16 APR 2024

Innovation in biotech: the virtuous cycle of capital

In the long road from drug development to commercial launch, you need “a lot of capital, a lot of time, and to combat a lot of risk,” says Sonia Gupta, a managing director in the Healthcare Group within Investment Banking, in the latest episode of The Insight. Gupta describes how new opportunities sparked by scientific advancement are fueling a wave of M&A and financing, and notes that while both biopharma companies and traditional financial sponsors are looking for late-stage, de-risked assets, there is increased risk appetite for early-state innovation. 

"There's never been a better time to innovate with novel biology in the earliest stages of the game,” she says.

Biotech M&A has steadily grown from ~$60B in 2021 to ~$150B in 2023, with momentum only accelerating into 2024. "In order for biotech companies to progress and advance, they have to really leverage that virtuous cycle of capital in an incredibly nuanced way,” Gupta adds. “You need to be able to appeal both to new capital coming in as well as your ultimate customer.”

This virtuous cycle of capital is also playing out in the public markets, with public biotech offerings showing signs of rejuvenation as the economy stabilizes. Approximately $1.5B has already been raised in biotech IPOs this year across seven transactions – compared to $2.8B in 2023 and $1.6B in 2022 – underscoring a healthier pace of offerings and a brighter outlook for the industry. 

Source: Dealogic