What is the investment community excited about in 2022?

By Samantha Black, PhD, ScienceBoard editor in chief

February 6, 2022 -- Breaking down the sector based on types of investment, 2022 is shaping up to be an exciting year for biotech investors, according to Gabriel Cavazos, senior managing director of investment banking at SVB Leerink. Cavazos participated in a panel discussion on the outlook of biotech investments during Biotech Showcase.

Cavazos told ScienceBoard Editor in Chief Samantha Black, PhD, that 2021 was one of the worst years in biotech regarding investments since 2006.

“Some of the macro factors have been having an impact on the weakness … of the sector,” he said. “And then some company-specific events, particularly in Q4, really put a lot of pressure on the XDI biotech index. More broadly, we had a number of high-profile failures within the year, which really have had an impact on investor sentiment.”

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In spite of the tumultuous environment in 2021, it was still a record year for biopharma initial public offerings (IPOs). Cavazos listed the following as indicators of success and enthusiasm from the investment community:

    • In the first half of the year alone, there were over 75 IPOs in biopharma, realizing $14.7 billion.
    • There were 80 crossover deals (venture financings in which there is significant participation from investors that typically buy into publicly traded companies or IPOs).
    • Oncology, rare diseases, and central nervous system diseases led in terms of dollars flowing into the market.
    • Companies achieved over 80% of redemptions and 75 are in the pipeline. (A redemption is the return of an investor's principal on a fixed income security such as a bond, mutual fund, or preferred stock.)
    • Currently, there are 80 special-purpose acquisition companies (43 are life sciences companies, with $2 billion expiring in 2022).
    • Several large pharmaceutical companies have patent expirations coming up, translating to $125 billion in lost revenue that is expected in 2022.
    • There is $200 billion in revenue is coming from COVID-related sales.

    In 2022, investors expect a shift away from preclinical companies to companies with catalyst data that drive stock market prices, Cavazos commented. His team estimates $500 billion in cash will be available for acquisitions, share buybacks, and internal investments. They expect 2022 to be very active and hope to see an uptick deal-making, volume, and dollar value.

    “And I think that's where those markets are going, establishing proof of concept in smaller, more niche patient populations," Cavazos explained. "And then leveraging that success and broadening it to much larger indications, more chronic indications with a larger percentage of the population.”

    SVB Leerink is a healthcare-dedicated investment bank that has over 145 investment bankers focused on healthcare. They advise and work with biotech companies to help them raise equity investments for growth and innovation.

    Do you have a unique perspective on your research related to biotech finance? Contact the editor today to learn more.


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