The market outlook for life science – and how biotechs can weather the storm

Janice Bourque at the 2023 BIO Investor Forum in San Francisco on the market outlook

The 2023 Biotechnology Innovation Organization (BIO) Investor Forum ended the way it began: with caution about the months ahead and hope companies will continue to find funding solutions.

Indeed, despite the growth three years ago, belts have tightened in recent months, something both investors and entrepreneurs have had to accommodate.

But one thing remains clear: a good story with solid science, is the best way to weather the storm.

What’s happening in the biotech market?

“Typically there are about 700-plus publicly traded biotech companies, of which, as of last week, I think close to a third, were recently trading at negative enterprise value,” explained Ellen Lubman, Chief Business Officer at Werewolf Therapeutics. She spoke during the event’s final panel, Market Outlook: Timing the Next Tide for IPOs and Prioritizing Capital Partners.

“This means the market cap of the company or the valuation of the company (how the market is valuing the company), is less than their cash position. Obviously, that causes various degrees of disconnection between the true value of a company,” Lubman continued. “Hopefully, some of those market valuations will fully turn, companies will be able to raise capital, and the circle of life will continue.”


One area of optimism is in medical devices, a relatively “unsexy” realm that is riding the waves of earlier growth and may create momentum in the coming months. 

Companies with revenue, profitability, and Food and Drug Administration (FDA) clearance could “hopefully go gangbusters and then you will have a snowball effect,” explained Phillip Ebner, Executive Director, Life Sciences at JP Morgan Chase & Company.

Meanwhile, other areas cooled as the next popular investment opportunity came to the fore. 

“Oncology has actually cooled off significantly,” noted Carolyn Ng, Partner and Managing Director at TPG Life Sciences Innovations. “The new sexy thing is actually immunology and now I’ve seen a bunch of oncology companies pivoting their assets into immunology.”

Does size matter?

Additionally, different sized companies with varying priorities are moving through the landscape in different ways. What affects a small company may not affect big investors in the same way. 

“From a large pharma perspective, our strategy has been unchanged,” explained Eric Chang, Executive Director, Corporate Development at Gilead Sciences. “Firstly, when investing we focus on the quality of the company, or the target meaning the science and ask, does it meet a strategic need? And I think a secondary consideration is price. If we can negotiate the price, and if the value of a company is very low, we’ll never really sacrifice our bar for quality so in many regards, the volume and frequency of her dealmaking will not change dramatically.”

“We have a very fundamentals-driven approach to the way we do investing,” added Ng. “Back in the 2020s, people were investing in early-stage platform companies that would go public with no assets at a million-dollar valuation—we weren’t doing any of those…We really focused on the asset side of programs. I think that’s served as well now because now as we look around the market, I think the stories that are getting traction, and the stories that are getting interest are stories with real clinical data and are focused on companies that have delivered on clinical promise.”

The outlook for small and emerging biotechs

Many small and emerging biotech companies are nervous about their future—and for good reason. With investors wanting to invest in later-stage companies, the landscape for new and novel entrepreneurship is slim.

“It’s always painful when you’re in the midst of it and it’s your company, right?” reminded Janice Bourque, Managing Director at Hercules Capital. “When you’re in the middle of it, in a company, it can be very, very painful.”

But, as panelists and conference participants have discussed throughout the forum, there is still hope and good science does get funded. 

“There were a lot of funds, large funds that were being raised in this past year,” observed Bourque. “We know that early-stage investors are going to have to deploy it. The question is how.”

“You want to have thoughtful, strategic options in your company and more shots-on-goal,” said Lubman. “And I think you have to be realistic and more flexible around the types of deals you’re willing to do….The days of putting out a few patients of data, or a few signals of biomarkers, and so on, that used to trigger mega million dollar M&A deals—that’s not the case anymore.”

Instead, companies need to be reasonable and plan to be able to weather the long winter. “It’s always better to underpromise and overdeliver,” added Lubman.

And sometimes it is all about good timing, while sometimes good science has to bide its time.

“The science really doesn’t die,” said Bourque. “It might morph, it might get purchased, it might get rolled into something else, but the value of it really continues to build and it doesn’t really ever die. We learned something from all the failures, and we learned something from those that succeed.”

“I think the phrase deal makers need to make deals is cognizant in this realm,” mused Ebner.

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