Written by Kevin Hampton, Director of Marketing, Kineticos
Last week, Shailesh Maingi published an insightful piece dissecting the results of the Q2 Biopharma CEO Confidence Index and sharing his perspective on the implications. The article focused primarily on what is typically top of mind for biopharma CEOs: fundraising. The capital markets aren’t exactly thriving right now, which is forcing Biotechs to look to partnerships, M&A, etc. instead of raising capital in the traditional sense.
What’s interesting to me is that confidence in the deal climate continues to decline at an even quicker rate than confidence in capital markets. The percentage of CEOs who described the deal landscape in a favorable manner have decreased every quarter since we began our research this time last year. 82% described it as good (as opposed to fair or poor) in our first study in Q3 2015, and in the Q2 2016 study, only 35% expressed that sentiment.
If biopharma CEOs are not confident in their ability to raise funds through the capital markets or through making deals, our industry outlook isn’t very promising; however, that’s not the entire picture. I believe a critical oversight that some are making is that the majority of our CEO respondents have represented emerging biotech companies. In fact, 89% have either been privately held (64%) or had a market cap of less than $250M (25%).
The respondent profile is not nuance; it’s critical in analyzing the data. Our year’s worth of data is only telling the story of early stage developers and for the most part, does not include sentiment from those who are further down the development pipeline. To be clear, the data is the perspective of smaller, emerging biotechs so it represents only one segment of the market.
This story makes complete sense given what the market has been forced to endure over the past year. Biotech valuations are down, and investors/acquirers are mitigating their own risk by investing in late stage assets. In a time where issues such as pricing and reimbursement are adding uncertainty to the commercial viability of even late stage assets, of course CEOs with early stage assets aren’t going to get as much attention, and frankly, it shows in our research.
Not too long ago, the markets were wide open and investments/deals were closing much more freely than they are now. In today’s market, investors are thinking twice before taking on such risk. However, there is one trend that we have seen and will continue to see in the future: companies with truly innovative therapies will be heavily sought after and will have plenty of leverage throughout negotiations. Medivation is a perfect example of this. I wonder how their CEO, David Hung, views the deal landscape these days…..
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Kevin Hampton, Director of Marketing, leads Kineticos’ marketing efforts and is focused on building a brand that reflects Kineticos’ deep life science expertise and passion for improving patient outcomes. Mr. Hampton is responsible for the strategy and execution of Kienticos’ thought leadership and lead generation programs and also supports the sales function within Kineticos to ensure objectives remain aligned.