Is Deflation the Future of Biotech

The previous years were remarkable for biotech startups as the financing smashed all records. Now, as the pandemic weakens, inflation is on the rise, and the impact of the Russo-Ukraine conflict is intensifying, biotechs are in a bust phase.

FREMONT, CA: After the pandemic-driven investment boom in 2020, investment levels held steady through 2021 and brought in around the same amount, USD 36.3 billion. Asia is a region with growing biotech activity. Other companies that were active in funding and collaborating included those working on RNA therapeutics, adoptive immune cell therapy creators, and PROTAC (proteolysis-targeting chimaera) strategies. Investments involving machine learning also included financing. As pharma exhibited a stronger interest in partnerships, mergers decreased.

VC funding reached its high in the first quarter of last year and has since started to decrease gradually. According to market research companies, the sector has experienced a 10 per cent to 30 per cent decline. The pace of new stock offerings was the slowest in three years in the first quarter of 2022, indicating a more challenging funding climate. In 2020, the biotech uptrend began. The Nasdaq Biotechnology Index reached a high of 5392 points in 2021, and as of June 13, 2022, it was at 3368 points, a drop of 38 per cent. The biotech sector experiences fluctuations, much like all other sectors of the economy. Nevertheless, putting aside any short-term fluctuations, I believe that the sector's long-term trajectory has been positive and is continuing to do so, as healthcare spending has increased steadily and is now at

about 10% of GDP. The need for better healthcare and medications grows as the population ages, and this need is inherent to people's lives and unrelated to market conditions.

The sector has been modified at this moment. It will be difficult for early-stage businesses or first-time fundraisers to raise money. For a while, investors would steer clear of risky ventures in favour of more secure ones. Experts predict that investors will reinvest money from microcap startups into businesses that are already commercialising their products. They will consider companies in Phase 3 trials that also have sizable addressable markets after the markets have stabilised. Since the health technology industry is quickly expanding and has enormous long-term potential, VCs will continue to pay attention to it. More publicly traded biotech companies may be acquired by big pharma as a result of the price decline. The sector will recover, and finances won't dry up, according to experts.

The most successful startups have been those that have cutting-edge platform technologies, which serve as a foundation or infrastructure on which additional therapies can be built. Venture capitalists will continue to place their bets on such cutting-edge technologies. VCs will continue to pour money into fields like cell therapy 2.0, next-generation gene therapies, precision medicine, innovative delivery modalities, etc. It is not anticipated that the biotech industry would revert to its normal state before the pandemic. In a corporate climate that is rapidly changing, businesses will face numerous new issues that require adaptation. According to EY's Beyond Borders 2022 research, there are also enormous potential opportunities for biotech as it approaches the future, as 2021 showed.