I continue to be surprised by the number of pharma and biotech companies who are trying to raise capital or find licensing partners without a full business plan in hand.
Once upon a time, you could not raise capital without a formal business plan. Indeed, during my early career, part of my job was to read some of these tomes submitted to the fund I worked for. I would ask our Administrative Assistant to print and bind these documents so that I could read them on the train ride home.
Now everything has been reduced to a 10-slide “pitch” deck, chock full of tiny graphics, images, and barely readable sentences and phrases which will make ChatGPT roll its in silico eyes.
But if investors or licensing partners want to see “your deck,” why bother writing a full business plan?
The first reason is that a fully detailed business plan forces you to think thoroughly about the strategic and tactical issues you are facing, such as competition, product development, pipeline evolution, go to market, etc., etc.
Meanwhile, a “pitch” deck lends itself to facile, un-nuanced views on markets, competition, and related issues.
Let’s take prevalence and competition as an example. We frequently see pitch decks that make the same two points mistakes:
- Current prevalent patient (or “market”) population is x large, and will grow by y% in perpetuity, reaching z prevalence in some distant year.
- The treatment paradigm for that prevalent population is expected to remain unchanged for the foreseeable future
Any prospective licensing partner or investor worth their salt will immediately jump into a pipeline search to look for:
- treatment paradigm-changing competitors; and/or
- generic entry of established (and effective) current treatments which can dramatically shift treatment from one brand to a generic(s)
Readers of a certain age can undoubtably come up with examples of indications or markets which lurched in one direction or another, based on radical changes in treatment (i.e., the introduction of anti-TNF alpha monoclonals for psoriasis) and generic entries (i.e., the statin market).
Cell and gene therapies…bispecifics…many areas may be susceptible to radical changes in the competitive set; perhaps not today, but perhaps at the time YOUR candidate is projected to launch.
The well-written business plan will not shy away from these issues. If anything, the business plan will force (hopefully) the authors to analyze the current and future competitive set, derive scenarios for how the treatment paradigm could evolve, and conclude with a far more robust picture of where their own candidate will fit in the future treatment paradigm, therefore providing far stronger justification for the Revenue forecast and Pricing.
And this is the key point. What the pipeline looks like today is interesting. But what really matters is what the pipeline could look like at the time of launch (taking Likelihood of Approval into account).
Perpetual prevalence growth is a separate, but interesting topic. Of course, there are indications that will grow at the same rate as the underlying subpopulation (i.e., adults over 50 years of age), while some will grow even faster (i.e., diabetes and related sequela). But in perpetuity? Is there nothing in the pipeline that could radically change how the disease is being treated?
Recall that we are now seeing advances in the treatment of certain cancers and rare diseases which are de facto cures, practically (although not statistically) removing them from the prevalent population (cf., COVID vaccines).
A 10-slide deck will simply not provide the room to think through all of this. With a business plan framework, you have the freedom to explore these issues, in detail, developing scenarios which can inform financial projections.
Writing forces you (or at least it should force you) to ask and answer difficult questions…questions that, again, any competent licensing partner or investor will ask (or perhaps even already know the answer).
But there is, perhaps, a more important reason for writing a business plan.
The reason is this.
You write a business plan not because you expect it to be read. It probably won’t be read by anyone outside your internal team. At least not these days.
You write the business plan to inform the “pitch” and other outbound communications.
The post-business plan presentation(s) will now be far more thoughtful, detailed, and anticipatory of most questions you will likely receive.
In my own work with Connexin Therapeutics, I frequently extract and email selections from the business plan when prospective investors want more detail. In the past few weeks, I have done this to address topics such as:
- Examples of commercial-stage products delivered via intravitreal injection (Appendix D).
- Prospective licensing partners (Appendix C). This section includes not only a list, but also comments on our previous discussions with these potential partners, demonstrating an effort to engage with future partners well in advance.
- Competition (Appendix B and other sections). This is always a difficult topic to summarize in a single slide without proper, detailed analysis that only a business plan can provide.
This may sound like a lot of work.
That’s because it is a lot of work.
There are no shortcuts, not even with business plan writing software. A solid business plan needs not only writing skills, but also primary and secondary research skills to validate projections and claims of how your market(s) will (magically) evolve in your favor.
So do yourselves a favor. Pick up a pen and paper, and start writing. You will be far more thoughtful and successful in the long run.