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“We can make a deal but we don’t have to.”

Many emerging biotechs plan to partner with large pharma companies to advance their innovative portfolios, recognizing the challenges of building commercial and clinical development organizations from scratch.

The potential issue with this approach is that the biotech’s ability to progress becomes highly reliant on another company’s willingness to make a deal, which is subject to the macro-economic environment and big pharma’s evolving corporate strategies.

To reduce the reliance on opportune external circumstances, it’s essential to build a portfolio and select indications that create strategic optionality. In other words, ‘we can make a deal, but we don’t have to’.

Strategic optionality is highest for indications that have a concentrated patient population with a well-defined path to market, making them manageable even for smaller organizations. Biotechs are more likely to be able to develop and potentially commercialize these programs on their own.

The drawback of such indications is that they are often smaller and tend to have limited revenue potential (relatively speaking), which is why strategic optionality needs to be balanced with the importance of building a portfolio that represents large commercial opportunities to investors and potential partners. In other words, only niche indications may not be enough.

The way biotechs can strike this balance is by strategically sequencing indications: starting with smaller, well-defined markets to demonstrate proof-of-concept with a high degree of strategic optionality, while selecting large indications with aspirational blockbuster potential as follow-ons.

Developing a comprehensive portfolio strategy eases the pressure on the initial indication to tick all the boxes and allows companies to combine strategic optionality with a big commercial story.