COVID-19 and the Biopharmaceutical Sector:
Outlook for the financing and deal environment
In this report, we examine the impact of the COVID-19 pandemic on the financing and deal environment for the biopharma sector. In preparing this report, we have analyzed data in the public and private financing markets and have also looked at the M&A market, stated intentions of M&A dealmakers and the licensing market.
- The biopharmaceutical sector has seen revenue significantly impacted, with several companies lowering their full year guidance on earnings calls. Additionally, clinical trials are facing delays across the board and many industry experts anticipate seeing long-term implications on drug pricing.
- Despite these difficulties, both regulators and industry have stepped up broadly in dealing with the COVID-19 pandemic. The FDA has been operating on a record pace for granting NDA/BLA approvals while simultaneously getting out 67 Emergency Use Authorizations for products related to the Coronavirus pandemic. In an extraordinary show of unity, most major pharmaceutical companies have made significant R&D, resource or financial contributions to society during the pandemic period.
- Remarkably, the NASDAQ Biotech Index is up since the COVID-19 pandemic was declared. However, when we analyzed markets more closely, we find that three stocks have significantly impacted the direction of this market-weight index. In fact, more than two thirds of stock in the NBI are down and, globally, biotech stocks are down more than 10%. Median returns have generally been less than negative 20%. Specialty pharma and generics companies have been significantly impacted as investors have rotated into large cap pharma and high innovation biotechs.
- In the last six weeks, the IPO market has been as slow relative to recent months but not slow when looked at in the long-term context. Follow-on equity offerings are down substantially as public investors have stayed on the sidelines.
- The venture financing market has fared much better than the public financing markets. The last six weeks have been the strongest period for biotech venture financing in more than a year. Venture funds themselves have raised record amounts of money year to date. We count more than $72 billion in venture fund firepower ready to enter the marketplace in the years ahead.
- Healthcare M&A activity is down, including the biopharmaceutical sector, as companies focus on COVID-19 and their own internal business matters. We expect M&A activity to return to normal once the pandemic has passed. Unlike M&A, the licensing market has not shrunk in response to the pandemic. Japan regional licensing is steady and China licensing is up despite the COVID-19 pandemic.
- In the future, we anticipate increased budget pressures and further supply chain adjustments, as well as a greater focus on health security and infectious disease. We anticipate a substantial boom ahead in digital therapeutics and telehealth, as well as stronger social support for bioinnovation as a whole.
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