BioPharma

Report: Deals continue downward slide for biopharma tech

During first three months of 2022, biopharma tech companies raised less money and made fewer deals than they did in the last three months of 2021. A volatile stock market is exacerbating the trend.

Investors pulled back from biopharma tech companies in the first three months of 2021, though capital is still flowing in greater amounts than it was before the Covid-19 pandemic, according to a report this week by research firm CB Insights.

The pullback reflects, in some respects, broader trends in equity markets, which got off to a rocky start in 2022. But it also stems from a slowdown in funding for pandemic-related biotech as Covid-19 appears to wane, according to Kedar Karkare, a senior intelligence analyst for New York-based CB Insights.

“2021 was just a really frothy year,” Karkare said in an interview.

Future performance, he added, depends in part on public markets. “If we see there is a broader public markets rebound in 2022, that could drive a rebound in biopharma funding.”

Global funding for biopharma tech hit a peak of $4.7 billion in the second quarter of 2021 and has dropped in every quarter since, according to the CB Insights State of Biopharma Tech report, released this week. The total was $2.8 billion in the first quarter of 2022, according to CB Insights. The lion’s share – nearly $2.3 billion – went to U.S. companies, followed by $264 million for European firms and $246 million for companies in Asia.

There also were fewer deals: 66 in the first quarter of 2022, compared to 78 in the final three months of 2021. The average deal value also shrank, dropping from $54 million in 2021 to $46 million so far in 2022. Nonetheless, the average remains higher than the $36 million figure from 2020.

After a record-setting spike in 2021, exits were down, too. In the first quarter of 2022, there were six M&A deals, compared to 12 in the first quarter of 2022, according to CB Insights. There were two IPOs in this year’s first quarter, down from nine a year ago.

One factor that could be weighing on the market is the weaker-than-expected performance of biopharma tech companies that went public last year, whether through IPOs or special purpose acquisition companies, Karkara said. “That’s potentially caused a little bit less interest in the later-stage private biotech companies.”

In one sign of the trend, early-stage companies are taking a greater share of funding: 44% so far in 2022, compared to 39% in all of 2021. Their share had been declining at least since 2018, when it was 57%, according to the CB Insights report.

Still, some companies managed to land substantial amounts of capital in the first quarter.

The top fundraiser was Freenome, a South San Francisco-based company developing blood tests for early detection of cancer. Freenome raised $290 million from investors that included pharma and diagnostics giant Roche.

Other big deals include a $150 million fundraising for digital health firm Verana Health and a $236 million fundraising for New York-based Kallyope, one of two unicorns minted in the first quarter. It was valued at $1.2 billion, according to CB Insights. The other, ConcertAI, was valued at $1.9 billion.

Photo: champc, Getty Images

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