Live Markets: Biotech companies in 'Darwinian' world as cash remains king

Acorda Therapeutics

03/06/2024 18:03

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    BIOTECH COMPANIES IN 'DARWINIAN' WORLD AS CASH REMAINS KING
    About 31% of biotechs across U.S. and Europe have
insufficient cash to maintain their operations for more than one
year as access to public and private financing remains a
challenge, an analysis from consulting firm EY published on
Monday shows.
        Throughout 2023, biotechs saw a constrained public
financing environment. Those with early-stage assets were the
worst hit, with some like Clovis Oncology and Acorda
Therapeutics winding down their operations. 
    EY said biotechs remain in a "Darwinian environment" - in
which companies with highly sought after late-stage assets have
secured record-high premiums for M&A and follow-on deals, while
others struggle for survival. 
    The Nasdaq Biotechnology Index  .NBI  rose about 4% in 2023,
after declining for two straight years. The index is up another
3% so far this year.  
    
        
  
    Brokerage Jefferies said last month that while biotech
valuations have gone down, cash and access to capital has
improved - with "much healthier" cash runways during the bear
market of 2020-2023.
        Early stage biotechs rely heavily on venture capital and
public listings as their financing options. After falling
dramatically by 93% in 2022, IPO investment in biotechs nearly
doubled to $2.9 billion in 2023 - and is showing signs of
further recovery this year, the consulting firm said. 
    EY analysts said in the report that they expect fiscal
policy to shift toward lower interest rates in the next six
months, potentially triggering a recovery for biotech
investments. 
    The Federal Reserve has raised borrowing costs since March
2022 and financial markets initially expected the first interest
rate cut to come in March this year. This was first pushed to
June and is now expected in September.
    Dealmaking and deep pockets from larger pharma companies
such as Pfizer  PFE.N  and Abbvie  ABBV.N  present a ray of
hope. EY estimates that Big Pharma has more than $1 trillion in
dealmaking firepower - which is among the highest levels in the
last decade. 
      
    (Bhanvi Satija)  
     *****      
 
    
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