Small drug developers continue to hold all the cards, while young device makers suffer from a shrinking pool of buyers
Vantage releases its half-year analysis of sector performance: Pharma, Biotech and Medtech Half-Year Review 2018
The first half of 2018 has seen biopharma IPOs and venture financing accelerate from the already-healthy levels witnessed in 2017. Deal making has dimmed further, however, raising concern that overheated valuations in certain pockets of the sector are putting off buyers.
Meanwhile, despite the US FDA being on track for another strong year of approvals, several big biotech and pharma companies are under considerable pressure to rebuild their pipelines and replace ageing blockbusters.
The situation is reversed somewhat in medtech, where life is harder for young device makers: a worsening reimbursement climate has put off investors and a wave of megamergers among big cap medtechs has shrunk the pool of buyers.
“A very strong funding climate for young drug makers, coupled with a co-operative US regulator, is creating a lot of excitement in the small and mid-cap space in biopharma,” said Amy Brown, author of the pharma and biotech section. “Larger drug makers are desperate for innovation, however, which is becoming increasingly expensive to buy – a quandary that should concern executives and investors as 2018 progresses.”
“Smaller medtech companies are having difficulty finding buyers thanks to consolidation, and venture cash is also hard to come by,” said Elizabeth Cairns, author of the medtech portion of the report. “Mid-stage groups have no choice but to turn to the public markets for growth capital, explaining the surge in IPOs.” Other key findings from the first half of 2018 include:
- Big biotech and big pharma stocks were largely shunned by investors
- Demand for new biotech issues shows no sign of flagging, with a record $3.5bn raised in IPOs across western stock exchanges
- Venture financing continues to set records – more than $4bn was raised by private drug makers in both the first and second quarters
- Spending on biotech and pharma M&A looks set to surpass 2017, although this is largely down to the $64bn takeout of Shire by Takeda
- 2018 is shaping up to have the lowest spend on medical device M&A since 2013. The total disclosed spend was less than $12bn, compared with $48.8bn a year ago.
- Venture funds pumped $3.3bn into private medtech groups, across just 90 rounds.
- 10 medical device companies floated, meaning 2018 is already close to the full-year totals for both 2017 and 2016.
The report offers analysis and expert commentary on M&A deals, venture financing, initial public offerings and FDA approvals in the pharma and medtech sectors during the first a half of 2018. The report is based on EvaluatePharma® and EvaluateMedTech® data. Download the full report at http://www.evaluate.com/thought-leadership/vantage/vantage-2018-half-year-review