An unforeseen rise in special purpose acquisition company (SPAC) mergers and acquisitions (M&As) as a quicker route for biopharmaceutical companies to enter the public capital markets was witnessed during the COVID-19 pandemic, says GlobalData. However, the leading data and analytics company found that, as economic markets slowly try to rebuild post-pandemic, it is doubtful that 2022 will see the SPAC trend persist in place of the traditional route of initial public offerings (IPOs).

Mariam Shwea, MPH, Business Fundamentals Analyst at GlobalData, comments: “According to GlobalData’s Pharma Intelligence Center Deals Database, there was a striking 2,800% increase in announced biopharmaceutical SPACs recorded from 2018 to 2021, with the majority of the deals taking place in Q3 2021.”

The recent freefall of biotech shares has forced investors to push companies that recently went public to trade below cash and below their IPO offering price, adding to the pressure on the crossover market where investment is directed at both privately held and publicly traded companies. With this turn of events, these investors may start finding less value in private companies.

The bursting of the biotech bubble led to a sharp decline in stock prices due to diminished investor demand. This could hinder many early-stage drug companies by limiting the drugs’ progression and, consequently, the company’s revenue regeneration and overall performance.

Shwea concludes: “Despite SPACs still presenting a minority of companies with a viable and easy path to go public, there may be a return of the more traditional IPO route as the preferred exit channel into the public capital market for 2022.”