Each quarter, Locust Walk’s deal team compiles key statistics and trends on strategic transactions and financings. Our 2022 Third Quarter Report applies the latest data to analyze current activities in the life sciences deal landscape.

Biotech is in a narrow depression.  We would classify it as “narrow” rather than deep (long duration) because of the relatively short duration of the downturn so far.  Private financings are down 80% in number (not value) from 3Q21 to 3Q22.  The XBI is off >40% in the last 12 months and >50% from its highs in February 2021.  IPOs are down 95% from 3Q21 and 90% YTD vs 2021.  While there is still capital available, there is not enough capital to support the number of companies financed during the COVID boom. Unfortunately, we predict these conditions to persist well into 2023 baring an unforeseen change in fed policy. 

To gain confidence that we are moving to the other side of the narrow depression, 3 things need to occur: 1. Fewer companies must trade below cash (a reduction to no more than 50 or still double the pre-pandemic average), 2. The small company universe must contract from the 2021 apex by at least 50 public companies either selling, merging or going out of business (we’re less than half way there), and 3. US Federal Reserve stopping its interest rate hikes or injecting more liquidity. 

Nevertheless, despite the macroeconomic and political headwinds, several companies have boasted impressive gains in share price on the heels of positive data readouts. The results have enabled these companies to raise capital in a cash-constrained environment. With Biopharma back to its data-driven roots, we will continue to look for signs of recovery as we navigate our way through a challenging market. 

We invite you to read our report and would welcome the opportunity to discuss its contents with you.