Melanie Senior’s article in Nature Portfolio on ‘Precision Financing’ highlights the rigour behind private biotech financing in 2023 where strong data and efficiency are essential.
Two of our clients, Naveed Siddiqi of Novo Holdings and Antoine Papiernik from Sofinnova Partners were featured. Here are some key takeaways…
Since the pandemic, the biotech industry has experienced a shift from a period of abundant cash and easy public offerings to a more challenging financing environment that has seen a reduction in IPOs and M&A, limited access to venture capital, and stricter investment criteria.
However, within the private sector there is still money available for ‘hot’ therapies, and it remains possible to secure large rounds. A number of biotechs have even pulled off successful IPOs thanks to clinical-stage assets and buyers lined up in advance.
Rising interest rates make venture debt an expensive option. Programme and staff cuts continue, with distressed companies presenting opportunities for others to seize assets and attract new funding.
Early-stage investing in biotech remains relatively unscathed, with innovation still on the rise. While the size of C rounds decreased, A rounds remained steady in 2022.
For Novo’s Siddiqi “the 2023 story is about Europe” which he believes “offers great value for the science it’s producing”, citing inflated post-pandemic valuations in the US. Others point to the tendency for promising start-ups to migrate to the US, due to weak European public markets and insufficient growth capital. But consensus is that Europe’s strong science base means companies will continue to be created, even if they later move abroad.
Efficiency is a common thread spanning biotech investment strategies and R&D in 2023. Asset-centric approaches that accelerate programmes to the next data point with minimal capital and overheads are multiplying along the R&D spectrum as external funding sources become more discriminating.
Computational biology firms that apply AI tools to drug discovery and development continued to attract investment in 2022. While these tools are accelerating regular R&D activities, they have not drastically increased success rates or reduced R&D timelines. Alone they will not revolutionise drug R&D but are useful when applied with others.
In 2023, precision financing will replace generalisations. The IPO window will only be open for proven winners, and large private rounds only available to companies with compelling clinical data or a highly productive platform. The market is not expected to recover soon. However, as Papiernik notes, companies developing products that serve patients will continue to receive funding and may be part of a more resilient sector after the shakeout.
Read more here: https://go.nature.com/3zwadeX .
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