Investors pulled out of biopharma tech companies in the first three months of 2021, even as capital flows remained higher than before the Covid-19 pandemic, according to a report this week from research firm CB Insights.
In some ways, the pullback reflects a broader trend in the stock market that is off to a rough start in 2022.But as Covid-19 appears to be waning, it’s also stemming from a slowdown in funding for pandemic-related biotechs, according to Kedar Karkare, a senior intelligence analyst in New York. CB Insights.
“2021 is just a bubble-rich year,” Karkare said in an interview.
He added that future performance will depend in part on the public markets. “If we see a broader public market rally in 2022, that could drive a rebound in biopharma funding.”
Global biopharma technology funding peaked at $4.7 billion in the second quarter of 2021 and has declined every quarter since. CB Insights State of Biopharma Technology Report, released this week. The total for the first quarter of 2022 was $2.8 billion, according to CB Insights. The lion’s share — nearly $2.3 billion — went to U.S. companies, followed by European companies with $264 million and Asian companies with $246 million.
The number of deals has also decreased: 66 in the first quarter of 2022, compared to 78 in the last three months of 2021. Average deal value has also declined, from $54 million in 2021 to $46 million so far in 2022. Still higher than 2020’s $36 million.
Exports also fell after a record surge in 2021. According to CB Insights, there were six M&A deals in the first quarter of 2022, compared to 12 in the first quarter of 2022. There were two IPOs in the first quarter of this year, down from nine a year ago.
One factor that could weigh on the market, Karkara said, was the weaker-than-expected performance of biopharma technology companies that went public last year, whether through IPOs or special-purpose acquisitions. “This could lead to a little less interest in late-stage private biotech companies.”
One sign of this trend is that early-stage companies are gaining a larger share of funding: 44% so far in 2022, compared to 39% for all of 2021. Their share has been declining since at least 2018, when it stood at 57%, according to a CB Insights report.
Still, some companies received significant funding in the first quarter.
The most funded free group, a South San Francisco-based company developing blood tests for early detection of cancer.free group Raised $290 million from investors These include pharmaceutical and diagnostic giants Roche.
Other large transactions include Raises $150M for digital health company Verana Health and Raises $236 million for New York-based Kallyope, one of two unicorns cast in the first quarter. It’s valued at $1.2 billion, according to CB Insights. The other is ConcertAI, valued at $1.9 billion.
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