Amid uncertainty, a subdued post-pandemic environment
For all the headlines heralding an ice age for biotech financing and dealmaking, activity for the first half of 2022 indicates more of a correction — a sharp one, to be sure — to pre-pandemic levels. Consider that:
- After an enormous influx of capital into the sector in 2020 and 2021, levels of public and private financing have reverted to where they were before COVID-19 threw global markets into upheaval two-and-a-half years ago.
- As in many other sectors, the recent torrent of biotech IPOs has slowed to a trickle as global markets shuddered, and follow-on offerings have followed suit, reflecting high company valuations;
- In terms of volume, deal making has retreated to pre-pandemic norms but remains robust, showing continued appetite among large pharma looking to buy into platform technologies such as protein degradation, RNA technology and cell and gene therapy. While the number of deals plunged year on-year, the overall value for the first half soared as a result of a series of billion-dollar-plus deals, notably by Bristol-Myers Squibb and Sanofi.
- Mergers and acquisitions (M&As) have slowed dramatically, likely reflecting reluctance among emerging biotechs to sell at a time when they may be undervalued, along with hesitance by pharmas to make major cash outlays amid economic uncertainty. Here, again, we see continued appetite among amply resourced large pharmas seeking to replenish pipelines (e.g., Pfizer Inc’s $6.2 billion acquisition of Arena Pharmaceuticals).
The life sciences offer investors a countercyclical safe harbor during times of economic upheaval, and the salience of biopharma stocks during a once-in-a-century pandemic made this sector a particularly attractive place to ride out the storm. As COVID-19 begins to transition from a pandemic to an endemic and the possibility of recession has rattled markets, a lot of air has left this bubble. The fundamentals of these industries remain strong, with biotechs on the cusp of unlocking some truly amazing advancements in human health and pharmas competing to position themselves to deliver on them. However, with continued pandemic aftershocks and a war in Europe clouding the macroeconomic picture, we can expect to see continued pressure on the sector in the near term.
Included in this Contents:
- Amid uncertainty, a subdued post-pandemic environment
- Dealmaking remains robust
- Total financings drop significantly in H1 2022
- Mega-deals catapulted deal value to record levels
- U.S.-based companies led the deals landscape.
- M&A slowdown reflects general economic uncertainty
- Key takeaways
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