Foreword
In our last quarterly round up of the commercial landscape for biopharma, we found cause for some optimism. After a challenging 2022, M&A activity had already matched that year’s total figure and venture financing was ticking up as well. There was a clear line between the haves and the have-nots, but there were certainly reasons to be cheerful in some quarters.
Did the third quarter give us more to feel positive about? Well, no, not really. Despite the FTC finally waving through the Amgen/Horizon deal, the general sense in the market is one of uncertainty. Factors like the US Inflation Reduction Act, a tough global financial climate and geopolitical challenges continue to bite.
On the positive side, that creaking sound you may have heard recently was the IPO window finally opening enough for a handful of companies to hit the public markets. On the less positive side, many of them saw their initial valuations fall in the subsequent weeks. And all those that did take place were in the US, so Europe remains a desert for businesses looking to float.
Dealmaking has slowed significantly too, with just $13bn-worth of deals taking place in the quarter – a picture that would have been much worse were it not for Biogen’s acquisition of Reata. Hopes that 2023 would be a bumper year for M&A may have been dashed, but to keep things in perspective, we’re at least on pace for a mid-table year for the last decade. There are many who’d have happily settled for this 12 months ago.
What of fundraising? It remains a challenge, with VC data showing quarter-on-quarter drops in the number of biopharma companies raising private cash. With a large proportion of biotechs set to run out of funds within two years, this is a concerning picture. Until IPOs and M&A activity pick up, venture capital investors are having to fund their portfolio companies for longer periods of time, so new investment is limited.
However, there are still therapy areas with huge growth potential and big pharma pipelines need to be filled to mitigate the ever-present threat of the patent cliff. There’s potential for Q4 to give the industry a boost before the end of the year. For now though, the going remains tough.