Biotech
The Biotech Sector Says Goodbye to its Decade of Abundance and Faces Search for Funding
Some of the big companies in the biotech sector have already outlined their plans for the new phase. For now, the largest U.S. biotech companies have opted to go on a buying spree. In the first six months of the year, the twenty largest companies made eleven acquisitions of assets without risk or with agreements to moderate it.
The biotech sector has left behind a decade of abundance in its funding and will have to evaluate “new options” to continue growing, according to a study published by McKinsey.
Specifically, the consultancy argues that the sector has thrived over the last decade thanks to the expansion of venture financing, and companies that have been jumping into the market have been able to rely on the stock market, through public offerings (IPOs), to attract capital. However, in the first half of this year, investors have pulled out, slowing down their activity in the sector.
In 2021, U.S. biotech companies raised about $35 billion through venture capital and closed about 100 IPO deals. However, in the first six months of the year, the money raised barely exceeds $10 billion and fewer than fifteen IPO deals have been recorded.
The consultancy stresses that the large influx of capital into the sector over the last decade contributed to the achievement of gene therapies, precision oncology, and hepatitis C treatments, so the industry will have to open up to new investors such as “R&D investment, evaluate new financing options and consider mergers with other biotechs.”
Read more about the challenges facing the biotech sector and find the latest financial news of the day with our companion app Born2Invest.
Mergers or long-term debt are some of the strategies to survive the new phase
Some of the big companies in the sector have already outlined their plans for the new phase. For now, the largest U.S. biotech companies have opted to go on a buying spree. In the first six months of the year, the twenty largest companies made eleven acquisitions of assets without risk or with agreements to moderate it.
“Large mergers and acquisitions in the biopharma sector are likely to increase as the stock market downturn spreads,” the consultancy said. “But this will only be a solution for a handful of companies, not hundreds,” it clarified.
In addition to seeking allies, the consultant recommends cutting expenses in areas such as office space, opting for shared work and lab spaces; travel or salaries, and cutting bonuses. “In the future, we expect more scrutiny from investors on how capital is deployed beyond ongoing projects,” said McKinsey.
Another tool the consultancy suggests for these companies is long-term debt. For all of them, though, McKinsey recommends differentiation. “Assets and platforms that are not differentiated will have difficulty finding capital that can be better deployed in other sectors,” it warned.
__
(Featured image by TBIT via Pixabay)
DISCLAIMER: This article was written by a third party contributor and does not reflect the opinion of Born2Invest, its management, staff or its associates. Please review our disclaimer for more information.
This article may include forward-looking statements. These forward-looking statements generally are identified by the words “believe,” “project,” “estimate,” “become,” “plan,” “will,” and similar expressions. These forward-looking statements involve known and unknown risks as well as uncertainties, including those discussed in the following cautionary statements and elsewhere in this article and on this site. Although the Company may believe that its expectations are based on reasonable assumptions, the actual results that the Company may achieve may differ materially from any forward-looking statements, which reflect the opinions of the management of the Company only as of the date hereof. Additionally, please make sure to read these important disclosures.
First published in PlantaDoce, a third-party contributor translated and adapted the articles from the originals. In case of discrepancy, the original will prevail.
Although we made reasonable efforts to provide accurate translations, some parts may be incorrect. Born2Invest assumes no responsibility for errors, omissions or ambiguities in the translations provided on this website. Any person or entity relying on translated content does so at their own risk. Born2Invest is not responsible for losses caused by such reliance on the accuracy or reliability of translated information. If you wish to report an error or inaccuracy in the translation, we encourage you to contact us.
-
Crypto2 weeks ago
Ethereum (ETH): Two Major Pectra Upgrades Are on the Horizon for 2025
-
Cannabis1 week ago
The Czech Ministry of Justice Proposes Legalizing the Cultivation of 3 Cannabis Plants for Personal Use
-
Crowdfunding18 hours ago
Concrete Investing Launches First Income-Generating Operation with a Gruppo Building Campaign
-
Business2 weeks ago
Fed Performs CPR on a Cadaver: What the 50 bp Cut Means