BIO2022: Limitless Possibilities Despite Challenges in Capital Markets

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David H. Crean, Managing General Partner for Equitos Venture Partners and Cardiff Advisory, highlights news from the recent BIO Convention held face-to-face in San Diego, CA for the first time since the start of the COVID-19 pandemic.

After more than two years, the 2022 BIO International Convention (BIO2022) was back in-person in San Diego, California. The conference highlighted the industry’s momentum to realize a future where biotechnology can cure disease and create a healthier world through science. BIO attracted thousands of people from dozens of countries and assembled hundreds of sessions and keynote speeches and conversations with patient advocates, policymakers, and industry leaders. The ultimate goal for the week: better serving patients and the planet.

One could feel a noticeable vibe in the exhibit halls like we felt pre-pandemic. Estimates by BIO leadership informed attendees that there were more than 40,000 partnering meetings and global collaborations scheduled for the week. Attendees were focusing on how biotech can help solve pressing global health issues, protect our climate and nourish humanity. Spurring innovation and creating health equity for better patient outcomes around the world were just some of the topics discussed. Diversity, equity and inclusion were also a large part of the industry’s focus for the week highlighting the progress being made and planned for the future.

Thanks to the power of biotechnology. Our member companies, large and small, have done the impossible, creating vaccines faster than ever before, with the highest stakes in a century for global health.

Paul Hasting, CEO of Nkarta Therapeutics and Chairman of BIO

Paul Hastings, CEO of Nkarta Therapeutics and Chairman of BIO, delivered a summary in a keynote speech that typified the tremendous progress by the industry over the past two years. “Thanks to the power of biotechnology. Our member companies, large and small, have done the impossible, creating vaccines faster than ever before, with the highest stakes in a century for global health,” stated Hastings. “We’ll never know how many millions of lives we’ve saved in this pandemic because so many biotech companies worked together so tirelessly.”

Despite the great progress made by the industry highlighting the numerous successes and biomedical innovations, there remain significant challenges ahead in capital markets. This is a difficult market and a difficult environment. On the heels of an 8.6% inflation number, we saw the stock market drop and exhibit high daily volatility. The VIX, the market’s “fear barometer” stood at 33%, near its high for this year. The 10-year treasure yield is up 3.28% from a low of 1.63% in early January.  The Nasdaq biotech index is down 19.7%, along with SPDR S&P Biotech XBI (-39.7%) and S&P 500 (-22.9%) from early January 2022.

As of June 17, 2022, more than 200 life science public companies were trading below cash (negative enterprise value). The Fed raised the discount rate by 75 basis points last week and is clearly not done yet. Most alarmingly, the Fed is playing catch up on inflation with more than a six-point gap between actual inflation and target inflation. Quite a few economists see a recession as likely in the current situation.

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So how do innovative companies in the space react to such volatility and uncertainty while starved for capital and struggling to survive? Venture funding into these innovative companies is down significantly despite venture investors sitting on a large pools of capital. The global economy is facing numerous headwinds (inflation, interest rate increases, supply chain disruptions, geopolitical risks and uncertainties, and the lingering effects of the COVID-19 pandemic) and these factors are causing investors to seek more stable ground than risky ventures. That said, even though the fundamentals of the industry remain strong, the headwinds are forcing management teams and boards of directors to consider M&A, partnering and alternative pathways (e.g., debt financings, royalty buyouts) for staying afloat and driving value for shareholders. Of relevance, business partnering discussions were widespread and unusually substantive at BIO2022. A lot more M&A and partnering appears to be on the agenda than in recent history.

What we’ve seen this week is that our partnering platform is just the most essential part to doing biotech business right now.

Michelle McMurry-Heath, CEO, BIO

Ultimately, science and teams matter. Getting all this cutting-edge technology and the future of drug discovery is only one part of the equation. Talent is incredibly important for the industry of the future. It is the people that will make the difference in getting products to market, doing research and providing opportunities in the workplace.

It was a busy week for everyone at the conference, including BIO CEO Michelle McMurry-Heath. “What we’ve seen this week is that our partnering platform is just the most essential part to doing biotech business right now.” So, when BIO gets back together in Boston next year, expect more business collaborations and opportunities to explore. See all of you at the BIO International Convention in 2023.


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