Biotech company initial public offering (IPO) valuations have shown resilience during the COVID-19 pandemic, compared to other industries. This is largely due to the unique nature of pharmaceuticals and the industry’s role in developing a COVID-19 drug, as well as drugs for other serious medical needs, says GlobalData, a leading data and analytics company.
Sharon Cartic, MSc, Associate Director for Drugs and Business Fundamentals at GlobalData, comments: “According to GlobalData’s Pharma Intelligence Center Deals Database, in 2018 and 2019, there were similarities in the number of total deals and total deal values for venture capital financing, representing the highest totals from the previous 10 years. Now, 2020 has already reached over 40% of 2019’s total deal value, indicating that investors don’t seem to be slowing down, despite COVID-19.”
A broad portfolio and late-stage assets are attractive qualities that investors tend to look for when investing, although investors may be more cautious in the future, so overcapitalizing is a strategy to be considered.
Cartic continues: “Pharmaceutical companies looking for an IPO may be reluctant due to the COVID-19 pandemic and may seek an additional round of private funding. Additionally, there may be companies choosing to wait to make a move until they see what happens to other IPOs.
“Most early-stage emerging biotechs, while they may not yet be generating revenue, still need to raise funding—particularly from capital markets—to support drug development and to meet specific milestones, such as in clinical trials. However, clinical trial results may be delayed by the COVID-19 pandemic, as reported in GlobalData’s Coronavirus Disease 2019 (COVID-19) Sector Impact: Pharmaceutical Trade and Supply Chain Survey – Q1 2020 report. GlobalData expects that the greatest impact of the pandemic could be on patient recruitment, with 30% of US clients and 34% of European clients surveyed by GlobalData agreeing.”