Ropes & Gray is a global law firm with approximately 1,500 lawyers and legal professionals serving clients in major centers of business, finance, technology, and government. Since the company is quite active in the life sciences space and regularly publishes market research findings in private and public biotech markets, I was excited to ask David a number of questions about his reflections of 2022 market climate and what we can expect in the industry in 2023.
According to Ropes & Gray, 2022 has been a more downbeat year for fundraising. Valuations have fallen on public markets and the anticipated boom of dealmaking failed to materialise. However, there are a number of factors set to make 2023 a truly exceptional year for biotechs, whether in licensing, fundraising or M&A:
Listed valuations remain low. There are good targets whose pricing remains suppressed. In Europe the continuing weakness of the Pound and the Euro will make European targets even more attractive for US buyers.
Many biotechs are beginning to run low on cash, with expensive pipelines to fund. They may soon show more willingness to negotiate with investors.
Financial investors are becoming increasingly interested in the sector. Private equity and venture capital funds desperate to spend their piles of cash are expanding their horizons, moving away from healthcare services businesses and into actual biotechs. A number of these have already or are in the process of raising dedicated life sciences funds
Many big pharmaceutical companies are also sat on large amounts of cash. So far they have been judicious in the targets they choose. However, later stage biotechs in need of expertise and funding for expensive trials may become more willing to compromise on pricing for the right partner.
That said, not all dealmaking will be through M&A. There may be greater rewards for those willing to find alternative deal structures. Either way, 2023 promises to be a year to watch. Below are David's reflections on the market conjuncture:
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