Biopharma Confidence in Raising Capital and Mergers & Acquisitions
The following blog is part 3 of a 5-part series discussing results of the Q1 2020 Biopharma Confidence Index. Read part 2 of the blog series here.
An initiative of Worldwide Clinical Trials and Kineticos Life Sciences, the Biopharma Confidence Index (BCI) gauges the sentiments of C-suite and executive leadership in the industry with respect to scientific, clinical, regulatory, commercial, and business management considerations of their companies. The Q1 2020 BCI collected insights from a total of 112 respondents and divided their responses into three cohorts: private biopharma companies, start-up biopharma companies, and midsized/large pharma companies. The BCI aims to become a valuable source for insights on all aspects of the biopharmaceutical landscape.
Our five-part blog series presents highlights of the Q1 2020 Biopharma Confidence Index (BCI). This week, we draw out key observations from the BCI components related to raising capital, as well as M&A activities.
Importance of Capital Markets
Respondents were asked to rate how important they believe capital markets to be to their respective companies. They were then asked to rank their confidence levels. All companies show strong belief in the importance of capital markets. However, it is worth noting that respondents from larger public companies expressed less confidence than the other cohorts over the next 12 months. There is a discussion to be had about what contributes to the higher levels of confidence expressed by representatives from start-ups and private biopharma companies and how CROs might best support sponsors with respect to funding. In the face of external events, such as Brexit, the 2020 US election, and the coronavirus pandemic, it will be interesting to observe how confidence levels shift within the coming year.
The BCI asked respondents to express their expectations for the number of new IPO offerings to occur in the next 12 months. The data indicates that the perceived slow IPO market will improve in the coming year. This anticipation of increased IPO offerings invites CROs to consider how they might prepare for potential shifts in the clinical and regulatory landscapes. There may be some benefit in preparing service offerings specially tailored to those clients who are in “IPO mode.”
Valuation of Biopharma Companies
Respondents were asked to share their expectations for valuations with respect to both public and private biopharma companies in the next 12 months. Regarding the public stock market, the expectations were close to neutral, but slightly weighted toward the positive, with one more optimistic exception. The expectations were similar with respect to private markets, such as venture capital, private equity, and angel investors, with fewer respondents expressing an expectation of no change. It will be interesting to see whether clinical trial plans and decision making regarding factors like geographic location of trials will be affected by public market expectations.
Mergers and Acquisitions
With respect to mergers and acquisitions, respondents were asked to rate their level of optimism for M&A activity in the coming 12 months and to suggest what might be their top reasons for seeking out M&A opportunities. Their responses revealed optimism. For all company types, M&A activity is primarily aimed toward acquisition of pipeline assets to drive top- and bottom-line growth. Other key goals include access to new indication spaces and acquisition of technological innovations. The access to new markets and indications emerged as a stronger driver for larger companies than for smaller ones. With such interest in M&A, it may be beneficial for CROs to adapt their engagement accordingly and to explore how M&A considerations can inform the services required by sponsors. Particularly for those companies interested in moving into new markets or technologies, there may be opportunity for CROs to work with sponsors to ease them into these new spaces.
Want to Explore These Observations Further?
Join us for “Measuring Biopharma Confidence”, a five-part on-demand webinar series. Each webinar features a panel of experts, who discuss the results of the Q1 2020 BCI in detail. Drawing on their experience and expertise, they glean valuable insights and nuances from the data.
The third webinar in the series, “Raising Capital and Mergers & Acquisitions,” is available now. Watch it here.