Biotech doesn’t typically fail in the lab. It fails later — after early promise and before approval — when the cost of proving a drug works comes up against a funding system built for an earlier stage.

The problem became impossible to ignore after the pandemic boom faded. Funding that had flowed freely into biotech during Covid pulled back sharply in 2021, just as many companies reached the point where development becomes significantly more expensive. Programs suddenly faced a different problem: not whether the science worked, but whether they could raise enough capital to prove it.

Geoffrey Meyerson has spent nearly two decades working in biotech translating science into drugs. As co-founder of life sciences investment bank Locust Walk, he has advised companies as they moved from early data to the more complex process of finding partners to fund development, running clinical trials, and bringing drugs to market.

Over time, he said, the pattern became familiar: many programs would stall, not because the science failed, but because the path from early results to late-stage development was more elusive than expected.

But after living through the biotech boom and bust of the past few years, Meyerson says the problem runs deeper than funding cycles. The bottleneck starts to look a lot less cyclical and more structural, given the positives of a growing supply of clinical-stage assets, particularly outside the U.S., and a deeper base of development and investment expertise.

Other investors describe a similar dynamic. Large pharmaceutical companies have increasingly relied on the broader market to take on early scientific risk, stepping in later once a drug has been validated. “Then their job is to be really good at recognizing which companies actually produce data,” said one venture investor.

Meyerson began thinking about a fix: bringing together pieces of the process that are usually handled separately — identifying assets with clinical data, securing capital upfront, and managing the clinical development needed to move them forward — into a single system that would carry drugs through the most difficult part of their lifecycle.

That led to Banyan BioInnovations, a company Meyerson co-founded and is expected to announce today. Banyan combines Locust Walk’s investment banking platform, which finds the assets, creates companies, and sources capital, with a 15-person clinical development team brought over from SFJ Pharmaceuticals, a group that has done late-stage trials in partnership with large investors, including Blackstone. SFJ has done 10 drug deals, eight of which had positive data and were approved in 17 markets.

The development team will be responsible for running trials, generating data, and then pushing all of that toward approval. Banyan, which has offices in biotech hubs that include Boston, Shanghai, and Beijing, has already raised more than $100 million from life sciences investors. It also has a strategic collaboration and investment from ICON plc, a clinical research organization.

Each Banyan-backed biotech company is structured separately, with outside investors brought in to invest, help price deals, and make sure “everyone pays the same price at the same time,” Meyerson said, a deliberate break from venture models where early investors benefit from access and timing. The tradeoff is explicit: less emphasis on ownership, more on whether a company can fund its way through development.

“I think that assets with clinical data are where there is still room for real capital. Our bar is to have preliminary efficacy data, so we know we’re not just funding a science project,” Meyerson said.

While counterintuitive to many investors, even with promising data, moving a drug through clinical trials means assembling teams, selecting partners, and managing a process where execution risk can be as significant as scientific risk.

“You’ve got great science, but you’re trying to de-risk the clinical trial execution,” said Wes Kaupinen, CEO of Palvella Therapeutics, a publicly traded rare disease biotech company, who has worked with Meyerson. “That’s people risk — are you hiring the right team, choosing the right CRO, designing the right trial?” (Nothing moves ahead without those trials. A successful Phase 3 study recently gave Palvella’s stock a bump.)

By pairing capital with clinical development, Banyan is betting that investing in biotech can be made more predictable — not by eliminating risk, but by controlling more of the process that typically sits outside the investor’s reach.

The model also raises questions — about structure, returns, geopolitics, and whether the timing is right for a strategy that still depends on large amounts of capital.

One is whether focusing on clinical-stage assets — rather than earlier, higher-risk science — can consistently generate venture-style returns. Meyerson said the firm is targeting roughly fivefold returns on individual investments, describing the approach as “venture-like returns with growth equity-like risk.”

That depends on Banyan’s ability to consistently source assets with strong data — and to fund them through the most expensive stages of development, even in a restrained market.

Increasingly, the supply is coming from outside the U.S., particularly China, where biotech companies are generating a growing number of clinical-stage assets that are often underfollowed by Western investors.

For Banyan, China is a fundamental part of sourcing, not a side bet. Locust Walk’s relationships and team on the ground could expand the pool of potential deals with entrepreneurs, many of whom have been educated in the U.S. and have strong ties to the country. But doing business with China does introduce geopolitical and regulatory complexity at a moment when U.S.-China tensions remain high. Whether that complexity becomes a constraint — or part of the opportunity — will shape how far the model can scale.

It also depends on whether investors are willing to accept the tradeoffs embedded in the approach — less emphasis on ownership and timing advantages, more on whether a company can raise enough capital to carry a drug all the way through development.

But the larger question extends beyond Banyan Bio itself. How biotech funds that middle stretch may determine how many promising drugs ever reach patients at all.

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Why Biotech Struggles to Finish What It Starts