Beyond borders: EY Biotechnology report 2022 databook

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. 

This chart demonstrates the top 10 changes in public company market capitalizations between 2016 and 2021.

• Unsurprisingly, BioNTech and Moderna recorded the highest growth in public valuations between 2016 and 2021, driven by the runaway success of their respective mRNA vaccines against COVID-19 in the past two years. Regeneron has also benefited from COVID-19-related products via its monoclonal antibody cocktail, REGEN-COV, supplementing the revenues from its legacy products Eylea and Dupixent.
  
  
• Other notable leaps in market cap since our previous edition of Beyond Borders include Vertex, responsible for the cystic fibrosis orphan disease franchise; Seagen, a pioneer in next-generation antibodies, one of the new modalities promising to be of major significance for sustaining biopharma growth; and argenx for its recently approved Vyvgart, the only current treatment for anti-AChR antibody positive generalized myasthenia gravis (gMG).

This chart shows the top 10 biotech regions in the US.

• The traditional biotech clusters of Boston and Cambridge (Massachusetts), the Bay Area (Northern California), and San Diego and Los Angeles and Orange County (Southern California) account for a significant amount of the industry’s financial presence in the US.
  
  
• Massachusetts is the base for long-standing biotech leaders, including Biogen and Vertex, as well as new major players, such as Moderna, and leads all US regions in terms of the number of public companies, revenue, R&D spend and market capitalization.
  
  
• The number of US commercial leaders (public companies with more than US$500 million in annual revenue) has jumped from 17 in 2016 to 31 in 2021. A record eight new companies joined the commercial leader group in 2021, led by Novavax, Fulgent Genetics and Vir Biotechnology, all of which saw their revenues grow by at least 840% this year.

This chart shows the top 10 biotech regions in Europe.

• In comparison with the US, Europe lacks dominant biotech clusters that play a leadership role across the region. Sweden has the largest number of public companies, and the UK has the highest levels of R&D investment; however, Germany leads in terms of total revenue, market capitalization and net income, a performance driven almost exclusively by the enormous success of BioNTech in 2021.
  
  
• The European financial metrics are dominated by a small number of commercial leaders, a group that included 15 companies in 2021 (compared with 10 in 2016). Three companies ascended to the financial leader group in 2021, with cannabinoid-focused GW Pharmaceuticals exiting via acquisition by Jazz Pharmaceuticals in May 2021.
  
  
• Joining the commercial leader group in 2021 were argenx, CRISPR Therapeutics and uniQure, which each grew their annual revenues by over 1,300% in 2021. Notably, these companies all focus on new modalities: argenx is developing first-in-class antibody fragment technologies, while CRISPR Therapeutics and uniQure are focused on cell and gene therapy approaches.

This chart shows how early-stage biotechs focused on cancer and multiple indications attracted significant venture capital in 2021.

• In all, four of the top six (and 12 of the top 20) largest VC rounds ever recorded by biotechs took place in 2021. Of the overall US$26 billion invested, more than half came from just 82 funding rounds — 36 of which were investments targeting the oncology space. Again, the US dominated fundraising, accounting for 66 of these 82 rounds.
  
  
• The largest of these rounds went to Texas-based precision medicine company Caris Life Sciences, which raised US$830 million — the third-largest round in biotech history, behind only Grail Bio and Roivant Sciences in 2017. Caris has raised approximately US$1.3 billion in external financing over the past three years for its first-in-class liquid biopsy platform in oncology.
  
  
• Some of the other largest early stage rounds of 2021 included:
  • Massachusetts-based EQRx, which received US$500 million in second-round investments as it pursues its goal of creating more affordable cancer drugs.
  • Neumora, also of Massachusetts, which attracted the third-largest seed round in industry history (US$500 million) for its neurology drug candidates and discovery platform.
  • Massachusetts-based biotech, Adagio Therapeutics , which raised US$336 million to advance its COVID-19 antibody treatment.
  • SOTIO Biotech, based in the Czech Republic, which attracted the largest VC investment of any European biotech, drawing US$316 million for its oncology candidate.
  • Prime Medicine, which secured US$315 million in Series A and Series B investment to develop its Prime Editing gene-editing platform, a spin-off from The Broad Institute.

This bar graph shows US and European biotech IPOs for each of the years from 2006 to 2021.

• During 2020 and 2021, US and European biotechs carried out an unprecedented 216 IPOs, raising US$30.6 billion in the process (for contrast, the previous 10 years saw the biotech IPO market raise a total of only US$24.7 billion).
  
  
• The record-breaking 2021 IPO performance saw 93% of companies priced in or above their proposed ranges as they entered the public market, with an average size of US$135 million. Biotechs Sana Biotechnology, Lyell and Erasca secured investments several times larger than they initially asked for when going public in 2021; Recursion Pharmaceuticals, an AI company focused on drug discovery, raised US$502 million after initially seeking US$100 million.
  
  
• However, the pace of IPOs significantly slowed in the fourth quarter of 2021, with only 10% of the year’s total coming in the final three months. With biotech stock valuations beginning to decline in the third quarter, the end of 2021 saw just 15% of the year’s IPOs recording positive returns, with 31% seeing their value drop by 50% or more, and 66% losing at least 25%. In the first months of 2022, just eight biotechs executed IPOs, raising a cumulative US$342 million. This slow start in 2022 leaves biotech on track to raise its lowest total IPO capital in at least a decade.

This chart shows the top US and European biotech IPOs for 2021.

• Over the course of 2021, 56 companies executed IPOs raising over US$100 million, up from 46 in 2020. Once again, oncology was a major target, with 49 IPOs generating US$7.4 billion overall (for comparison, the next most prominent therapeutic area was neurology, with 14 IPOs raising US$1.1 billion).
  
  
• Ten of the top 20 IPOs went to companies with lead drug candidates either at a preclinical stage or in Phase I of clinical development. This includes the year’s largest IPO, Washington-based Sana Biotechnology, which raised US$676 million — a biotech IPO record — surpassing Moderna’s US$604 million in 2018, and second only to Serono’s US$1.1 billion IPO in 2000. Sana Biotechnology is focused on developing oncology treatments, including targeting T cells to address various blood cancers.
  
  
• Other notable IPOs of 2021 included:
  • Utah-based Recursion Pharmaceuticals, which raised nearly US$502 million for its AI-driven drug discovery engine. The company has four clinical-stage programs and raised around US$420 million in VC funding prior to its IPO.
  • Evotec of Germany, which recorded Europe’s largest biotech IPO of 2021. Evotec has been traded on the Frankfurt Stock Exchange since 1999, but debuted on the US NASDAQ in the last quarter of 2021. It has 11 disclosed clinical-stage programs and over 100 earlier-stage candidates.
  • Rounding out the year’s top five IPO deals, Lyell Immunopharma and Instil Bio are both using cell therapy platforms to develop cancer therapies.

This chart provides a list of select SPACs for 2021.

• According to EY research, 2021 saw 30 biotech SPACs, generating US$9.4 billion in investment capital; of this, more than US$4.8 billion came in the form of IPOs, while another US$4.5 billion came from private follow-on offerings — representing a significant uptick from the five SPAC deals that raised US$852 million in the previous year.
  
  
• The largest of 2021’s SPAC deals was secured by Massachusetts-based EQRx, which aims to develop versions of blockbuster medicines at “radically lower” prices. As noted, the company previously raised US$800 million from VC investors and announced its first five pipeline drug candidates.
  
  
• Only three of the year’s SPAC deals happened in the final quarter of 2021, with the market, like other financing streams, appearing to dry up. The market will be further constrained by the U.S. Securities and Exchange Commission’s March 2022 announcement of new rules intended to place greater restrictions on the SPAC market to protect investors. 

This plot graph shows Capital raised by leading US and European regions, excluding debt, for 2021.

• Massachusetts, Northern California and Southern California led the way in total equity and VC funding, as well as in the total number of equity rounds. Massachusetts alone raised US$26.6 billion in total equity financing (27% of the combined total for the US and Europe), and US$7.8 billion in VC (30% of the US and Europe total).
  
  
• The US as a whole dominated the VC market, raising US$20.2 billion compared with US$6 billion for Europe. In terms of total equity, the US generated US$79.3 billion, compared with US$20.7 billion for Europe. The UK was the only European country to figure among the top five overall biotech investment regions, with Texas rounding out the list. 

This bar graph shows US and European strategic alliances based on up-front payments for each of the years from 2012 to 2021.

• While 2020 was remarkable for up-front payments, with alliances signed that guaranteed US$19 billion up front, 2021 saw that number fall to US$9.7 billion — just 6% of the total potential value, the second-lowest in a decade and well behind the 9% annual average seen over the previous 10 years.
  
  
• In 2020, there were 38 deals with more than US$100 million paid up front, but 2021 saw only 30, with the average up-front payment dropping by US$30 million compared with the previous year.

In short, biopharma companies in 2021 prioritized smaller alliances with lower up-front payments. Early data for 2022 suggests this trend will continue: The first quarter of the year saw US$3.3 billion of up-front capital committed to alliances, in line with 2021, but well below the levels seen in 2019 and 2020.