Investors turn attention to biotechs with clear path to market
Companies that are further down the road to market are more attractive to investors than those in early development
Biotech investors are honing in on firms that are close to getting their drugs to market, as the IPO environment slumps from its peak in 2021.
Interest in biotech companies looking to go public is now primarily focused on those with candidate drugs which are already in clinical trials, according to interviews given to Reuters by six industry experts. This risk-averse approach has been prompted by a fall in valuations and a lack of big deals this year.
It is a challenging time for biotechs looking to go public, as stock prices ballooned in 2021 and fell in 2022. Only five of 102 biotech firms that listed last year in the US are now trading above their debut price.
Speaking to Reuters, global healthcare leader for investment research firm Third Bridge, Lee Brown, said: ‘Small- and mid-cap biotech were coming at valuations that were incredibly high and so folks that were involved with those have been burned by them.’
Now, investors are trying to guard against unstable market conditions by selecting targets with a clear path to commercialisation over targets that are in the earlier stages of development.
Biotech IPO environment
Last year, there were a record 152 biotech IPOs globally, with companies raising more than $25 billion in total. As of June 10, 23 biotechs had gone public in 2022 raising $2.3 billion, compared to 68 in the same period last year.
Due to unfavourable market conditions, many biotechs are reportedly sitting on their IPOs, conserving cash, and waiting until investors and banks are more comfortable taking these deals to market.
In 2021, nearly two-thirds of the 182 companies that went public were either in preclinical or Phase 1 testing. Many of those companies have struggled since, which has prompted increased scrutiny from investors. They report that it can be difficult to gauge the correct value of earlier-stage companies compared to later-stage targets.
Regulating M&A
Concurrently, mergers and acquisitions in the pharmaceutical industry have been subject to increased scrutiny from regulators in Europe, the United Kingdom, and United States. Antitrust enforcers have raised concerns that such deals could stifle competition, push up prices or hold back innovation.
This comes as the industry has seen increased consolidation in recent years, with larger firms often choosing to acquire small, specialised companies to build out their pipelines, rather than expanding existing in-house capabilities.
As the number of biotech IPOs declined this year, so too did the number of biotech M&As. As of June 10, six of these deals had been announced, compared to 32 throughout 2021.
Related News
-
News Patients vs Pharma – who will the Inflation Reduction Act affect the most?
The Inflation Reduction Act brought in by the Biden administration in 2022 aims to give better and more equitable access to healthcare in the USA. However, pharma companies are now concerned about the other potential costs of such legislation. -
News CPHI Podcast Series: What does the changing US Pharma market mean for industry and patients alike?
In this week's episode of the CPHI Podcast Series Lucy Chard, Digital Editor for CPHI Online is joined by James Manser to discuss the political and market changes in the US pharma field. -
News CPHI Barcelona Annual Report illuminates industry trends for 2024
The CPHI Annual Survey comes into it’s 7th year to report on the predicted trends for 2024. Over 250 pharma executives were asked 35 questions, with their answers informing the industry landscape for the next year, spanning all major pharma marke... -
News Which 10 drugs are open to price negotiation with Medicare in the USA?
The Centres for Medicare & Medicaid Services, under the Biden administration in the USA, has released a list of the 10 drugs that will be open to price negotiations as part of the new legislation under the Inflation Reduction Act (IRA). -
News EU Medical Devices Regulation causes unintended disappearances of medical devices for children, doctors state
Doctor groups and associations have appealed to the EU to correct the EU Medical Devices Regulation law that may cause unintended shortages of essential drug and medical devices for children and rare disease patients. -
News 10 Major Drug Approvals So Far in 2023
Last year, 37 novel drugs were approved by the FDA, this was a high number for such a category, and covered many fields including oncology, demonstrating how promising further research is, and how it is only continuing to build. To date, there are alre... -
News Detecting Alzheimer's disease with a simple lateral flow test
A novel rapid diagnostic test for early-stage Alzheimer's disease has been developed using a biomarker binder from Aptamer Group along with technology from Neuro-Bio, the neurodegenerative disease experts. -
News CPHI Podcast Series: outsourcing and manufacturing trends
Listen to the CPHI Podcast Series this June to hear Gil Roth of the PBOA speak with Digital Editor Lucy Chard about the biggest trends and topics to watch in pharma outsourcing and manufacturing at the minute.
Position your company at the heart of the global Pharma industry with a CPHI Online membership
-
Your products and solutions visible to thousands of visitors within the largest Pharma marketplace
-
Generate high-quality, engaged leads for your business, all year round
-
Promote your business as the industry’s thought-leader by hosting your reports, brochures and videos within your profile
-
Your company’s profile boosted at all participating CPHI events
-
An easy-to-use platform with a detailed dashboard showing your leads and performance