The 2023 JP Morgan Annual Healthcare Conference

For the past decade, biotech startups have been the darling of venture capital firms and other investors, with many eager to fund the next billion-dollar medicine. However, these days, drugmakers are spending as much time convincing investors they have enough cash to survive as they are developing their promising treatments. With a significant reduction in biotech funding, investors focus discussions on want to discuss focus, cash, and runway.  This difficult market downturn will continue the current tough environment for risky assets like biotech stocks.

 

The biotech industry, which had grown accustomed to big capital influxes before and during the pandemic, is now facing a slump in private investment. VC firms invested a record $36.6 billion in biopharma companies in 2021, up 281% from 2017, but this dropped 19% in 2022 to $29.5 billion, according to SVB, the parent of Silicon Valley Bank.

 

This change in funding has led to hundreds of new biotech companies, but many are now struggling to stay afloat. More than 300 public companies will need to raise fresh funds within the next 18 months, according to investment bank Torreya Partners. The changing landscape is forcing companies to rethink their financing strategies or focus. Biotech executives at the JPMorgan Healthcare Conference in San Francisco, the industry’s most important annual gathering, spent almost as much time detailing how much money they had to convince investors they’re a safe bet.

 

Biotech companies are now considering anything to stay afloat, from narrowing their focus to only the experimental drugs with the highest likelihood of succeeding, to laying off employees, and hunting for Big Pharma partners to help cover research and development costs. Gene-editing pioneer Editas Medicine Inc. recently announced it would eliminate about 20% of its staff and focus its attention on blood disorders instead of eye diseases.