The overwhelming consensus from experts on a market outlook panel: the biotech sector is on solid ground.
Sara Michelmore, Senior Vice President of MacDougall Biomedical Communications, led a discussion with:
- Janice Bourque, MBA, Managing Director, Hercules Capital
- James Healy, PHD, MD, General Partner, Sofinnova Ventures, Inc.
- David Lederman, Director, Equity Capital Markets, Chardan Capital Markets
- Jordan Saxe, Senior Managing Director, Nasdaq
Despite challenges in the rest of the economy, 2020 has been the strongest on record for biotech—record IPOs, record follow-on offerings (or FPOs), significant uptick in private investment, significant new fund formation, and strong capital formation.
In fact, IPOs alone have already raised $12 billion—and we still have a few months to go.
Nasdaq’s Jordan Saxe said the strong momentum will carry the sector well into 2021, with an expected 10 more IPOs by the end of the year on top of the 60 which have already occurred.
What is driving the success?
It’s not just about COVID—though they agreed that the pandemic has made biotech popular, sparking interest from traditional investors but also from “generalists” who do not typically invest in this space.
Other success factors include the way the IPOs are priced and the fact that these emerging companies are delivering. As Chardan’s David Lederman noted, “It helps that all the deals are pricing right, trading well. Companies are delivering on what they said they were going to do.”
Janice Bourque of Hercules Capital pointed to a maturity on the part of emerging biotechs: “What we’re seeing on both the private and public side is that these companies are getting the funding that they need and getting it well in advance of some of the milestones they are looking to hit, so that they have runway to be able to get through.”
The risks of a rosy outlook
There are more generalists coming into the market because of increased interest due to COVID, but as James Healy of Sofinnova Ventures pointed out, “These investors may not know the risk they are underwriting.”
“I’m not sure everybody appreciates how long and how challenging it can be when companies are still pre-clinical,” agreed Bourque.
Another problem: the political environment, including the undermining of the public trust of the FDA, CDC, and NIH as well as the election that could cause apprehension in the marketplace since the marketplace likes certainty.