The private biotech market continues to grow on the back of scientific breakthroughs fueled by steadfast innovation. This is in spite of sharp public market volatility as the sector’s COVID-driven exuberance fades. Critically, private market valuations are starting to reflect this public market volatility.
In this piece, we explore the state of the private biotech market and highlight three key themes we expect to continue.
State of the biotech market: M&A activity, legislation, and macro considerations
Biotech M&A activity was unremarkable last year, but we believe it should accelerate in 2023 as pharma companies adapt to upcoming patent cliffs, leverage approximately US$500 billion of buying power,1 and lean into attractive valuations. While the US Inflation Reduction Act legislation was a headwind to the biotech industry in 2022, it has also provided greater clarity and limited the sector’s drug-pricing-related downside risks going forward.
Though existing macroeconomic uncertainties and ongoing regulatory considerations continue to challenge the overall sector in 2023, we believe winners should be disproportionately rewarded on substantial progress and strong data.