U.S. biotech financing drops 46% in Q1 compared to 2021

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Venture financing deal value for U.S.-headquartered biotech companies dipped by 46% in Q1 2022 compared to Q1 2021, according to analysis from GlobalData. 

The data and analytics company said the decrease was due to venture capital firms becoming more selective in their investments due to the current economic and geopolitical uncertainties.

Mariam Shwea, business fundamentals analyst at GlobalData, said, “While a large number of early-stage biotechs went public with inflated stock prices in 2021, Q1 2022 entered a bear market with stock prices plummeting and many biotechs trading below value as a result. Venture capital firms are now more selective in their biotech investments for 2022 compared to 2021.”

GlobalData’s Deals Database found oncology received the largest total venture financing out of the top five therapy areas, with a total deal value of $1.5 billion in Q1 2022. 

Oncology in top spot

The continued growth in funding for oncology is reflective of the large patient populations with high unmet needs for numerous oncology indications in the US and globally. For investors, oncology provides broad scope for continuous clinical research and drug development.

Shwea added: “Investors have become more selective in investing towards early-stage biotechs in the current bear market. Therefore, biotech companies should aim to widen their selection of venture capitals when raising funding. Instead of having one or two, companies should have three or four investors each who have deep pockets and knowledge of the sector to pitch their business to.”

Biotechs looking to receive funding and enter the public capital market need to be developing a therapy that fills an unmet need, GlobalData said. The company added that, during 2021, lots of early-stage biotechs went public. 

With venture capitals now looking at having tighter cash reserves for their companies, investors are turning towards undervalued public companies, those which now trade at a price lower than their actual value.

Shwea concluded, “It remains to be seen if this trend will continue for the foreseeable future, with both investors and pharma companies thinking more cautiously about allocating capital.”

Explore other topics: USAVenture capital

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