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  • Writer's pictureHarris Kaplan

Biotech 2024: History Doesn’t Repeat Itself, but It Often Rhymes



After more than two years in the doldrums, initial public offerings, an important indicator of the biotechnology industry’s health, have shown signs of life.

 

The theme of biotech having turned the corner is echoed by a number of industry investors. In Barbara Ryan’s column in Pharmaceutical Executive in March, she outlines a number of reasons for investor optimism:


  • Investors belief that interest rates will come down in 2024

  • Compelling clinical data

  • A red-hot M&A market

 

A run of offerings in the first six weeks of 2024, most worth around $100 million or more, has put the sector on its strongest pace since 2021.

 

After surging 38% in the last quarter of 2023, the XBI was able to close the year with a gain of more than 7%.

 

Life sciences M&A transactions were higher in 2023 compared to 2022. There were 27 M&A transactions in the fourth quarter, bringing the 2023 total biopharma M&A upfront to $128.8 billion. There is reason to believe that life sciences M&A activity will continue. The top 18 pharmaceutical companies have over $500 billion available to fund transactions. According to an article published by Ropes&Gray, given the abundance of biotech companies exploring “strategic alternatives,” significantly increased firepower in the industry, and the high volume of bankruptcy filings, there is promise that 2024 will continue to see an uptick in M&A deals as the “haves” seek to take advantage of the “have-nots.”

 

The View from the Crow’s Nest


There’s a lot of money sitting on the sidelines that believe investing in biotech companies will deliver solid returns in 2024 and beyond. M&A will remain a vehicle for large pharmaceutical companies need to fill their pipelines due to pending patent expirations of large, revenue producing assets. And with the IPO markets opening up again, VC’s now see clear exits for investments in early-stage biotech companies.

 

But, having been chastened in 2022, investors are likely to be much more selective than they were in 2021: looking for markets with high unmet need, strong clinical data supporting a highly differentiated asset, and a solid commercialization pathway should the company decide to remain independent.

 

As Mark Twain said, “history doesn’t repeat itself, but it often rhymes.”


 
Author: Harris Kaplan, a managing partner in Spinnaker’s Minneapolis office

If you are interested in learning more, get in touch at strategy@spinnakerLS.com. 

Spinnaker offers true partnership and comprehensive guidance to help leaders navigate the complexities of the Life Sciences industry and chart a path to success. From early-stage market assessment through commercial execution and ongoing lifecycle management, we deliver tailored solutions to ensure optimized practicable results.
 

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