While the whole world came to a standstill and everyone stayed at home, the biotech and pharma companies kept working throughout the year, in spite of the pandemic.
Currently, 2021 is carrying forward the same momentum as of 2020’s, setting records, raising funds and exit activity. As of March 18, 2021, US biotech & pharma VC deal activity has already notched $9.1 billion across 248 deals. On the mega-deals front, 29 have already taken place in 2021, which is tracking to exceed 2020’s 75 biotech mega-deals. By hiring scientists, managing clinical operations, or even licensing in new drug IP to expand portfolios, these outsized financing rounds allow biotech companies to rapidly expand. We expect deal making will be equally robust in 2021 and exceed $20 billion for the second consecutive year as investors continue to chase asymmetric returns within the high-risk, high-reward segment of the VC-backed biotech market.
VC deal making in 2020 – the year saw a record investment of $28.5billion of capital across 1,073 deals. This representing a 60.5% year-over-year increase in deal value over 2019’s aggregate $17.8 billion – the largest YOY increase till date.
IPO activity of VC backed biotech companies in 2020 - IPO market is intrinsically linked with a VC- backed biotech company’s ability to raise the large amounts of Capital needed for pushing multiple critical trials. The vast amount of capital, as well as the sheer volume of institutional and retail investors, allows all companies to expand drug development capabilities. By focusing on the exit landscape, we can gauge the public market sentiment toward these privately backed biotech companies and understand the ways investor liquidity occurs for VCs.
Biotech companies have a strong intellectual property (IP) protection around their drug technologies, so even as the elective procedures and clinical trials stalled briefly in Q2, companies have been able to quickly resume operations with minimal impact.
IPO valuation steps up multiple for biotech & pharma companies.
M&A activity of VC-backed biotech companies – in US, companies have bagged $12.4B in deal value across 43 transactions. Most of the M&A activity saw a downfall as strategic acquirers turned inward during pandemic. Large cap companies stored up resources to ensure ongoing operations and research and development (R&D) pipelines remained intact before looking for acquisition target.
The impact of IPO and M&A activity - capital available either within public markets or via partnering with a large-cap biopharmaceutical company is often far more bountiful than the Capital available from Venture investors. While IPO transactions help venture-backed companies with their capital need, M&A transactions typically help with non-capital needs like operations, manufacturing and human capital, among others. VC-backed biotech companies, strength typically lie in drug discovery and clinical testing.
Bridge Point Capital is a private equity firm based in New York, with a focus on U.S.-Asia cross-border investments. We specialize in investing in disruptive mid- to late-stage healthcare companies that can benefit from penetrating the vast, yet unexplored Asian healthcare market. We aim to leverage our expertise in both healthcare and capital markets, to establish a lucrative investment platform for our investors.