Navigating CGT Biotech's Financial Headwinds And The Path Forward

By Erin Harris, Editor-In-Chief, Cell & Gene
Follow Me On Twitter @ErinHarris_1

In today’s turbulent biotech landscape, companies are being forced to rethink their strategies across every stage of development. Recently, I had the opportunity to sit down with Dr. Ali Pashazadeh, Founder of Treehill Partners, for a conversation in which he offered a candid and informed perspective on the financial pressures facing the CGT space and the strategic pivots that could help biotechs move forward. From the ripple effects of biomedical funding cuts on early-stage innovation to the evolving roles of CDMOs amid regulatory shifts, Dr. Pashazadeh outlined both challenges and potential solutions. He explored the promise and limitations of AI-driven discovery, considered the viability of alternative funding models, and shared practical advice for biotech leaders navigating a new era of capital discipline. Despite the problems, Dr. Pashazadeh sees reason for optimism, particularly for those willing to embrace new models, rethink old assumptions, and align cutting-edge science with sound commercialization strategies.

A Shifting Investment Landscape

To begin, Dr. Pashazadeh highlighted the paradox at the core of many CGT companies: high science, high technology, and high aspiration, but little to show in terms of delivery over the past decade. “Too often, companies focus on scientific advancement while overlooking foundational aspects like manufacturing,” he says. He illustrated this with an example of a company with a 12- to 16-week “needle-to-needle” timeline, unattractive from a licensing or commercialization perspective, despite significant venture capital and pharma interest. In many cases, it’s the less glamorous area of manufacturing that ultimately determines success or failure.

One of the most signficant points Dr. Pashazadeh made was about the importance of establishing a clear target product profile (TPP) from the outset — likening it to setting GPS coordinates before taking a road trip. Often, CGT companies begin development without a firm indication or end goal, resulting in shifting priorities mid-development and depleted funding that makes additional investment difficult. He explained that Treehill Partners specifically targets companies with promising science and data but weak drug development or commercialization capabilities, stepping in as both investor and operating partner.

Early-Stage Innovation in a Cost-Conscious World

When our discussion turned to the impact of funding cuts on early-stage innovation, Dr. Pashazadeh offered a pragmatic view. While acknowledging the importance of early innovation, he suggested that many U.S. companies historically dependent on NIH grants may need to adapt. The UK and France are already demanding clearer ROI from government-funded research, and similar scrutiny may be inevitable elsewhere.

Dr. Pashazadeh emphasized that innovation doesn’t always stem from new assets. Sometimes, existing compounds yield unexpected breakthroughs, as demonstrated in one of Treehill Partners’ ophthalmology ventures. However, the volatile public markets have made venture capital more cautious, and that wariness is taking a toll on innovation pipelines.

The Price Problem in Cell and Gene Therapy

No conversation about CGT is complete without addressing its cost. Dr. Pashazadeh was blunt in his assessment: prices are unlikely to decrease unless there is a radical rethink of the entire value chain. He noted that therapies targeting small patient populations with bespoke solutions are not scalable or profitable enough to support broader market entry. To break this cycle, manufacturing costs must come down, and larger indications must be targeted.

In-House Manufacturing Vs. Outsourcing

The industry’s pendulum has swung between in-house manufacturing and outsourcing to CDMOs, but Dr. Pashazadeh sees the latter gaining renewed favor. He advises CGT companies to partner with a reputable, globally scaled CDMO with U.S. manufacturing capabilities. He stressed that attempting to reinvent the wheel internally, especially without deep human capital, is often a costly misstep.

Dr. Pashazadeh also highlighted a recurring issue: the desire for complete control. Many companies build in-house not out of necessity but from a belief that ownership equals quality. He states that this siloed thinking, particularly in manufacturing, contributes to CGT companies’ ongoing struggle to meet commercial expectations.

Exploring Alternative Funding

Regarding venture capital, Dr. Pashazadeh explored alternative funding avenues. He noted the limited success of private equity in early-stage biotech and the challenges faced by Phase 3 companies in securing capital. While organizations like NovaQuest Capital Management have made inroads as non-traditional investors, their lower risk appetite limits widespread impact.

Regions like Turkey and the Middle East present potential, albeit often reliant on personal networks or niche interests. Ultimately, Dr. Pashazadeh emphasized that CGT companies face more hurdles than most, requiring robust end-to-end strategies to win investor trust.

AI’s Role in CGT

Of course we covered AI’s role in CGT during our conversation, and Dr. Pashazadeh offered a tempered perspective. He expressed skepticism toward the term’s ubiquity, often observing it used as a stand-in for “we don’t know.” In Treehill Partners’ own attempts to implement AI, the biggest challenges were unclean data and an inability to validate AI’s outputs.

Clinical trial data remains too scarce and fragmented to support meaningful insights. Dr. Pashazadeh noted that real artificial intelligence requires vast data sets and iterative feedback loops, elements that are currently lacking in CGT.

Advice to CEOs: A Blank Page Approach

I asked Dr. Pashazadeh to offer some advice to CGT startups navigating today’s turbulent financial waters. “Evolve or become extinct,” he said, urging biotech CEOs to embrace a “blank page” mentality rather than relying on legacy strategies or assumptions. Indeed, he called for a new breed of biotech leader — one who integrates scientific excellence with a sharp commercial lens, even from early development stages. The old, sequential model of “science first, commercial later” no longer applies. Every dollar spent must serve the dual purpose of generating data and building a commercially viable pathway.

As my discussion with Dr. Pashazadeh revealed, the CGT companies most likely to succeed will be those that adopt a holistic, integrated approach to development, manufacturing, and commercialization. They will be led by CEOs willing to rethink everything, including how innovation is defined, funded, and executed. Because there is no shortage on roadblocks, the path forward is clear: evolve strategically, or risk being left behind.