Alternative Financing in Today's Healthcare Market
WEBINAR TOOK PLACE MAY 7, 2024 - VIEW THE VIDEO
Alternative Financing in Today’s Healthcare Market – Takeaways from our CEO Roundtable Discussion with HCRx and Cara Therapeutics
The DNB//Back Bay Partnership for Healthcare recently hosted a webinar with Clarke Futch, CEO of HealthCare Royalty Partners (HCRx), and Chris Posner, CEO of Cara Therapeutics, a biotechnology research company that worked with HCRx on a royalty deal.
This was the second in our series of roundtable discussions for biopharma and med-healthtech CEOs. We aim to share the most current thinking and approaches around healthcare development and financing.
One of the critical issues that all companies face is that markets are unpredictable. Diversified financing strategies are critical in enabling corporate success. When markets are robust, alternative financing vehicles are sometimes overlooked, but they can be a powerful tool to create non-dilutive and meaningful needs of advancing healthcare development and commercialization.
Our Takeaways:
From a financing point of view, the stock markets are beginning to recover. Even though it’s not at an aggressive pace, they’re getting stronger. The “small green shoots” are coming up with 11 IPOs in Q1 in the US (vs. 5 IPOs in Q1 last year) and 12 IPOs in Q2.
Alternative financing is “anything that’s not equity” and is one way to “lower the company’s burn rate” or extend a company’s flexibility. Alternative financing might look like royalty financing, different types of debts, out-licensing deals, partnerships, risk-sharing agreements, etc. Remember, when you give up some sort of future revenue potential for money now, you don’t always know what will happen.
Clarke Futch has been in the biopharmaceutical investment space for 23 years and noted that the biopharmaceutical market has grown 50x over that time.
HCRx was started in 2006, raising $7.5B in capital and investing in 109 products across 15 therapeutic categories. This year they’ll receive $0.5B of royalty revenue.
Royalty acquisition occurs when the innovator outlicenses their patent to a more established marketer in exchange for a royalty. This can be done globally or in certain territories. A company like HCRx provides capital today in exchange for the right to receive a future royalty stream.
At some point in a company’s corporate financing history, it will be the right time to do royalty financing. The key is figuring out when is the right time.
Cara Therapeutics is advancing life-changing therapies for people suffering from chronic pruritus. As a development company, they take drugs through various clinical stages to approval. This is a lengthy and expensive process that requires significant resources.
Cara wanted to bring its oral formulation (their MVP) through the clinical phases so they looked at ways to monetize the royalties from drug sales in Europe and Japan to give them the best solution for their capital needs. Alternative financing with HCRx gave them more “runway extension” for budgeting and planning.
Several considerations in Cara’s decision-making: working alongside commercial partners to make sure not to underestimate the royalty stream (different countries, different payer systems, etc.), significant preparations (diligence took several months), engaging outside advisors who are experts in royalty stream monetization, bringing on legal advisor with experience with this type of transaction, putting together a “SWAT team” of finance, legal, commercial, and clinical experts for “rapid response” to help solve issues in timely manner
For companies out there, start with your product and the science. How does your product meet the unmet need of patients, physicians, caregivers? Can you tell the story well? Does your data support the story you’re telling? What’s the competitive landscape now, both here and abroad? What might it look like in five years? Move forward.
To listen to the full webinar, request a link to the video here.