This past Wednesday, January 31st, Gilmartin Group’s Managing Directors, Laurence Watts and Stephen Jasper hosted a webinar with Jefferies’ Michael Brinkman, Managing Director and Joint U.S. Head of Biopharmaceuticals Investment Banking, and Charlie Glazer, Managing Director and Head of Healthcare ECM to discuss recent trends in the biotech capital markets and outlook for 2024.
Moderators:
- Laurence Watts, Managing Director, Gilmartin Group
- Stephen Jasper, Managing Director, Gilmartin Group
Speakers:
- Michael Brinkman, Managing Director, Jefferies
- Charlie Glazer, Managing Director, Jefferies
KEY TAKEAWAYS
2024 Biotech IPO Market Outlook:
Jefferies believes the biotech bear market is over as the panelists are seeing broader investor optimism across the sector due to increased macroeconomic visibility with a preference for later-stage, de-risked programs. Jefferies was a bookrunner on more than half of the 19 biotech IPOs last year and noted that the IPO market for biotechs hasn’t necessarily been closed, rather the bar for quality deals was set high. That bar is slightly lower today, and looking ahead to the rest of 2024, the panelists believe IPO activity can double from 2023 levels.
A New Class of Biotech IPOs
Jefferies doesn’t expect to see the market return to 100+ IPOs as seen in 2021, which the panelists viewed as unsustainable, as investors today are much more deliberate about the way they invest. For biotechs, clinical news flow drives market price, and the later-stage a company is, there is a lower probability of failure/negative data. Investors are looking for biotechs with promising late-stage data (e.g., CG Oncology), strong proof-of-concept data (e.g., Cargo Therapeutics) or a de-risked pre-clinical program (e.g., Apogee Therapeutics). The panelists expect to see continued investment in the oncology space, particularly in radiopharmaceuticals and ADCs, and increased interest in the autoimmune and I&I space, while gene therapy has fallen out of favor amongst investors.
A New Class of Biotech IPOs
Jefferies doesn’t expect to see the market return to 100+ IPOs as seen in 2021, which the panelists viewed as unsustainable, as investors today are much more deliberate about the way they invest. For biotechs, clinical news flow drives market price, and the later-stage a company is, there is a lower probability of failure/negative data. Investors are looking for biotechs with promising late-stage data (e.g., CG Oncology), strong proof-of-concept data (e.g., Cargo Therapeutics) or a de-risked pre-clinical program (e.g., Apogee Therapeutics). The panelists expect to see continued investment in the oncology space, particularly in radiopharmaceuticals and ADCs, and increased interest in the autoimmune and I&I space, while gene therapy has fallen out of favor amongst investors.
Pharma M&A is Likely to Continue
The wave of pharma M&A is expected to continue, especially as big pharma is faced with imminent patent expiration in the next five years. The panelists noted that there are several large companies that have significant holes to fill, and those that have large programs (e.g., Lilly, Novo) are actively spending their profits on M&A. Jefferies doesn’t expect to see too many mega-deals, especially given the FTC’s aggressive proposed M&A guidelines. That said, the panelists expect any company with promising Phase 3 data will get snapped up, so long as valuations aren’t over-inflated.
Supportive Macroeconomic Backdrop
Overall, Jefferies sees a favorable macroeconomic backdrop for the biotech capital markets due to increased visibility around rate cuts. The panelists noted that the expectation for rate cuts is enough for generalists to start moving from an underweight position to an equal-weight position in biotech, and don’t believe the timing or number of cuts will have a material impact. The panelists added that they don’t expect the presidential election to have a significant impact on the biotech sector.
Gilmartin Group has deep experience working with both private and public companies in biotech and across the healthcare space. For more information about how we strategically partner with our clients, please contact our team today..
Authored by: Claire McCardell, Associate Vice President, Gilmartin Group