It has been an unprecedented year so far for Biotech industry and the economy as a whole. Building upon the record amount for 2019, it was expected to be another record-breaking year for Biotech funding. After the initial shock that for a short moment threatened to shutter the sector’s bright outlook – together with that of the broader economy – Biotech roared back with deal-making activity nearly eclipsing 2019’s full-year records. Although for many, 2020 will probably be remembered as the year that wasn’t, this year is preparing to be the best one ever as the sector continues to thrive.
We took a deep dive into the CipherBio data platform to see how the Biotech funding fared during the year to date and compare it with the previous year to help readers understand the current industry developments and make sense of the factors that are shaping its future in this game-changing environment. Who are the top Biotech investors in the world and what companies they funded in 2020? What are the biggest deals in 2020 and who are the most notable newcomers? Is the recent boom all COVID19-related? Discover where the industry stands and how it compares to 2019 to decipher what’s ahead of it in the future.
An Unexpected Start to The Year
Awash in money, the global Biotech industry was gearing up for another record-high year at the beginning of 2020. Yet, the bright outlook was soon threatened – but for a brief moment. As the first quarter was nearing to an end and the virus continued to spread around the world at an accelerated rate, much of the deal-making activity halted as investors hit the pause button trying to make sense of the shock and estimate how the crisis may unravel.
With barely any business activity in sight, the year was written off by many in the second quarter. But, in contrast to surging devastation of whole swaths of the economy, Biotech was gearing up for a roaring start of the second half of the year.
Although it is still unclear what economic damage will the pandemic leave by the time the virus outbreak abates, in 2020, so far, the sector has performed superbly across the board from private to public markets. Private Biotech funding ramped back up at a reassuring rate after the temporary halt. Biotech companies comprised 80% of all US IPOs in the first quarter and the US Nasdaq Biotechnology Index in late April neared a five-year high (Nature, May 2020).
Top 20 Biotech Investors in the World
Figure 1: Most Active Biotech Investors Globally As Measured By Number of Series A to C Transactions (2020 Year to Date); Source: CipherBio, September 2020
With 9 Biotech deals in 2020, Orbimed and RA Capital Management are the most active investors followed by Novo Holdings, Janus Henderson Ventures, Atlas Venture and ARCH Venture Partners, each contributing with eight Biotech deals during the year. American investors dominate the table with the overwhelming majority (Figure 1).
Top Biotech Locations Attracting VC Funding
CipherBio data reveals that the US is an undisputed leader in life science space as the location attracting most of the Biotech funding since the beginning of 2019 — 69% of all deals closed in the top 10 locations globally accounts for the US (Figure 2). From overseas locations, the UK dominates with 25 deals closed over the same period, closely followed by China (24) and Japan (21).
Figure 2: Top 10 Biotech Locations As Measured By Number of Series A to C Deals (2019-2020 Year to Date); Source CipherBio, September 2020
Top Biotech Deals in 2020
CipherBio data collected since 2019 to date demonstrates that large Biotech deal size is getting bigger (Figure 3). Although there is an equal split of the largest ten deals between the years (five deals in 2019 and five in 2020), the top of the table is biased towards the current year, with two out of the three biggest deals materializing this year. As the year is not over yet, we may witness more large deals happening before the end of the year.
Series A dominate among the top ten deals since 2019 with six transactions, followed by Series B which contributes with three deals, while the same period saw only one Series C transaction which made it to the top ten deals (Figure 3)..
Figure 3: Top 10 Biotech Deals Since 2019 (January 2019-2020 Year to Date); Source CipherBio, September 2020
Top 10 Biotech deals in the first quarter of 2020 include nine US companies and one from Europe – Immunocore, a British company focusing on biological therapies to address unmet patient needs in oncology as well as infectious and autoimmune diseases, which raised a $130M series B round in March 2020.
Series B transactions start to dominate among the biggest deals during this quarter with half the transactions belonging to this investment stage and with much smaller presence of Series A and Series C transactions (Figure 4). This continues to hold in Q2 as well (Figure 5)..
Figure 4: Top 10 Biotech Deals in Q1 2020; Source CipherBio, September 2020
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Figure 5: Top 10 Biotech Deals in Q2 2020; Source CipherBio, September 2020
Top 10 Biotech Newcomers Globally
2020 saw some of the big financing rounds supporting early-stage Biotech companies, although the deal values were higher in 2019. The valuations decrease in 1H 2020 is especially notable in smaller Series A deals placed towards the end of the table (Figure 6).
Figure 6: Top 10 Companies Raising Early Stage Funds (Seed and Series A) in 2019; Source CipherBio, September 2020
Two out of three highest valued VC funding debuts in 2020 include Chinese companies: Mabwell’s $278.5M Series A and Legend Biotech, a company developing innovative cellular therapies, which raised a $150.5M Series A in Q2 only to go public two months later – which makes it one of the most prominent newcomers both in private and public space this year. An early-stage company that managed to raise funds right before the pandemic is EQRx, a company dedicated to discovering, developing and delivering better medicines at lower prices, whose $200M Series A was backed by a lineup of notable investors including GV, ARCH Venture Partners, Andreessen Horowitz, Casdin Capital, Section 32, NexTech Invest, and Arboretum Ventures.
Figure 7: Top 10 Companies Raising Early Stage Funds (Seed and Series A) in 2020 (January 2020 – September 2020); Source CipherBio, September 2020
Still, the deal values are showing signs of downward trend. Compared to 2019, when all but three of the top ten newcomer deals involved transactions valued at $100M and higher, 2020 saw only three transactions exceeding that mark so far (Figure 6 and Figure 7).
Is It All COVID-19-Driven?
The world is counting on the Biotech industry to develop therapies and vaccines needed to end the pandemic, saving lives and economies. Although the virus outbreak is stimulating a massive inflow of capital into the sector intending to fund the unprecedented efforts to develop vaccines, predictive antibody tests and new drugs (or repurpose existing antiviral drugs), the 2020 Biotech surge is not all COVID19-related.
A significant factor contributing to the heightened interest of investors is the defensive nature of the Biotech industry which helps it outperform in an economic downturn.
Biotech Challenges Ahead: 2020 and Beyond
Still, it’s not all rosy. Despite Biotech’s essential role in this global public health crisis, the sector cannot entirely escape the detrimental impact of the shock as some of the adverse effects will inevitably trickle down, reaching all parts of the economy at varying degrees.
Disruption of clinical trials is one of the consequences and a costly one at that. A recent study released by clinical trial technology company Medidata shows that new subjects entering trials are 30% below the pre-pandemic level, but still much higher compared to April when the new subject starts dwindled by 70%. Although clinical trials are bouncing back, the study estimates that an increase in COVID-19 cases in the US could affect clinical trial activity in the coming months.
Another study finds that of the 295 non-COVID-19 industry-sponsored US studies planned to start in 2020, almost half of them (43%) are delayed, with a mean delay of 4.75 months.
Drug approval timeline – or how long it will take to complete the drug approval race and meet the clinical endpoint – is a critical factor contributing to Biotech companies’ valuation and the inflow of capital that fuel scientific ventures on their journey from idea to clinical application. With clinical data often being the currency for accessing much needed funds, any delay in clinical trials may have profound effects on Biotech companies.
Biotech entered 2020 in good health with optimistic expectations regarding the flow of capital to fund the scientific ventures. Backed by strong long-term fundamentals and its essential role in the global fight against the virus as well as defensive nature of the sector, Biotech is abounding in more capital than at any time in its history.
After the second quarter of 2020, and a largely muted impact of the raging pandemic on the Biotech market, the sector bounced back at the mid-year point with the record-high funding flow in the midst of what many call the worst recession in living memory.
US investors continue to dominate the global Biotech space and the US remains the top Biotech location. The table representing top ten deals since the beginning of 2019, features an equal split between transactions closed in the first eight months of 2020 and the full year 2019, documenting that the current year yields large Biotech deals at an accelerated rate compared to the previous year. Unlike 2019 which saw more Series A transactions among the biggest deals, in 2020 Series B starts to dominate as Series A transactions are decreasing in value.
Still, not entirely decoupled from the broader economy, the sector is faced with its own challenges, most notably clinical trial delays due to the virus outbreak. So far, it appears that COVID19-related delays hinder but still don’t pose a lasting threat for the sector at large. However, the adverse effect on individual companies will materialize at differing degrees depending on their particular circumstances..
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