There were a few bright spots for biotech as 2023 closed out. The XBI was more than 30% off its lows by year end, and the Fed signaled potential for 3 rate cuts in 2024. M&A is picking up, with the acquisitions of RayzeBio and Karuna Therapeutics, just two examples. But questions remain about the sustainability of the rebound.
At an industry salon hosted by Demy-Colton, “Extending the Runway,” Gabe Cavazos, Senior Managing Director at Leerink Partners, expressed optimism for 2024, anticipating positive momentum and deal-making. “While I don’t have a crystal ball, the sentiment has been at an all-time low, and it can only go up from here. Seeing new funds raised and strong balance sheets in pharma and midcap biotech indicates more deal-making and capital infusion into the sector,” Cavazos said.
Moderated by Virginia Amann, CEO of ENTENTE Network, the salon focused on addressing the challenges biotech CEOs face in the wake of a slow IPO market, prolonged private financing rounds and overall industry uncertainty. Gabe Cavazos was joined by Marian Nakada, PhD, Vice President, Venture Investments JJDC, Johnson & Johnson, Dennis Purcell, Founder, Aisling Capital, and Brad Sitko, Chief Investment Officer, XOMA.
Sitko shared Cavazos’ optimism. “We’re closer to the end of this long biotech winter. It’s like a game of musical chairs– the music is slowing, but the exciting games lie ahead for those left standing. Optimism for 2024 prevails, though specifics remain uncertain.”
Nakada added, “The recovery might not be evident, but there are well-capitalized companies in stealth mode, making positive strides. While some challenges persist, there’s unreported activity contributing to the industry’s resilience.”
Purcell offered a historical perspective, noting the industry’s ability to operate on sentiment rather than fundamentals and emphasizing the rapid shifts in perception over the years. “Sentiment can change on a dime. We saw that in the obesity market with Lilly and Novo, for example, an explosion in their stock prices reflects the sentiment now on obesity drugs. So, when it changes, it can change fast.”
Purcell added, “The industry undergoes cycles, and we’re at a point where science is outpacing valuations. The end of this challenging period is on the horizon.”