GlobalData, a leading data and analytics company, unviels Thematic Intelligence report, “The State of the Biopharmaceutical Industry 2024″, to highlight the shift in investor sentiment in biotech industry.
The biopharmaceutical industry is witnessing a shift in investor sentiment. Despite facing challenges such as declining venture financing and macroeconomic pressures, there exists optimism about a recovery in biotech funding. Healthcare professionals globally express cautious optimism, emphasizing the importance of alternative funding avenues and industry partnerships. This dynamic landscape sets the stage for potential growth and innovation in the biotech sector, says GlobalData, a leading data and analytics company.
GlobalData’s Thematic Intelligence report, “The State of the Biopharmaceutical Industry 2024,” reveals that 44% of healthcare professionals surveyed globally are optimistic or very optimistic about biotech funding recovery in the next 12 months. This optimism follows a downturn in private biotech venture financing, where funding in 2023 declined by 43.2% and 52.3% compared to 2022 and 2021 respectively.
Ophelia Chan, Business Fundamentals Analyst at GlobalData, comments:
“This downturn was driven by macroeconomic pressures, prompting investors to be more cautious and focus on existing portfolios. The recent challenges such as high inflation, elevated interest rates, and geopolitical instability have further fueled investor caution.”
According to GlobalData’s Pharma Intelligence Center Deals Database, venture financing for US-headquartered companies with innovator drugs surged by 104% to $20.7 billion in 2021, prompting numerous early-stage biotech to go public with high valuations. However, this resulted in overvalued biotechs failing to deliver milestone outcomes, leading to a decline in investor confidence and increased selectivity in new investments.
Nonetheless, biotechs are seeking alternative funding. In the same survey, 39% of respondents favored enhanced industry partnership as the most effective measure to address biotech funding downturns.
In Asia-Pacific (APAC), government incentives or grants are preferred over private venture capital (VC) investors to mitigate the downturn compared to those in North America and Europe. According to GlobalData’s Pharma Intelligence Center Grants Database, US NIH grant funding for private companies headquartered in the US increased by 16.1% to $1.86 billion from 2021 to 2022, reflecting the importance of government funding bridging investment gaps received from VC investors.
Chan concludes: “Despite challenges in private biotech funding, venture capital has sustained biotech innovation. Following a decline from record highs in 2021, VC funding has remained relatively resilient throughout 2022 and is now showing signs of returning to pre-COVID-19 pandemic levels. Access to alternative capital sources such as enhanced industry partnerships and government grants, along with market stabilization and easing inflation, fosters a promising outlook for future biotech investments.”
Note: Includes all announced and completed deals for target companies headquartered in the US from 2013-2023 as a percentage growth from the baseline year 2013. Includes deals where at least one drug involved is an innovator for Marketed, Pre-Registration, Phase III, Phase II, Phase I, Preclinical, and Discovery development stages.
About GlobalData
4,000 of the world’s largest companies, including over 70% of FTSE 100 and 60% of Fortune 100 companies, make more timely and better business decisions thanks to GlobalData’s unique data, expert analysis and innovative solutions, all in one platform. GlobalData’s mission is to help our clients decode the future to be more successful and innovative across a range of industries, including the healthcare, consumer, retail, financial, technology and professional services sectors.
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