A trend of stock price downturns has made biotech investors wipe their hands of long-shot, early-stage drug developers. Instead, they’ll be focusing their funds on getting in bed with firms boasting drugs that are closer to market. Industry insiders say that small and mid-cap biotechs are suffering greatly from latent valuation and a dearth of landmark deals. Going forward, investment will likely glom onto larger firms—especially ones with candidate drugs already in the clinical trial phase. Even the private market has seen its own deep-pocketed supporters lean toward companies whose lead experimental drugs have moved onto the human subject level of testing.
"Investors are becoming a lot more selective and it's a very challenging time for biotechs to go public," said Avery Spear, a senior data analyst at Renaissance Capital, an IPO research firm. Evidence of this includes the fact that only five out of the 102 biotechs that listed in the U.S. last year are currently trading north of their debut price.
While last year saw a record 152 biotech IPO around the world, and funding rounds totaling over $25 billion cumulatively, a mere 23 have gone public so far in 2022. The same-period difference: a staggering 45 fewer biotech IPOs. Additionally, the NASDAQ Biotechnology Index (NBI) has slumped 18.6% for the year, and roughly one-third of stocks comprising the biotech index are trading at negative enterprise value.Biotech Investors Want Drugs That Are Closer to Market