By Richard Mark Kirkner

2023 has been a challenging year for biotech companies, ophthalmic and otherwise, for raising capital in the public markets, but attendees at OIS Retina heard from a panel of financiers—two bankers and two venture capitalists—that the public equity market has shown some life this year.

The panel was one of many at OIS Retina in Seattle. Attended by 350, the annual gathering brings together key players in the retina innovation space, broken down accordingly: 50% startup executives, 20% industry executives, 15% finance/investment professionals, and 15% retina surgeons. The event wound up with Cedric Francois, MD, PhD, CEO of Apellis Pharmaceuticals, receiving the Retina Innovator Award.

But the state of the capital markets was front of mind for attendees. “I know it’s tough to raise funds now, but it’s always tough,” ONL Therapeutics CEO David Esposito noted earlier in the day. Later on, the panel charged with evaluating the public equity markets provided context on just how tough it’s been—and that may not be as tough as it seems.

When pressed by panel moderator Pravin Dugel, MD, president of Iveric Bio, Jason Jun, Managing Director, Healthcare Investment Banking for Citibank, said he’s seen “a nice pickup” in mergers and acquisition activity recently, as volumes so far this year already exceed 2022. Contributing to that activity, he said, are the host of patent expirations large strategic investors will be grappling with in the next half decade.

“I think the strategics continue to evaluate a set of targets and I think principally, in the 2025 to 2030 time frame, where most strategics have patent cliffs, if you look at the spectrum of public companies out there that have the ability to move the needle for some of these strategics, it is a relatively limited list,” Mr. Jun said. Nonetheless, he added, “that list exists.”

But what those strategics are looking for is a near-term payoff, said Cariad Chester, a Partner at TCG Crossover. “There’s a path to revenue contribution, and you can alleviate some of that loss,” he said. “That is the sweet spot for a lot of investors at the current moment.  Companies that are not quite on the path to near-term revenue are really forced to anchor their value creation story around shrewd side derisking.”

Derisking and asset differentiation are key to attracting strategic partners, said Cameron Taylor, Managing Director, BofA Securities | Life Sciences. “Within the ophthalmology field in particular, strategics have been more cautious,” he said. “They’ve been able to be more cautious because many of them didn’t have the capital to deploy over the last several years, and we’ve had folks that have gotten out of field.”

However, now those players who left are moving back into ophthalmology, another dynamic driving a gain in M&A activity, such as it is. “But there’s still a way to go in terms of what we’re going to see,” Mr. Chester said.

For Anupam Dalal, MD, Chief Investment Officer and Managing Member at Acuta Capital Partners, making an investment in a company isn’t done with an M&A in mind. “My assumption is that a lot of the strategics are looking for the same things I’m looking for: great drugs that are transformative, disruptive; and great intellectual property,” he said. “Usually it’s not that complicated.”

He added, “I think there are plenty of deals that happened with retina for non-derisked assets.”

Bringing a drug candidate through the development process to commercialization requires “a huge investment to go right in the clinic and bet on something without any backing whatsoever,” said Dr. Dugel, the panel moderator.

But strategic investors will drive that process. “I think we’ll see more and more strategics in field,” Dr. Dugel said. “I think it’s just the beginning. I think we’ll see new strategics in this field. I think culling some of them is not a bad thing at all, but I think we’ll be sitting here this time next year looking back and saying we’ve got an entirely new profile of people that are looking into our field and it’s just going to energize our field even more. The opportunity is certainly there.”