The biotech sector has been on a rollercoaster ride through 2022. 

Following 2021, which was filled with record-setting growth and sizable investments in biotech companies, significant obstacles have emerged in the industry.

According to an Ernst & Young report released in June, the biotech industry exceeded expectations during the COVID-19 pandemic but now has “challenges to valuations and access to capital.”

One E&Y analyst said that the large cap biopharma industry faces a “foundational growth gap” related to upcoming patent expirations for leading biologics and pipelines. 

Despite the headwinds, Arpeggio Biosciences, a preclinical therapeutics company, recently raised $17 million in a Series A funding round led by Builder Ventures Capital

Arpeggio CEO Joey Azofeifa said his company has been fortunate to have the strong support of reliable VCs amid a “challenging environment to fundraise.”

He said the funds are directed towards two initiatives: further development of a program which serves an anti-cancer agent for mesenchymal tumors, as well as scaling the underlying technology for discovering new medicines. 

Arpeggio’s core technology focuses on targeting transcriptional mechanisms in drug resistant diseases to enable biomarker discovery. Azofeifa said the company also developed an inexpensive way to sequence RNA that can be leveraged in several ways. 

Partnering with pharma companies, notably with Forma Therapeutics, has been a key aspect of Arpeggio’s early success, Azofeifa said, noting that many biotechs typically double down on their pipelines.

On the go forward, Azofeifa said Arpeggio’s business model is centered on building out new programs to target different types of cancers and even rare diseases as it moves away from contract research or fee-for-service work. Still, he acknowledged, that will take more money before the company even reaches a Series B funding round. 

He said he remains bullish on the prospects for the broader biotech sector, noting that “good companies with good data will continue to get funded.” Azofeifa cited the success of Moderna’s role in developing an effective COVID-19 vaccine as a contributor to the significant excitement last year around the potential for mRNA technology.

One issue that some biotechs can run into, he noted, is that developing products takes a long time and that those organizations that raised large funds in summer 2021 didn’t have much of a pipeline or drug candidate yet. This is where he sees an area where Arpeggio is differentiated by focusing not only on its process but also delivering products at the end of the day. 

“The real value to investors, and more importantly to patients, is the underlying piece of a molecule that you generate,” he said. “This whole market correction for biotech will force a lot of platform companies to be singularly focused on making drugs, which is the whole point.”

For a February 2024 Q&A with Cour Pharmaceuticals CEO John Puisis, click here.