- The biotech sector is off to a rocky start this year.
- After some signs of growth in late 2022, funding is down in 2023.
- Jefferies analysts said that if things don’t improve, we’ll see more layoffs and R&D cuts
It’s a not so happy new year. At least for the biotech sector.
That’s according to Jefferies analysts, who said in a Wednesday note that 2023 was off to a rocky start, as funding dried up for biotech companies.
Last month, companies in the sector raised just $3 billion from investors — down 22% from the $3.9 billion that they raised in the same period a year ago. This comes after some “glimpses of strength” in the second half of last year.
“Weak funding continues to ripple through the industry,” the Jefferies analysts wrote.
They added that many biotech companies have pulled back their ambitions and cut their spending to preserve cash.
So far in 2023, funding has tumbled across the board. Only two companies went public in the US in January, raising $22 million — a 98% decrease from the same month last year.
Already, February is looking better for IPOs. San Francisco-based Structure Therapeutics went public last week, raising $161 million.
VC funding also struggled, totaling $1.16 billion in January, down 30% from last year. Jefferies analysts said that this was due to fewer and smaller deals across the board. They added that as private market valuations tend to react to public markets, VC funding will likely continue to lag in the first half of this year.
Amid the difficult market, the analysts said that they were seeing companies try to save on cash in three ways: by shrinking programs to have fewer data points or target fewer illnesses, pausing research on potential molecules for development, and cutting staff.
There’s already been many examples of these instances already this year— 21 in fact, according to the analysts’ tally.
“2022 was a tough year for the industry, and if funding doesn’t get better, expect biotech restructurings to keep growing,” they said.