Biotech companies will raise less capital in 2022

Frankfurt After record figures in the first two years of the corona pandemic, German biotech companies raised significantly less capital in 2022. A total of 921 million euros in fresh money flowed into the industry, around 60 percent less than in the previous year, as the industry association Bio Deutschland announced on Wednesday.

On the one hand, this is due to a special effect of the corona pandemic. The two German vaccine developers Biontech and Curevac received a large part of the capital in 2020 and 2021 with a total of more than two billion euros. On the other hand, the vaccine successes gave a strong boost to investments in biotech companies in 2021.

But the consequences of the Russian war of aggression in Ukraine, the energy crisis, inflation and economic uncertainties have also put a heavy damper on the industry: The valuations of the most important German biotech companies have fallen significantly on the stock market: Biontech’s market value has fallen by around 37 since the end of 2021 percent, Curevac’s by almost 71 percent and Evotec’s by almost 58 percent.

The outlook for the biotech industry for 2023 is bleak

“The mood in the industry is significantly more pessimistic than in previous years,” says Bio-Germany Managing Director Viola Bronsema. In the annual trend survey, only 40 percent of the managers surveyed in biotech companies described their current business situation as good; in 2021 it was still 64 percent. More than half stated that the energy crisis was having a negative impact on their business situation.

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The outlook for the current year is also bleak, even worse than during the 2008 financial crisis. Only 26 percent of companies expect an improvement.

While company leaders still assessed the political climate for the industry as extremely positive over the past two years, this index value has now fallen back to the level it was before the pandemic. “There is the impression that politicians all too quickly forget the role of innovative biotech companies,” says Bronsema. “That is negligent, also and especially with regard to future challenges.”

In 2021, the industry had generated sales of around 26 billion euros in Germany. The more than 770 companies employ almost 45,000 people. In order to strengthen the industry, the federal government has launched some promising measures such as a start-up strategy, future strategy or future fund, says Oliver Schacht, CEO of the association. “It’s all about speed and actual implementation here.”

Germany is not alone in the decline in capital inflows. 2022 has also left its mark on US companies. However, investments are still being made here to a much greater extent. Venture capital for biotech companies developing drugs fell by more than half to $11.4 billion in 2022, according to figures from the US industry association.

IPOs in this category fell from 80 to 14. With a total of 1.2 billion dollars, the companies collected only about a tenth of the value of 2021.

German companies did not dare to go public in 2022

No biotech company from Germany dared to go public last year. In 2021 there were still three companies. The US technology exchange Nasdaq has long been the preferred place for initial listings. The experts of the biotech scene are based in the USA, and the companies can usually achieve a higher rating there.

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About half of the funds raised in Germany are accounted for by private and half by listed companies. Despite the decline in capital inflows, Olivier Litzka, partner at life science fund company Andera Partners, remains confident about the industry. This is no longer in the limelight as it was during the pandemic. “But there are still many promising companies and product developments in Germany,” Litzka told Handelsblatt.

Financing has returned to pre-pandemic levels. “But that wasn’t a bad level. And the overall trend is upwards over the years,” explains the industry expert.

Last year, Andera Partners participated in one of the three largest biotech financing rounds in Germany: The cancer specialist Tubulis collected 60 million euros in May. The company develops so-called antibody-drug conjugates (ADCs) with which tumors can be targeted. The antibodies ensure that the chemotherapeutic agent, i.e. the cell toxin, is brought directly to the tumor.

Tubulis, Catalym, Resolve: The Biggest Biotech Financings of 2022

Ideally, this is accompanied by fewer side effects than whole-body chemotherapy. Tubulis started in 2019 as a spin-off from the Leibniz Research Institute Berlin and the LMU Munich.

fresh capital

72

Million Euros

was collected by the company Resolve Biosciences from Monheim near Düsseldorf.

The biotech company Catalym from Martinsried near Munich has also dedicated itself to fighting cancer. It received a total of 50 million euros in a financing round in November. The money is to flow into further clinical testing of the drug candidate Visugromab. This is intended to neutralize a specific protein that tumors use to protect themselves from the body’s own immune system. For this reason, currently available cancer therapies often do not work as desired.

The company Resolve Biosciences from Monheim near Düsseldorf collected the most money. The specialist in the research field of spatial biology received a total of the equivalent of 72 million euros from investors.

Resolve advances what is known as molecular cartography. This technology provides insights into the biology of single molecules and cell structures, enabling scientists worldwide to gain new insights into the causes and processes involved in infectious diseases such as Covid-19, neurobiology, oncology and developmental biology. Since its introduction, the system has been successfully placed in several leading laboratories in Europe and North America.

capital is available

The slump on the stock exchanges in the USA is likely to continue to have an impact on the biotech sector. Litzka expects that privately financed companies will find it more difficult to collect fresh money in the future. “Many large funds, especially American ones, have had to accept heavy losses in the value of their listed investments in recent months. Now they’re getting back into low-valued public companies. That’s why less money is currently flowing into private companies in the USA,” he says.

In his view, this does not apply to Europe. Because some European venture capital funds have collected a lot of money in the past two years, which has only been partially invested so far. That also applies to Andera Partners, says Litzka. “Following the large round of financing we led in Tubulis last year, we will be investing in Germany again this year.”

More: Expansion race of the corona vaccine manufacturers

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