Chris Palatucci featured in STAT News

First published on 19th January 2024 in STAT+ First Opinion series. Reproduced with permission.

What a week — this year’s might have been the busiest JPM I’ve ever had. I’m not saying that to brag, it’s a statement about the industry. There was even one tweet from STAT’s Adam Feuerstein calling the meeting mood “jubilant.” As a partner at an executive search firm, I’d concur. My time was packed with the usual mix of requests from potential, current, and former clients as well as investors to discuss search projects, and of course the meeting requests from potential candidates.

Perhaps most notably: I didn’t encounter nearly as many “can you please help me find a job?” requests as last year. That suggests to me that 2024 will be a better year for the industry’s job seekers.

The year 2023 was rough for everyone in this sector, including recruiters. There was still plenty for us to do, and we’ve had some really great placements, but it was slower than the prior year.

That change brought some opportunities. My company conducted internal programs on diversity, equity, and inclusion and other topics of critical importance to those involved in building the teams that will get drugs to patients. We brought in industry experts to enhance our depth of technical understanding to provide clients with bespoke service offerings, and we built up our database with targeted outreach.

The reset was also a good thing for the industry. The talent market had gotten out of whack. In the overheated market of the prior couple of years, candidates were commanding outrageous salaries. The industry, desperate to feed the beast, begrudgingly complied. In 2023 we saw salaries come back to reality, but one can never unring a bell, so we don’t expect to ever go completely back to pre-pandemic levels of salary.

During the run-up in the pandemic years, we saw a ton of “tourist money” come into the sector — Texas oil money, New York banking money, sovereign wealth funds, Asian billionaires. (I even had a call with what I realized after about five minutes was the Russian mob, and you should have seen me tap dance out of that one.) These investors saw life sciences as recession-proof, and the astronomical valuations made them want in. Unfortunately, they had (and have) a shallow understanding of what it takes to get a drug on the market and that it could be 15 years before they see a return. Thankfully, many of the tourists have been pushed out or have voluntarily left, but before they did, they played a major role in changing the sector’s compensation norms. In 2022, the all-in cost of a chief medical officer was pushing dangerously close to $1 million, giving many pause.

In 2023 we also saw a profound delay in decision-making, with clients looking at their cash burn and being reluctant to sign onto expensive commitments when both the private and public funding environments were so rocky.

One more trend I’ve seen developing is the change in profiles for some roles. When markets turn down, everyone wants to do non-dilutive deals, so we saw a demand spike in chief business officer and other business development roles. (Frankly, I wonder why so many companies had delayed bringing that talent on board.) The recent focus has been on those candidates with strong deal sheets and a robust network in pharma. This has always been a component of a good business development profile, but the emphasis has been there almost to the exclusion of anything else.

Another example is chief scientific officer. The most in-demand profile used to be one of the three people on the planet who are the world experts in the company’s technology, with industry experience and the ability to take the load off the academic scientific founder of the company.

Now, clients are looking for more of a generalist. It wasn’t that long ago that “platform” was a bad word in VC circles. Now, we have degradation technologies, genome editing technologies, nucleic acid technologies, and others, all of which form the basis of many companies and all of which have multiple applications. Chief scientific officers for these companies need to have a breadth of experience and understanding across domains, and need to be able to work extremely closely with the business development team to evaluate which of these indications will be developed in-house and which will need to be sold or partnered.

The early pandemic years also saw lots of me-too companies being formed. But one source reports that there are over 230 CAR-T companies in various stages of development. Do we really need that many? In 2023 we saw many of them leave the stage.

Finally, in the past year or so there has been a very rapid rise in demand in digital health, AI/ML, and other areas at the intersection of tech and life sciences.

In sum, 2023 was a year of retraction, but to a more sane level of activity.

So what will 2024 look like? The mood has definitely shifted and we’re getting much more inbound interest from clients who want to start projects right away. Here are some of the dynamics I expect to see in the new year:

• Europe, which has traditionally trailed the U.S. in terms of activity, has been strong for us, but with the positive vibe at JPM2024 and emerging signals from the U.S. capital markets, I believe that the U.S. will pick back up and eclipse the activity in our other international offices.
• As the IPO window creaks open, there may be more demand for IPO-ready chief financial officers, as was the case the last time we came out of a correction.
• Academic R&D activity has not abated in this downturn (it never does), and all that science will need to be developed. We’ll start to see demand for early-stage preclinical and translational talent. After this, there will be a recapitulation of the drug development timeline over the coming years with increasing demand for regulatory, then ClinDev, then market access, etc.
• The uptick in demand for senior leadership in techbio companies will continue, and tech investors will increasingly value the expertise of recruiters who understand and have access to life sciences talent with a technical bent.

My colleagues and I have heard from bankers and lawyers that they’re expecting it to be at least the third quarter of the year before they see sustained growth, but judging by what my company has seen, I expect we’ll see the upturn much earlier than that as clients recognize that it takes several months from initial call to having someone sitting at their desk.

At JP Morgan, I’d say that most people I spoke with had a similar take — maybe not as confidently optimistic as Adam proclaimed, but certainly an order of magnitude more positive than JPM 2023. I spoke with one CEO who had runway until April, thus having a necessarily less jubilant outlook. Funding is never easy, but there is so much pent-up demand that there has to be a break. A few months ago, I did a back-of-the-envelope calculation suggesting that at least $15 billion in new venture money was raised for the sector in 2023. Early-stage biotech VC Bruce Booth recently put a finer pencil to it, and it turns out the real number is closer to $20 billion. In any case, limited partners aren’t sitting with their feet on their desks — they want that money deployed. Over the summer, a leading investment banker told me he’d never seen this backlog of S-1s for life sciences before.

Of course, I’ve seen this movie a few times before in my career. I’m fully expecting both to hear the chorus of “prudent growth” as the markets open and to see investors jockeying to get bigger and bigger deals done and bigger and bigger funds raised. Let’s just hope for the best, as the industry is fundamentally about addressing medical needs.

Christopher Palatucci is a Client Partner at Coulter Partners, the leading global executive search and leadership development specialists at the cutting edge of Life Sciences, Health and Technology. Based in the firm’s Cambridge, Mass. office, Chris holds a Ph.D. in neuroscience and had a business development career prior to his more than 15 years in retained life sciences search.

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