After many years of comparative abundance in the biotech capital markets, signs of current distress are everywhere. But is the current situation an overdue but inevitable correction or are there more fundamental causes?
In prior market downturns, ‘trade sales’ have provided the exits unavailable though public markets. However, in this current market, M&As have been nearly as rare as IPOs. One driver perhaps not receiving the attention it deserves is an unprecedented glut of biotech companies with clinical stage programs that now, during the bear market, they are looking to sell to a cadre of buyers that has not increased since the last long capital hiatus back in 2008-10. The result is a supply and demand imbalance which is not, to put it mildly, in favor of sellers. Pharma buyers are struggling to separate wheat from the chaff and are unwilling to pay premium prices for assets that were more highly valued through the bull market years. An additional headwind to deal making is the Pharma buyers’ elevated perception of commercial risk since many programs are clustered around a limited number of validated targets without proven differentiation. These problems may be especially acute in oncology (maybe close to two thirds of “available” clinical stage assets).
Finally, a significant slug of the venture investment over the past decade has gone to support advanced therapeutic platforms, e.g. cell and gene therapy, which are burdened with their own inherent commercial as well as manufacturing challenges, also clustered around a limited number of validated targets, and with the majority of large pharma not yet bought in. Taken together these challenges increase the urgency for biotech company leadership and their investors to strategize carefully, especially with regard to when and how to deploy today’s precious capital to differentiate their assets and address commercial de-risking to add to and hopefully synergize with what has been accomplished in the clinic.
Join us as two industry experts who have seen their share of market cycles discuss lessons from the past and how these can be applied to the unique challenges of today.
Head, Biotech Strategy, Lumanity
Founder & Senior Advisor, Aisling Capital