FT Article26 Oct 2022 17:50
https://on.ft.com/3TFkYUy
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"In 2000, the Nasdaq biotechnology index dropped almost 70 per cent over three years. This time, that index, which now includes larger biotechs, has fallen 28 per cent from its peak in early September last year, and the S&P XBI, of smaller companies, has fallen 41 per cent since last November’s high.
Some companies, usually those with new clinical data that show their product is on the right track, have been able to raise follow-on funds in the public market, with $5.2bn raised in the third quarter, more than the first and second quarters combined.
Michael Yee, an analyst at Jefferies, said there was an appetite to buy biotechs with positive data, though it is far harder to raise money if you have less certainty about your pipeline.
“If you do have a good result, there is the opportunity to finance, which is really important. It gives you a lifeline.”
But even for those companies, most of the funding is from existing investors, with one healthcare banker saying new shareholders often made up only about 40 per cent of a raise, compared with 60 or 70 per cent before the sell-off. Share offerings are now done quickly and quietly to avoid the impact of giant swings in the market, and investors want to do much more due diligence, he added.
Biotechs soared during the pandemic. Non-specialist investors and hedge funds piled in, pushing up valuations and funding large swaths of start-ups that had not even begun human trials.
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