2022 was considered by many to be a transition year for biotech companies. Following the massive investment, cheap capital and public accolades for companies developing Covid treatments and vaccines during the pandemic, last year witnessed the IPO market grind to a halt and a slowing of new drug approvals. Now, as the biotech sector prepares plans for the remainder of this and coming years, companies are faced with continued uncertainty. However, with these challenges and uncertainty come numerous opportunities for companies that are adequately capitalized.
According to BIOPROCESS ONLINE, there are three key themes in 2023 that are likely to have an outsized impact on the business decisions of life sciences leaders:
RBC Capital Markets added: “Major clinical catalysts finally started to go positively, reminding investors that the previous onslaught of clinical trial and regulatory setbacks likely stemmed from expanded numbers of unproven early-stage recent IPO names, rather than any intrinsic changes in the risk profiles of more established biotech companies. Commercial performance also continued to outperform expectations, highlighting biotech’s relative insulation from inflation and recession concerns.
RBC continued: “We expect even better performance for higher quality, catalyst-driven small and mid-cap companies as 2023 progresses. Smaller cap biotechs, while rebounding modestly off of mid-year lows, have still meaningfully underperformed large and mid-cap biotechs, pharma and the S&P, with a more challenging capital environment forcing greater dilution and program deprioritizations.
However, the market has rewarded – and should continue to reward – shares when key derisking catalysts provide visibility to large future market opportunities. As such, we believe there are select, high-quality, catalyst-driven smaller-cap companies which remain underappreciated and should perform well in 2023, helped by increasing regulatory permissiveness in key areas of innovation and M&A, even if restructuring and dilution among weaker stories limits overall index performance.”
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