Money Week article on biotechs26 May 2023 12:04
Snippet from the latest issue -
"More recently, the biotechnology sector has been at a low ebb, after “the second-worst bear market in the sector’s history, losing 70%”, according to Woody Stileman, managing director of the RTW Venture Fund. This is attributable to prior overenthusiasm for biotech, the threat of drug price reform under the socalled “inflation reduction act” in the US, and worries that falling share prices would lead to pre-revenue companies running out of cash.
But “macroeconomic and fear-driven drawdowns have always been followed by a strong recovery”, says Trevor Polischuk, a partner at healthcare specialists Orbimed. “The valuation of small and mid-cap biotech companies has been crushed compared to their big pharmaceutical company counterparts.” Many of these companies face a patent cliff as eight top drugs with combined global sales of $100bn face the expiry of their patents within five years.
The solution for them is to acquire biotech companies with promising products at a late stage of the clinical-trials process. “There has already been a surge in merger and acquisition activity in the last year, with the number of deals nearly doubling and their value nearly tripling in 2022. There is a lot more to come,” he says, pointing to 11 deals so far in 2023, five at share-price premiums above 100%. The pipeline of new products is growing rapidly. Polischuk expects the top 15 biotech-sourced product launches to generate $60bn of cumulative sales within ten years as a result of “a record number of molecules under development, up 70% since 2016.” Big pharma is doing plenty of drug development itself, accounting for many of the biggest likely blockbuster drugs.
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