American biotechs strapped for cash apparently have a rough road ahead. GlobalData reports that, compared to a year ago, venture financing deal value for U.S. biotechs dropped 46% in the first quarter. Causation is linked to a general market downturn in the sector as well as a plethora of geopolitical uncertainties. Another issue is tepid clinic performance from once-promising therapies, a byproduct of market overcrowding in the boom years of the past. Accordingly, many biotechs are culling staff and scraping together capital to keep their assets on a forward trajectory.
The glut of companies touting inflated stock prices while hurrying to IPOs last year, just ahead of a significant market fall-off, has proven to be a recipe for VC distaste. Now, as a fair share of biotechs trade well below value, a speedy recovery for investment seems to be a pipedream.
There is good news, though, in terms of nationalistic schadenfreude: the situation is even worse across the pond. GlobalData uncovered metrics pointing to a growing divide in VC funding between the U.S. and Europe. The latter’s companies have amassed $56 million less per quarter than U.S.-based companies in the past five years. “The fall in biotech indices . . . in addition to low biotech valuations following the COVID-19 pandemic, means U.S. companies looking to buy may see European biotech start-ups as rich pickings,” said GlobalData’s Sharon Cartic, Associate Director of Business Fundamentals. “This could result in Europe’s biotech sector losing out to the U.S., unless Europe looks to improving venture financing investments of biotechs, particularly those with late-stage assets, to enhance their chances of generating revenue once they’re listed on the stock markets.”