Venture financing deal value for US-headquartered biotechs decreased by 46% in Q1 2022 compared to Q1 2021, finds GlobalData

Venture financing deal value for US-headquartered biotech companies decreased by 46% in Q1 2022 compared to Q1 2021, according to GlobalData. The leading data and analytics company notes that this decrease was due to venture capital firms becoming more selective in their investments due to the current economic and geopolitical uncertainties.

Mariam Shwea, MPH, Business Fundamentals Analyst at GlobalData, comments: “While a large number of early-stage biotechs went public with inflated stock prices in 2021, Q1 2022 entered a bear market with stock prices plummeting and many biotechs trading below value as a result. Venture capital firms are now more selective in their biotech investments for 2022 compared to 2021.”

GlobalData’s Financial Deals Database found that oncology received the largest total venture financing out of the top five therapy areas, with a total deal value of $1.5 billion in Q1 2022. The continued growth in funding for oncology is reflective of the large patient populations with high unmet needs for numerous oncology indications in the US and globally. For investors, oncology provides broad scope for continuous clinical research and drug development.

Shwea continues: “Investors have become more selective in investing towards early-stage biotechs in the current bear market. Therefore, biotech companies should aim to widen their selection of venture capitals when raising funding. Instead of having one or two, companies should have three or four investors each who have deep pockets and knowledge of the sector to pitch their business to.”

Biotechs looking to receive funding and enter the public capital market need to be developing a therapy that fills an unmet need. During 2021, a large number of early-stage biotechs went public. Thus, with venture capitals now looking at having tighter cash reserves for their companies, investors are turning towards undervalued public companies, those which now trade at a price lower than their actual value.

Shwea adds: “It remains to be seen if this trend will continue for the foreseeable future, with both investors and pharma companies thinking more cautiously about allocating capital.”

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