Vol 83 – Innovations in Funding Models for CMC Drug Development: A Venture Capital Perspective

August 23, 2023The Pathfinder 28 Min Read

An exclusive interview with a leading Venture Capital (VC) group that is pioneering the funding of startup biotech companies, focusing on CMC drug development. 




In the ever-evolving world of biotechnology and pharmaceuticals, funding models play a crucial role in the success of innovation. The challenge of funding Chemistry, Manufacturing, and Control (CMC) drug development has always been complex. Venture capital has become an instrumental force, driving innovations in funding models and enabling groundbreaking work in CMC drug development. We sat down with one of the most progressive VC groups to understand their perspective and insights. 


A New Wave of Funding 


Q: What drives the decision to invest in CMC drug development? 

VC Group: “Our decision is primarily driven by the critical role that CMC plays in the drug development lifecycle. We recognize the need for innovative therapies, and CMC development ensures the quality, safety, and efficacy of these drugs. The potential for creating life-changing treatments motivates us to invest in this sector.” 


Q: How has the funding landscape changed in recent years? 

VC Group: “The landscape has shifted towards a more collaborative and holistic approach. We now see co-investments, syndicated funding, and public-private partnerships. These models enable risk-sharing and foster a supportive ecosystem for startups.” 


Technology and Innovation 


Q: How are technology and AI reshaping the funding models? 

VC Group: “AI and data analytics are game-changers. They enable us to analyze market trends, identify investment opportunities, and assess risks more accurately. This has led to more targeted and efficient funding, creating a win-win situation for both investors and startups.” 


Q: How do you evaluate potential investments in the biotech space? 

VC Group: “We look for visionary leadership, strong scientific foundations, clear regulatory pathways, and a feasible business model. The integration of AI and data analytics into development processes is a definite plus, as it aligns with our belief in technology-driven innovation.” 


Regulatory Compliance and Risk Management 


Q: How do you ensure compliance with regulatory guidelines such as Fast Track, Break-through Therapy, and Accelerated Approval? 

VC Group: “We actively collaborate with regulatory experts and consultants to understand the regulatory landscape. This ensures that our portfolio companies follow the best practices and align with the regulatory requirements, mitigating any potential risks.”  

Venture capital’s influence on the CMC drug development landscape is unmistakable. The shift towards more collaborative, technology-driven funding models reflects a profound change in the way we approach biotech investment. As we continue to explore new frontiers in medicine, the role of venture capital in shaping the future of drug development remains pivotal.  

This interview provides a valuable lens into the innovative approaches and strategic thinking that are driving success in this domain. The insights shared by the VC group offer a roadmap for startups, investors, and all stakeholders looking to navigate the complex and exciting world of CMC drug development. 


Cycles of Funding: Navigating the Complex Landscape 


Venture capital funding in the biotech sector typically follows a sequence of stages, each tailored to the development phase of the company. Here’s a deeper look at these cycles and how they have been affected by the recent rise in interest rates, with a special focus on small emerging biotechs. 


  • Seed Stage

In the seed stage, VCs look for strong concepts and potential breakthroughs in areas like CMC drug development. However, the recent increase in interest rates has led to a more cautious approach. Investors are now demanding more detailed plans and robust data, especially in critical areas like CMC, where compliance and scalability are key.  

  • Early-Stage Funding

At this stage, companies must demonstrate progress in their CMC development plans. The rise in interest rates has made funding more expensive, leading VCs to scrutinize projects more closely. Startups must now provide clear evidence of compliance with regulatory requirements such as ANDA and 505(b)(2) submissions and show a well-defined path to commercialization.  

  • Growth Stage

Companies at the growth stage are expected to have mature CMC development processes in place. The recent economic changes have forced VCs to be more selective, focusing on companies with a strong competitive edge in CMC innovation. The rising costs of borrowing have also encouraged collaborations and partnerships to share risks and resources.  

  • Late Stage and IPO

Reaching the late stage or planning for an IPO requires the company to have a well-established CMC process. The rise in interest rates has led to a shift in investment strategies, with VCs now emphasizing long-term value and stability. They are particularly keen to see strong CMC development models that align with regulatory guidelines and demonstrate scalability. 


Small Emerging Biotechs: A Closer Look 


Small emerging biotechs have felt the impact of rising interest rates more acutely. VCs are now taking a more hands-on approach, actively engaging in the oversight of CMC development. The vetting process has become more rigorous, with greater emphasis on: 


  • Regulatory Compliance: Ensuring alignment with Fast Track, Break-through Therapy, and other key regulatory pathways.  
  • Technology Integration: Evaluating how AI and data analytics are integrated into CMC development to enhance efficiency and innovation.  
  • Risk Management: Assessing the company’s ability to manage risks associated with CMC development, including quality assurance, validation, and stability data assessment. 


The recent rise in interest rates has undoubtedly changed the dynamics of venture capital funding in CMC drug development. The cycles of financing have become more intricate, and the bar for success has been raised, particularly for small emerging biotechs. 

These changes are not necessarily hindrances but opportunities for startups to prove their mettle. By focusing on robust CMC processes, regulatory compliance, and innovative use of technology, they can attract investment and thrive in this new economic landscape. The future of CMC drug development lies in adaptability, resilience, and the relentless pursuit of excellence. Venture capital remains a vital partner in this journey, guiding and supporting companies as they navigate the complex terrains of innovation and growth. 


Transforming the Supply Chain into a Value Chain: The Crucial Role of CMC Data 


In the modern pharmaceutical landscape, the traditional concept of a supply chain has evolved into a value chain. This transformation is not merely a semantic shift but represents a profound change in approach, particularly in the context of CMC drug development. 


The Supply Chain to Value Chain Evolution  

A supply chain focuses on the logistical aspects of production, ensuring that materials and products move efficiently from one stage to the next. The value chain, on the other hand, considers the entire lifecycle of a product, from conception to delivery, and emphasizes creating value at every step.  

In the realm of CMC drug development, this means that each stage, from research and development to manufacturing and distribution, must contribute to the overall quality, efficacy, and safety of the drug. This holistic view requires rigorous compliance and a robust framework that aligns with regulatory standards. 


Importance of Compliance in IND to NDA Journey 


The Investigational New Drug (IND) application represents a critical milestone in drug development, leading towards a New Drug Application (NDA). Compliance with regulatory guidelines throughout this journey is paramount. 


  • Data Integrity: CMC data has become a focal point in this process. Ensuring the accuracy, consistency, and reliability of this data is vital for regulatory approvals.  
  • Quality Assurance: The value chain must uphold the highest standards of quality, especially in CMC processes, to meet the stringent requirements of both IND and NDA submissions.  
  • Alignment with Regulations: Adherence to guidelines for Orphan Drugs Designation, Fast Track, Break-through Therapy, and Accelerated Approval becomes essential in building a successful value chain. 


CMC Data: The Core of the Value Chain 


The critical role of CMC data in the value chain cannot be overstated. It provides the foundation for: 


  • Decision Making: Accurate CMC data guides strategic decisions in development, manufacturing, and regulatory compliance.  
  • Risk Mitigation: Comprehensive analysis of CMC data helps in identifying potential risks and implementing preventive measures.  
  • Regulatory Alignment: Well-maintained CMC data ensures alignment with regulatory expectations, facilitating a smoother transition from IND to NDA. 


The transformation of the supply chain into a value chain reflects a broader shift towards a more integrated and value-driven approach in CMC drug development. The emphasis on CMC data, coupled with strict compliance with regulatory standards, underscores the complexity and importance of this transformation.  

In an environment where interest rates, scrutiny of small biotechs, and other economic factors are shaping the investment landscape, the value chain stands as a testament to the industry’s commitment to excellence and innovation.  

The journey from IND to NDA is fraught with challenges, but with a robust value chain that recognizes the centrality of CMC data, pharmaceutical companies can navigate this path with confidence and integrity. The future of drug development demands nothing less, and the industry appears well-prepared to meet these demands, leading to better patient outcomes and advancing the frontiers of medicine. 




The pharmaceutical industry stands on the brink of a new frontier, where the old rules are being challenged and new paradigms are emerging. CMC drug development, once a niche area, has become the battleground where innovation, funding, and regulation collide. The transformation from supply chain to value chain is not just a change in terminology but a profound shift in philosophy. It demands a reimagining of how drugs are developed, funded, and brought to market. As interest rates rise and the scrutiny of small biotechs intensifies, the industry must adapt, or risk being left behind. The stakes have never been higher, and the opportunities never more tantalizing. This is a moment of reckoning, a time to embrace change and forge a path that aligns passion, innovation, and compliance. The future of medicine awaits, and the industry must rise to the challenge, armed with the knowledge, courage, and vision to shape a new era of healing and hope. 

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The VirtualPharm Podcast is an audio series that covers topics related to compliance and regulatory affairs in the Lifesciences industry. Each episode, hosted by an expert in the topic with decades of experience, offers listeners detailed insight into the changing regulatory environment.

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