By the numbers: As the pandemic biotech boom fades, it’s beginning to look a lot like 2019 — or before

This year, with Nasdaq iced over, everything is falling behind. A quick turn to CDER’s approvals for the year reveals that the group has stamped an OK on only 28 drugs, well behind the 42 recorded by this date in 2021. And with manufacturing inspections in China on hold, as well as the general lingering fallout from the pandemic, there are no signs of a comeback in the last two months of the year.

Chris Dokomajilar

We asked DealForma chief Chris Dokomajilar to do a special 10-month run of the numbers to give us a clearer picture of where we’re headed in a stressful 2022, and you can see the cracks widening in almost every key spot.

It is important to note, though, that with the inevitable end of the pandemic boom, we’re still seeing historically high rates of investing. But silver linings are few and far between.

Let’s turn to the numbers, through the end of October.

When the market turns off the money spigot, you can bet that everyone, public and private, doubles down on licensing deals as an increasingly important source of cash.

This year, though, even with the added emphasis, there’s been a notable downturn year-to-date, with less cash and a somewhat smaller set of milestones overall as the industry hunkers down to ride out the storm. Cash in hand is trailing the boom times in 2021 by about $4 billion, or $11.1 billion during the near-record times in 2021 versus $7.2 billion in the first 10 months of the year. And Dokomajilar recorded only 434 deals January-October, compared to 601 the year before.

That takes us back to 2019 levels, which no one complained about at the time.

There may be significantly fewer deals coming through the pipeline now, but we did get a bump in the median upfront in cash and equity. In this market, cash is king as everyone looks to extend their runway the best way they can.

One of the most bitterly disappointing charts for biotech execs and investors to look at this year is on M&A. At the beginning of the year, Big Pharma had the cash on hand to haul in a wide variety of biotechs and programs. Instead, M&A has been shrinking again, even as valuations have been hammered down across the board. A wide variety of biopharma execs I know are still predicting an explosion of new deals in the year ahead, catering to the major players’ need to beef up pipelines for 3 and 4 years out, but it’s a long time coming. Also, while some outfits are using the occasion to pick up bargains, Big Pharma is clearly still happy to pay a premium to de-risk assets. They’re just not finding a whole lot of them, so far.

Also, notice how the manufacturing M&A wave has shrunk as times got more difficult in the industry.

One or two big deals inside the final stretch could change this chart significantly. But right now it’s not looking good.

When it comes to venture investing, we are once again turning the clocks back to 2019. The $30 billion racked up in biotech in the first 10 months of last year now comes in at slightly less than half that figure. Again, no one was complaining about those numbers in 2019, but we’re seeing a shakeout of the easy money players as traditional biotech VCs prepare to invest more in their portfolio companies to get through the market meltdown.

Right now, early, preclinical deals are where it’s at. The boom, of course, is broken, but we are more in line with 2020 for the early stuff. It gets worse, though, as you travel down the pipeline. By the time you get to Phase III, the year-to-date comparisons versus the annuals are in sharp contrast. Nine years of steadily rising numbers are coming to a cliff.

IPOs took a swan dive in 2022 off of a very high ladder created in the pandemic, as we all know. The old days of making ready-market money off of just about anything that could walk, talk and kind of look like a biotech are over. For now.

With the IPOs went the PIPEs and follow-ons, though not at quite the same sudden plunge. At this rate, the industry won’t even be able to come in at 2019 levels, and that’s with a considerably larger number of public biotechs to feed these days. Right now, it takes good data to get a market response worthy of a decent follow-on. That rule appears to have legs.

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