.

I’ve been a sell-side biopharma analyst, an M&A banker involved in major transactions, a biotech CFO responsible for two IPOs, a venture capitalist and a biotech Board member. Leading a biotech company has never been more challenging. Here’s my advice for CEOs, CFOs and Boards:

You are in a race against time

You need to deliver catalysts well before your funding runs out. Design clinical studies that get you to proof of concept as quickly as possible. Focus like a laser on patient enrollment so timelines don’t slip. Give yourself extra buffer on your timelines, and then add more buffer on top of that. Under promise and overdeliver.

This past year a number of relatively young precision oncology companies overcame the complexities of early-stage clinical trials and are now moving to pivotal Phase III trials that could change standards of care. These include Nuvalent Inc. (NASDAQ:NUVL), with next-generation ALK inhibitor NVL-655 for ALK-driven lung cancers; Revolution Medicines Inc. (NASDAQ:RVMD), targeting pancreatic and lung cancer with pan-RAS drug RMC-6236; and Relay Therapeutics Inc. (NASDAQ:RLAY), with mutant-selective PI3K inhibitor RLY-2608m for HR-positive/HER2-negative metastatic breast cancer. All three companies managed to find patient populations and pick indications that would relieve pressure on Phase I recruitment and other challenges that hamper many small companies.

When raising money, account for the unexpected and plan for the long term

You need more funding than you think. Companies often focus on clinical trials but also need investments in areas such as CMC and commercial planning in the long run. And there will be speed bumps along the way. Argenx S.E. (Euronext:ARGX; NASDAQ:ARGX) and Beigene Ltd. (NASDAQ:ONC; HKEX:6160) have each raised about $6 billion at ever-increasing valuations on positive data and/or lucrative partnerships. But don’t get too hung up on valuation. Over the past 14 months, Revolution Medicine has raised at different valuation levels by acquiring EQRx Inc. for its $1 billion cash and another $862.5 million in a follow-on offering. While investors may have complained about dilution along the way, they’re not complaining anymore. Dilution has never killed a company but running out of cash is a terminal condition.

If you have enough capital to get to the next catalyst, don’t fret about your share price

The stock price will eventually take care of itself provided the catalysts come through. The job of a CFO is not to check the stock price every five minutes. Your job is to make sure the company is sufficiently financed to support the catalyst path. The job of the CEO and the Board is to make sure that the experiment is worth the risk.

Specialist biotech investors want alpha

Investors will pay for data that represent both a clear positive over the standard of care and an opportunity that targets a valuable market. Anything short of that will be nitpicked, questioned, debated, criticized, punished. A middling result will put you in the penalty box. If possible, you are better off waiting to show data when you have an interpretable dataset.

Make contingency plans

Even when things are going great, CFOs should have levers in place to extend cash runway if necessary. CEOs and their strategy teams should always spend some portion of their time exploring alternative strategies. Having a Plan B from day one as a public company is essential. However far ahead of the competition or well-differentiated you think you are, be prepared for unknown roadblocks. It’s hard to change course if you’ve never thought about alternative assets.

Be willing to pivot

Some biotechs have risen from near-death experiences by pivoting to completely new assets or new indications. While it’s too soon to judge the final outcome, Erasca Inc. (NASDAQ:ERAS) replaced several early-stage assets with newly acquired preclinical RAS targeting molecules from China and concurrently raised $160 million to fund the new programs. Nuvation Bio Inc. (NYSE:NUVB), after the discontinuation of its lead asset, acquired Anheart Therapeutics Inc., which brought in a late-stage ROS1 inhibitor, giving it another shot at success. More recently, Rapt Therapeutics Inc. (NASDAQ:RAPT) bought a validated anti-allergy anti-IgE mAb from China’s Jemincare and raised $150 million from new investors willing to bet on the new asset.

You may not be able to go it alone

Mergers between similarly sized public biotech companies are rare. This needs to change. The biotech universe now contains almost 800 publicly traded companies, with nearly 500 trading at under $200 million. Selective mergers could free up trapped assets and trapped cash, and create valuable technological and financial synergies.

When a merger makes sense, Boards should find a way to work through valuation and social considerations. Recursion Pharmaceuticals Inc. (NASDAQ:RXRX) and Exscientia plc recently merged in an all-stock transaction and will potentially be stronger together. Mergers have occurred in the private genetic medicine space including Chroma Medicine with Nvelop (forming Nchroma Bio Inc.) in an effort to combine complementary technologies. Expect to see more of these combinations, both in the private and public sectors.

Build your company for the long run

Many biotech companies have created enormous value by becoming commercial enterprises, which only enhances their takeout appeal, as we recently saw with Intra-cellular Therapies Inc. (NASDAQ:ITCI), taken out by Johnson & Johnson (NYSE:JNJ) for $14.6 billion. I am bullish on M&A given the Pharma revenue cliff and massive firepower, not to mention more favorable FTC, but timing is unpredictable. Low valuations are not usually catalysts for deals. Pharma is looking for strategic growth drivers not “good deals” on cheap stocks.

Don’t assume a pharma partnership will decrease your takeout value

It’s a myth that partnerships prevent a whole-company takeout. But it’s a fact that they often provide critical financing and expertise, enhancing your path to value creation. And many partnerships have led to whole-company acquisitions, the most recent being the acquisition of Poseida Therapeutics Inc. (NASDAQ:PSTX) by Roche (SIX:ROG; OTCQB:RHHBY), which started out as a partnership. For desired assets, existing partnerships didn’t preclude large whole-company takeouts by other acquirers, such as Merck’s acquisition of Acceleron, Pfizer’s acquisition of Medivation, and Abbvie’s acquisition of Pharmacyclics.

Encourage an environment of open debate

C-suite executives often live in a bubble and talk to themselves. It’s important to be open to alternative points of view and even dissent from throughout your organization.

Over time, this treacherous, difficult environment will actually produce stronger biotech companies. In fact, it’s already happening. A group of superstar mid-cap companies has emerged. In addition to Argenx and Beigene, Biontech SE (NASDAQ:BNTX), Summit Therapeutics Inc. (NASDAQ:SMMT), Insmed Inc. (NASDAQ:INSM) and Vaxcyte Inc. (NASDAQ:PCVX) have created tens of billions in market value, several of these in this past year alone.

Some of 2024’s biggest gains came from obscure names driven by paradigm-changing data. Longboard Pharmaceuticals Inc., acquired by H. Lundbeck A/S (CSE:HLUN B) in December, was up 895% last year on the back of compelling data for bexicaserin for developmental and epileptic encephalopathies (DEEs), an area of high unmet need. Janux Therapeutics Inc. (NASDAQ:JANX) was up 400% in 2024 on potential for practice-changing data from its T-cell engager JANX007 for prostate cancer. Insmed shot up threefold this past year on the back of transformative Phase III ASPEN data in bronchiectasis, which unlocks a potential multi-billion dollar opportunity. None of these were household names a year ago. And a few single-asset companies took their drugs all the way to the market. Madrigal Pharmaceuticals Inc. (NASDAQ:MDGL), Intra-cellular, and Tg Therapeutics Inc. (NASDAQ:TGTX) have executed their lead drug launches flawlessly and have been rewarded handsomely.

The business challenges of biotech are sobering. But in the end, nothing is more satisfying than playing a small part in achieving a scientific breakthrough. I’ve never been more excited to work with CEOs, CFOs and Boards to make a difference for patients and investors.

Jami Rubin is senior managing director at Guggenheim Securities, and a board member at Relay Therapeutics. She was previously CFO at EQRx and Boundless Bio.