This bar graph is the EY survival index for emerging biotech leaders in the US and Europe for each of the years from 2019 to 2021, demonstrating how many years of cash these biotechs have on hand.
- With public valuations dropping sharply, access to capital markets becoming more difficult and M&A yet to rebound thus far in 2022, biotechs that effectively manage their cash reserves will be in a stronger position than other competitors. Cash reserves are particularly critical for pre-commercial companies with no marketed assets. Companies unable to secure funding may be forced to restructure, shed employees or scale back research projects to limit their cash burn.
- Encouragingly, however, over the 2019–21 period, public biotechs have significantly improved their cash reserves, driven by a sustained influx of capital from commercial revenues and investments. In all, 84% of commercial leaders hold more than five years’ worth of cash, and 98% hold at least three years’ worth.
While emerging leaders have lower cash reserves, their overall cash positions have improved markedly between 2019 and 2021, with only 14% now holding less than a year’s worth of cash reserves (compared with 35% in 2019), and 44% having at least three years’ worth (from 29% in 2019). That being said, according to one recent report, 128 biotechs were trading at a market cap smaller than the cash they had on hand.¹
¹ “A record number of small biotechs are now trading below cash. Is this the bottom yet?,” Endpoints News website, https://endpts.com/a-record-number-of-small-biotechs-are-now-trading-below-cash-is-this-the-bottom-yet/, 9 May 2022.