2018 Is a Hot Year for Biotech Startups, IPOs and M&A Activity
Despite market volatility, ongoing debates about drug pricing, and various scandals such as the Theranos debacle, everything Martin Shkreli touches, and Novartis paying President Trump’s attorney Michael Cohen $1.2 million for access to the president, it hasn’t slowed down biotech startups or investors. To the contrary, so far it’s been a big year for biopharma investment.
It’s been a pretty good year for mergers and acquisitions in the biopharma industry, with Takeda Pharmaceutical buying Shire for $62.2 billion, and the year starting with Sanofi buying Bioverativ for $11.6 billion and then Ablynx for $4.8 billion. Celgene acquired Juno Therapeutics for $9 billion, shortly after buying Impact Biomedicines for $1.1 billion.
But the landscape for initial public offerings (IPOs) has been excellent as well, particularly in Massachusetts, which has recorded 13 IPOs since the beginning of the year, raising a combined $1.3 billion. This exceeds by money raised the record in 2014, when 17 Massachusetts biotechs raised $1.2 billion, and the year’s only half over.
Forbes had Pitchbook analyze the deals so far this year and came up with $15 billion from venture capital firms for healthcare startups so far this year. Although the number of companies starting in the first half of 2018 is lower this year than last—779 in 2018 compared to 855 in 2017, investors are making bigger investments this year.
Forbes writes, “Despite the excitement over digital health startups and the continuing worries about drug pricing, biotechnology companies dominated June fundraisings. Humacyte raised $150 million at a $789 million post-value thanks to an investment by Fresenius, which will commercialize the company’s blood vessel implant, and Kaleido Biosciences raised $101 million at a $576 million post-value in a round in which Invus Group, Rock Springs Capital, Flagship Pioneering, Fidelity Management & Research, and Alexandria Real Estate Equities all participated.”
In other categories, such as health technology, Emulate brought in $36 million for a $200 million post-value, and Cedar raised $36 million at a $116 million post-value. The biggest deal so far this year is $300 million raised by Grail in May. The next largest was Heartflow, which focuses on cardiac imaging, which raised $240 million in February. Secretive messenger RNA company Moderna, the same month, raised $500 million with a $7 billion valuation, then in May raised another $125 million from Merck.
Although Theranos’ crash and subsequent fraud charges seems to have captured the public’s imagination with talk of a film deal starring actress Jennifer Lawrence and the bestselling book “Bad Blood” by John Carreyrou, it’s not the only biopharma company to have its own bad-luck story. Intarcia Therapeutics raised $615 million in August 2017, but when the U.S. Food and Drug Administration (FDA) rejected its diabetes drug in September, the company killed programs and cut staff. Outcome Health raised $510 million in June 2017, but was then sued by investors, which was later settled, and several of its largest pharma clients abandoned the company.
Still, overall the good news seems to outweigh the bad in the first six months of the year.